Monday, April 16, 2012

SCV Startup -- an important accelerator hits the market

Clearstone was excited to sponsor this event and to aid and abet the unchecked enthusiasm that is Erick Arndt in his quest to harness the talent around him into an accelerator program...
click title above for link....

Thursday, March 15, 2012

LAVA Awards

I am on the board of LAVA (Los Angeles Venture Association) and they have increasing amounts of energy. I wanted to pass on the results of the LAVA Venture Awards...


LOS ANGELES VENTURE ASSOCIATION
11301 Olympic Blvd. #376
Los Angeles, CA 90064
866-466-5282
info@lava.org


LOS ANGELES VENTURE ASSOCIATION
9th ANNUAL AWARDS DINNER HONORS
Venture Capitalist Jon Funk, 7 ENTREPRENEURS

Santa Monica, CA. – March 15, 2012 – The Los Angeles Venture Association (LAVA) held its Ninth Annual Venture Awards Dinner Wednesday evening to recognize Southern California’s best venture-backed companies, and to celebrate the induction of Jon Funk into the LAVA Hall of Fame. The awards dinner was attended by over 230 leaders in the Venture Capital community, including CEOs and founders of successful emerging companies. It was held at Fairmont Miramar Hotel in Santa Monica.

This year's LAVA Hall of Fame inductee, Jon Funk, has been directing startup investments in emerging information technology companies in Southern California since 1986. Jon currently serves as the founder and Managing Partner of Ocean Road Partners. Ocean Road Partners is a venture capital firm serving the venture capital and technology communities of southern California.

Jon also serves as a Managing Director with Allegis Capital and has held that position since Allegis’ founding in 1996. At Allegis, Jon sourced and directed several of the firm’s top investments in its history, all Series A financings backing southern California technology companies. These investments include Sandpiper Networks (Westlake Village, acquired for $630 million in 2000 by Digital Island), Rent.com (Santa Monica, acquired for $430 million in 2004 by eBay) and Shopzilla (West Lost Angeles, acquired for $560 million in 2005 by the E.W. Scripps Company), cumulatively producing over $1.6 billion in liquidity for their shareholders. Rent.com and Shopzilla represent two of the top 10 venture-backed IT winners for the period 2001-2010.

“This is one of LAVA's signature events and it continues our tradition of showcasing Los Angeles' top emerging companies, entrepreneurs and investors,” says Randy Churchill, President of LAVA. “Earning recognition in trying economic times is especially challenging, and this year's nominees all deserve congratulations and admiration for their accomplishments.”

The seven award winning companies were selected by a panel of judges comprising the region's top venture capitalists from 19 nominees in the following categories:

Best Venture Funding in Internet/eCommerce: TrueCar
TrueCar, Inc. is an automotive solutions provider focused on changing how cars are sold by providing a significantly better consumer experience while helping qualified dealer partners gain incremental market share and reduce costs. (www.truecar.com)

Best Venture Funding in Internet/Ad Technology: SocialVibe
SocialVibe is a digital advertising technology company that powers engagement advertising for some of the world’s top brands. (www.socialvibe.com)

Best Venture Financing in Clean Technology and Energy:CODA Automotive Headquartered in Los Angeles, CODA Holdings is a leading developer of advanced Lithium-ion power battery systems comprised of three key business lines: CODA Automotive, CODA EV Propulsion Systems and CODA Energy. (www.codaautomotive,com)

Hottest First Time Venture Funding: BetterWorks
BetterWorks’ company mission is to help small and medium-sized businesses recognize, reward and retain employees by “Making Work Rewarding”. (www.betterworks.com)

Best IPO Exit: Cornerstone OnDemand
Cornerstone OnDemand is a leading global provider of a comprehensive learning and talent management solution. (www.csod.com)

Best M&A Exit: Riot Games
Santa Monica based Riot Games is a leading developer and publisher of premium video games that target video game enthusiasts. (www.riotgames.com)

Most Capital Efficient Exit: Accordant Technologies
Polycom is the global leader in standards-based unified communications (UC) solutions for telepresence, video, and voice powered by the Polycom® RealPresence® Platform. (www.polycom.com)



About the Los Angeles Venture Association:

LAVA is Los Angeles’s premiere Venture Capital focused industry organization that provides a forum for Entrepreneurs, Investors and the community of businesses that assist companies in their formation and growth. LAVA celebrates 28 years of service to the community. It is led by a team of volunteers that provide program, sponsorship and leadership in the Venture funded community. For more information, visit www.lava.org.


CONTACTS:
Leonard Lanzi,
LAVA Executive Director
310-450-9544
len@lava.org

Monday, January 30, 2012

Never Suspend Your Judgement

At Clearstone, we were having a great discussion today around wisdom, and what it takes to make consistently better decisions. Decisions about life, about work, about investments. As is the case with many "big ideas", the conclusion can me trace to a simple concept. Become aware if you are ever, in ANY way, suspending your judgement, AND then NEVER suspend your judgement.

