GROWCalifornia

GROWCalifornia: A Jobs Initiative That Will Work!

2010-02-09T15:28:00.001-08:00

Over the past 18 months we've heard numerous theories about how to fix the economy and create jobs: launch a public works infrastructure initiative, heal the investment banking and commercial banking world, bail out the American auto industry, give citizens small tax refunds so they'll spend a few hundred dollars more on consumer goods. Thus far, these options haven't generated much traction.

Creating jobs is not complicated. Numerous studies over the past two decades have told us who creates the meaningful jobs in this country. It isn't the government, or big, multi-national corporations. It isn't the hundreds of thousands of mom-and-pop shops that exist in every community across the country. Rather, it's a small number (3-4%) of entrepreneurial growth companies who create 70-100% of all net new jobs in the United States. Some are start-ups, others emerging growth companies, and still others existing market leaders. What is unique about entrepreneurial growth companies is their ability to innovate and to produce scalable products. Because they can tap large national or global markets, they bring new dollars into their community and state; increasing the overall economic pie rather than just redistributing it.

At Golden Capital Network (GCN), we plan to fill a leadership void and launch a jobs initiative called GROWCalifornia. We are implementing it on a region-by-region basis throughout California as we confirm local and regional partners who share our vision that entrepreneurial growth companies will create jobs. The objective of GROWCalifornia is to find the growth companies, recognize their important economic contributions, and provide them with access to the resources -- whether financial capital, industry expertise, customers and strategic partners, talent, or government programs -- they need to help them grow.

The GROWCalifornia process we have created enables us to quickly identify the companies in any community, and to capture important economic and job creation data from those companies. In January, a soft launch of GROWCalifornia tested 3 key hypotheses. First, could our system identify the growth companies. Second, would they provide us with jobs information and other relevant economic data. And, finally, would they tell us whether they have resource needs and would they like help in accessing the resources. The result was a success.

Over 60 companies signed up to participate in GROWCalifornia and provided us with information about their companies and their job projections and requirements. We learned about intriguing, and under-recognized, growth companies such as Fifth Sun, Auctiva, Mooney Farms , ProPacificFresh and Klean Kanteen. Companies that are each stamping an indelible economic signature on their community.

A majority of the companies who participated in the soft launch indicated they would be hiring new employees in the next quarter, and expected revenues to increase. We also learned that every company had at least one resource need and would welcome a warm referral by GCN to a service provider or capital source who could help them address that need. In our initial sample, over 150 referral requests were made by the companies. We are now in the process of proactively referring these companies to the initial members and sponsors of GROWCalifornia.

GCN is now ready to publicly launch GROWCalifornia to create jobs and wealth in the state by supporting the types of companies that have always been the economic "difference makers" - and the core of our mission. We will continue to do events, as bringing people together in a physical setting to network is always an important piece of the equation. But with GROWCalifornia we will assist growth companies, capital sources, service providers, and the public sector every single day of the year. A new model we are happy to bring forward.

I urge you to join GROWCalifornia and help lead the state out of our economic funk and create sustainable, meaningful jobs. The process is simple, and the value proposition is clear for each GROWCalifornia participant.

If you represent a growth company - small or large -- simply fill out our online survey twice a year. For your participation, we'll recognize your company as an elite contributor to the local and state economies, and help you get access to any key type of resource you are seeking. The data is kept strictly confidential and only presented in aggregate form. Click here to participate.

If you represent a capital resource, service provider or emerging growth company seeking to expand your visibility to other growth companies, contact me about being a Referral Network Member or GROWCalifornia sponsor. Every two weeks we'll pass on to you growth company referrals who are seeking services or capital in your area of expertise or particular sector of interest. If you become a sponsor, we'll provide heightened visibility for you to a target audience. We are limiting the number of participants per area of expertise to maximize the impact for participants.

If you represent a job creation, workforce investment, or commerce-related organization or government agency, you should consider being a local, regional or statewide partner of GROWCalifornia. If your mission is to find jobs and put people to work, we have a turnkey solution for you.

