Thoughts on how to allocate equity for early stage startup founders:
As expected, a second wave of clean energy investing is now in force. Experienced investors from the first wave (2005-2014) who had less than impressive returns are back in action. Much like the second wave of internet investing that led to the massively valued social media companies, I anticipate the Cleantech 2.0 will yield a number of valuable franchises.
On a related note, the research on VC and cleantech that TBJ Investments contributed to is on Connected Papers, which links the paper to prior art and derivative works:
Here's where SPAC's make sense:
If you take the old school mentality that an IPO is a financing mechanism, and not a liquidity mechanism, a SPAC is ideal for Cleantech. A SPAC IPO provides access to funding to take a clean energy innovation to scale; this is far beyond the time/patience window of VC's and even the most patient corporate investors. SPAC's therefore are one of the BEST ways to solve the duration problem pointed out in the paper published in collaboration with Dr. Ben Gaddy a few years back:
Predictions for rest of 2018:
1. SAFE Notes will increasingly show themselves to be one way piers, and not bridges to preferred rounds
2. Lowered barriers to entry mean that there is an oversupply of SaaS companies. We're start to see consolidating in the private market as a result
3. The Intel security debacle will re-energize the semiconductor market
Quick Summary of Past/Current Investments:
* Mohr, Davidow Ventures ENF VII * Mohr, Davidow Ventures ENF VIII * Bessemer Trust Meadowbrook Equity Fund * Buzzient * BionTTech * Eba Systems * OpenVision Technologies * Veritas Software * Symantec * CardioDX * Finsphere * Genomatica * Gordon Murray Design * Infusionsoft * iRhythm * RainDance Technologies * ZeaChem * CarrierIQ * PBworks * Technorati * X/Seed Capital Management * Adamas Pharmaceuticals * AudienceScience * Nomi (Merged with Brickstream) * Brickstream * Buzzient * Pacific Biosciences (IPO) * Panasas * Verinata Health * Xambala
Seems that the #Brexit is settling in. From my experience running a software operation from the UK with multiple European operations and customers, it's about to get nasty if England(!) doesn't get access to the Common Market. Bring back the days of overpriced, bad English products/services.
Venture capital (VC) firms spent over $25 billion funding clean energy technology (cleantech)
start-ups from 2006 to 2011. Less than half of that capital was returned; as a result, funding has
dried up in the cleantech sector. But as the International Energy Agency warns, without new
energy technologies, the world cannot cost-effectively confront climate change. In this article, we
present the most comprehensive account to date of the cleantech VC boom and bust, aggregating
hundreds of investments to calculate the risk and return profile of cleantech, compared with
those of medical and software technology investments. Cleantech posed high risks and yielded low
returns to VCs. We conclude that “deep technology” investments—in companies developing new
hardware, materials, chemistries, or processes that never achieved manufacturing scale—drove the
poor performance of the cleantech sector. We propose that broader support from policymakers,
corporations, and investors is needed to underpin new innovation pathways for cleantech. Public
policy can directly support emerging technologies by providing easier access to testing and demonstration
facilities and expanding access to non-dilutive research, development, demonstration, and
deployment (RDD&D) funding. The public sector can also encourage new investors and corporations
to invest in cleantech innovation. Corporate strategic investment in emerging technologies
coupled with deep sector-specific expertise can accelerate scale-up and provide access to markets.
And non-VC investors willing to supply substantial capital for a decade or more are more likely
to reap satisfying returns in the long run, if they work with those partners to help develop and
There's an interesting article today by Sarah Lacy in Pando Daily. In it, she analyzes why there seem to have been a lot of high-profile failures among "celebrity" startups that had raised tons of money, and were being touted as doing very well by their boards and investors up to the point at which they failed. In addition, she laments the fact that, in today's environment with the growing cult of the celebrity entrepreneur, boards seem willing to let "celebrity" startups spend all their money despite the obvious fact that the business is going to fail. Here's what she wrote:
I'd argue that there is a 3rd prize; a healthy income on the 2% mgmt fee...
Lots of big VC rounds are being raised. A number of companies have raised $100M+. It's probably important to note two things:
1. The collective market caps of companies in certain sectors exceed the market sizes of those sectors
2. 75% of most exists are below $100M.