In my business I have become a pattern matcher. It is an occupational hazard and drives those people closest to me nuts. In evaluating investments, company and people every day you learn to focus on the meta data -- the data that describes the data.

One pattern I have discerned from the most successful, and often most experienced, at starting and building great companies, is that they act as if they are always the PRINCIPAL (not the AGENT) in every activity they do and evaluate. They become absolutely trustful of their mind and their sensibility to makes sense of all situations and to judge all situations (sometimes harshly). They become the gifted athlete who, having learned the basic skills of the game, becomes free to operate on a higher level. They quickly hone in on the flaw of any plan, product, process, service or value proposition. I believe they do this by freeing their mind to question everything anew, and quickly give a "yeah or nah" vote to each premise they uncover.

If you consider the mistakes you have made in your past, you may find that buried in that decision was a premise or assumption that was commonly held as true, or you held as true, that slipped through real examination. You may also find that you did not feel compelled to push your thinking into that decision as work was already done in that area by "experienced, smart people." That is suspending your judgement. Pushing yourself to not smuggle in any hidden assumptions is the first step in getting wise.

Wednesday, July 27, 2011

Steady as She Goes...

The business of venture backed internet companies is pretty hot these days with sky rocketing IPOs and a flurry of fundings. But finding the signal amidst the noise has never been harder. 60 days ago, a certain company was all the rage. At least half a dozen of the new pitches I took referenced the company’s assumed success as a comp for their own glorious future. I remember thinking how fast that happened and how people were providing so much assumed intelligence towards investors, who MUST know what they are doing. Here we are a mere 60 days later and the company (which shall remain anonymous, but there are plenty of examples) is getting pummeled in the press. The founder left. While the piling on is now most likely overly negative, an analysis finally focused on the data that mattered — mainly that nobody is using the product.

Venture is rife with gossip and suspicion and shadenfreund because we all don’t know how the future will unfold and we all take risk. Gossip and information is unavoidable and fine and well, but in venture capital all the information MUST culminate in an independent mind, taking an intelligent and supported point of view. This point of view is open to critique and attack and risk, but taking a stand among all the unknowns of our business is the only hardscape that decision makers in the highly ambiguous world of startups and venture capital can use to move forward.

Friday, July 1, 2011

HomeAway IPO

There has been a lot written, most negative, about the valuation of the HomeAway IPO this week. Here are a few comments from a shareholder, who admits he has some bias, but I believe his comments are credible....

"So I’m totally biased (I’m a shareholder but not an insider) but IMO HomeAway deserves to be lumped in much more with LinkedIn & Facebook & Ebay for that matter than a Pandora or a Groupon because of network effects. Huge market (at least 10X of OpenTable), low penetration, increasing economies of scale, killer management team. Having seen the pitch, I’m not at all surprised at the market’s reaction."

"What’s funny is there were a number of negative articles yesterday by TheStreet, SeekingAlpha, and Business Insider saying they didn’t like the business or the valuation and IMO their analysis was terrible."

Tuesday, January 18, 2011

Comments on Ryan Born

OK, Ryan Born posted the essay below (below my comments) and for some reason LinkedIn would not allow me to comment in length. My comments here and his post below.


MY COMMENTS

OK, despite the obviously purposeful edgy tone, good post. And while I generally agree and give similar advice, here are three anecdotes or truths about SoCal investing and startups that contradict.....

1. On associates. One of my investments doing GREAT (and I mean GREAT) is SupplyFrame in Pasadena. I remember the day Clearstone associate Jaideep Singh came into my office and said "Dude, you got to meet these guys and you got to invest." They were pitching in the other room and I ran right in prepped for a good meeting. We made the investment two weeks later.

2. On Angel groups. So Cal is much less efficient than Northern Cal in its organization. You can find a diamond in the rough and you don't know where great advice and good investment money comes from. My advice is talk to everyone but DO definitely be ruthless with your time and make the party evaluating your company be responsible and professional and do not allow them to waste your precious time.

3. On available funds. True but there are all sorts of pots of money around a longtime venture firm. An example is Clearstone, where we are avoiding early stage investments into our main fund, but actively investing in early stage out of two other pools of money, one a super angel type fund. We just closed on new investments Cetus and CupidsPlay in the last two weeks (to be announced soon). I would assume that other long term venture firms have similar flexibility.

Jim

RYANS POST>>>>>

It’s been over 3 years since I moved to LA and started what I’ll call the Los Angeles Venture Capital “fundraising scene”. Over the past 3 years, I’ve raised a good deal of money (some disclosed, some undisclosed) and I’ve formed a few opinions along the way, which I’m going to share here in hopes that you can avoid wasting valuable time as you go about your own fundraising efforts in Los Angeles.

