Here is the presentation I gave at the Houston Technology Center’s Web Based Business Startup School Series sponsored by The Planet:
Enjoy!
Monthly Archive for January, 2008
Jan27th2008
I was listening to Colin Cowherd on ESPN Radio this past week and the topic was baseball salaries. Colin made note of the fact that the New York Yankees have, what amounts to an almost unlimited supply of cash to acquire as much talent as they can bring in. Unfortunately, this has not translated into any marginal success for the Yankees over the past several years. In contrast, many teams have been able to match the Yankees post-season success on a much smaller budget.
If any of our readers are baseball fans, you’ll have undoubtedly read Michael Lewis‘ baseball classic, Moneyball. If you have lived under a rock or in a cave for the past 5 years, Moneyball is a book about the hypothesis that the collected wisdom of baseball insiders over the past century is subjective and often flawed. Statistics such as stolen bases, runs batted in, and batting average, typically used to gauge players, are relics of a outdated view of the game and the statistics that were available at the time. By using sabermetrics (econometrics for baseball), Billy Beane, General Manager of the Oakland Athletics, was able to assemble playoff caliber teams for almost a decade with one of the lowest payrolls in the league.
Whereas I feel that the book offers the business world a fantastic analysis and case study of the opportunity of market inequities and arbitrage, I think the point I want to make here is that a team like the Yankees has an excessive payroll and makes bad spending decision while the resource constrained A’s make much smarter decisions and garnered the same effective results (obviously something worth discussing since many of the arbitrage opportunities in the market have been discovered and eliminated).
Translate this to the business world and you will hear terms like “capital efficient” and “bootstrapped” to identify savvy entrepreneurs and startups that make do with less and identify better ways to enact a successful startup. I leave you with this quote from Sun Tzu’s The Art of War:
“Throw your soldiers into positions whence there is no escape, and they will prefer death to flight. If they will face death, there is nothing they may not achieve.”
Jan19th2008
This past Friday morning I had the pleasure of getting out of bed early (again) to attend the Houston Technology Center’s Education Seminar Series on Raising Capital in Texas Today. Today’s session was entitled, “Raising Funds for Growth: Series B and Beyond“. The moderator for the event was Scott Crist of Aegis Texas Ventures. Our panel of experts for this seminar were:
- Kemal Farid, CEO of Merrick Systems;
- Daniel S. Parsley, Chairman and CEO of SalvageSale; and
- David Ferdman, President and CEO of CyrusOne.
You can read through the presentation at the link above but here is an overview of what was discussed:
- The three represented a nice variety of business capitalization history: venture funding (SalvageSale), self-funding (CyrusOne) and bootstrapping (Merrick Systems).
- Merrick Systems’ need for additional capital was to accelerate growth in both organic and new markets. Rather than look at an equity solution, Merrick Systems put together a senior credit facility with Silicon Valley Bank. This is something that many small business startups fail to look into mostly due to a lack of understanding of this segment of the market. The majority of the startups that I have been involved with were able to secure quality credit from the “venture tech banks” like Silicon Valley Bank, Comerica (through their Technology and Life Sciences team), Square1 Bank and Bridge Bank (if you need any introduction to one of these lenders, send me an email).
- SalvageSale’s recent financing seemed more like a leveraged MBO than growth capital, although the new investment from Spire Capital is likely a good way to both recapitalize the company and partner with a solid fund with a track record in successful buyouts.
- CyrusOne effectively sold the company to a private equity group but still has a very active management. Abry Partners has a history here in Houston with their purchase of Caprock back in 2006. What is nice about what Dave Ferdman did was recapitalize the existing investors and provide an infusion of additional capital to fund CyrusOne’s continued growth in data center development.
The biggest takeaway from me is how important your early rounds are in the long term outcome of the company. As in most things, the early decisions tend to have a more material impact on a company’s velocity than do the latter ones. Merrick Systems was able to grow without much of any dilutive impact and is now poised to further grow through senior debt, the second least costly capital next to public debt. SalvageSale confessed to seller’s remorse with their early stage investors but were able to break through and now have a bright road ahead of them. CyrusOne recognized that the future required deeper pockets and made an excellent decision to partner with a long term investor rather than sell out to short term needs for liquidity.
