Entrepreneurship, Innovation and Other Buzzwords

We love hearing our policy makers and other economic leaders touting entrepreneurship and innovation as the prescription for our current economic ills. At Golden Capital Network we’ve been prescribing this for the last 10 years. Even so, we still periodically have to stop and clarify internally for ourselves the nuance of words like “entrepreneur” and “innovation.” They are more ambiguous than they might seem.

“Entrepreneur” is vexing not only for its difficulty to spell and pronounce, but because not all entrepreneurs are created equal. Yet there is no easy way to distinguish between them. Is the corner hot dog vendor an entrepreneur? Sure he is. But how closely related is the hot dog vendor to the 150 employee solar hot water heater manufacturer, or the 400 employee craft brewery, or the five person licensing shop with patents to use UV light to cure everything from crop rot to toenail fungus (to crib just a few real world examples from our own backyard here in far Northern California)?

Are mom and pop hot dog cart vendors, or other regional small businesses like them who sell products and services exclusively to a local market, going to bail us out of our economic doldrums? Probably not very quickly. Regional lifestyle companies are important to the economic mix, but in terms of economic impact, when we think about “entrepreneurs,” we like to think about companies that are “scaleable.”

Scaleability, to us, indicates how large and quickly a firm can grow, and it is a critical distinction among entrepreneurial ventures. Scaleability depends on the market, the products, and not to be overlooked, the aspirations of the actual entrepreneur. All the data indicate that scaleable companies have the highest potential to affect real, positive change within regional economies. They also show that entrepreneurs who were successful scaling large enterprise did so based on another, equally ambiguous concept: “innovation.”

The word “innovation” can be as troubling as “entrepreneur” in terms of misuse and misunderstanding. Steve Lohr, a longtime staff writer for the New York Times, helped us considerably with this one recently when he contrasted “innovation” with “invention.”

“Invention is coming up with a break-through idea… Innovation is the process that translates that knowledge into economic growth and social well being,” Lohr wrote in a Nov. 12 article profiling the Kauffman Foundation. “Invention is science. Innovation is economics.”

Innovation, in our experience is the application of new ideas, including technology and other inventions, in a commercial environment. Technology by itself is not necessarily an innovation, nor is an innovation necessarily technologic. It’s all in how the entrepreneur uses a technology, idea or invention to solve a problem that has a commercial impact, either internally to improve functions and operations in his or her own company, or externally as a product offering for the marketplace. This is the crux of “innovation.”

In the economic development industry, where we ultimately hang our hats here at GCN, the recent trend has been to use “technology entrepreneurship” or “technology economic development” as the phrase du jour. This might work in places like Silicon Valley or Austin, Tx – where a true “technology” industry exists – but it is not so accurate in most other places where there is plenty of innovation happening, but fewer actual technology companies.

Already we are seeing phrases like “innovation economic development,” “innovation economics,” “innovation brokering,” and “innovation facilitation” crop up to reflect this newer, more refined understanding of the nuance of how innovation and entrepreneurship interact on the ground and in the marketplace. At Golden Capital Network, where our mission for the past 10 years has been to “foster innovation growth entrepreneurship for economic development,” now that more people might get what we've been talking about, maybe we can get more done.

Valuation 2.0

The proliferation of social media and the rapid expansion of the userbase brings to mind the old saying about "there must be a pony in here somewhere".  With so many eyeballs being aggregated, surely social networks like Facebook and LinkedIn must be good investments.  But how good, and more importantly, how much?

Arjun Sethi recently published a compelling analysis on vcexperts.com that examines how to estimate the value of Web 2.0 companies, and the challenges of doing so with traditional valuation models.

Since many of these companies are pre-revenue, or collecting only meager revenues, a great deal of the company valuation is a reflection of the capital invested, rather than a multiple of earnings.  For this reason, private equity firms are not a suitable investment partner for social network sites.

In other words, many of these social networking sites would not be a good investment for private equity because a large part of their value would actually come from the money invested by the private equity firm. Even more, the fact that many of these sites have shown decreases in member over the past year means that advertising revenues will likely decrease.

Because of this, the authors advise that venture capital frims would be better investment partners for these kinds of opportunities, since they have the agility to focus resources surgically, and to harvest returns through other means than selling the company on a secondary market.

Venture capital firms have more freedom to focus on the short-term to move in and provide a company with necessary capital and then seek repayment of the investment in one way or another. In addition, venture capital firms, by their very nature, are in a position to give smaller amount of money to companies in order to provide a source of capital for future growth. Rather than being determined about book values, equity, and changes in revenue, they can be more concerned about helping a company get off the ground or grow through a period of transition.

The paper is chock full of tables and charts illustrating its analysis.  Anyone interested in understanding valuations of social media companies will find it a worthwhile read.

Wisdom From The Web

Streaming .TV shows by UstreamSo much of what I love about the Web is the serendipity and richness in the random connections I've made through the various network nodes I open.  For example, this morning I received two tweets from different but related contacts I follow.  The video above was posted by coworking pioneer Alex Hillman, co-founder of Independent's Hall in Philadelphia.  It's a brief address by "Chief Ideologist" Morten Lund of Lund XY Global Ventures at LeWeb 08.  He makes a very interesting point about how the economic downturn is irrelevant to entrepreneurs.  He notes that entrepreneurs can fail any day, whereas the big bankers have discovered that they can, too.  Some additional  sound advice from Lund is to focus on getting good people rather than good ideas.  Good people can make bad ideas successful, while bad people can tank good ideas.  This echoes Jim Collins' proscription: "First, Who."

About an hour prior to Alex' post came a link from New Work City's Tony Bacigalupo to an item from Belmont University's Dr. Jeff Cornwall about how the entrepreneurs emerging from the millenial generation are motivated less by making money and more by making a difference.  

I think what we have to get used to is that they are redefining what entrepreneurship is all about. To them, it is not simply a ticket to unimaginable riches.

When I talk to students about why they want to be entrepreneurs, the answer "to become the richest person in town" does not come up like it did back when I was teaching Gen X-ers.

They are using entrepreneurship as not just an economic tool, and not just a social tool as we see with their fascination with Social Entrepreneurship, but as a cultural tool.

