Friday, June 25, 2010

The Boston Regional Entrepreneurship Week 100

Yesterday, I wrote that Joe Caruso was hoping to recruit 100 thought leaders for a Boston Regional Entrepreneurship Week  (BREW) to be held the week of Oct. 12, 2010. Joe was concerned that time was short to plan and organize this event.

Joe just got his 100th member, just 24 hours after he asked. It is quite an impressive group. Opinion leader or not, you can join the group here. Should that fail, go to Linkedin and look up “Boston Regional Entrepreneurship Week.”

I tip my straw hat to Joe Caruso and his 100 BREW volunteers.

Internet Trends 2010 by Morgan Stanley Research

The last time I wrote about Morgan Stanley presentations, they had just published their report on the mobile internet. Now, just seven months later, the mobile internet has become just the internet. These reports contain great data for anyone who is preparing a business plan for a new venture.

Thursday, June 24, 2010

A new BREW: the Boston Regional Entrepreneurship Week in October

A number of our very active local Angel Investors have cooked up a plan to designate the week of Oct. 12 as Boston Regional Entrepreneurship Week. Present at the inception were Angel-at-Large Joe Caruso and Unconference Disorganizer Bill Warner, joined by Chris Sheehan, Dharmesh Shah, John Landry, and Jean Hammond.

“We're trying to expand Bill Warner's Unconference into a week of activity and celebration for entrepreneurial activities in Boston. We were just talking about the idea, and suddenly it has taken on a life of its own,” says Caruso, who hopes to involve Angel Groups, Venture Capitalists, technology-based corporations, and the Commonwealth of Massachusetts.

“We are hoping to get 100 thought leaders onboard very quickly,” says Caruso. He’s off to a good start. He set up a Linkedin group this morning and by midday he had 23 members.”

Opinion leader or not, you can join the group here. Should that fail, go to Linkedin and look up “Boston Regional Entrepreneurship Week.”

You can also contribute to discussions on Linkedin. I suggested to Joe that they expand the boundaries of the group beyond those regularly honored, running roughly from Microsoft NERD to the Longfellow Bridge, then West to the Kendall Square Red Line Stop, and South to the Stata Building at MIT. Using Saul Steinberg’s famous New Yorker Poster, “View of the World” as a guide, Joe promises to consider the idea.

New Hampshire’s New Start-Up Accelerator

A team of technology entrepreneurs led by Mark Galvin has partnered with the University of New Hampshire (UNH) to launch a new startup business accelerator - the New Hampshire Innovation Commercialization Center (NH-ICC). The goal of this nonprofit center, located at the Pease Tradeport, is to create new jobs in the region by selecting high potential early stage companies and providing them with a combination of business resources, seed capital and “hands on involvement” by seasoned startup executives.

UNH, which has developed a strong entrepreneurial culture through spin-off companies, by housing the internationally respected Center for Venture Research, and through its campus-wide Holloway Business Plan competition, provided startup capital for the NH-ICC as well as expertise in creating the unique public-private relationship. The NH-ICC will work to facilitate the use of university research by its resident companies through licensing and royalty agreements. UNH will also provide resident companies with student research assistants and mentors from its colleges, including the Whittemore School of Business and Economics.

“This is a great opportunity for the university to support technology entrepreneurship both on our campus and in our community, while at the same time leveraging our resources to help support the creation of private sector jobs in the state,” said UNH President Mark W. Huddleston. “Turning the university’s intellectual capital into commercial opportunities as a way not only to expand revenue streams but to enhance economic development and job creation in the state is a key component of the university’s 10-year strategic plan and I’m pleased we are well on the way to seeing results.”

“The economic downturn of the past two years has taken a significant toll on the New Hampshire startup community, where a host of innovative new technologies – not to mention local jobs - are languishing on the sidelines because of the lack of a viable path to commercialization,” said Mark Galvin, the founder of Whaleback Systems in Portsmouth, Cedar Point Communications in Derry and managing director of the NH-ICC. “The NH-ICC will provide a path for promising early stage companies to bring their products to market while also creating sustainable, high-value private sector jobs in the state.”

Added Galvin, “UNH has played a critical role in getting this initiative off the ground, providing both resources and funding. We look forward to helping the university accelerate the commercialization of its research, inventions and technology while also using the NH-ICC to attract entrepreneurs from throughout New England to build their startup business in New Hampshire.”

