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Notes from Bob Metcalfe’s Capital Factory Talk
One of my favorite talks at the Capital Factory Demo Day 2011 was from Bob Metcalfe. Bob is famous in the technology world for inventing ethernet and founding 3Com, a billion dollar company.

Here are notes from Bob Metcalfe’s talk:
- Personal goal is to help with startup networking and networking startups
- Four careers that were 10 years each: Scientist, entrepreneur, journalist, VC, and professor as his newest
- Old and new knowledge, new info and old applications
- Personal focus: entrepreneurial technology at scale
- Art is at the center of stARTup
- Success story
  On the board of the company that made PowerPoint and sold it to Microsoft for $14M
  PPT was from a pivot because the VP of Engineering spent so much time raising money and needed a way to tell their story
- Dorio ecology of startups – 6 major species
  Research professors
  Graduating students
  Scaling entrep
  VCs and angels
  Strategic partners – willing to buy from unproven
  Early adopters
- Introduction to startups and raising money:
  Deboz Montgomery – MIT class of 1969 and tennis team manager invited Bob, who was Captain of MIT tennis team, to lunch in Silicon Valley and taught him the industry
- Steve Jobs:
  Jobs called to recruit him to Apple but Bob told him he’d just started a networking hardware company
  Jobs helped by introducing him to his networks
  Jobs introduced him to Venrock and Page Mill Partners angel fund
- 3Com
  Sold 1/3 of 3Com for $1.2M in his first funding round to angel investors
  Raised $11M in IPO
- Startup culture
  Rumors involve pulling all nighters and eating ramen noodles
  Need to be healthy to be successful
  Should sleep 8 hours a day
  Write all the time
  Speak all the time
  Sell all the time
  Engineers need sales people
- Need to have a plan
  Had a plan to take Ethernet from $5k a chipset to $5 a chipset
Bob did a great job and UT Austin is lucky to have him leading the entrepreneurial charge for undergrads. The course he teaches at UT Austin is called 1 Semester Startup and it’s for undergrads who are actually starting companies (22 startups and 100 students).
September 8, 2011
Capital Factory 2011 Startups
Yesterday I had the opportunity to hear pitches from the Capital Factory Demo Day 2011 startups. Capital Factory has 20 mentors that each put in $5k and then invest $20k in five startups. Demo Day then has 300 attendees with 100+ being investors. Here are my notes:

Storymix Media – create stories from videos
- Few people share edited video
- Photo books solved problems for photos but nothing for videos
- 78 million photo books sold last year
- Video is harder even with iMovie
- Goal to make it easy, fast, and affordable
- Web-based video editing
- Starts at $99
- Focused on wedding videos
- $5k for good wedding video
- 98% of brides recommend a video after a wedding
- iPhone app to capture video on phone, upload to Facebook, then use Storymix
- Investing in customer acquisition
- Looking to raise $500k
HelpJuice – auto-updating FAQs
- Auto-updating help page for businesses
- Costs $1-$6 per email handled
- Get answers as typing question
- CC juicers@helpjuice.com to have the outsourced team update the FAQ
- Differentiation: search, juicers that manually update, kb
- Raising $150k
SpeakerMix – marketplace for speakers
- $10 billion market
- 70% is private events
- Marketplace of speakers for meeting planners
- 6,500 speakers and over $1MM booked
SwimTopia – swim team management
- Swim team management software
- Huge number of swimmers on a team – over 100 on avg
- 50 volunteers positions per meet
- MS Access product in 90s is most common app
- Launched this year
- $500 per team per season
- 2.6M swimmers
- 25,000 teams
- General sports market eventually
GroupCharger – fundraising platform
- AlumniCharger
- State budgets cut by 10%
- Only 5% of university alumni donate
- Oklahoma has 300k alumni and 8% give
- Finds alumni on social media, coordinates events, make intros
- 1.5 million clubs and chapters
- 55k alumni associations
- $125k annual marketing budgets
- Eight person startup
- Raising $200k with $75k committed
The startups did a great job and presented well. I hope to see them be successful.

What else? What are your thoughts on the five Capital Factory 2011 startups?
September 8, 2011
Notes from Brian Sharples of HomeAway at Capital Factory
Image by Wyscan via Flickr

After Bob Metcalfe talked at Capital Factory 2011, Brian Sharples of HomeWay gave the next talk and did an amazing job. Brian is the consumate serial entrepreneur that took time off to see the world after selling his company. His family preferred to stay in homes instead of hotels so he spent a good bit of time looking through different vacation rental sites, especially area and country-specific ones. It didn’t take long for his next big idea: roll up the leading vacation rental sites.

