Saturday, October 25, 2008

MIT 100K Elevator Pitch Competition results

Some good news: I placed second in the Mobile Track at the MIT 100K Elevator Pitch Competition last week with my start-up "MoJoe"! My brain was completely fried by Saturday AM thanks to the midterms that preceded the event, so the results were a pleasant surprise. Unfortunately, only the first place winner was allowed to proceed to the finals from the Mobile track and the BioTech track owing to the fewer number of contestants, so I was unable to pitch in the finals.

Looking forward to doing better at the upcoming Executive Summary Competition!

A huge shout-out and "Thank you!" to all my classmates and friends who encouraged me to pitch, and not give up!
Last week, several of us at MIT Sloan had the opportunity to hear about the cool research done at MIT about founding technology based enterprises from Professor Edward Roberts, the Founder and Chair of the MIT Entrepreneurship Center. We were offered a glimpse of the results of many years of research spanning hundreds of Technology companies, and the findings were fascinating.

Successful founders had the following traits:

- They became successful over their lifetime. Genetic predisposition had nothing to do with it. In other words, successful entrepreneurs are made, not born.

- They typically have a high need to achieve, and a moderate need for power. Professor Roberts made the point that people with a high need for power do not succeed in enabling and benefiting from the talents and insights of those around them, effectively holding the organization back and sometimes driving it into the ground.

- They partner with other co-founders. When the original founder does not have sales and marketing expertise, they seek out co-founders with that expertise.

- More the number of co-founders, higher the probability of success. His research studied companies with up to four co-founders. There was not enough data points to conclude about the effectiveness of companies with five or more co-founders.

Successful start-ups shared the following traits:


- They possessed a high degree of advanced technology transfer.

- They were product oriented.

- They had strong marketing orientation and practices, always putting customers first.

- They all possessed a focused growth strategy

For the super successful companies, later stage strategies included:

- A strategic product/business focus

- Strengthened market orientation

- Overcoming new problems

- Personally avoiding fatal "founder's diseases"

One other point that struck me which Professor Roberts made was that VCs on a start-up's board have mixed interests. Their focus is the company's exit strategy. For people who want to build great companies and help entrepreneurs build these companies, this is a painful and incompatible mindset.

He left us with a lot of food for thought, and speaking for myself, very curious and excited about what else the research uncovered.

Tuesday, October 21, 2008

Sage advice for tough times

This showed up in my inbox today. I thought it was sage advice for tough times.

Alan Patricof, founder and managing director of New York venture capital firm Greycroft Partners LLC and an éminence grisea of the U.S. investment community, sent us a statement today urging restraint in how bloggers and members of the media characterize the "contagion" roiling global financial markets.

Patricof, who also formed the private equity firm that would become buyout giant Apax Partners, specifically addresses the flurry of reports this week that Silicon Valley venture firm Sequoia Capital Partners had summoned its portfolio company executives to warn of the impact of the ongoing financial crisis. While advising emerging companies to closely monitor costs and to be realistic in their near-term growth forecasts, he also says this is "not a time to panic, cut off all investment in the future, and burrow into a dark hole." -- Alain Sherter

Following is the full text of Patricof's statement:

The comments made by the partners of Sequoia Capital at their recently held 'CEO Summit' have been widely covered by leaks to numerous bloggers. These bloggers have disseminated the details and spread the contagion of the sentiments to the public at large, unfortunately running the risk that the words become a self-fulfilling prophesy. Without challenging the comments, which expressed a heightened degree of doom and gloom for the economic prospects of young start-up companies particularly, I do think it calls for a somewhat more restrained response on the outlook and required action before throwing the baby out with the bath water. Certainly, we are going through a period of enormous economic and political uncertainty. The loss of confidence, primarily in our financial system, as a result of the excess of the past five to ten years (if not longer - we may never know how long some of the flawed
practices have been going on) is one of the leading contributors. We are also at the moment looking for leadership on the political front, and both because of very low public support for the President and because we are in the midst of a heated election for his successor, we have no real voice of authority to provide some guidance,
reassurance, and inspirational confidence that the bus has a driver who knows where he is going.

Nevertheless, aside from an over-inflated housing boom that had to collapse sooner or later and a complicated financial system that arose in part to fuel this engine, the basic economy was in reasonable shape, with GNP growth and productivity gains supporting a solid, if not vibrant outlook (I know the automotive industry is also
going through bad times but it no longer pervades the economy as once conveyed in the expression, "As GM goes, so goes the nation.")

Advances in technology are allowing companies to make goods and provide services faster and cheaper. The wireless revolution and the Internet have made the dissemination of information easier and more pervasive for the entire world and brought significant benefits to every phase of our economy. That is not going to stop, although it may temporarily slow down. In these difficult times, there will be
winners as well as losers (and the former may be fewer in number for a while).

The point is, the financial problems are being addressed, if not a bit belatedly, and some international mechanism will be found in short order for some coordinated policy that will restore order and confidence to the system.

Most young companies, with which we are specifically concerned, are financed with equity capital. That has its positives and negatives; on the one hand, debt is a very small factor in the capital structure of most small companies so loan foreclosures and the interest rate burden are not of prime concern. On the other hand, equity capital,
which is provided by private investors, requires confidence in future prospects for reaching profitability and creating a strong market value. Certainly under current conditions it is hard to engender such confidence although history has demonstrated that it is in times like these that great opportunities are created. I have always said, "The best time to invest is when the drums are beating, not when the trumpets are blaring!"

This is surely a time for companies to pay meticulous attention to detail, particularly their cost structure. It is a time to be realistic in their near-term assumptions for revenue growth and take nothing for granted. Raising additional capital to support operations is of course critical, as it is at any time, but this is particularly a time for young companies to be extra cautious in developing pragmatic assumptions of their needs and in focusing on the amount and not necessarily the cost of that capital.

This is not a time to panic, cut off all investment in the future, and burrow into a dark hole. Take a page from the packaged goods industry that the time to gain market share is during tough times when your competitors are weaker in responding. And while this may feel more directly related to portfolio companies, we as a venture industry should not retreat either. It is our strong belief that we can and will continue to make sound investments in excellent opportunities. It is as good a time as ever to start a company with sound fundamentals.

So my point is to heed the caution of the Sequoia comments but to use them only as a strong message to reexamine all cost elements and growth plans and use this opportunity to assure that you are a survivor. Find a way to use this moment to gain your greater share of the market by providing a solution that is needed by others to
improve their prospects in the difficult environment ahead. Tighten your belt and live within your means. Although the timing makes this message seem more prescient, it is a philosophy that works for successful companies at all times and at all stages; it is simply put, good business. This is not a time for heroes!