What fascinates me about this is the synchronicity of the messages in these different channels, and that they both were brought to my attention by my colleagues in the coworking world.  Clearly, there's a close connection between coworking and entrepreneurship as it is evolving.  That connection is community.

We've been building and promoting venture communities as an engine for prosperity, and the challenge is keeping that engine fueled, lubricated, and driving initiatives that produce global impact while creating sustainable value -- and values -- at community, regional, and statewide levels.

More Wisdom From Tom Hayes

Author Tom Hayes was a featured speaker at GCN's New California 100 event last summer, and also spoke at the Venture Island - Chico "Make Or Break Beach" episode.

His book "Jump Point" is a fascinating peek into the not-too-distant future.  By 2012, Hayes projects that 3 billion users will be on the internet, equal to the entire global workforce, and that this inflection point will trigger significant social, economic, and entrepreneurial transformation around the world.

The next 100 million internet users won't be connecting via computers on broadband hardwired connections, but through a variety of interfaces, including cell phone handsets and application-specific appliances.

Now he and ABCNews.com's Mike S. Malone have written a detailed analysis of marketing in this "brave new world of retail", recently published in the Wall Street Journal.

But companies with millions of members of online communities are now asking: What next? How do we sell them products and services, or mobilize them into massive de facto R&D, manufacturing and sales departments? We have been studying the challenge and have concluded that very few of the traditional techniques of classical marketing (call them Marketing 1.0), or even of eCommerce (Marketing 2.0) will work in the world of social networks. A very different set of tools, concepts and practices is needed. Call it Marketing 3.0.

As we have been learning, users on the Web have a different set of expectations, and command the capabilities to determine which messages will even reach them.  Anyone hoping to reach customers through this medium will find Hayes' article enlightening.

Keiretsu Forum Angel Capital Expo

Our friends at Keiretsu Forum are conducting their Angel Capital Expo next week, on the Microsoft campus in Mountain View.  Keiretsu Forum and their members have long been enthusiastic supporters of Golden Capital Network, from helping us get the word out about our events, to sitting on our panels, to including us in their programs.  Accredited investors from our network are encouraged to attend, and to enjoy a discounted admission of $100 (a $275 savings) by registering here.

The details:

Friday, November 21, 2008 from 07:30 AM - 03:30 PM
Microsoft Silicon Valley Campus Conference Center
1065 La Avenida St., Bldg 1, Mountain View, CA 94043

300 angel investors
15 presentations
Exhibition booths for discussion and due diligence
 
About
Angel Capital Expo is the premier gathering of the angel capital community, bringing together investors and entrepreneurs looking for funding. Angel Capital Expo is organized by Keiretsu Forum, the world’s largest angel investment network, and was created to foster collaboration among angel groups, as well as reach out to the larger investment community.

Presenters
The Expo will feature presentations from 15 early stage companies in technology, life sciences, consumer products, clean tech, social ventures, and other industries are welcome to apply. Companies that apply to Keiretsu Forum are typically in their A or B rounds having already secured initial funding of $500k to $1.5 million from founders, friends, family, and individual angels.

Attendees
Attendees will include 300 private equity (angel) investors, venture capitalists, and corporate investors. Invitation is extended to accredited investors only. See definition at http://www.sec.gov/answers/accred.htm. Online registration is available at http://nov21expo.eventbrite.com. Contact Zaineb Faizi, Event Coordinator of Keiretsu Forum, for more information at zaineb@keiretsuforum.com .

Agenda
07:30am-08:30am  Registration, Breakfast, Booth Exhibitors
08:30am-08:45am  Opening Remarks
08:45am-09:00am  Guest Speaker
09:00am-10:00am  Block I Presentations
10:00am-11:00am  Break and Booth Exhibitors
11:00am-12:00pm  Block II Presentations
12:00pm-01:30pm  Lunch and Booth Exhibitors
01:30pm-02:30pm  Block III Presentations
02:30pm-03:00pm  Most Valued Company Award Competition
03:00pm-03:15pm  Announcing the Results of the Competition and Closing Remarks
03:15pm-03:30pm  Adjourn

About Keiretsu Forum
With over 750 accredited investor members throughout seventeen chapters on three continents, Keiretsu Forum is the world’s largest angel investor network.  Keiretsu Forum membership is comprised of serious investors, venture capitalists, corporate/institutional investors and serial entrepreneurs that provide early-stage capital in the range of $250k-$2 million to high-quality, diverse investment opportunities.  According to the San Francisco Business Times, in 2007, Keiretsu Forum was the most active angel group in the greater Bay Area with $33.4 million invested in 31 ventures. Keiretsu Forum is not a fund and does not invest as an LLC. Members collaborate in the due diligence, but make individual investment decisions. For more information on Keiretsu Forum, please visit www.keiretsuforum.com.
 
About Angel Capital Expo
Angel Capital Expo is the premier gathering of the angel capital community. The Expo is a recurring event across the United States; bringing together investors and entrepreneurs looking for funding. Angel Capital Expo is organized by Keiretsu Forum and was created to foster collaboration among angel groups, as well as reach out to the larger investment community. For more information on Angel Capital Expo, please visit www.angelcapitalexpo.com .

Uptime Chico Launch Party

Chico’s first and only coworking studio, Uptime, opened up its doors for a grand opening event on Thursday, November 6. The studio was filled with local entrepreneurs and other Chico dignitaries.

Assembly Member Doug LaMalfa presented Crystal Martin of California Nursing Academy with a Proclamation honoring her success in his district.

The top three finalists in Venture Island Chico were awarded their prizes at the event. The Venture Island business plan competition for entrepreneurs concluded last June at the CEPCO annual banquet. The winner, Crystal Martin of California Nursing Academy, was awarded with her first-place plaque and check, while Steve Culton of Desert Air Industries and Robert Strazzarino, of College Scheduler, received their awards for tying in second place.

Brendan Kim, of Altos Ventures, presented "RIP Good Times: A Different Perspective On The Downturn", and explained why his firm is still looking for good investment opportunities, including their recent investment in local networking company Digital Path.  Jim Higgins, CEO of Digital Path, also spoke.

