Angel Funding for Startups

Businesses that Push the Boundaries of the Law

Sanjay Manandhar, Mark Thirman and David Powsner discuss an upcoming program, to be hosted by the MIT Enterprise Forum Software Circle, on February 28, 2013, on the topic "Businesses that Push the Boundaries of the Law."

Does Revenue Really Matter?

Does Revenue Really Matter?

Every business needs to make money—certainly, every for-profit business does. The question is “by when?” Most businesses need to make it from the get-go or, at least, before the owners run out of money. This would be typical of a “bootstrapped” business, which survives and grows from its own revenues.

Financing and particularly, for example, investor funding makes it possible for a business to put off the day when those revenues need to come in. That extra time can be used for market studies, product development, and so forth. It can also be used to acquire marketshare. Think about a restaurant or retail store that has a grand opening sale at which it reduces prices — and, thereby, delays revenue — in order to gain initial marketshare.

Software businesses and, particularly, Internet businesses can take this to a greater extreme. Unlike, say, a restaurant, a dry cleaner or other brick and mortar business, which might have a potential market that is limited to the local and surrounding towns, the market for an Internet business is, potentially, worldwide. Moreover, with products that are made up of digital bits and bytes, the incremental cost of producing and shipping can be quite low for a software or Internet business. So if we think about delaying revenues, you could imagine how an Internet business might really be able to grow market share through a “grand opening sale” of sorts— that is, by charging little or nothing during its initial months or years of operations. Think of it as a “landgrab” as against other entrants into the marketplace.

Unfortunately, it was this logic that led to some real excesses that we now know of as the "Internet bubble." In the late 1990s and early 2000s, there was more than a bit of the “goldrush” mentality. The Internet was new and growing, as were potential markets in China, India, and elsewhere. At the time, the opportunities seemed boundless and if you are an optimist with money to invest, it was hard to resist the craze.

Whether it was a result of banking deregulation, the push to lower mortgages so that every American family could buy a house, or whatever, there was just too much money “in the system,” back then. People were willing to throw investment dollars not just at proven businesses but at any start-up that presented the possibility of being a business. The excess of investment dollars induced investors into some pretty hazy thinking.

And, then, there was the theory of the “greater fool.” It goes something like this: Why should an early investor worry about whether any particular start up could make it in the marketplace, if there was likely to be a subsequent investor or acquirer who would buy the business at a greater valuation—regardless of whether the business truly had legs.

Taken together, these presented a perfect storm, of sorts, that led to the rapid growth and even more rapid collapse of the bubble.

Since then, the government has tried to put in place laws and regulations aimed at curbing some of the root causes of the excesses of the era. Whether those will prevent a future bubble is another question entirely. The fact that we arent in one now (or are we?) may simply be because people either have or are willing to invest and theres less “irrational exuberance” to energize growth of a bubble. The result is that, today, investors seem to be more critical and are, more often than before, requiring that startups prove that they have or can more readily attain real revenue.

So for the startup that wonders whether revenue really matters, take to heart that a viable business plan remains a must-have if you are looking for investment funding. That plan needs to include a path to revenue. Must the startup have actual, current revenues to attain that sort of funding? Well, current revenues are a plus but they are not necessarily a dominant factor. After all, for example, a so-called lifestyle business that has current revenues but has no possibility for real growth may not be attractive to investors at all.

Listen to a podcast on the subject at: http://www.mitforumcambridge.org/news/software-revenue/ and, if you are in the Boston area, join us for a live discussion January 31, 2013, on the MIT campus. Register at http://www.mitforumcambridge.org/events/software-circle-event-does-revenue-really-matter/.

(c) Copyright David J. Powsner 2013.

With thanks to Randy Cronk of greatwriting.com and the MIT Enterprise Forum of Cambridge for motivating this discussion.

Big Data is Not Just For Big Business

In this session, we are pleased to present excerpts of a recent panel discussion BIG DATA offered by the MIT Enterprise Forum Software Entrepreneurship Special Interest Group in connection with the Tufts University.  The panel discussion was held on October 25, 2012,  on the Tufts  campus in Medford, Massachusetts

Our panelists were David Dietrich and Jeanne Hopkins.   David is advisory technical education consultant on big data and data science for  EMC Corporation, where he recently co-developed that company's first course in those areass. David has been involved with data analytics for nearly 20 years. Prior to taking on his current role at EMC, he managed a line of analytical software products for regulating the US banking industry, and developed Software-as-a-Service and Business-Intelligence-as-a-Service offerings. He’s worked with many Fortune 500 companies, and collaborated with the U.S. Federal Reserve to develop predictive models for monitoring mortgage portfolios.

Jeanne  Hopkins is chief marketing officer executive vice president of Smartbear Software.  She also authored“Go Mobile,” the #1 best-selling mobile marketing book on Amazon. She has expertise in data-driven on-line marketing. Jeanne’s background is in customer acquisition expertise across channels including SEM, SEO, Email, Display, Affiliate Marketing, Facebook, Retargeting, Customer Referrals, and Partner Marketing.  Prior to joining SmartBear, Jeanne was vice president of marketing for Hubspot, where she was responsible for creating and converting organic and paid demand into 50,000+ new sales-ready business opportunities for the team of 100+ Inbound Marketing Specialists.