This chart is a good primer on where most exits fall:
Getting awful bubbly out there...
In his Siebel Essentials blog, Alexander Hansal continues his exploration of the Siebel Open UI.
VERY interesting. Oracle going to monthly updates on Siebel.Implies a lot more life in the platform. This is logical since Oracle gets $1B in maintenance reveneue (equivalent to $3-$5B in market cap effect).
Alex Hansal also points out the underlying reason why so many production Siebel customers are neither upgrading nor migrating from Siebel: The upgrades require such a major repository merge that for a large organization, this could be person-years of additional development to resolve.
Migrating to Salesforce(and losing years of customizations) would be an equivalent expense.
Hence why so many customers are looking to "Innovate around the Edges" of Siebel vs. upgrade or replace.
By Bruce Cleveland
Couple points to add:
1. Siebel maintenance spend is actually growing not decreasing. Siebel customers spent $1B on maintenance in 2013, up from about $600M in 2011.
2. Saleforce may dominate the edge of the network(marketing), but especially in Telecom, Siebel still owns the core (alongside Amdocs, Oracle, SAP, etc)
3. With my portfolio company Buzzient, we've seen a few behaviors recently:
We all have a lot to learn from Bruce's recollections of this moment in time, but it's also valuable to step away from they hype and see what's really going on with customers still using Siebel, potentially alongside Salesforce.
2013 was a year of transition. 2014 is going to be a year of dramatic changes. First off, we've made a few key moves at TBJ Investments over the winter. The most dramatic of which is that we moved out of Boston to Washington DC. Some of this is related to career opportunities, but the essential fact is that DC is going to go through a significant set of changes, and with that will be a number of investment opportunities:
Each of these themes will be explored in greater depth, but expect 2014 to be a dramatically different year.
Adding to its portfolio of CRM solutions, Oracle Corporation (NYSE: ORCL) has entered into an agreement to acquire Responsys (NASDAQ: MKTG), a cloud-based email and social marketing company to be part of the Oracle Marketing Cloud. Under the terms of the deal Oracle will acquire the company for $27 per share in cash or approximately $1.5 billion, net of Responsys’ cash. This represents a 38% premium over its share price the day before the transaction. In response to the annoucement, Responsys shares climbed to $26.90 in morning trading. Oracle Corp.'s stock added 3 cents to $36.63.
Another "marketing cloud" acquisition. At some point companies will stop marketing to each other and start selling, supporting, and building things again...
By Richard Napier
Why the Buzzient Social CRM offering for Siebel is superior; ability to link social data to current systems of record! #buzzient
By Richard Napier
Unique to Buzzient is the ability to do Social CRM for Hosted, On-Premises, and Hybrid configurations
By Richard Napier
Great summary from On Demand Education on the value of adding Buzzient to Siebel for Social CRM. A TBJ Investments portfolio company!
The opposite of play isn't work, it's depression
Great points by Bruce Daley from CCE2013. I'd also add that Social is a clear theme for all the enterprise players, and customers have this on the NEED list.
A leading Siebel blog has launched an applications exchange for Siebel specific code similar to Salesforce.com's AppExchange. Called the Siebel Store, the new marketplace is the brain child of Oli Ollerenshaw a long time Siebel consultant.
This is a BRILLIANT idea for the Siebel ecosystem. There are tons of production applications like Buzzient Social CRM which could be accessed this way.
EarthIntegrate has integrated its Pando Distributed Enterprise Marketing Platform with Oracle's Siebel CRM and will use the interface to help onboard a large financial institution. The institution in question has agreed to a $3,500,000, three-year contract in an effort to improve their customer's experience through better sales execution. The new customer will use the "Product Creator CMS," "Data Profiler," "Plan Administration >CMS," "Impersonation & Delegation" and "Approval Auditing & Archiving" modules of Pando.
Interesting data point for those who don't realize how vibrant the Siebel economy still is. $3.5M deals are hard to come by, and most SaaS companies claiming the "death of Siebel" are nowhere near this ballpark.