1. DON’T PITCH THE BITCH (i.e. Don’t pitch “Associates”)

In this instance, “the bitch” = “the associate at a VC firm” (gender agnostic). Don’t waste your time pitching associates at VC firms. In my opinion, VC associates have absolutely ZERO decision making ability / influence and will likely leave the firm within a 2 to 3 year period for one reason or another so any long term firm relationship you to wish establish through them will likely fade. Don’t bother with associates, it’s just a waste of your time. Instead, go straight for the VC partners with real check writing ability. If they pass you off to an associate, be wary. It’s straight out of the movie Boiler Room, except that in Boiler Room they chauvinistically advise not to sell stock to women. Here, I’m just advising that you not try to sell to VC firm associates, as it’s a waste of your time. Seriously, don’t pitch the bitch.

2. PAY LITTLE TO NO ATTENTION TO THE FORMALIZED ANGEL GROUPS

Every young entrepreneur in LA has heard of the Tech Coast Angels and their unaffiliated clones / red headed step children – The Pasadena Angels and The Maverick Angels (who actually charge you to pitch – run to the hills). In particular, if you have a “consumer internet” company, i.e. the kind of company you see regularly covered on TechCrunch, then my advice is to not bother with any of the LA based formalized angel groups. The reasons are too numerous to mention (HINT: They are Dinosaurs and although they’ll be bragging about Green Dot for the next decade or more, don’t be fooled, you’ll be wasting your valuable time and energy trying to get in front of them).

Rather than ranting aimlessly about these groups (NOTE: I’d be happy to debate them publicly about my issues with them), I’ll just simplify my reasoning behind this point with the following short story: Someone very high up (i.e. an executive / board member) at one of the groups recently told me that he’s fundraising for a new company of his own. When I asked if he planned on pitching the same formalized angel group at which he holds office, said NO (I’ll refrain from detailing why in an effort not to sell him up the river). Amazing right? I could go on and on and ultimately into a tirade ripping into these groups but I’ll keep it professional and just tell you that if a member of the group thinks it’s a waste of time to pitch the group itself, then it’s likely a waste of time for you too. If you are absolutely set on pitching members of formalized LA based angel groups (TCA, Pasadena Angels, and Maverick Angels), then go directly to the individual angel members themselves for personal investments (rather than the group) or better yet, go and pitch angels that don’t associate themselves with one of these formalized groups.

3. DON’T PITCH FIRMS WITH NO MONEY!

This may sound totally obvious but reality, it’s not always easy to tell, and there are at least a handful of “cashless VCs” in LA. Due to the awful economy of 2008, 2009 (RIP Good Times), and beyond, some VCs have died off or are in the process of slow downward spiral. Some have had a hard time raising new funds and are close to or already out of cash. Those that still have cash are slow playing their hands, or have reserved their remaining cash exclusively for follow on investments (i.e. topping off their existing portfolio companies when cash gets low). That being said, these VCs still hang around the “fundraising scene” and will often take a meeting with you, even though they have little to no cash to actively invest, just to ensure themselves that there are not passing on the next Twitter, Groupon, or Zynga. The problem here being that they wouldn’t have the check to write even if they though you were the next $1B+ exit. So how do you know which firms are out of money? Here’s 3 easy ways…

1. Ask them point blank how much cash they have to put towards new investments, the last investment they made, and the amount of the check.

2. Ask around – i.e. other VCs and entrepreneurs to get a 2nd opinion of the firm and it’s financial position, and

3. Do a little research and find out when they closed their last fund and the amount of the fund.

If everything passes the smell test, then by all means go ahead and court the heck out of them. If things don’t add up, be sure to ask for intros to other investors that are more active.

Wednesday, January 12, 2011

The Problem with the Super Angels

There is a lot of talk these days about the growing number of angel funds and super angel funds, that is funds that quickly invest 250k to 2MM (roughly) into a company and remain very hands off. To be sure these super angel funds do indeed properly fit into the new trends around company creation. At Clearstone, we have also launched a super angel fund and strategy.

What I worry about is the path that most companies take to success and the staying power of this capital. In my 15 years plus in venture I can think of only two portfolio companies, Overture (goto.com) and Rubicon, which were able to flawlessly hit their launch plan. Overture pioneered the pay for placement search market and raced to $100MM in revenues. Rubicon hit the market just right with a publisher centric advertising solution. Otherwise, all of our other successes, a dozen IPOs and an equal amount of large M&A exits, took a very crooked path to success.

In each of these cases, what was needed was conviction and a belief that the company and product we were building was going to be needed and valuable in the marketplace -- eventually. What was needed was smart, educated capital that had been heavily involved with customers and products and other, more nuanced sources of credibility around the growth of the company.

It is rare for any "1.0" version of anything to work just right. More often than not products, and the messaging and marketing around them, need lots of reiteration and market testing to hit their inflection points. The same is true with companies. In my experience the super angel money has been "hot money" that develops "alligator arms" and runs when the hat is passed in a conviction round. In addition, the small amounts of capital available from these funds put unnecessary and complicated restrictions on the already difficult business of making a start-up venture successful and driving it towards a large exit.

The success rate of start-ups is low and experience can make it higher. However, my experience tells me that capital providers that are small and hands off are by definition seeking (i.e. "hoping for") a quick hit and start-up success rarely works that way.