The NH-ICC will select up to 12 seed stage technology companies on a rolling 12-month basis and “graduate” resident companies after 18 months with the expectation that they will remain in New Hampshire, grow rapidly and create new jobs. The NH-ICC’s operations will be funded through a seed investment from UNH, private investment fund management fees and carried interest, and matching business development grants. Selected resident companies will receive $100,000 to $250,000 in seed funding from the private investment fund.

UNH has had a strong entrepreneurial focus since at least 1984, when the Center for Venture Research was created within the Whittemore School of Business and Economics. Currently led by Director Jeffrey Sohl, the Center studies early stage equity financing for high growth ventures.

The Whittemore School Holloway Prize Innovation-to-Market Competition, established in 1988, is designed to stimulate entrepreneurship throughout the University System of New Hampshire. A short video of this year’s final round is available on WMUR's Chronicle.

In 2001, the first company was spun off from UNH. Chaoticom, a joint project of the Math Department and the Whittemore School, received seed funding from the eCoast Angels Investment Network.

Now,  in 2010, we have NH-ICC. AT IBM in the 1960s, we knew it was summer when the Branch Manager switched to his straw hat.  This summer, I tip my straw hat to Mark Galvin for getting this accelerator launched.

Tuesday, June 8, 2010

Angel Investors, Measuring Their Added Value

Can you measure the value that angel investors add toward the success and growth of new ventures?

Following a recent Tweet from CommonAngels (aka James Geshwiler) , I uncovered a working paper on this topic authored by William R. Kerr and Josh Lerner of HBS and Antoinette Schoar of MIT. Their conclusions:

• Angel-funded firms are significantly more likely to survive at least four years  and to raise additional financing outside the angel group,

• Angel-funded firms are also more likely to show improved venture performance and growth as measured through growth in Web site traffic and Web site rankings; The improvement gains typically range between 30 and 50 percent,

• Investment success is highly predicated by the interest level of angels during the entrepreneur's initial presentation and by the angels' subsequent due diligence,

• Access to capital per se may not be the most important value-added that angel groups bring. Some of the "softer" features, such as angels' mentoring or business contacts, may help new ventures the most.

Another interesting conclusion: “Angel investors as research subjects have received much less attention than venture capitalists, even though some estimates suggest that these investors are as significant a force for high-potential start-up investments as venture capitalists, and are even more significant as investors elsewhere. This study demonstrates the importance of angel investments to the success and survival of entrepreneurial firms.”

I am particularly intrigued by the authors’ conclusion that mentoring and business contacts may be more valuable than money. Entrepreneurs never make me feel that way, which is unfortunate, as I have lots of advice available.

The study is based primarily on data provided by the Tech Coast Angels and the Common Angels. Cooperating with the authors were some of the usual suspects: James Geshwiler of CommonAngels, Warren Hanselman and Richard Sudek of Tech Coast Angels, and John May of the Washington Dinner Club. The Kauffman Foundation partially supported this research.

You can find a summary of this paper, The Consequences of Entrepreneurial Finance: A Regression Discontinuity Analysis, right here. The full paper is also available online.

Wednesday, June 2, 2010

Open Angel Forum to Slay Chimera, June 18

The Open Angel Forum is coming to Boston on June 18, and they will be very welcome. I do wish, however, that they would either change the way they present themselves or that our local journalists would do a better job of providing perspective so as not to undermine the very values the OAF claims to promote.

For example, Scott Kirsner, one of the most vigorous and talented journalists covering the technology scene, writes in his blog: "Peeved about events that charge entrepreneurs an entry fee to present their businesses to angel investors, Jason Calacanis decided to create Open Angel Forum earlier this year. The series of events, held so far in places like San Francisco, New York, and Los Angeles, is 'dedicated to providing entrepreneurs with free and open access to the angel investors that they need,' according to the Web site."

I cannot understand how local entrepreneurs, particularly inexperienced ones, can read that description without inferring that they do not currently have "free and open access" to our local Angels and Angel groups, while in fact we have the world's longest continuous tradition of open access. And I hate to think that even one prospective entrepreneur would be discouraged from applying to our local groups because he has been warned off by assertions of "high charges."

In this isolated case of misreporting, Kirsner doesn't stand alone, as similar notices have appeared in Xconomy, Mass. High Tech, Boston Business Journal, and will undoubtedly be repeated many times in the next few weeks. Here is what Mass High Tech has to say: "Calacanis launched the Open Angel Forum in December out of anger over so-called “pay to play” angel groups, which charge startups a fee to present their pitches."