Bob Linscheid, from CEPCO, and Stewart Knox from WIRED Northstate, also spoke.  Dignitaries in attendance also included Butte County Supervisor Maureen Kirk, Chico City Councilmembers Ann Schwab and Tom Nickell, City Manager Dave Burkland, and Butte County CAO Brian Haddix, Interim Dean of the CSU-Chico College of Engineering Mike Ward, and College of Business faculty coordinator of the entrepreneurship major, Julie Indvick.

Silver & Gold Winners, Finalists & Presenters!

Company	City	Industry
Winners
ASI (BEST OVERALL)	Sacramento, CA	Software/IT
Ionic Water Technologies (BEST NEVADA)	Reno, NV	Internet Services/Web 2.0
Finalists
AKI Biotechnology, Inc.	Reno, NV	Life Sciences
Aubice	Greenwood Village, CO	Internet Services/Web 2.0
Key Tech	San Rafael, CA	Seed Stage
TyBit	Fayetteville, NC	Internet Services/Web 2.0
Wi-Fi Rail	Gold River, CA	Clean Technology
Presenters
ABK	Los Angeles, CA	Life Sciences
AllRentalsNetwork	Chico, CA	Internet Services/Web 2.0
Auto Answers	Tomball, TX	Software/IT
Bio Bath	Las Vegas, NV	Life Sciences
Bright School	San Francisco, CA	Software/IT
Home and Garden Center DIRECT	Reno, NV	Seed Stage
Hot Topper	Los Angeles, CA	Clean Technology
Innovative Recruiting Group	Carson City, NV	Internet Services/Web 2.0
InTUUN Systems, LLC	Reno, NV	Software/IT
MedTrust Online	Scottsdale, AZ	Life Sciences
Mobile Service Technologies	Henderson, NV	Software/IT
Motiv Engines	Reno, NV	Clean Technology
MotoAdvisor	Zephyr Cove, NV	Software/IT
Nutrition Report Cards	Reno, NV	Seed Stage
OneGate	Davis, CA	Seed Stage
SportsAlert.com	Los Angeles, CA	Internet Services/Web 2.0
Talk Life LLC	Reno, NV	Seed Stage
Ternion Bio Industries	San Jose, CA	Clean Technology
The Grun Company	Modesto, CA	Clean Technology
The Poker Network	Arvada, CO	Internet Services/Web 2.0
Thermal Imaging Consultants	Sparks, NV	Life Sciences

Silver & Gold a Success!

The companies presenting this year at the annual Silver and Gold Venture Capital Conference were varied in their product but not in their determination. On October 21, 2008 at the Peppermill in Reno, NV we had 31 companies presenting to over 50 investors evaluating not only the businesses but the presentation itself. Gayle Crowell, a Warburg Pincus partner and host for the Silver & Gold finalist showdown said, “Even though everyone’s a little nervous about the markets and venture investments are down about seven percent last quarter, remember that investors have limited partners behind them and they have to invest that money.” See the video link of intro comments by Jon Gregory, president and CEO of GCN, and Gayle Crowell, Warburg Pincus. Warburg Pincus, one of the world’s largest venture capital firms, just closed its most recent $15 billion fund.

The award for Silver & Gold Overall Presenter went to Administrative Systems, Inc. (ASI) which is based out of the Sacramento area and are with the Software/Information Technology industry. The award for the Silver & Gold Best Nevada Company went to Ionic Water Technologies, Inc. from Reno, NV who are involved in Clean Technology. View the presentations and feel free to give some feedback. Just because the competition is over doesn't mean that these companies don't need your input! Check them out and let them know what you think!

Read up on the conference if you missed it and get an idea of what goes on at venture capital conference. Bill O'Driscoll wrote an article in the Reno Gazette, entitled Reno's Silver & Gold conference: Small Businesses Urged to Adapt Amid Turmoil.

Adapt. In tough times like these, it's the key to survival for small business.

That was the message to 125 business leaders and others Tuesday at the eighth annual Silver & Gold Venture Capital Conference in Reno.

"Small businesses are struggling. You see a lot more vacant spaces as you drive by strip malls," said keynote speaker Steve Mills of DCA Capital Partners, an investment firm in Roseville, Calif.

Read More

Capitalism Is Dead!

As seen in the most recent edition of The Economist.

Yeah. Right.

Uptime Chico Coworking Now Open!

Not to toot our own horn or anything (is that a whistle I hear), but Uptime was featured in a Chico News & Review article on October 2. We could go into more detail about it, or we could just let you read it for yourselves...

Open-source office space
Coworking phenomenon is catching on in Chico

By Serena Cervantes

Josh Morgan runs a public-relations agency out of an office in El Dorado Hills, a two-hour drive from Chico. He has family and clients in Chico, but he’s not here quite enough to make getting an actual office make sense.

So, he uses the Uptime Coworking Studio for his work space. “This way, we have a space, we have an address we can use, a place we can meet with people,” Morgan explained.

Coworking is a new phenomenon that is catching on in cities across the country—and now has reached Chico. The idea behind it is to capture the growing number of entrepreneurs and other business people who rely mainly on “virtual” offices—laptops, Blackberrys and the like—but now and then need to use a real office space.

Known as “community offices” or “office parks,” they are shared work spaces that provide the latest in technological equipment as well as an opportunity for business people to bounce ideas off each other.

In Chico, Uptime is currently running out of the Golden Capital Network office until construction is completed on the 1,200-square-foot coworking studio in the same building. Business nomads like Morgan are using the GCN office until they can transfer to the studio.

Morgan’s clients include technology companies, and a big part of his job is writing. He likes to be in a quiet space for that. But his work also involves creativity and brainstorming, and for that he likes to have other people around.

“It’s having them there and the ideas they might have. You can bounce something off of somebody much easier,” Morgan said. “Working virtually, I can do that over IM, I can do that multiple ways, but there’s something to be said for actual physical interaction that can help the creative process.”

GCN is a nonprofit corporation that provides a business-education system for coaching entrepreneurs and early-stage companies. It serves as a platform for business infants, helping them gain economic development, investment connections, and showcasing.

Uptime is a product of Venture Communities, one of three components that make up GCN. Located on Salem Street, above Alley Tats and Celestino’s Pizza Parlor, the coworking studio is expected to open its doors Monday (Oct. 6).

