June 19, 2010 TCTJr Direct Thoughts

Number 5: The Cat Is Out of The Bag and The Bags In The River!

Yep number 5 is in the bag. We exited and finally closed. Here is the press release:

BenefitFocus Acquires BeliefNetworks

I came into the office the day after the press release and the phone rang:

me: Hello?

speaker: Hi this is such and such with Morgan Stanley

me: hello.

speaker: How are you today?

me: good. I suppose your calling about the release.

speaker: yes, you have had quite a run.

me: I suppose so.

speaker: well we just wanted to make sure your aware we are available for these type of liquidity events.

me: Yes I am aware and already have taken care in such areas, thank you good bye.

Honestly this time around it was lackluster. I’m not jaded just tired of the chinese water torture that is prevalent due to the region. So if anyone has been following what has been happening over the last couple of years we founded a company that created some pretty good software. We won some awards, had some customers using the technology and to top it off it is some of the hottest technology being discussed. When blood is in the water the sharks come. The M&A folks at the following companies had very frank and positive discussions with us: Google, Facebook, Oracle, IBM, Microsoft, NewsCorp etc. As noted a company called BenefitFocus acquired us. Which brings me to the current issue at hand. If anyone read my previous blog ( Amazing Moments Of The Past Year) then you may remember this:

It’s not just Timbuktu, it’s beyond nowhere.

This was in response to location. Lest anyone think that location does not matter. It does. Sandhill, Embarcadero, 1st Street Pioneer Square, Newbury St. Having to get on a plane and leave requires time and time is money especially in disruptive software. Geography makes a difference: Menlo Park, Seattle,Cambridge, London, Bangalore, Israel. You can make the argument all day about burn rate and easy access to talent but it is much easier to go where the money is to begin with and not have to compete at a disadvantage.

So here is where I want to make some very strong points:

(1) Location Location Location – Did I say Location?!

I seem to be able to time technology pretty good. When to deploy, what is going to happen and how it will unfold. When we were in the early stages of thinking about names, look and feel and all the really fund stuff of a startup we had a teleconference with some folks who I trust that have been around the block several times and have worn several hats. When I told them I was going to found the company in Charleston, South Carolina they about jumped through the phone. One of them said “Dude please do not waste these ideas in that area.” Another said, “Look you wont get funding, if you do it will be a small amount, then the same companies that fund the institutional rounds also are the same companies that will buy the company or put their buddy Bob the CEO with a background of being a copier salesperson in place.” Well me being me i said man we have enough contacts and background to make this happen. The talent will be cheaper and we can get some guys to move from the valley due to cost of living.

Guess What? I WAS WRONG! Yep I said it: I WAS WRONG!

Along those lines everyone may also remember this: Deadly Sins of A StartUp by Bill Bagloglu ? Read to about page 8. Take your time I will wait. OK? Finished? So amazingly enough he mentions the company that purchased BeliefNetworks! He also mentions this: “Geographically, BenefitFocus is in one of the most technology unfriendly places in America, South Carolina.They had no venture funding or top- tier capital investments behind them.” It appeared my hubris had gotten the better of me. Now BenefitFocus is amazingly successful. I believe they are the Microsoft of the Health industry. Yet they have been in business a L O N G time.

(2) East coast VCs focus too much on the IPO:

Every single and I mean every single east coast VC talked to us about IPO. I was direct our exit strategy was NOT IPO it was to get purchased by Google, Microsoft, Oracle, IBM, Cisco, Yahoo (you know the guys behind the firewall). I dont even need to put a link in these guys. Lo and Behold! on TechCrunch a story about how IPOs are essentially a thing of the past for the very reasons I was stating almost 4 years ago now. Further I said I wasnt founding the company for this particular company I was founding the company to exit so I could start a proper VC!

The Poor, Pilloried IPO

So I completely agree with this assessment.

(3) Too much time Business Model Engineering

Yet Another Thing I find interesting is the extreme business model focus. Almost three years ago when we had real time (before spritzer APIS) twitter semantics with clustering people were looking at the stuff running and said, “Twitter is a fad, why focus on Twitter?” I continually argued it was going to be one of the main data feeds for the world of Dataspaces moving forward and that the actual software wasnt that important. Data as a Service (Daas). Literally I thought people had gone catatonic on me. Then the would ask: “Yes but where is the software?”

Thus I am ready to get on with this new show and hopefully help some of the hopeful few entrepneuers in the South East get the right thing accomplished and that is taking your idea to the bank!

Until then go big or go home!

