gdp's Comments

StartupCFO : SaaS is not cheap - part deux

Thu, 9 Jul 2009 21:51:37 +0000

Mark, Thank you for answering my question in your post. I have to agree with Mark Z. on the benefits of SaaS over upfront licensing fees. For a company to be truly successful, you should not only be able to close the initial sale but should also care about upgrade licenses and maintenance fees. This all goes to how useful your product is and how sticky it is. I think with SaaS models, you gather useful and timely customer intelligence everyday which you can then use to evolve the product and better target the product. In the early years of any company, you really do not know your target customer and every useful nugget of market information comes very handy. In the licensed model, it is possible to implement customer usage data but it is not going to be as rich and detailed as in the SaaS model. The other comment about churn depends more on how sticky your product is and the average lifetime. The more the customer uses your product. the more it is integral to their business processes and the more information they accumulate, the harder it is to switch. If a product is successful in achieving these, then the customer acquisition cost will be paid for quickly. With a SaaS model, it is much easier I believe to do this than in a software licensing model.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Reverse due diligence - Making sure your VC isn't a dolt (or worse)

Thu, 2 Jul 2009 16:39:01 +0000

We are currently going through this process at Pixily and one of the questions we have asked CEOs is how are investors reacting in this economy. Even the most pessimistic projections are being invalidated because of the economy and if an investor understands it and supports the entrepreneur, then that is an investor for the long term. The other questions we are asking is: 1. What is the day-day working relationship with the investor? How engaged are they? How often do they want you to engage them and what reasons? 2. Investors want you to be transparent and share information with them, especially if things go wrong. How do they respond to it. 3. Do they provide strategic advise? Are they insistent that you follow them or leave it to the judgment of the leadership team to implement them? 4. If there were other investors, what are the differences among them? 5. Do they facilitate meetings between all the management teams of their portfolio companies to share knowledge, contacts, customers, ideas and expertise? the CEOs of Investor's portfolio companies is how are the investors reacting considering everything that you projected whe

StartupCFO : SaaS is not cheap

Thu, 25 Jun 2009 15:43:04 +0000

Are you suggesting that all SaaS businesses are capital intensive? Are you referring to the money spent on R&D or licensing technology? What if a company builds all or most of the technology in-house and licenses only pay-as-you-go technology similar to using the Amazon cloud on the hardware front? Prasad Thammineni CEO, Pixily

Ideas and Thoughts from Winter Street VC and Entrepreneur : VC Pitch #12

Fri, 19 Jun 2009 12:31:09 +0000

Since this post refers to my 10-minute pitch, I felt it only makes sense to share the extend of preparation. To get to a 10-minute pitch took me a number of practices. It started with a 30-40 minute pitch and the more I presented, the more I learned what investors cared about what they would like to see in the first presentation: the high level subjects and their specifics. With each presentation, the details went into the appendix and the strategy with 1 to 3 tactics were left in the slides. Even though I have presented over 50 times, I still review the slides before a presentation. It helps me get in the zone, get the message down and complete the presentation in 10 minutes. Since the details are in the appendix, you can always bring them up when an investor wants to dig deeper into a topic.

Ideas and Thoughts from Winter Street VC and Entrepreneur : 4 Ways to Generate New Business Ideas

Tue, 26 May 2009 19:50:42 +0000

You bring up a very important aspect behind this book, Healy. I happened to be one of those students who was in his class and went through the whole process this book describes in more detail. It is one of the best entrepreneurial classes I enjoyed while at Wharton. In fact, our idea was one of the four companies to have made it to the last round - no, Pixily is not one of them.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Has B2B publishing found an online revenue model before B2C publishing?

Tue, 19 May 2009 18:34:16 +0000

I think there are at least two factors making it easy for business publishers to charge for their content: 1. What is the competition for that content? In the consumer space, there is a lot of competition for the same content. In fact, I think any magazine or news paper that you find on a newsstand has competition. Customers have plenty of choice and price is dictated by the market - margins are thin making the business very vulnerable to external factors. There are of course exceptions like WSJ and that is why they are still able to charge for their print and online content. Consumer Reports is another example but again that is something we will have to wait and see how it survives Yelp/Amazon reviews and more. 2. What is the business model? If the publisher derives majority of its revenues from advertising then they are definitely more vulnerable. If they are giving away free or almost free subscriptions to increase customer base then they are the first ones to go with the moving of content online. Classic examples include Business 2.0 magazine, InfoWorld and few others. They gave away subscriptions to increase their readership and then turned around and charged advertisers high rates. If on the other hand, the publisher charged huge subscription fees then they will survive the online content push. A subscriber who is paying high fees is paying for the content and not the delivery mechanism. In fact, they may prefer getting it online Vs. offline since this makes for easy access, note taking, archiving and sharing. Examples include Harvard Business Review, McKinsey Journal, and New England Medical Journal. Of course, there are few that might have figured out to balance advertising and subscriber fees. They could be niche magazines or have a huge brand following - wired and real simple come to mind. But again, it remains to be seen.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Leaving venture capital

Thu, 14 May 2009 20:36:07 +0000

You did it! Welcome aboard! Congratulations and most of all Good Luck!