Coworking started in San Francisco as the vision of a computer programmer named Brad Neuberg. About two years ago, he and other like-minded young techies and business people began meeting to discuss the idea, explained Tara Hunt, who was part of that original group and now owns Citizen Space, in San Francisco, one of the first coworking studios to open its doors.

Via e-mail, Hunt described coworking as being about providing affordable, open, collaborative spaces for people as an alternative to working from home or from noisy coffee shops. “Coworking is really tied to the nomadic worker who is part of a growing movement of people who don’t have offices to go to, but want to work in an environment with other people.”

The goal was not to create anything like typical office rental spaces, Hunt said. Rather, it was “more like an artistic collective with a technology twist. Many of the core ideas of the open-source movement (collaboration, community, openness) went into the core philosophy of coworking.”

That philosophy has spread quickly. Google has a map of coworking sites in the United States, and there are dozens of them. Most are located in metropolitan areas, but now they are spreading to smaller communities—as well as overseas.

“Mid-sized markets such as the Stocktons, the Fresnos, the Bakersfields, the Reddings—Chico—may want something like this in their community,” said Karen McHenry, manager of business operations for Golden Capital Network.

Alan Chamberlain, program director for GCN’s Venture Events, is overseeing the Uptime project. The people who really respond to it are young, independent and self-motivated, he said.

“They’re what we call the Millennials,” he explained. “They’re a very important economic force. They’re very picky about what they’re willing to accept in the way of a work environment and a job. They’re all about instant gratification. They’re also totally viral; they live on the Web 2.0.”

He loosely defines Web 2.0 as a concept for social-space interaction and collaboration. It encompasses such sites as Facebook, MySpace, Twitter, Wikis and Craigslist. He noted that 70 million Millennials were born between 1980 and 1996; a third of them are still in school, and altogether they earned $210 billion last year.

Four groups are likely to use a coworking studio, Chamberlain said, with the largest being sole proprietors who own home businesses. Mobile freelancers, telecommuters, and start-up entrepreneurs also will use the service.

Here’s how it works: For either a monthly or a day-use fee, clients have access to the studio, which in addition to the usual stuff—computer desks, tables, chairs, and sofas, a conference room and private meeting rooms—will have the latest technology tools. Those will include WebEx computer conferencing, IP video and IP telephony, as well as high-power, ad-free Internet service.

In addition, Uptime, in conjunction with Golden Capital Network, will host “dealflow” showcases (presentations in which venture-capital investors review early-stage companies), seminars, guest speakers, workshops, panel discussions, and networking events. Indeed, one of the major benefits of joining the studio is its intimate relationship with GCN.

The membership fees are similar to those of a health club, where an annual commitment is required and clients will be billed monthly. A basic business membership is $99 per month, $9.95 for a day pass. If a client wants a fixed-desk membership (located in Golden Capital Network’s existing offices), the monthly fee is $250.

Nolan Brown, the first person to walk into Uptime in search of a coworking atmosphere, is a good example of the kind of person who can make use of the service. He’s a 23-year-old entrepreneur with a nomadic lifestyle.

Brown and his brother started a mobile software company called Bitfire Systems in May 2008. They write software for iPhones and Blackberrys, or “smart phones.” They write software for other companies, as well, but mainly they’re a consumer product company; their main focus is consumer applications.

“We do everything over e-mail, over the phone, over Skype. We don’t need a central office, but I still wanted a place where I could have some kind of space,” Brown said, “and that’s where Uptime kind of came in.”

He has been at Uptime for only two months, and already he has networked with other young entrepreneurs who run their All Student Rental business out of the studio. He explained the benefits:

“Because I’m technical, because I’m computer science and a lot of people are business, we don’t ever mesh, but this way we do. We both own companies, we both run companies, and this way we get to know each other and are able to utilize each other’s resources and expertise. That’s how it’s supposes to work. It really is symbiotic.”

Trying to Keep Up

Brooks Jordan discusses trends, for instance, Twitter and why and how some things are successful, when some are not. In the digital age there is so much growth. How does one keep up with it all and who gets left behind?

Why does something catch on? Because enough people get why that something has value and how it works until they’ve drawn in even the laggards. Then it has a life of its own.

That’s happening to Twitter.

But what if the something isn’t a thing like a Web app but a political movement, or a soccer team in a rebuilding phase, or an industry.

That kind of something that has lots of people and moving parts needs standards in order to evolve. A standard is a norm or a rule or principle that the community accepts as valid.

What would we have done, for example, if the W3C hadn’t created some guidelines for Web development and design? Many of the apps we use every day wouldn’t be the same and might not even exist. Even Microsoft has caught up to those standards with the release of IE8.

The Web is driving a lot of people crazy because the potential has been, and continues to be, huge. And there have been lots of successes. But, even so, when "free" is the starting point, how do you build a viable company off of what requires a very different way of thinking and executing?

Clearly, that isn’t just a question of the specific business idea or opportunity, which can be singularly great, lucky, or acquired, it also has a lot to do with the features of the environment everyone is operating in.

In the broadest sense, the new business environment is a digital media environment, what VideoEgg calls a “demand environment.” Meaning, connected consumers get to demand - or reject - what they want. No matter what kind of business you’re in - t-shirts or wind turbines - you have to deal with the digital version of demand.

Standards that are based on this new type of consumer-driven demand are going to help a lot with that. And, if you’re looking for them, they’re starting to pop up in various places, like this recent piece about Web TV, which is all about nascent standards.

It talks about tapping niches, distribution models, traffic measurement, user guides, living-room TV integration, promotional support and viewing formats. Many aren’t even close to being figured out, but clearly TV on the Web is beginning to take form - they’ve started the conversation, and that’s a big step.

No doubt, other industries may be ahead of or behind Web TV, but everyone is starting to think about standards.

Whether it's standards or the vast potential for the web to go on and on and on, everyone needs to realize that the digital world will go on whether we learn to change with it or not. Might as well, roll up our sleeves and stop sniveling and get down to business.

Get On the Bus

Remember the days when you'd call to talk to a business and a real person answered the phone? Remember when you used a credit card and they'd swipe that heavy contraption back and forth making a carbon copy of your card or when your old LP's were traded in for new-fangled tapes? Well, if you can remember it, it's almost certain you've gotten the look from a "Digital Native" when you've talked about it, as if to say, "Oh, my god! How old are you?" In a book summary from John Palfrey and Urs Gasser's Born Digital: Understanding the First Generation of Digital Natives, David Hornik takes you through a comical example of what Palfrey is eluding to.