June 19, 2010October 25, 2022 TCTJr General Discussion

Amazing Moments of The Past Year

Over the past year there have been some great moments in the history of the company that I co-founded. For context this is my fifth endeavor into the world of start ups. The other four had very nice outcomes and I have been involved with all sides of “The Process”: Raising money, advisory boards, venture capital technical due diligence, acquisitions, acquiring (at large corporations) and making the tea (of which I just made a refreshing batch…). I have seen and heard some amazing comments and have seen some amazing stunts. I remember one VC who fed his wolf hybrid dog biscuits during pitches. The time allotted to present was three dog biscuits and then at the end they would decide whether or not to move forward. Very efficient no muss no fuss. Do or Die. The proverbial elevator pitch had better be novel, succinct and efficient. Each VC has their own process. One must adapt either apriori (if possible) or in the moment to what particular moon phase or bio-phase is occurring with respect to the particular partner during the pitch or hopefully further due diligence. Associates are always nice to deal with as they are usually excited to be talking to you either because 1) they dig the technology 2) they are trying to make an impact on the new ‘found’ company. Hopefully you will make it past the associate, get a second meeting and get a couple of partners on the phone.

This past year we have met with no less than 75 potential funding partners. That in and of itself has been amazing to me but given the global train wreck of the economy, it needs to be put in perspective. Given this large footprint of meetings we have had to be extremely adaptive in the moment much like the software we are creating. Here is a list of the usual suspects of responses during an initial meeting or subsequent meetings:

Interesting, looks like it has legs
We are intrigued
Great! (multiple times)
How will you monetize?
Interesting (said with added emphasis)
What is the specific business model?
Are the engineers all FTEs and in the office?
What do you think your pre/post/exit valuations are?
How do you compare to XYZ company?
Hitherto, other and etc…..

OK so you say big deal been there done that got the t-shirt – swag city. So here we were cruising along answering question after question in the relentless Chinese Water Torture of Due Diligence and Elevator Meetings – one after the other – after the other. This is the process. If your dealing with disruptive technology you need that money amplifier to succeed and get a jump on the competition as fast as possible First one ships usually wins in this space. Its the give and take of the game. It is a great game. As far as I am concerned it is the only game.

So as we are grinding along and the following questions are the ones that still to this day have slack jawed me in amazement:

Is it done yet?

This was in response to “Are there any further questions?”. The question was entirely reasonable with one exception: This was ONE MONTH after we had opened doors. I have been involved in some eureka software moments, as well as quick turning some builds – but nope – sorry to say I ain’t that good. We went through the checklist, passed the checklist for their process and was told, “Well we can’t give you a reason why we are passing, we just aren’t going to invest.” Wow maybe I need to change my deodorant.

Where do your ideas come from?

This was a during technical due diligence. So we are going through ‘The Process”. I was a little taken back that the tech due diligence team wanted to look at our code during a series A raise. yet the good folks at this institution assured me that if the tech due diligence team gave us a thumbs up they would proceed to a term sheet as they only do deep tech due diligence to close. Here is our build process, here is our code, here are our specifications, provisional etc. Then they asked, “Where do your ideas come from?” I thought this person was kidding then I realized this was FOR REAL. Oh yea we forgot tell you about our process, the idea fairies come and leave the answers to the grand unified field theory on my chair every night so I can write up the architecture and specifications. We ended up passing the tech due diligence with flying colors, yet no term sheet materialized. Maybe the idea fairies took it and left being that I haven’t seem them around.

This is a Flash Demo right?

Well no it is not, in fact it is running software. As I was demo-ing our real time software and explaining what was occurring, one of the partners said, “This is a Flash Demo right?”. This was after an hour of discussion of what we had up running. I was standing in front of the 60″ HDTV with the current date and time showing from the results of our software, I then hit enter again and again the current date and time changed to the appropriate current data and time. The discussion then centered around if the current date showing was the actual date. Why yes it was and no this isn’t a Flash demo thank you very much.

What about Google, Microsoft, IBM, Oracle Apple etc.?

I always love this one. I do not consider “thoughting” to be working on or competitive to your current endeavor. “Thoughting” is what happens at many companies. Have you worked on that? Oh yea we THOUGHT about that a decade ago. These companies are concerned about huge issues like Net-Neutrality, data privacy, anti-trust concerns, identity and cyber-security. Of course you need to consider what (insert large software company here) is doing in the current tech your involved with creating, but that does not mean you shouldn’t go out and work on the “Next Big Thing”. Is that what this country is built upon? I cannot stand people who play to failure. I try to be extremely self critical and one of my faults that I try to work on is solipsism. I generally believe people will strive to win at adversity and I end up placing my ethics and value system upon them. Case in point when we were starting our current endeavor, we were told by a large software company engineering executive, “It would not matter if you were making pencils. You and your team will make great pencils. We are investing heavily in (current tech). Go off write come code, file some provisionals and we will probably buy you. We are buying everything in (current tech) not nailed down.”. So yes what about the “guys inside the firewall” as I like to call them. Go do something don’t just sit there and be scared. You have speed and agility on your side (and no rules).