All in all, the three gentlemen were excellent presenters and provided attendees with another quality HTC educational event.
Jan19th2008
If you’ve attended our last two Houston Startup Happy Hours or this past Thursday’s Open Coffee Club, you might have had the opportunity to meet our friends from the Creative Space in Bryan/College Station:
- Bill Erickson
- Roby Fitzhenry
- Travis Ward
- Jeff Blickenstaff
- Ryan Plesko
- Cody Marx Bailey
- Michael Cummings
- Ben Burkert
To quote them on what the Creative Space is:
“The Creative Space is a group of like-minded individuals out to make great work, together. We all work as one to push the local community through artistic and business endeavors while sharing space and cost.”
These guys are the epitome of what the term “startups” mean and, mark my words, will all be very successful. If you want to meet them in person, make a point of heading to BarCamp Texas on January 26-27. It’ll be a grand ole time.
Jan19th2008
Please join us at the kickoff of the Houston Technology Center’s 2008 Web-Based Business Start-Up School series on January 30, 2008 from 12:00 PM - 1:00 PM where I will represent Startup Houston as the feature presenter for Web Trends - 2008. This series is sponsored by Houston’s own, The Planet and will be held at the Houston Technology Center. Pre-registration is free so sign up now (the event will cost $15 for walk-ins).
The topic will address Startup Houston’s perspective on what should be hot on the Web in 2008. See you there and bring some lunch.
Jan17th2008
If you haven’t already made plans this morning, we hope that you will join us for Houston’s OpenCoffee Club!
About : The Houston OpenCoffee Club encourages open and informal discussion and networking among entrepreneurs, technology enthusiasts, and investors to help grow startup companies in the Houston area.
Thursday, January 17th, 2008
8:00AM - 10:00AM
The Coffee Groundz
2503 Bagby St
Houston, TX 77006
(713) 874-0082
Map
You can RSVP and see who else is attending here: http://entrepreneur.meetup.com/1424/calendar/6707202/
You can find additional information on the Houston OpenCoffee Club on our Meetup page and on the StartupHouston blog. You can also find information about how OpenCoffee Club got started and what it is all about here and here.
Jan17th2008
Houston-based personal finance tools site SpendView.com was recently featured on Mashable.com after receiving $2 million in their first round of financing from Meakem Becker Venture Capital out of Pennsylvania (not Houston?). While Mashable does have some criticism of the service, in the end they feel that SpendView’s approach will ’streamline and simplify the whole process’ of managing your finances. You can read Mashable’s full coverage of SpendView here.
We first saw SpendView at the Rice Alliance IT and Web 2.0 Venture Capital Forum and were very impressed with the interface and some of the unique tools that we think will give them an advantage in this hot space. You can see the write-up we did on them here.
Jan17th2008
The Houston Business Journal put together a great interview with Blair Garrou of DFJ Mercury on what he thinks are some of the hot areas for investment and growth in Houston. Here are a few excerpts I found interesting.
“Blair Garrou, managing partner of Houston venture capital firm DFJ Mercury, is bullish on the Bayou City as fertile ground for start-up companies.”
“DFJ Mercury typically invests between $100,000 and $1 million in seed and early-stage companies and also builds syndicates through its DFJ network for larger investments. The company has invested in six Houston start-ups over the last two and a half years — three in bioscience and three in technology. ”
“I’m a proponent that this is a fertile ground for start-ups. You can’t compare Houston to San Francisco. Start-ups are in the DNA in San Francisco — it’s been a way of life for generations. You don’t have those kinds of conversations around the dinner table here yet. I think Houston has the ability to be strong in three areas — life sciences, software and Web 2.0 deals.”
You can read the complete article here. You can also see our previous interview with Blair on StartupHouston here.
Jan14th2008
Several months back, I met George Giannukos and Thomas Marriott, local entrepreneurs from Texas A&M who started a new gaming venture called GameWager. GameWager is an online, matchmaking platform that enables members of all skill sets to win cash/fun prizes & recognition competing in the most popular PC games online. They host pay-to-play (poker style), cash prize tournaments where the entry fees are distributed to the winners in structured payouts and free, token-based (arcade style) tournaments where gamers collect more tokens as they win; all of which can be turned in to their “Reward Zone” which will be full of prizes.