If you have not yet experienced "Digital Natives" in their natural habitat, come on over to my house on any weekend. When I wander down stairs on a Saturday or Sunday morning, the scene is always pretty much the same. The TV is on and yammering away. But my kids are far more engaged in their respective laptops than they are in the TV making noise in the foreground. My 6 year old is likely buying a new go kart for his Webkinz monkey. My 8 year old is busy shooting balloons on Addicting Games. My 11 year old is blogging about some great new Japanese rock band video he found on YouTube. My 13 year old is reading the latest news about his favorite performers on Broadway.com. And, amazingly, while "watching" TV and voraciously consuming the Web, my children are more than capable of fighting with each at the same time -- digital multitasking at its finest.

Digital Natives today may be a small group of non-voting, non-credit card holding kids. But soon Digital Natives will be the predominant consumers of media, goods, services. And as such, they will expect their experiences to be inherently digital. Analog experiences will be viewed as quaint -- perhaps they'll trigger nostalgia for the good old days of board games and books -- but, in the end, the expectations will be one hundred percent digital. Companies will need to think differently about how they market to Digital Natives. Governments will need to think differently about how they engage Digital Citizens. Doctors will need to think differently about how they treat Digital Patients. It won't be an evolution -- it will need to be a revolution.

I already see this revolution when I'm pitched on businesses whose customers are kids. Businesses focused on children or Millennials (the next big group of consumers being chased by the advertising world) have no interest in the historically analog world. Their products are naturally digital. They acquire customers digitally. They interact digitally. Indeed, any analog byproduct of the digital experience (you know, like meet real humans in person) is just that, a byproduct. Kids want their media consumption, their shopping, their communications to be digital. Webkinz is a great example of this phenomenon -- who would have thought that stuffed animals could prove to be the gateway drug to a digital experience? Yet that is precisely what they have become.

In light of all that, it was great to read the timely new book by John Palfrey and Urs Gasser called "Born Digital: Understanding the First Generation of Digital Natives." John and Urs look into the opportunities and challenges posed by this digital revolution. Those of us with kids are living in and among the Digital Natives and certainly can use all the help we can get to navigate this brave new world both for ourselves and for our kids.

When I was about 6 or 7, my family got our first VCR. Every time the electricity would go out my Dad would have me reset the clock because he could never figure it out himself. When I moved out on my own my Dad gave me that VCR. He said that the blinking light drove him crazy (without me around the clock was never set and just flashed 0:00). Now he has an MP3 player that he loaded with songs, and figured out how to play it through his car stereo. I rode in the car with him the other day and I noticed the dashboard clock was blinking the "0:00." When I asked him about it he said, "I can't figure it out," as he clicked from Carly Simon to The Beatles on his Mp3 Player. Some things don't change, but he is learning the new technology to suit his needs, which I'm sure a lot of you are having to do. As for telling time? Right now, my Dad's content wearing a watch.

"Truths" from a successful Internet entrepreneur

Justin Kitch, founded and grew Homestead Technologies for 11 years before the company was acquired by Intuit in 2007. One of his passions is working with other people starting and growing companies and he has put together a list of "truths" that he says he's "pretty sure anyone starting a business should ignore at their peril." Below is the list, hes going to be expanding on these over the next few weeks at his blog, CEO Unplugged.

1. Think web first.

2. Have a human capital strategy.

3. Find a channel, then build a product—not the other way around.

4. Plan now for success—or it will never come.

5. Raising money is not your biggest problem, being able to spend it appropriately is.

6. You're not thinking big enough!

This list is going to be especially relevant over the next few weeks as the Golden Capital team works with early stage companies to prepare them for the 8th Annual Silver & Gold Venture Capital Conference in Reno. Not all of the "truths" above are going to apply to everyone, but as is often said, "think of the source of the information," in this case, it's a pretty good one.

Royal Pain Relief

A royalty agreement has been reached between the creators of music and the internet radio industry that seems to have remedied the standoff between the two camps.  The recording industry, represented by RIAA and other groups, and the streaming content sites, represented by the Digital Media Association, have agreed in principle to a royalty of 10.5% of revenue for interactive streaming services.  The agreement has been sent to the Copyright Royalty Board for final approval.

This is a huge step forward for internet radio.  New royalty requirements (a 38% increase) for intenet streaming threatened to essentially cripple the fledgling industry.  The proposed royalty rate was higher than satellite radio pays.  Broadcast radio pays nothing at all.  Internet giants such as AOL and Yahoo considered abandoning their Web radio operations.

Tim Westergren, CEO of Pandora, the largest privately held internet broadcaster, was explicit that the new royalty rates would mean going out of business.  "At the new rates we're losing tons of money. If we don't think there's a real answer that's going to happen, it's our fiduciary responsibility to stop.''

And that would be a real shame.  Tim presented his business (then called Savage Beast Technologies) at the GCN 2003 East Bay Venture Capital Conference, and won "best of show".  Since then he's built his broadcasting platform to a $25 million business, although it's still not profitable.  Millions of listeners have become regular listeners of Pandora, which allows users to custom configure their own radion stations based on their musical preferences.

We're glad for Tim, and for Pandora, that cooler heads have prevailed and that the royalty structure will accommodate the infant industry while still making sure the creators of music are compensated.

SNAP Summit^3 - October 28th at the Parc 55 Hotel in San Francisco

SNAP Summit is the premier San Francisco conference on social application business and development.  Past speakers have included Dave Morin of Facebook, Jim Benedetto of MySpace, Seth Goldstein of SocialMedia, Jia Shen of RockYou, Jeremiah Owyang of Forrester, and countless more.  We are expecting another sold out show, with over 350 developers, founders, business exectives, and bloggers attending.  For more information, check out SNAP Summit or email Cassie at cep@rfop.biz.

Golden Capital Network blog readers can attend with a 10% discount by clicking here.