Here are some notes from Brian’s talk at Capital Factory:
- HomeAway timeline:
  Started it in 2005
  IPO in early 2011
- Three core areas:
  The idea
  The funding
  Making it work (execution)
- Big idea:
  Consolidate worldwide market of vacation rental homes
  Why isn’t there an Expedia for vacation rentals
- Execution:
  Team, tools, plan, capital
  Manage risk
  Intense curiosity
  Understand competition
- Market research:
  Spent five months talking to people before starting
- Previous attempts by others:
  Expedia bought vacation rental co in 1999 and changed from subscription to percent of transaction and it died in a year
  Owners and renters wanted to talk to each other so percentage wouldn’t work since they’d go around the system
- Insights:
  Most important thing in marketplace business is scale
  Think ahead
  Like game theory
  Bought VacationRentals.com for $35M so that a competitor wouldn’t get it
- Capitalization:
  Acquired five companies on day the business started including one in Europe
  Raised $405 million before going public including the largest venture round ($250 million) in nine years
Brian did a great job and his ability to execute is evidenced by the $3.2 billion market cap of HomeAway (source: Google Finance). If you have a chance to hear Brian Sharples speak I’d highly recommend it.
September 8, 2011
Capital Factory 2011 Fast Pitches

Two weeks ago I spent an enjoyable day at the Capital Factory Demo Day. After the five startups that participated in the program presented for eight minutes several startups from the community gave three minute pitches. Here are some brief notes from the fast pitches:

Apptive
Create a mobile app with no programming
Takes less than an hour
Push content and notifications
Raising $500k

CopperEgg
Super real-time cloud monitoring
Monitoring in seconds instead of minutes
Server installed monitoring agent

TheDailyDot
Hometown newspaper for the web powered by social media

Forecast
Checked in 53 times at taco shack and friend never spontaneously joined
Free mobile app to tell friends where you’ll be later
Catch users at unique moment in buying cycle
27k users already
Raising $250k with half committed

Greenling
5000 customers
Subscription service for local organic food
In Austin and San Antonio
Technology enabled business service

Hoot.me
Switch Facebook into study mode
Browse live study sessions
Handles math text as well
Paid tutoring side and free peer-to-peer side
All college students at UT
Did DreamIt Ventures in NYC
Raising seed round

Ihiji
More and more devices require network functionality to work
Software platform for service oriented networks to self heal and remote issues
Actively selling for a year
Raising Series A

Infochimps
Selling data downloads and API access
Venture backed
Building context into the data

Loku
Big data plus Flipboard for local
Raised $1M
Raising series A

OwnLocal
The AppStore for Local
Small biz needs website, social media, SEO, and everything else (cloud based marketplace for apps)
Customers paying $100k year

NightRaft
Locate, authenticate, curate, serve
Problem: who’s in the live music audience
App for consumers connected to Facebook
Business value from data collected
Raising seed round

Ravel
Enterprise software to analyze big data
Examples are predictions, energy data, government

Ricochet Labs
Qrank
Make it easy to make mobile games with content
Platform to create a game layer across all knowledge
Self-serve web-based toolkit to make games
Branded Qrank game has 400k users

Rockify
Delivering content to mobile devices
Technology makes it easy to make cross platform apps and ability to push content

Spanning
Help companies manage critical data in the cloud
Google offers no backup and restore system
Spanning Backup for Google Apps
$30/user/year
Raising Series B

StormPulse
Bad weather reporting
Weather risk management tool
Weather is a long term trend

VolunteerSpot
Mom-center viral platform
850k volunteers
Adding 25k users per week
Raised seed round
7000 Facebook fans
Raising round

WPEngine.com
Managed WordPress Hosting
Speed, scale, security, support
Heroku for WordPress

The startups did a great job and I enjoyed the fast pitches.

September 8, 2011
Notes from Capital Factory Demo Day 2011 and Austin, TX
Image via Wikipedia

Over the last 30 hours I’ve had the opportunity to get a glimpse of the Austin, TX startup community and partake in the Capital Factory Demo Day 2011. Jason Cohen of WP Engine (great WordPress hosting) treated me to an early dinner last night followed by a Capital Factory event in the evening. Today was packed with great speakers and pitches by over 20 startups.

