Business Ramblings – Page 4

VCs Say Startups Wants to Stay Private

December 5, 2008 Leave a Comment

Tonight I attended an interesting panel discussion that featured three Bay Area venture capitalists discussing the impact that today’s recession based economic conditions are having for startups and their fund raising processes. Two things from this discussion jumped out at me.

The first being that all three of the VCs agreed that if you can bootstrap your company and or drive to profitability with taking very little money, then do it! This isn’t what you would expect to hear from a VC, but when you consider that most VCs are “businesses” that are structured to do large deals, this makes sense. Smaller business opportunities exist all around us that could be grown to a $10M-$50M exit. Most VC’s can’t invest the time into those opportunities when these entrepreneurs are looking for under $500k of investment. Those are the deals that a few dedicated entrepreneurs could bootstrap and grow by staying focused and end up with a very nice payout with the majority going to the entrepreneurs.

The other topic that jumped out at me (but by no means surprised me, I agree with it) is that fact that most entrepreneurs or managers in startups and small companies don’t dream of taking their company public anymore. There is so much overhead and pain involved with being a public company today with regulations, requirements, and value being driven by those who don’t focus on long term fundamentals of a company that it isn’t really worth it unless you are large enough or have a unique and defensible enough value proposition. Add on top of this the increased public distrust and angst toward senior executives of public companies that the reasons for being an executive in a public company are far out weighed by the headaches involved.

On that same thread, I find it amazing how some very large companies who are sitting on Billions of dollars of cash are completely abusing their employees right now in order to increase their stock price. I have heard some scary stories as of late that take cost cutting to new highs and lows, and employees are having to take some of these cost cutting measures directly to their bottom line. It’s one thing when the company is fighting for it’s survival, but another when the company is sitting on Billions in cash and has growing revenues. The reason for this in my opinion is that stock prices currently are not being valued based upon the fundamentals of the company. Yet the senior executives of a public company can’t follow their best business sense to do what’s right toward their employees and customers because they have to cow tow to wall street analysis and fund managers who are are influencing their stock priced based on the macro economic situation.

Who wants to be a public company CEO in this climate?

(Though with the right company, right now is the time to invest with these artificially deflated stock values…)

Exploring The Energy Flip Side

August 7, 2008 Leave a Comment

Tonight on my drive home, I heard an interesting radio program on my local NPR station (KQED). They were airing part of the Asia Society’s U.S.-China Green Energy Conference, a segment about Fueling a Clean Energy Future. The introduction was from one of the partners (I think he was a partner) from NEA. Most of the discussion that I heard (recording wasn’t posted at the time I am writing this) was about the energy needs of the world and the possible energy generation alternatives.

NEA is a venture capital firm. So the types of investments that they are looking at are the ones that will score huge payback. If the opportunity won’t turn into at least a $100M+ business, they usually aren’t interested. So it makes sense that they would be investing huge in the power generation side of the planetary energy coin.

However, on the drive home, it struck me…what about the flip side of that coin? If the estimated future power consumption for the planet is measured in the 10’s of Terawatts of power and if the power needs are increasing as developing nations raise their standard of living to match the developed nations standards, why isn’t there as much attention given to saving power?

Are we focused to much on addressing the symptoms and not enough on the cuase?

I remember years ago hearing about a company that was working on a power transformer that would allow devices to go into standby mode and consume fractions of a watt of power instead of 10’s of watts of power that is the norm now (see my previous post about Results from Monitoring the Meter). About a year ago I tried to find that company, doesn’t exist any more. Transmeta was another company that was focused on the power savings, but dropped off the radar and is a IP management shell employing more lawyers than engineers right now. The only company that I can think of immediately that is both above the radar and impacting huge power savings directly from their technology is VMware.

There are huge areas of waste that we can still address. Image how much of a dent we could put in the future consumption if our focus on how not to use as much electricity expanded beyond CFLs? I hope there are more companies out there than I know of working on conservation technologies, but I guess I find myself a bit annoyed by the lack of focus that seems to be applied to them.

(Disclosure: as of this writing I am employed at VMware as a Solutions Consultant.)

BAM: Startups Get Business Smart

April 30, 2008 Leave a Comment

Earlier this week I got together with a group of entrepreneurs I know and I was surprised to learn that one of them is starting to instrument his online application to provide Business Activity Monitoring (BAM) capabilities. Granted, he didn’t realize that what he was doing was BAM, but that just shows that as a business person he intuitively knew he needed to instrument and monitor his business.

This is a very smart move on his part. Early on in a startup’s life cycle all the focus can be on the business of the end users and forget about the business of running the business. With limited engineering resources, where do you invest them? Most startups will invest all of those resources into their product offering. Only later, when the product complexity has grown and they are out talking to investors do they realize the mistake they made.

This particular entrepreneur is the founder of Amahi, which offers a linux home server. You sign up for the Amahi service, which is currently free, and then download the Linux based software needed to run your home server. Amahi has highly automated the process of getting everything installed and up and running, in the end you have your old PC re-provisioned as a home server for your “family intranet”. You can then monitor your home server from the Amahi website.

With their new instrumentation, Amahi can now monitor how many people have signed up and where each one is in the installation process. If a customer stalls out somewhere in the installation, Amahi now knows about it and can proactively reach out to provide assistance. Beyond that, as the person running the Amahi business, the Founder now knows what his conversion rates and time frames are for customers for each stage of their installation. If Amahi ever needs to go talk to investors for funding, this information is invaluable as it shows how their business works and provides the investors a sense of comfort that the business is being professionally managed.

As a long time statistics hound, I worked in the early day of the web providing application instrumentation for running explosive web businesses. We were always focused on the technical instrumentation of the servers, but I also got interested in the business possibilities instrumentation provided. BAM has been a decade long initiative to move that instrumentation up to the business level, an initiative which was highly successful. However, BAM typically focuses on larger companies. The principals of BAM can just as easily be applied to Startups with just as much value. The startups just need to invest the time to build it into their system from the start.