How Not To Pitch Your Startup

It doesn't matter if you have a great product to invest in, if it is something that is in high demand, whether you have a great model or the figures to back it up. If you can't sell your idea to investors, you won't get it off the ground. Our colleague (and occasional poster here) Chris Soderquist pointed us to a post by startup guru Guy Kawasaki, who gives entrepreneurs an entertaining list of "what not to say".

Many entrepreneurs ask me what is the best way to open a pitch to potential investors. I'll answer that question at the end of this posting, but first let me tell you the ten worst opening lines that you can use:

1. You say: "I'm bright and ambitious." Investor thinks: "That's a relief because I usually invest in stupid and lazy people."

2. You say: "I'm a blue sky thinker." Investor thinks: "You have no business model, and you don't know how to ship."

3. You say: "I don't know much about your firm, but I thought I'd contact you anyway." Investor thinks: "You're a lazy idiot--why are you wasting my time?"

4. You say: "I love to think of new ways to solve problems." Investor thinks: "Is this a high-school science fair?"

5. You say: "I have lots of great ideas, but I have trouble figuring out which one to try. Let me tell you about a couple." Investor thinks: "I want to know which idea you're going to kill yourself trying to make successful, not which ideas have crossed your idle mind."

6. You say: "I've always wanted to be an entrepreneur." Investor thinks: "I've always wanted to be a professional golfer. So what if you always wanted to be an entrepreneur?"

7. You say: "I'm sure you are aware of the growing need for security. Web 2.0, Open Source, whatever." Investor thinks: "If you're sure I'm aware, why are you telling me you're sure I'm aware."

8. You say: "If you sign an NDA, I'll tell you my idea." Investor thinks: "You are clueless. How can you not know that venture capitalists don't sign NDAs?"

9. You say: "The last time I contacted you, I..." Investor thinks: "I'm going to fire my secretary for putting this clown on my calendar again."

10. You say: "My goal is to build a world-class company." Investor thinks: "How about you ship and sell the first copy before we talk about world-class anything?"

Now you know what not to say. Here's what you should say:

"This is what my company does..."

It's that simple. What you're trying to do is get potential investors to fantasize about how your product or service will make a boatload of money. They can't fantasize if they don't know what you do. And they don't want to be your friend, mother, or psychiatrist until they understand what you do, so cut the crap and explain what you do.

Omit these all-too-common errors from your presentation when you communicate your "great ideas" to potential investors. Stick with the basics and you might just get your point across in a professional and timely manner and wow the people who are the ones who need to be wowed.

U R Here

Julian Stone, CEO – Project Management Software specialist for ProActiveSoftware.com, ProWorkflow.com, and Julian101.com has created a map of sorts to navigate the rapidly evolving Web 2.0. With this chart mapping out the different social media sites and breaking them down into explanations it helps to figure out where we are, and where we're going, complete with all the trendy lingo and a point of view that makes comprehending it easier. It is a great way for everyone to figure out the Web 2.0 and enjoy its benefits for businesses.

8th Annual Silver & Gold Venture Capital Conference

Every fall for eight consecutive years, intrepid angel investors and venture fund managers have flocked to the Reno/Tahoe area to review the most promising early stage growth companies from the western United States at Golden Capital Network's Silver and Gold Venture Capital Conference series, presented jointly by Golden Capital Venture Events and Nevada's Center for Entrepreneurship and Technology.

The conference features a full day of innovation showcase sessions, as entrepreneurs pitch their business plans to sector-specific panels of active investors who will evaluate their presentations. Forty active angel investors and venture capitalists have already confirmed their participation. In a new twist, presenting companies will be allotted more time during their presentations to focus on their product innovations. The top presenters on each panel will go on to a finalist showcase judged by a panel of investors moderated by Gayle Crowell of Warburg Pincus.

"Golden Capital Network's venture capital conferences offer the best, most promising dealflow across multiple sectors," says Rebecca Lynn, of Morgenthaler Ventures. "The 8th Annual Silver and Gold event is a justly renowned regional showcase." Entrepreneurs wishing to present at the conference should apply now. The cut-off date for acceptance of executive summaries is Monday, September 22, 2008. After screening by a selection committee to ensure quality, qualified entrepreneurs will be selected on a first-come, first-served basis. There is a $695 presenting company fee, which includes complimentary conference registration, a 10-minute presentation to a panel of qualified investors, and one-page summary in the conference binder. A maximum of 40 companies will be selected, so it is important to complete your application as early as possible.

Active angel and venture investors interested in participating as panelists should contact Golden Capital Network CEO Jon Gregory by calling 530-893-8828.

Other Conference Highlights

The conference will also feature the Best of the West Early Stage Expo, which brings together all critical components of the early-stage value chain - entrepreneurs, angel investors, business and technology executives, venture capitalists and a complete range of professional services providers - in a high-energy, high-impact networking setting during the conference reception. During this one-of-a-kind event, exhibitors and attendees will make a year's worth of important contacts in one two-hour setting. Other conference highlights include the opening "Ballroom Blitz" in which all of the presenting companies make one-minute "Power Pitches" to introduce their business to the conference investor panelists, sponsors and attendees. In this fast-paced segment, attendees get a sense of the wide array of sector, geographic and technology plays that will be showcased throughout the day. Finally, the Silver and Gold Conference will be used to launch the inaugural Northern Nevada Technology Awards Program, which will honor companies through the Tech Company of the Year, Tech Start Up of the Year, and the "Green" Company of the Year, and individuals through the Tech Entrepreneur of the Year, CIO/CTO of the Year, and Tech Educator of the Year. The awards program is hosted by NCET and Northern Nevada Business Weekly.

Aspects of Social Media Optimization

Most Web marketers are familiar with Search Engine Optimization (SEO); the practice of structuring web pages to make them "crawler friendly" to Google and other search sites.  But with the proliferation of Web 2.0 capabilities, intrepid marketers are becoming fluent in Social Media Optimization (SMO).  Tom Pick discusses the various aspect of SMO on his blog, including Discussion Forums, Social Bookmarking, Wikis, Video and Social Networks.

(Discussion Forums)…are a place to showcase your expertise in a non-promotional way. For example, in an SEO forum, telling everyone how great your agency is at SEO is suicide; but displaying your knowledge by offering expert tips on title meta tag creation or non-spammy link building is brilliant.