Here are a few observations:
- Startups congregate downtown taking advantage of great nightlife and proximity to UT Austin
- UT Austin hasn’t had much influence on the startup community but that’s starting to change as of late
- SXSW is the most amazing gem of the city with respect to startups by bringing in people from all over and exposing them to what Austin has to offer
- There are many comparisons between Austin, TX and Boulder, CO
- Austin startups lament the lack of capital available locally
- Mobile apps are especially hot with many consultancy success stories
- Dell, based in the suburb of Round Rock, is completely absent from the startup scene (it isn’t the anchor tenant people think a startup community needs, in fact I heard it referred to as a logistics company and not a technology company)
- Capital Factory’s speakers were world class and told great anecdotes about building their billion dollar startups
- Engineers are in demand and startups are trying to recruit more to move to Austin from the West Coast
- HomeAway and BazaarVoice are two big recent success stories
Overall, I’m very impressed with Austin and Capital Factory and have several items to take back to Atlanta.

What else? What do you think of Austin’s startup community as well as Capital Factory?
September 7, 2011
Why VCs Won’t Like Fred Wilson’s Valuation Posts
Image by Lachlan Hardy via Flickr

Fred Wilson has a rich history of bringing more transparency and understanding to the venture capital world, including the dynamic with entrepreneurs, via is popular blog avc.com. Recently, there have been two especially interesting posts:
- Pricing a Follow-On Venture Investment
- Determining Valuation Multiples
Valuations for startups, other than outliers published on TechCrunch (see Dropbox’s $4 billion valuation on $30 million in revenue), are often a closely guarded secret. One of the big advantages for traditional VCs is the opaque nature of information and the frequency of negotiating deals. Think about it: a VC might negotiate a couple deals per year while a successful entrepreneur might negotiate a few deals in a lifetime. The more information that becomes available results in a more efficient market for VCs and entrepreneurs. While VCs will always have an advantage the dynamic is much more less heavily favored for them than previously.

VCs won’t like Fred Wilson’s valuation posts because they present examples of high valuations and low VC ownership positions. Entrepreneurs, when they read the posts, are naturally going to think those valuations are representative of their startups. Note that Fred uses terms like category leaders, of which most startups aren’t.

Also, when he talks about investing $3 million at a $30 million post-money valuation, implying a 10% ownership stake, that’s not a high enough stake for most VCs to get out of bed, unless the startup is at a very late stage. Entrepreneurs expecting these valuations and VC ownership positions are going to be very disappointed. And, VCs aren’t going to like having to deal with the push-back and convincing that these aren’t normal.

I like VCs and think they are an important part of the eco-system, but I’m sure these posts are going to cause headaches for VCs and entrepreneurs alike.

What else? What do you think of Fred Wilson’s valuation posts?
September 6, 2011
Use Startup Goals in Passwords
Image via Wikipedia

Keeping goals aligned and top-of-mind in a startup helps increase the likelihood of success. Too often company-wide goals aren’t understood by team members and aren’t discussed on a regular basis. In addition to common best practices like an LCD scoreboard in the lobby here’s another, most subtle technique: set the personal and shared startup passwords to goals. The idea is that there are a fair number of accounts that need to be shared amongst team members as well as used personally and these can be used to reiterate goals (make sure and change them at least quarterly).

Here are some example startup goals encapsulated in passwords:
- 10NCin2011 (10 New Customers in 2011)
- 500kMRRinQ3 ($500,000 Monthly Recurring Revenue Q3)
- 50SQLinSept (50 Sales Qualified Leads September)
The great thing about this approach is that it forces team members to think about the goals more often, much like the new advertising services that use CAPTCHAs to engage with brands.

What else? What do you think of using startup goals in passwords?
September 5, 2011
Retargeting Tips from SEOMoz
Image via Wikipedia

For the second half of the SEO session from SEOMoz at Dreamforce 2011 I had the opportunity to hear @joannalord provide retargeting tips. Retargeting, if you aren’t familiar with it, is when ads are shown on third-party sites to people who’ve already visited your site or pages you control. For example, have you ever visited major sites like CNN or ESPN and seen advertisements for products you looked at recently? Those were retargeting ads. Retargeting is a powerful way to earn more conversions from traffic you’ve already worked hard to generate.