Ideas and Thoughts from Winter Street VC and Entrepreneur : Healy Jones responds to Prasad on the SBA and VC

Wed, 22 Apr 2009 18:27:28 +0000

Healy, VCs are not actually excluded from the program completely. They are excluded from the Phase I of the program. A SBIR firm can get VC funding and still continue to qualify for further SBIR grants. On the other hand, VC backed companies cannot apply for any of the phases. Prasad

Ideas and Thoughts from Winter Street VC and Entrepreneur : Healy Jones responds to Prasad on the SBA and VC

Wed, 22 Apr 2009 17:55:13 +0000

Healy, Having gone through the SBIR application process last year for Pixily, I know a little bit about the process and the award criteria. I see your point on how VCs could be better users of tax payer money than a small business. But I feel the reason the SBIR was created was to help individuals and small businesses innovate, whereas VCs are more about commercialization. The SBIR's main objective is in promoting fundamental discoveries that have a broad impact on the community. It is more about innovation (at least in Phase I of SBIR) and less about commercialization. Only in Phase II, one needs to commercialize. The other criteria is that the applicant should not have been already funded externally. But once they receive the grant, they can raise external money and in fact SBIR matches the external funds up to a point. This is true with both the phases (Phase 1: $100K and Phase 2: $500K and matching of I think $50K in phase 1 and $500K in phase 2). That means a VC can invest in a SBIR funded company. Being an entrepreneur, I feel that VCs should not have access to Phase I of SBIR - for the following reasons: 1. If VCs are allowed, the playing field will be tilted heavily towards VC-backed companies. VCs and their portfolio teams have access to great talent and will put together very winning applications thereby putting a non-VC backed small business at a great disadvantage. 2. There are at least 5M small businesses in the US and a number of them come up with innovations that have a great impact on the society. All they need is time and some capital to build prototypes and test them out without the pressures of a professional investor. SBIR gives $100K and 6 months in Phase 1 and if you achieve defined milestones, you can apply for Phase II. As the inventors of the light bulb would say, it takes a lot of passion, perseverance and many tries before you perfect an invention for large scale commercialization. I am not sure VCs would give the innovator the same amount of time, capital and resources. 3. My last point is even more important. $100K goes a long way for a small business as opposed to a VC backed company. If the VC truly believes in the idea, then finding $100K is a non-issue. For a small business on the other hand, especially in this economic climate, that $100K could make or break the idea.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Technology conferences - worth the cost?

Tue, 6 Jan 2009 19:53:03 +0000

If you don't have the money to sponsor or buy an expensive booth, you can rent a conference room next to the conference (it works best if it is in a hotel) and conduct demonstrations all day long. Hotel management may even setup signs for you that lead to the conference room. You can have your employees network and invite VCs, and potential Customers and partners. We did something similar for $300 (as opposed $5000) in a conference last September and I had some major partners stop by to see a demonstration of the product. Shortly after that, we signed a partnership agreement with Xerox/Visioneer and landing some follow-up meetings with other high-profile partners. Needless to say that the conference organizer was not very happy. Small price to pay for high ROI.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Venture capital New Year's Resolutions

Tue, 6 Jan 2009 19:28:14 +0000

I am not good at keeping resolutions, therefore, I am not going to make them. I am glad you are doing it Healy. As an entrepreneur, here is my take on how conferences. Like Healy said, preparation is key. The more you prepare, the more the ROI. I try to figure out what my objectives are and how I can fulfill them before the conference. It is not always possible to have a definitive plan, but some plan is better than none. It should not only include what sessions you want to attend by also who you want meet and for what purpose. If the individuals you want to meet are pretty important, I would recommend reading up on them.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Venture capital industry in crisis - I would hope so