And while I applaud the attempt to make Angel capital more accessible to entrepreneurs, I feel a need to point out that in not charging presenters the Forum is not innovating, but is just following the tradition of most existing angel groups.

New England has a long tradition of Angel Investing without charging fees to entrepreneurs. To my own knowledge, the first of our regional Angel Groups was the Breakfast Club, formed in 1976 by Mort Goulder, Dick Morley, George Schwenk, and Doug Drane. Still operating, The Breakfast Club reviewed about two business deals a week, investing in about four companies a year. Morley and Schwenk estimate that the club has boosted more than 100 startups. To many, the face of the breakfast club was the late Mort Goulder. “He was a great inspiration to a lot of companies,” Schwenk said. “It’s interesting how many e-mails have been written about him in the last two years. I didn’t know techies could write so well.”

One well known startup that benefited from The Breakfast Club was Carbonite, a Boston firm that provides back-up systems to computers. “Mort is just one of these guys who just makes things happen,” said David Friend, president of Carbonite. “He was just busy, busy, busy. For a guy his age to be running around like that was amazing.” The Common Angels was another seed round investor.

Another example is VKernel of Andover, a joint project of the Breakfast Club and the eCoast Angels."Mort was both a mentor and friend. A true inspiration to the high tech entrepreneurial spirit of New Hampshire," founder Alex Bakman said recently.

Some angels who learned from the Breakfast Club and went on to form other Angel groups include Jean Hammond, a founder of Golden Seeds , and myself, co-founder of the eCoast Angels.

Angels tend to invest locally, so the first thing an entrepreneur should do is check group listings on the Angel Capital Association (ACA) web site. The ACA, under the leadership of Common Angels Managing Director James Geshwiler, began discouraging members from charging presentation fees and continues to do so today. On the ACA site, a local entrepreneur will find 16 New England Based Angel groups. Polling these groups earlier this year, I found only one, Golden Seeds, charged, and that the charge was minimal, $100.

Many groups of Angels, such as The Breakfast Club, are not members of the ACA. In New Hampshire alone, I know there are such groups in Nashua, Hanover, Keene, and in the Mt. Washington Valley. Additionally, not all Angels are in groups. The number of active Angel Investors in 2009 was 259,480 individuals, according to the best source available, the Center for Venture Research at UNH. Collectively, these Angels invested $17.6 billion last year, spread over a total of 57,225 entrepreneurial ventures. Expressed as a round number, I estimate that the number of these Angels who charged presentation fees is zero.

Finding these unaffiliated groups and individuals can be more difficult for the entrepreneur, but it is relatively easy for anyone who is wired into her local technical and business community. Ask other entrepreneurs, as well as attorneys, accountants, and bankers. They'll know.

Talking recently with Jeff Sohl, Director of the Center for Venture Research, we discussed two actual problems limiting the growth of Angel investment. The first is encouraging more people to become Angels. There are lots of individuals with sufficient resources to be Angels, but they never see any deals, have no clear idea how to find and evaluate them, and are thus in the bleachers rather than on the field. The other real problem is what Jeff calls "latent Angels." Latent Angels join a group or attend investment presentations, but they can never quite bring themselves to actually make an investment, thus relegating themselves to the dugout.

Perhaps Jason Calacanis' Open Angel Forum, leaving the slaying of the Chimera to Bellerophon, could use its magnificent publicity machine to get more Angels onto the field and into the game.

Tuesday, June 1, 2010

Mobile Startups at the MIT Museum - June 7th

If you can make it into Cambridge, Mobile Monday is taking over the MIT Museum for a night of mobile exhibitions, food, and drink on June 7th. Come see new mobile startups including Springpad, Peekaboo, RaizLabs, Zazu, Vendee, Two forty four am, LiquidBits, uGuideMe, Delfigo Security, Hello Vino, Tweetworks, Adva Mobile, Sayagle, and many more.

Date: Monday, June 7th from 6.30pm to 9pm.

Location: MIT Museum in Cambridge.

Register at the Mobile Monday Boston Web Site.
As you enter the MIT Museum, directly across Windsor Street is MIT's Barta Building (now building N42) which housed  the famous Whirlwind  project, which I described in an earlier post. Built in 1904, the building was restored to its original brick exterior with its distinctive gargoyles in 1997-8. It is neigh impossible to overstate the significance of Whirwind to the development of Route 128 as a center of computing technology and venture capital.