Thursday, June 26, 2008

Starting a company 101

Recently, Fred Wilson wrote a post about his "boredom" with Web 2.0 companies. He didn't really mean this, but it's worth expanding the topic a little bit.

He mentioned his buddies working in alternative energy and biomedical technologies that seemingly improve the way people live in this world. Is there a future for Web 2.0 to have the same impact as these?

If there's nothing else I learned at MIT, it's the Startup 101. What is the first question that an entrepreneur should be asking? While there's no right answer, what I noticed from many successful companies is, "Am I solving your problems?" In other words, "Does my 'baby' touch your heart, head, and wallet?" If all these conditions are met, we have a business here. Biomedical technology and clean tech are perfect examples that induce fears of something really serious happening to the world that we live in.

I should at least mention that there are some business with pure entertainment purposes like gaming, gambling, etc. that do not necessarily need to address big problems besides just being fun.

Investors get excited when entrepreneurs induce fears about not doing anything about the company. Some of the most successful/interesting companies do this just so well.
  • Google emerged as a problem solver to horrible user experience and search results from other competitors.
  • A123 Systems made it possible to have high power mobile batteries that some customers were dying to get.
  • Wikipedia created a "reliable" source of information non-existent previously by pulling in voluntary experts from around the world. Wikipedia does a much better job than using keywords to search the web when I need quick facts.
  • and the list goes on.
I hear this all the time at MIT and want to share this with everyone. "Don't complain, go out and fix the problems!"

Saturday, June 21, 2008

Where to find seed funding?

Browsing many VC/startup websites during my free time, one of the questions I see very often is, "I'm looking for angel investors to put in some seed funding for my high growth company?"

First of all, don't try to pitch your idea to the public. None of the investors I know use publicly written business idea to find companies. I know many founders are just dying to publicize how great the idea is and how fundable his company is, but this is a question that you should be answering during the diligence process.

Let's now focus on where to find angel investors. Just so that we are on the same page as to the definition of angel investors, not all high net worth individuals are qualified as angel investors. There are some, but most of the angel investors are part of angel groups like CommonAngels in MA. I've had great opportunities to get to know many of these "certified" angel investors, but I guess not that many people have the same chance. So, where would you find them?

Here are some ways that I find quite successful in having any luck finding angel investors.

1. Networking events: If you don't show up in any tradeshows, networking events, conferences, etc., you better get a ticket and go there. Just to name a few networking events in Boston, you can go to Web Innovators Group, Tiecon East, ACG, AlwaysOn East, etc. Investors hang out where entrepreneurs hang out, and vice versa. Some of these events publish the list of people coming. Before you head out the door, jot down some of the names and do some targeted networking. The trick here is that angel investors don't really have official title like "Angel Investor". If you get lucky, the chances are, you will end up talking to some wealthy individuals to advocate your company, advise your management, and possibly pitch in some personal money to run your business.

2. Introduction through VC: It's not a secret that VCs and angel groups talk to each other for many reasons. There are different investment strategies and focus that they go after. Let's say that you talked to an investment professional at a billion dollar fund, and he finds some merits in your business. Yet, your capital need is too small for their fund size. Then, the VC probably knows an angel or two to make some introductions and let you figure out if there's a better fit.
4. Introduction through well-known entrepreneurs: Some entrepreneurs think that money comes from .....well... people who seem to have money (like VC, angel groups, etc.). Talking to well-known entrepreneurs can get your foot in the door to angel investors. They might as well be angel investors as well. They are in the same shoes as you are and will be interested in hearing more about what you do.

Wednesday, June 18, 2008

How LinkedIn is used in venture capital

Regardless of LinkedIn's ability to monetize and eventually become a successful business, it has certainly become a social phenomenon. My first introduction to LinkedIn goes back to almost 4 years ago, but I really have not used it much besides accepting invitations from my friends at Sloan

I talked about why people use LinkedIn with a friend at MIT. He used to be a fervent user of LinkedIn with 500+ people in his network, most of whom he knows very little. And he stopped visiting the website. So what's the problem? His point was that he was getting very excited with how much he can brag about knowing some interesting people. When he ran out of gas sending numerous invitations and people he really didn't know stopped accepting his invitation, he got bored.

This is a serious problem. Let's just be honest here. Unless you are a very seasoned professional with years of experience to build out your first-degree network, it's just impossible to have 500+ first-degree network on LinkedIn. So, what's the problem with it? You are straight-out lying.

Let me scare those LinkedIn loving entrepreneurs a little bit. As part of diligence calls, VCs always do customer and management reference to feel comfortable about what and whom they invest in. Sometimes they use the list provided by founders, sometimes they use their own network, and sometimes they call random people that they feel are related to your company. LinkedIn is not used extensively since VCs pride themselves with the wide network to assess, but it gets used more often than you think.

Here are two examples of what could happen with your LinkedIn connection.

A: VC finds your profile on LinkedIn and finds that you two are connected through a credible, well-known investor. He picks up the phone immediately and asks questions about how you know each other. It may turn out good or bad. In the end, you demonstrated that you openly share your true offline network online, and it's useful.

B: VC finds your profile on LinkedIn and finds that you two are connected through a credible, well-known investor. He picks up the phone immediately and asks questions about how you know each other. You don't know each other other than exchanging some random online invitations. Everyone wasted time.

I'll leave it up to you to make the judgment here. I can't say all my network is as clean as I want it to be, but I cleanse my network once in a while.

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The end… and the new beginning

This is my first blog post (well, my test post is the official first). The last two years I spent at MIT Sloan were absolutely the greatest time of my life. As I left the MIT graduation with the seemingly important MBA degree diploma tucked under my arm, I knew that the good time was all over.

Now, I face the real world with better times. To be honest, I am so much excited than ever. With all the experience, skills, and network I gained over the last two years, I can finally make real difference in the world.

Despite the lack of confirmed job post-graduation, I thought I share with y'all how I am going to focus on.

  1. Family - Well, obviously. Before I came to MIT, I was determined to make the most out of the two years. 24 hours were just too short to do what I wanted to get out of the b-school. Thanks to my wife and now 9-day old baby girl Daine, I had a fair share of time outside home, maximizing the value of my b-school education. You two ladies mean the world to me, and you always have
  2. Building early-stage, innovative companies - I let go of many, many job interviews from some of the most respected companies in the world. First of all, I was stupid but I have absolutely no regret, because my passion tells me that I LOVE building things from nothing. I just cannot be happier with getting stressed out about not having a definite direction whether it's successful or not. Of course, I'd like to make things work and be successful. I don't know where I will end up for my job, but it will be somewhere in-between vacuum space, working hard, and part hard!
  3. Solve difficult problems - The first day at MIT started with a speaker from OnStar's VP of New Business Development, who is also a Sloan alum. The greatest thing about b-school was hearing all kinds of opinions and life lessons about how I should live. He said that solving problems that is just too difficult to solve was the life motivation to him. Okay, this really sounds cliche, but this is what I need to do. I encourage everyone to do this as well.

The above three topics will be the focus of my blog. Come and visit me often, and comment!

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