It’s not just Timbuktu, it’s beyond nowhere.

Will this Angel Round get you to profitability?

As entrepreneurs, we strive to be optimistic in all endeavors. Yet somehow, this inquiry is even a stretch for me. Yes, it would be great if you could just put in some angel funding and the next thing you know out pops a Microsoft, Google or (Insert Large Publicly Traded Entity Here). Times have changed. World markets have changed. There is a conflict with the requirements of experience and basic needs of becoming more experienced. What is wanted is the 15 year experienced multiple company, multiple exit founder or initial team with little or no salary or living requirements much like say a new college graduate. It is also interesting in light of the recent market that large VCs are now looking at angel type investments due to lower valuation and better values due to market pressures which put pressure on traditional angels because 1) the large VCs can afford the risk 2) it will probably squash down the angels on the series A raise. So many angels are trying to posture as though they are institutional investors and asking conflicting questions in the same instance, “Can you go off and be self sustaining so we make unbelievable gains, higher than 10x on an exit in the near term” and “We do not want to get crammed down on the valuations during an institutional round.” A couple of weeks ago I had an interesting discussion with a C-level executive of a large software corporation concerning our company which they had already pushed down to corporate M&A. I asked them how it was coming along and they said they are trying but we aren’t expensive enough, go raise some more money.

Aint that always the truth.

April 9, 2009 TCTJr General Discussion

The Three T’s of The Startup

Startups are an amazing process. It all starts with an idea or “what if” scenario: a blank whiteboard and an empty room, a discussion of like minds. Specifications are written. Code is prototyped. Boom!

I have been on all four sides of the startup equation: creating/founding, VC technical due diligence, acquiring at software corporations, and being acquired by software corporations. What does it take to create a chance at a successful Startup? I like to call it the Three T’s: Talent, Technology and Timing. I believe this is what creates the 1% of startups – the successful entities. The Big Idea of your NewCo coalesces the three T’s together. So lets break down the Three T’s:

• Talent

One common thread that I see is The Team, The Crew, The Clan. The Team is core to any of the startup functions. Take a well-seasoned and technically strong team that can execute on a code base in a very efficient manner and all of a sudden a grade B idea turns into a grade A idea. I do not care if you are making pencils. If you have a great team, it will make the pencils into pens! I wrote in a previous post concerning the talents of people who exist in the world of technology startups. Most are multi-faceted over-achievers. Let us look at a very basic core description of some of the attributes I look for in a member of a technical team:

Must have the ability to:

Translate business requirements into system design and implementation.
Breadth of knowledge in several areas and stretch beyond current models.
Understand a variety of constantly evolving business requirements, tools and platforms. (I am willing to bet that idea or business model will change)
Speed and Agility. Can you work intelligently with speed? You will be prototyping systems that have never built before with little or no technical documentation/requirements
Keep Theoretical Rhetoric at the door. It is good over a beer not somewhere that equates to running production code.
Do It All constantly with little or no assistance or answers.

Oh, did I mention constant ridicule from people that say The Big Idea is not possible or they already thought about it? Most companies like Google, Microsoft, Apple, Oracle, Yahoo! or IBM (the folks inside the firewall) acquire companies for two basic reasons: 1) talent or 2) technology. Ok, pretty obvious yet what is the underlying motivation? The talent play is human resource recruiting on steroids. I was talking to an executive at a software corporation somewhere in The Wild West and they said they really do not like acquisitions but look at it like they get an in place department ready to kick start onto something else. Wait what happened to your lovely Big Idea? That is modus operandi and “T” number two.

• Technology

In many cases the technology is acquired for defensive reasons. Why you ask? The good folks inside the firewall usually do not want the other folks inside the firewall to have the latest and greatest creations. Is it really all that important to them? Not really. It is adjunct to the core businesses of the companies inside the firewall. Be careful here – do not fall in love with the technology you are creating. It is very easy to do so. The technology is just a means to an end that enables the idea. That said, sometimes new technologies are created to create the idea. Reduction into practice is what it is all about. I cannot tell you how many times I have heard, “Well we have THOUGHT about that technology.” Ok well glad you have thought about it, thanks we are going to go off and build something to drive a business model to fruition. Given a great team that can execute a clean concise code base (complete with specifications and provisional patents) makes a very attractive package for said corporations to pick up. They get more minds on the keyboards. Possibly your ever changing Big Idea will be used on the corporation. I must say making money off some code you wrote via an acquisition that is deployed via one of the folks inside the firewall is cool. In fact so cool it feels criminal. Especially when it is at the right TIME.