There's more evidence of $BA Boeing brand damage after the battery debacle. Some of this has been listed in a previous post on the Buzzient blog:
Since this original post, there's been a lot of noise about various aircraft fleets delaying purchase of 787's or even shopping for alternative airframes. If we take a look at Buzzient sentiment analytics for the last month, we can see this clear divergence for the 787 product line, where sentiment drops appreciably when compared to other Boeing products:
The dramatic drop in the red line (787 model) corresponds to the time period where it became known how bad the battery problems are. Since that time, Boeing announced decent results, but we can see in the social sentiment charts a lingering gap in product sentiment. Will this show up in delayed orders in subsequent quarters? I think prudent traders, using this Buzzient data alongside other measures would advise a HOLD on $BA.
This is one worth exploring. In comparing the Buzzient sentiment charts for Cabela's over the last 7 days and the Bloomberg chart for stock price, it's almost like they're inversely correlated:
Case in point, Feb 8 was the high point for sentiment, which correlates to the low point for the stock price in the past week. Is it that social sentiment drives new stock purchase behavior, hence the increase in stock price lags? If so, then using social media sentiment could be a VERY interesting and profitable technical indicator of where stock prices are going to go, particularly for long-oriented investors. Will analyze this further over time, but another tidbit of data on the potential application of social media analytics and sentiment to equities, ETF, and other long instrument trading.
As a follow up to the previous post on the Series A crunch( Series A Crunch), it's important to also think of alternatives. Yes, my principal thesis is that seed-funded companies without institutional investment should focus first on their core business and customers in order to get over the financing hump. That being said, the smart company also looks at alternatives.
If you're a startup that has been bootstrapped, hasn't raised any institutional money, and will need money anytime in 2013, you should strongly consider selling. Why?
1. The angel market is about to dry up
Everyone feels it. There's lots of competition right now for angel money, and few angel groups really have an efficient process for looking at lots of deals. To be blunt, so few angel groups have high volume deal screening processes that there's a bottleneck in looking for angel money. So, if an angel group tells you that their process takes 30 days, well, it actually takes 60 to 90. If they say 60 days, it's really 6 months.
In addition, there are so few cash on cash returns at the seed stage that a lot of angels are illiquid as well. That means they're waiting for cash buyers for existing portfolio companies in order to get back in the market.
2. VC's are being "Crunched" as well, and will act accordingly
There's another crunch going on; it's the Underperforming VC Crunch. Most venture capital firms underperform the S&P, and have done so for the last decade. A number of LP's are reconsidering their allocation to VC; CalPers for example is reducing their allocation from 7% to 2% or less.
That means that in order to justify their existence, those firms which aren't in a select few will have to drop eye-popping returns on at least 1 deal that captures headlines. That deal may/may not drive the overall portfolio, but will give the VC firm a reason to lobby for another LP allocation. To do this, VC's will tend to do later stage deals, even though their charter might be to invest earlier stage (Series B at a Series A Price). This is all about survival and justification of that 2% management fee, so charter be damned.
So, if you're a seed funded company looking at a "true" Series A where you have some revenue, customers, product, etc, but haven't begun to auto-scale, you're SOL. 9 out of 10 VC firms are just not going to be up for company building right now. For them, they're in their own "crunch", and in the battle for survival between you and them, well, guess who they'll pick?
3. There is an innovation gap that advantages startups; this means YOU!
Since the financial crisis, the level of R&D by both public and private companies has been somewhat suppressed. What that means is that the VP of Engineering/VP of R&D for larger companies has a list of innovations he/she would love to have, but has never been able to fund. That's where startups come in. If you're seed funded and have an actual product, your offering helps those companies accelerate their own plan. For the seed-funded entrepreneur, you get access to larger distribution channels and resources you don't have. It's a Win-Win.
To survive the Series A Crunch is going to take a lot of nerve, hard work, and an iron stomach. As you gird yourself for more capital raising, don't turn away from the acquisition route as well. If you find the right investors who are up for company building, carry on. If you don't find enough of them, M&A provides an alternative path that benefits your startup, your investors, the acquirer, and you the entrepreneur. Particularly without the "overhang" of VC preferences, M&A could be a BETTER outcome for early investors and entrepreneurs than with continued capital raising.