I cannot go into too much detail as this site has not launched yet but from what I am aware of, they have assembled many well respected names in the gaming industry as partners to make it easier to play with friends and offer a secure & fair gaming environment online. The addition of friendly wagering on one’s own performance adds a unique element to the game play which should make their model interesting to watch.
I had a chance to talk with Thomas Marriott recently and here are some excerpts from that conversation:
Josh: Gaming is a huge market. Why haven’t we seen someone succeed with this business model so far?
Thomas: The market size and opportunity are undeniable. However, it’s a tough nut to crack. There have been some fantastic attempts and we can attribute varying factors to the failure of each; from their twist on the model itself to strategy and execution.
Josh: I saw you guys present at the Houston Angel Network. Excellent job! You’ve been very successful in getting funding to date…to what do you attribute that to?
Thomas: Thanks! Although we’re gamers, we further buried ourselves in the industry and paid close attention to competitors failed attempts. As a result, we have taken an extremely methodical approach entering this space - spending a considerable amount of time conducting due diligence, assembling a rock star list of advisors and securing interest in the gaming community. Our efforts created results and that was key to investors.
Josh: Has being in Houston been a plus or a minus so far?
Thomas: As with anything, there are pros & cons - so I can’t say overall its been either. Austin and Dallas are some of the most vibrant gaming communities in the world, the quick drive to them as been invaluable for conferences, networking and business development.
Josh: Do you think you’ll be able to stay in Houston as you grow? What issues do you see going forward?
Thomas: I’m afraid the need for capital and better valuations will pull us out West - we’ll see how things go. For what its worth, we prefer to stay in Texas and will be back if relocated!
Josh: Anything you’d like to add?
Thomas: You guys are doing a great job with Startup Houston…efforts like these will allow startups to stay in Houston longterm!
Also, if anyone in and around Houston (or just passing through) wants to get together to discuss business, entrepreneurship, gaming or anything else we have in common, feel free to each out. We can be reached on LinkedIn, Facebook or GAMEWAGER.net
Thanks guys!
Jan14th2008
For 2008 Startup Houston has invited some of Houston’s best and brightest to provide guest posts on topics that they feel can help the Houston startup community to experience more success in 2008.
We are proud to have Misty Khan as our first guest blogger for January. Misty is the President and CEO of Advena Artemis, which provides sales consulting and the HuntressPro sales productivity software package for Microsoft Outlook, and has a wealth of experience in the areas of entrepreneurship, business development, CRM implementation and optimization, business process mapping, project management, and engineering.
We look forward to many more great posts in the months to come from Misty and others.
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Feeling a Little Lost & Overwhelmed as a Start-Up Company?
If you are, then as one of my old bosses used to say “don’t feel like the lone ranger.” I see a lot of questions on LinkedIn.com from start-up principals who feel the same way (especially in the technology sector) where founders may have more technical than business skills. But never fear, because there is a great solution to help ease these feelings called ‘networking’ and you may be surprised how much it can really help you out.Here are a few things networking can do for you as a start-up:1. Introduce you to other start-up principals who are or were in the same boat as you. These folks can be a great source of not only a sympathetic ear (don’t underestimate the value of the ear), but also of solutions they used to get past common hurdles. Why reinvent the wheel when someone else has probably already come up with a great solution that they are more than willing to share with you.
2. Introduce you to potential investors, advisors and board members. I see a lot of VCs and angel investors hanging out at OpenCoffee Club meetings as well as the Houston Technology Center (HTC) and other great networking events here in Houston. These guys are interested in hearing about new opportunities to invest in, and you have one, so why not seek them out where they congregate. Even if you don’t find a willing investor, you are going to get some great feedback from these folks on what you need to do to get an investor’s attention or where to find the kind of investors that will be interested in your opportunity.
Continue reading ‘5 Ways Networking can help your Startup stand out in 2008′
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