(Social Bookmarking)…sites like Digg, del.icio.us, StumbleUpon, Mixx and Searchles are great places to spread the word about your own thought leadership content as well as, and even more importantly, positive coverage your company gets from other bloggers, journalists or analysts.

A wiki is another place to share your knowledge of a particular topic with a community or the world. You can do this by either writing an encyclopedic article about a topic; adding to or editing an existing article; or adding links to your own thought-leadership content as supporting material.

Business video production is growing exponentially because video is engaging, repurposable (for example, you can use a video on your website, at tradeshows and in presentations; post it on YouTube; use it as an asset for blogger outreach or a channel sales tool; add it to social media press releases; etc.), potentially viral, and increasingly searchable.

At the least, social networking services like LinkedIn, Facebook, and Konnects provide increased exposure for your company (and your "personal brand") while also providing SEO and reputation management benefits. At best, these sites can help you make valuable new business connections.

The end result ultimately would enable you to have the top search page which would be a great way to get the word out about your particular industry and get feedback at the same time.

Starbucks Connects with Customers

Working the inner recesses of the Web 2.0, Starbucks has come up with a novel way to get feedback from it’s consumers. After creating an account one can share ideas or complaints via the site and have other members vote on their observations.

Posted by StuartOnline to Other Involvement Ideas

Today while at the local Starbucks (Tiger Point) in Gulf Breeze, Fl I watched three people within 20 minutes leave because there is a charge for WiFi. They all went to other places within the area that offered FREE INTERNET connection. With your high prices for coffee you would think you would offer this service for FREE. Let me add I do own shares of stock in Starbucks.

Posted by Suz01 to Other Product Ideas

I work at home as a remote employee. There have been many times that I have wanted to treat a co-worker to a Starbucks for helping me out on a project, or just to brighten their day. Wouldn't it be neat if you could purchase a drink for someone via the Starbucks web site? The recipient gets an email stating, for example, "Suzanne bought you a drink!" The recipient prints the email (with a barcode) and takes it to their nearest Starbucks to redeem.

Starbucks is recreating itself in order to connect with the customer on an intimate level. Something that was only done in-store before but now they have a wider foundation for new ideas and opinions first-hand by implementing their online exchange.

Skeptic's Surprise

In an article written by Bruce Ross in The Record Searchlight, dated September 5th, he initially states his skepticism regarding Venture Island. However, after attending the event he said that the event was “entertaining, educational, and an introduction to 20 creative businesspeople.”

“When you think venture capital, you probably think technology, but the entrepreneurs were a mix — insurance and accounting consultants with new ideas, farm products, creative new tools cobbled together by tradesmen, a craft brewery and, yes, some high-tech materials and Web idea.”

Ross is putting his money on Shasta Crystals new idea regarding the manufacturing of the crystals used in mini projectors. According to him, all the businesses represented, “win or lose this event, are worth keeping an eye on.”

Typing Angels

Andrew Muse has posted a useful taxonomy of angel investors on myventurepad.com.  Muse's approach could be illustrated pretty effectively with a quadrant graph, with the axes describing investment experience and objectives.

He makes a pretty compelling case that seeking angels exclusively through an angel group is probably not that effective.  He also confirms what we've long preached, which is that you need more than money; you need smart money.

They are people who have previously made lots of money in and around your space.  They have subject matter expertise around your idea and can often provide a lot more than money.  In many cases they will know the ultimate customer that will ensure your success and insure their investment.

The right investor partners can make all the difference.  In addition to subject matter expertise, they can help connect you to talent, strategic partners, distribution channels, and early adopter customers.

Lawyers, Guns, and Money

A colleague from my former story arc in Silicon Valley posted a very interesting essay today about the uneasy relationship between product management and risk management, and how it showed up in the Google Chrome launch. Some excellent insights for anyone developing software products from Jeffrey McManus.

The product used the standard Google licensing agreement, which gives Google a non-exclusive license to anything you submit to a Google service. Because they used the same license on the browser, people who didn’t read or understand the legalese came away with the impression that Google owns everything you do using the browser. And “non-exclusive” is key here (it means they can use your data — in a search index, for example — but they don’t “own” it). Still, it freaked some people out and for good reason — the one-size-fits-all nature of a license agreement that’s appropriate for a web site isn’t necessarily going to fit well for a browser product.

In a content ecology where trust is paramount for credibility, this sort of oversight costs you more than customers. It costs you your reputation.

On Your Marks

At the Start Conference last week, although it was not a "deal flow" event, we did get to hear some pitches from some startups. We usually see thirty or forty companies at a GCN event, all of them explicitly seeking private investment, so it was interesting to see a few companies that were simply giving some examples of pitches (and that weren't coached by us).

There were a couple of companies with some market traction I wanted to feature here. Hopefully, we'll feature them at a future GCN conference, as well. But for the benefit of our investor network, I though it worthwhile to mention them on our blog.

Apture provides publishers with multimedia integration capabilities. This post is littered with examples of how it works. Pretty simple; you just highlight the text you want to associate with multimedia, and a box pops up with examples of relevant content from all over the web. You select the item (or items) you want to link and Apture does the rest. When the reader mouses over the link, windows pop up with the linked content. Really just about the coolest thing since draft beer.

Get Satisfaction is a customer service community platform that enables customers and the companies they do business with to interact, collaborate, and resolve issues. A user can ask a question, report a problem, or share an idea about how to get the most out of the product or service. Businesses can respond directly to address the issue, and other users can join in with their fixes, workarounds, hacks, and other advice. So far Twitter, LinkedIn, Doppler, PBWiki are using Get Satisfaction to create stronger relationships with their users. I expect a lot more will, as well.

Ready? Begin.

Big fun last week at the Start conference. About 400 aspiring entrepreneurs filled the Cowell Theater at Fort Mason Center in San Francisco to hear from successful startup vets, service providers, and private investors.

Structured as a series of conversations moderated by Bryan Mason and Jeffrey Veen, the discussions included war stories, practical advice, some comedic horseplay, in an interactive web 2.0 environment.

This last element was the least successful, and the part that I most wanted to see in practice. As it happens, when you put hundreds of laptops in a small room with insufficient WiFi coverage and next to no power outlets, the utopian vision of open source brainstorming quickly becomes clouded. But the idea was cool, even if the execution was less than ideal. I'm sure next year they'll do a better job of that.