The moderator for the program was Shirish Ranjit, a recovered entrepreneur and now software developer with the MIT Lincoln labs. Organizers for the program, in addition to Shirish, were Mark Thirman, former founder and CEO of Air Print Networks and, now, a director of partnerships  for Vodafone; Vineet Sinha and Chris Deschenes, both of Architexa, a software solutions provider where Vineet is founder and CEO and Chris heads up  business development efforts; Sanjay Manandhar, founder and CEO of Aerva, a digitale signage technology company; and yours truly, David Powsner, an intellectual property lawyer partner with the law firm Nutter McClennen Fish.  

Angel Funding for Startups

Excerpts of a recent panel discussion offered by the MIT Enterprise Forum in a Get Smart program  entitled "Angel Investing. It's Right for Many Startups.  Is it Right for Yours?"

The program was hosted by Nutter, McClennen and Fish, LLP, a Boston-based  law firm with corporate, litigation and IP practice, and  was held on October 30, 2012,  at the law firm's Louis Brandeis conference center, in downtown Boston.

Panelists were from Boston Harbor Angels,  a Boston-based angel investing group made up of business leaders who invest in high-growth, early-stage companies. Since 2004 the group has made investments in companies in medical devices, IT, consumer products, business products, specialty materials, Internet, aviation, etc.   

In the session, you'll hear from Mic Williams, the founder and president of Boston Harbor Angels.  He has been an investor for over 34 years, with investments ranging from commercial real estate to manufacturing, mining, movies, lumber products, ships and a television enterprises. Since he founded the Boston chapter of Keiretsu Forum in 2004 and then Boston Harbor Angels in 2006, he has personally invested in more than a dozen "portfolio” companies. 

You will also hear from Jeff Arnold, a member of Boston Harbor Angels and the CEO of Arnold Strategies, LLC, which assists early stage and growth companies in strategy, marketing, financing, organizational development and strategic partnerships. He was formerly a CEO of multiple technology and life science companies who raised over $140 million in venture capital and public financings and achieved four exits through acquisition and IPO. Jeff is a mentor to early stage companies at the MIT Venture Mentoring Society, on the grant review board at the MIT Deshpande Center and an investor with Boston Harbor Angels and Mass. Med. Angels. He was formerly Chairman of the Greater Boston Chapter of the American Heart Association. He received a BSEE from MIT in 1972.

And, finally, you will hear from Bill McPhee, also a member of Boston Harbor Angels who currently serves as the director of outsourced business development services for Health Advances LLC, a life science strategy consulting boutique.  Bill has 25 years experience in transactions, strategy and operations consulting and venture capital. He has served as founder and managing general partner of Mi3 Venture Partners, an early stage life science fund; founder and managing director of Lucas, McPhee & Co., an international strategy firm; and, a consultant at Bain & Co. 

You can read more about the panelists and the MIT enterprise form of Cambridge get smart program at http://www.mitforumcambridge.org/events/get-smart-on-angel-funding

Here's a little background . . . 

Angel investment in startups totaled over $22 billion in 2011 and funded some 66,000 companies, according to UNH’s Center for Venture Research. With average funding-round sizes well over $500k, angel groups are increasingly joining forces with other investors to bring that average closer to $1.5 Million. So says the Halo Report, which also notes that Internet, healthcare and mobile/telecom companies are the largest beneficiaries of those monies.

So who are angel investors? Many are former successful entrepreneurs, who provide advice, in addition to money, to target companies. Angels, however, can also be individuals of lower wealth and/or with non-entrepreneurial background who are drawn to startups for a higher rate of return than might be expected in the stock market, notes the Kauffman Foundation.

The popular press suggests that venture funding is the key to every startup’s success. But that sort of funding comes at a high price in terms of equity and performance expectations. Angels expect equity and performance, too—yet at levels better geared to the realistic trajectories of many startups. Angels, according to the Wall Street Journal, are a “good funding source to consider after you’ve tapped your friends and relatives.”

Social Media for the Startup

A panel discussion on using social media for marketing the start up business, excerpted from a program offered by the MIT Enterprise Forum Software Entrepreneurship Special Interest Group in connection with the Babson College Olin Graduate School of Management.  The panel discussion was held on September 27, 2012,  at Babson's downtown Boston campus. 

Panelists were Todd Van Hoosear, principle of Fresh Ground, a Boston-based Public Relations and Social Media Firm, and Matthew Growney, founder and CEO of Isabella Products, a mobile Internet device and services company focusing on consumer-products. 

There is more information on the program and panelists at http://www.mitforumcambridge.org/events/software-sig-event-%E2%80%A8state-of-the-art-social-media-and-business-four-years-on/

The moderator for the program was Shirish Ranjit, a recovered entrepreneur and now software developer with the MIT Lincoln labs. Organizers for the program, in addition to Shirish, were Mark Thirman, former founder and CEO of Air Print Networks and, now, a director of partnerships  for Vodafone; Vineet Sinha and Chris Deschenes, both of Architexa, a software solutions provider where Vineet is founder and CEO and Chris heads up  business development efforts; Sanjay Manandhar, founder and CEO of Aerva, a digitale signage technology company; and David Powsner, an intellectual property lawyer partner with the law firm Nutter McClennen Fish.  

In addition to listening to this podcast, we welcome you to visit our website at techentrepreneur.info