• Timing

This is a tricky one. A very smart professor once told me, “Timing is Everything.” The tech world operates, as do most things in life, within the vicissitudes of cyclicality. What comes around goes around. It just looks and smells slightly different. In the startup world if you think it; it may have already been accomplished and the terminology quick follower may not be quick enough. In most cases they who ship first usually win although a good Rolodex™ of contacts help as well. Knowing when to launch or deploy or even start the Big Idea is everything. Given a great team and some good technology when do you pull the trigger to deploy the Big Idea? Recently, there has been much discussion of semantic intelligence and predictive analytics. Information Retrieval and Knowledge Discovery were extremely hot 1998 to 2001. Many of the same tools and methods for performing natural language processing, machine learning, data mining and a host of other adaptive methods were alive and well yet much of the infrastructure was not in place. Today we have infrastructure technologies with REST, Hadoop, EC2 and the like and it makes getting down to business of creating Societal Mathematics so much more enjoyable because one does have to worry about the pipes. Also we have so much more data in the areas of digital born goods via the World Wide Wait (ah Web – excuse me). Is it truly different? Not in an academic sense. The timing is important. A great idea or a great team to far ahead or far behind could spell disaster for a startup. In most cases it is better to be a “front-runner” than a “quick follower”. In a startup hours are days and days are months. So it is very important to get out of the gates quickly. Analysis to paralysis can be a death knell. A grade B idea timed correctly with great execution will magically turn into a grade A exit.

Is this a concise cookbook? No. Yet I hope you found it helpful and thought provoking. There are no panaceas for idea2bank monetization but that doesn’t stop me from trying to find one!

Remember: your ideas are your own until you tell someone.

April 7, 2009October 25, 2022 TCTJr Out In The Fringe

The Origami of Instinct

We, as a society, are losing our instincts. I believe that instinct plays a role in successful startups. In a startup, it is imperative and essential you possess a passion for being the strongest, fastest, smartest or combination of all of the aforementioned with respect to the technology or business model you are creating. There are no gray areas concerning creating a successful agile business. You cannot pass off the blame or pass the buck in this environment. This is one reason that so many come back to the startup world. This is survival of the fittest. Yet some do not view it this way. They view a method of tearing down instead of raising everyone’s performance level.

Playing to Success; Playing to Failure

Some play to success or play to failure. Playing to succeed is the process that I prefer and honestly only know how to perform within the context of my career. Playing to success means that you involve as many people as possible in the discussions to make the pie larger for everyone. You also involve people that are BETTER than you. I like to term this “Wolves Drinking Out of the Same Pond.” If all the wolves drink from the pond and protect the pond, it will create a more extensive and healthier pond for all the wolves (companies) involved. Playing to success is connecting the Elite of the Elite together. If you look at the world of successful startups, the people involved are usually multi-faceted over-achievers. They are great business types AND world-class rowers; they are world-class programmers AND accomplished musicians. Then most add extracurricular endeavors like marathon running, martial arts, or extreme sports. Most read self-help books or some non-fiction daily; if it is fiction, it usually is something arcane, or they are re-reading, Milton’s Paradise Lost. These people usually seek out others of like kind to aid them. Also, most do not need self-help books, yet they strive to make themselves better at all costs.

So let’s return to the importance of losing our instincts. Our ability to perceive fight or flight situations are becoming less and less. We do not, daily, need to detect these situations or do we? We no longer need to smell the air to detect an adversary. What does that do to our pre-cognitive processes when engaging with an adversary (read competitive company). Is tearing down the new competitive startup advantageous?

On the contrary, startups should ban together. The startups are the wolves. We have the advantage, we have the speed, might and willpower, and passion for creating faster and more focused entities. Exits are Acquisitions. So why wouldn’t we want to increase our ability to detect Fight or Flight? Do you think that Venture Capitalists can’t detect when you are not entirely committed or are unsure of the answer you were just asked? You bet they can detect any fright mechanism. Use at your disposal what led you to arrive at this juncture. To increase and practice your senses (all 6 of them), and I bet it will make you a better entrepreneur. If it doesn’t, at least you will have improved yourself. For those that already know, you already have, and I will see you at the pond.