Still, some folks did manage to get their questions and comments through to the online moderator, George Oates using Twitter (I gave up on the laptop after lunch and followed the virtual deliberation on my cell phone) and Meebo.

We've been putting on events for entrepreneurs, angel investors, and venture partners for going on a decade, so I was especially curious to see this program. In part because I didn't know anything about it until about four days before it happened. I hadn't seen any conventional marketing; no email blasts, no broadsides, no partner communications, etc. I learned about it through a tweet from @missrogue, who casually told the 9000+ people paying attention to her Twitter stream that she was registering for it.

Naturally, I followed the link she thoughtfully furnished, signed up, and went down for the program. What was very interesting to me was that this was not being presented by a conference organization like GCN, IBF DEMO, etc., but rather it was dreamed up about two months ago by Mason and Veen, and cultivated virally through the various social media proliferating like mushrooms after a hard rain.

And it was a pretty good show, too. Some nice features included the interactive engagement with the audience (which could have worked better, but still cool), the peer-to-peer content, and the craft-brewed draft beer during the afternoon break.

There were also some very interesting new companies giving their venture pitch, about which more in the next installment.

Orking Cows

There is a hot and happening trend in knowledge work these days. It seems to have emerged a couple years ago, largely spontaneously, as disaffected technology freelancers got fed up with the isolation of working in their home offices and the turbulent chaos of working in cafes.

My first inkling of this came when reading a special report in the Economist magazine last April, which discussed the "new nomads" who work wherever they can find signal, whether on their laptop, PDA, smart phones, or blackberries. You see them at Starbucks, the library, and other areas where WiFi is promiscuously available.

On a recent road trip, my GCN colleagues and I sketched out a business plan to create a mental health club for nomadic innovators, a "venture community center" where entrepreneurs could work on their businesses among others of the similar inclinations, with access to GCN's network of domain experts, coaches, investors, etc. When I began to look into it, I discovered we'd reinvented the wheel, albeit a fairly shiny new wheel with a lot of permutations.

The term of art in the movement (it's so embryonic as to hardly constitute an industry -- yet) is "coworking". It manifests in a number of models, but the common features are a community workplace occupied by people working on their own projects, but actively collaborating, brainstorming, and socializing.

One of the godmothers of this movement is Tara Hunt, co-founder of CitizenSpace in San Francisco. I had an opportunity to visit her operation last week, and it was fascinating. For one thing, it was within sight of the location of the first startup I worked for back in the 1980s, Friend Technologies (introducing a service called "voice mail"; you may have heard of it). But the other thing that I found intriguing was that it was largely unoccupied, even though they are sold out. Startling at first, upon reflection I realized it made sense; when you're a one-man-band, you're not spending a lot of time at a desk. You're out there, meeting with folks, adding value at client premises, and prospecting for new business. CitizenSpace is an agreeably funky loft space with a dozen desks and an airy conference room. There was indeed a meeting taking place in the conference room, but aside from Tara, there was only one other solitary worker at a desk.

CitizenSpace is organized around a co-op model. It's not intended to produce a profit, but rather be a crucible for creative collaboration. The members are all "desk residents"; that is, they have a desk that is theirs alone, and pay a monthly rent for the use of it. While some coworking spaces are similarly aligned, others are more explicitly business models that can produce surplus cashflow, while preserving the core principles of the coworking movement. These include;

• Openness – Willingness to share ideas freely, without license. Open-source brainstorming.
  
• Collaboration – Creative interaction that promotes innovation and new science.
• Community – Sharing risks and rewards, obligations and opportunities.
• Sustainability – Combining resources so that less is used by more.
• Accessibility – Minimizing barriers.

I also visited Sandbox Suites in San Francisco, a commercial coworking scene, and that was also sparsely occupied at midday and midweek. Two conference rooms were busy (and their posted schedules looked pretty full, as well), but the rest of the space was pretty empty. They have resident desks like CitizenSpace, but also ad hoc access to tables, chairs, desks and a wifi network (called "hot desking") for a monthly membership fee, depending on part-time or full-time use.

It is a very attractive, casual, vaguely hip space, not at all like an "office". There is a conversation pit of black leather sofas and easy chairs. A row of cubicles separated by translucent plastic panels were lined up against one wall, but otherwise it was all very "open plan" cafe style furnishings.

I also visited a launch party in Fresno for OfficeBay, a spinoff of another casual workspace operation called CargoBay, which started up 18 months ago, offering 50 10'x10' hardwall offices with a desk and IP telephone for $399 a month. The play here is that there are also rollup-door storage units, a shipping and receiving dock, and a photo studio (a lot of Ebay auctioneers operating there). The new place has larger offices for up to 6 workers, a cluster of individual cubicle resident desks, and a hot desk area off the main lobby. This is a more overtly commercial work space operation, and not very aligned with the coworking movement, but it is clear that the potential for collaboration and community is there, as well.

From reading the Google coworking group and wiki page, it's clear that coworking is in its infancy, and seems to have the most traction in major urban centers in established technology corridors. In midmarket communities, coworking is primarily following a "jelly" model, which is sort of a flash mob of people who coordinate via twitter or text message to descend on a library community room or cafe to spend the day working together.

I think the coworking model has great potential for incubating emerging growth companies. Existing incubator programs have been problematic, and have largely failed to stimulate interdisciplinary collaboration. I think this is due to the limited number of dedicated office spaces that can be supported in that model.

In a coworking space, significantly higher numbers of companies can be supported, since the resources are randomly deployed as available and as needed. It also provides a venue and audience for guest speakers, panel discussions, workshops, and networking events explicitly focused on entrepreneurship and business development themes. There can be a social dimension as well, such a karaoke or Guitar Hero night.

The connections that can be made in this sort of intentional community can be very immediately valuable, indeed. These are the types of professional relationships colleagues form in large corporate workplaces, and are what freelancers miss the most when they begin working exclusively from home. As in corporate office relationships, these connections can become long-term allegiances, forming a network of like minds. I think successful coworking venues will be the ones that put resources into stimulating and sustaining collegial connections. For the innovator wanting to start and grow a great company, coworking is like a petri dish for ideas.

coworking