Here are some notes from the session:
- Develop strategies for different audiences
  Grow the relationship with sequence retargeting
- Grow and strengthen your brand
  Get creative with creatives
  Introducers (brand), influencers (testimonials), converters (call to actions)
  Use retargeting as a qualified testing vehicle
- Expect more from the data
  Impressions – 15-20 per month
  CTR – .15% to .30%
  CPC and CPM – use both
  Conversions – 1:10
- Try Search Retargeting
  Chango.com – offers the service
  Share audiences by putting pixel on related sites
  Category sites that are also related
  Drop cookie in emails to house list
- Think bigger
  Jobs page
  Awards you’ve won
  Tell about affiliate program
  Tell them to follow you on Twitter
Thanks to @joannalord for the great presentation on retargeting. If you don’t use retargeting already take a look at AdRoll and FetchBack.

What else? What tips do you have for retargeting?
September 4, 2011
Notes from the Guidewire Software S1 IPO Filing
Guidewire Software, Inc just released their S-1 IPO filing to raise a proposed $100M. Guidewire provides software for property and casualty insurance companies to run their back-office including underwriting, policy administration, claims management, and billing. Basically, behind-the-scenes software necessary for insurance companies to operate. Now it isn’t as sexy as marketing automation software, but it is a critical component of business.

Here are some notes from the Guidewire Software S-1 IPO filing:
- Average initial client contract length is five years (pg 1)
- Factors driving the industry: (pg 3)
  Aging IT infrastructure and increasing scarcity of experienced workforce
  Increased business risk due to continued reliance on inefficient processes
  Financial loss due to fraud and error in the claims process
  Changing insurance customer expectations
  Continued pressure on underwriting margins
- Growth strategy: (pg 3)
  Continue to innovate and extend our technology leadership
  Expand our customer base
  Upsell our existing customer base
  Deepen and expand strategic relationships with our system integration partners
  Increase market awareness of our brand and solutions
- Revenues: (pg 6)
  2008 – $70.6M (losses of $16.8M)
  2009 – $84.7M (losses of $10.9M)
  2010 – $144.6M (profits of $15.5M)
  2011 first nine months – $121.4M (profits of $33.4M — $24.4 related to a tax issue, so really $9M in profits)
- Q2 and Q4 are best quarters due to fiscal year end with sales rep incentives and calendar year end due to buying patterns (pg 10)
- Some customers get to buy a perpetual license at the end of the contract term (pg 10) — they aren’t a SaaS business
- Top 10 customers accounted for 38% of revenue (pg 10)
- Services revenues were 48% of revenues for this year (pg 11) — that’s extraordinarily high
- Accenture is suing Guidewire over patents (pg 12)
- Product implementation takes 6 – 24 months (pg 15)
- Products are typically deployed in a customer’s environment (pg 25)
- As of April 30, 2011, they had 610 employees, including 93 in sales and marketing, 270 in services and support, 190 in research and development and 57 in a general and administrative capacity (pg 92)
- Co-founders own between 3.9% and 5.1% of the fully diluted equity (pg 127)
This S-1 IPO filing for Guidewire Software represents a fast growing traditional enterprise software company that is doing great. It’s especially impressive to see a company grow revenues so fast while barely increasing sales and marketing expense.

What else? What did you think of the Guidewire Software S-1 IPO filing?
September 2, 2011
Notes from Clayton Christensen’s Disruptive Innovation Talk
Image via Wikipedia

As part of the Dreamforce Executive Summit there was a private lunch with the famous HBS professor Clayton Christensen. Christensen, best known for the book The Innovator’s Dilemma (at Duke I had economics classes with Matt Christensen, Clayton’s son, and remember him to be very sharp). A year ago Clayton Christensen had a stroke and has since gone through rehabilitation to learn how to speak again. His talk was sharp, funny, and insightful.

Here are a few notes from Clayton Christensen’s talk:
- Decentralization is disruptive, and is hard to catch
- Pace of performance improvement outpaces ability to use improvements
- Entrants typically win at disruption
- Disruption generates repeated upside surprise
- Decentralization follows centralization (think about what has happened with computing and how that will happen with healthcare)
- The right product architecture depends upon the basis of competition
Clayton Christensen told great stories, anecdotes, and really drove his point home that innovation is disruptive. The most common story followed the pattern that a big company doesn’t want to compete in a smaller, less profitable market and an upstart figures out how to be successful in the smaller market slowly moving up market until the big company is defeated.

What else? What are your thoughts on Clayton Christensen and disruptive innovation?
September 1, 2011