Thu, 11 Dec 2008 16:32:01 +0000

When you say VC's should reinvent themselves. The question is how? Here are a few I could think of. I am not sure if they are the right ones but would love to hear from you and other VCs. 1. Who they should raise money from? WSJ wrote earlier this week that limited partners are not following through with their capital commitments. 2. When should they make investments: seed, really early, early, growth, bridge, later? 3. Don't chase me-too kind of investments. Take risk and go after ideas that target potentially unproven and large markets 4. Play it safe, and see the existing investments through - not much of innovation here

Ideas and Thoughts from Winter Street VC and Entrepreneur : Quick VC pitch tip #4

Thu, 4 Dec 2008 00:27:02 +0000

I really like your t-shirt! I am going to wear one when I go meet VCs :-) In all seriousness, I think you should wear at least a jacket. I think atTie is an overkill, but a jacket would make you more serious. A jacket with a colorful shirt would strike the right balance. A dark blue/black/green/pink shirt with a navy blue jacket would make you look professional and at the same time not look like dinosaur. You can find some cool shirts at Express or Banana Republic. But again, if your business is like facebook, you could wear shorts and nobody wouldn't care.

Ideas and Thoughts from Winter Street VC and Entrepreneur : VC valuation valley of death

Wed, 3 Dec 2008 19:35:47 +0000

Oops! Looks liked I misunderstood Strategics. What I was trying to get at is, are VCs still investing in game-changing companies as much as they were doing couple of years ago? Or are they more focused on businesses that will generate revenues without having to acquire millions and millions of customers (like social networks)?

Ideas and Thoughts from Winter Street VC and Entrepreneur : VC valuation valley of death

Wed, 3 Dec 2008 17:56:45 +0000

Good post Healy. Here are few questions for you and the other VCs reading this blog: 1. How has the economy impacted valuations of startups, especially those that have not raise money yet? 2. Are VCs still investing in strategics? 3. Finally, is your hype part of the graph same as the valley when all I hear from VCs is focus on becoming cash flow positive.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Cloud computing for the enterprise - will it require data portability?

Wed, 26 Nov 2008 16:34:50 +0000

Healy, you make a good point as to why enterprises are less concerned about standards and interoperability, and more concerned about data-in-out of the cloud. jPeople, the company I ran for 7 years prior to Pixily, provided virtualization services to large companies and what we found is similar to your analysis. They will start with non-critical applications, pilots and so forth, before embracing the cloud. Also, consulting, monitoring and support need to be provided along with the cloud-computing offering. Enterprises will need hand-holding before, during and after the implementation of the cloud. Amazon AWS or similar offerings have limited consulting, monitoring or support services packaged with the offerings and one has to hire a third-party to get these services - for instance, RightScale for AWS. Recognizing this fact, IBM announced the Cloud certification program earlier this week to certifiy cloud offerings and the consultants who provide cloud solutions. http://www.serverwatch.com/news/article.php/37872... In addition, enterprises will be concerned about the implications of using cloud computing on Sarbanes-Oaxley and similar regulatory requirements before going down that path. I believe that it will be mid-size companies, who don't already own their data centers, who will embrace the cloud as a cost-cutting measure before the big guys jump in. The big guys have their private computing clouds in their data centers and will be the last to change.

Ideas and Thoughts from Winter Street VC and Entrepreneur : Atlas cleantech company get luv from the guv

Sat, 22 Nov 2008 02:53:14 +0000

Cool! Many congrats to you Atlas and to Lilliputian's!

Ideas and Thoughts from Winter Street VC and Entrepreneur : Quick VC pitch tip #1

Sun, 16 Nov 2008 16:59:07 +0000

Great practical tip. Here are few other things I do before making presentations to VCs/Customers/Partners. These are applicable even if you are presenting using a WebEx call. 1. Turn off your twitteroo/twitterdeck, skype, email alerts (gmail/outlook), and other form of alerts. People need not know what people are saying to you. 2. Close all applications except for the ones you will use. 3. Boot your laptop before arriving to the presentation. Over a period of few days of hybernate/sleep mode, windows tends to slow down and not necessarily function well. Last thing you want is facing difficulties connecting to the Internet in the VC/Partner/Customer office. 4. Always carry a remote presenter. It will make you free to move around the room and bring some energy into the presentation. 5. Finally, carry a long network cable. Do not expect the meeting room to have one and do not expect wireless to be present everywhere. If you are presenting to a customer/partner, do not expect to see a projector. Carry one with you.

Ideas and Thoughts from Winter Street VC and Entrepreneur : The Venture Capital Deal Hype Cycle

Wed, 12 Nov 2008 02:09:46 +0000

Excellent post Healy! How long does each of these stages take? I know there is no definitive timeline but having a sense for an average time could help in helping the process get to the closing.