April 3, 2009 TCTJr Out In The Fringe

The Can’t Do Voice

Most will not find this pertinent to making money or startups. However, it is very pertinent. Undo the “can’t do” thoughts in your head. Can’t do’s have no place in a startup.

This is an excerpt from a larger work entitled “A Day at the Zoo” by the now-deceased Dr. C.S. Hyatt

Sa-Shu-Ah – by Crag Jensen

Close your eyes, relax and float downstream.

Hello – I am the man on the Radio
I am the man on your television News Channel
I am the man behind the pulpit and the man who works for the Government
I am the man whom you must believe in because I am the man whom you fear the most.
I am – alas- the man who has been planted inside your head since you were too young to even talk – to walk- to reason or question.
Yes, it’s true – I am the man who never tires of telling you what to do – how to vote – what to eat – what to buy – what to believe in – where to go – when to go – and how to go.
I am the man who sits inside your head and dictates – dictates – dictates. I am, therefore – and in essence – your personal – government approved & church sanctioned – dictator.
I am not you, but I will be all that is left of you at the end of the day because you have long since relinquished the responsibility of being who you really are because it is much, much, much easier to listen to and obey me – rather than to break free of me and actually accomplish something worthwhile in your – so-called life.

Life-life-life
No Don’t waste it
Don’t be a slave to your programming – anymore
When you can open – yes you can open the door.
And Set yourself free.

And though I wish you well – only time and work will tell
Just how you will fare – true success is all too rare.

But whatever you do wherever you go – don’t forget
To keep on undoing yourself (undoing yourself, undoing yourself…)

March 27, 2009 TCTJr Out In The Fringe

The Death of Keywords and Domain Names

I was considering the death of keywords and domain names. Here is what I believe is going to happen over the next year if not sooner:

1) Keywords will be supplanted by relational phrases

2) Domain names will be supplanted by Twitter Usernames

So before your sitting there saying god this guy is a complete dumb ass just roll with it for a second or two. Finally with the advent of infrastructure on the web becoming stable many of the technologies that were around circa 89′ / 99′ have come back into the fray. Here is a laundry list in no particular order of importance: Machine Learning, Data Mining, Natural Language Processing, Semantic Intelligence, Predictive Analytics. Some have parts of others and some are considered umbrellas of other technologies. The importance of the infrastructure being in place is phenomenal. We used to have to worry about things like co-location,bandwidth,storage etc and now it is a given. EC2,S3 and the like have made these worries a non entity and we can get down to the business of creating intelligent computing – finally. Twitter Trending a (#) hashtag on follow Friday is nothing more than creating your own intelligent content delivery (iCDN) system abliet at this time human powered. There is the ability to have relational and semantics across those and also fusing the symbolic with the semantic. Don’t think its possible? http://www.mashmeup.com Enter a complete URL and watch what happens. No Keywords. No Adwords. So what does that leave to bid on in the world of search or ads? What if you didn’t have your precious AdWords to buy or Keywords to put into your SEO? We have to come up with a different model. How about a model of barter arbitrage based on the immediate viewership in the moment? Just In Time Content Creation that can be trended and optimized. When we used to think about this there was no animal such as device edge caching. Done. There was no animal-like Support Vector Machines in real-time. Done. We are at a precipice where this is possible and we are seeing it. There is however the issue of privacy and creating a personalized in moment web world for you that I will discuss on a different bloggatorium. That said we will start bidding on information in situ and not based on the banal keyword. I can hear it now. Keywords were so 2010.

Given we will not longer have keywords to bid on what’s in a name? Mashable. Jack. PerezHilton. You get the picture. I am sure most of you have already barnstormed the TwitterVerse much like the heyday of the early days of domain names. There are still some nuggets out there. However, just look at the traffic. It is amazing to think that Twitter was an accident. I like to call Twitter the Narscisstic Attention Deficit Disorder Network (aka NADD). There have already been some rumblings on the back channel of how much is the going price for the top 10 slots. Immediate hits on your page (back to my first point). How does the Twitter Username semantically relate to what is happening in the moment? How about changing your Twitter UserName to fit the moment and then bid? A new Stock Market Model. The opportunities.

Then again I could be totally wrong.

March 25, 2009 TCTJr General Discussion

Being Amazed After All This Time

First welcome to my “blog”. I finally stood up this blog in order to assist others in the maze of creating and making money from ideas. Thus the Idea2Bank moniker. What better way to make money than from a simple two-sentence idea, some slideware, a specification then software? It is truly unique. I hope to see you back and I will be posting daily. Y’all Come Back Now – Ya’ Hear?