It is time for us to move beyond the rhetoric of 2009 and into action in 2010. I look forward to working with you to create jobs.

Call 530-893-8828 for more information or e-mail us at growcal@goldencapital.net

Should your growth company be a part of GROWCalifornia? Click here

Click here to see a list of Butte County companies involved

2009-12-01T14:38:00.000-08:00

“Invention is science. Innovation is economics. Entrepreneurship translates one into the other."

Golden Capital Network is thankful for the support during the past 10 years from the early stage angel and venture capital investment communities, and from the startup entrepreneurs we have had the pleasure to serve. As we enter 2010, we are pleased to present a new initiative that will elevate our ability to provide value and track metrics from innovation companies well beyond the startup phase.

GROWCalifornia is a project by Golden Capital Network to provide solutions for innovative growth businesses that drive the economy, service providers that serve them, and the public sector that supports them.

The purpose of GROWCalifornia is to identify, survey, report and make service referrals to 1000 high-performing, locally-based innovation companies in the state.

GROWCalifornia provides a unique value proposition by reaching out to locally-based high-growth companies and collecting primary data about their performance, their innovations, their job creation, their business needs, and their opinions on matters of business climate, talent and capital.

GROWCalifornia surveys and reports on businesses from various industry sectors and growth stages that meet unique criteria for potential expansion and positive economic impact. These data reports are valuable economic planning and rapid response tools for economic development, workforce training, elected officials and the business community at large.

The results of the reports are released at networking and press conference events to discuss the findings, offer innovation-focused business content, and to benefit companies, service providers and officials through visibility and networking.

Individual growth company referrals identified through the survey process go directly to the GROWCalifornia partner network, whose members pay an annual membership fee for the opportunity to offer operational value to the growth companies.

The GROWCalifornia partner network delivers critical support to growth companies. Members of the network represent multiple disciplines and are screened for quality and integrity. Direct referrals are made via email with links to online profiles of the companies and the providers.

The GROWCalifornia index divides the state into 20 different regions and tracks 1000 companies that represent high likelihood to generate new products, new revenue and new high wage job opportunities. Growth business criteria include:
• Growth focused management
• Locally owned or operated headquarters or base of operations
• Current or potential national and global markets
• Scaleable products or services
• Significant process or product innovations

GROWCalifornia is the first project of its kind to recognize, quantify, report and support innovation, entrepreneurship, risk capital and regional affinity as key drivers for jobs and regional economic growth.

If you are a growth company, a service provider or a workforce/economic development official interested in joining GROWCalifornia, find out more by calling 530-893-8828.

Venture Island - North State: The Trading Post

2009-08-03T12:42:00.000-07:00

The Venture Island - North State entrepreneur competition launched its second annual competition with a special event called "The Whole Pina Colada" on June 23. The event showcased several successful innovative product companies in the North State. The Venture Island competition process includes a series of four challenges.

The first challenge, "The Trading Post," took place July 23 at the N.T. Enloe Conference Center. In this challenge each entrepreneur was given two minutes to pitch his or her company to a panel of esteemed judges from the investor and professional business communities. At the conclusion of the event, companies were stack ranked based on their presentations and the top companies earned the night's prize and bonus points for the next round.

The top ranked pitch from "the Trading Post" was Novasyte followed by, Save Our Skins, Telecom Lifters, Cable Master, and MyIndependentContractor.com. Other contestants included BAQ Enterprises, Bumblebee Transport, Clean Traks, HFB Enterprises, MendaComp, Organic Chico Wash, SafeHealthInsurance.com, Sauer Energy, You Gaming, and Wiredcat. All contestants will go on the the next challenge, "The Snake Pit," taking place September 10 also at the N.T. Enloe Conference Center.

The “Snake Pit” program challenges contestants to justify their business opportunity, their solution, and their execution strategy. This will be a five-minute Powerpoint presentation detailing the problem to be solved, their proposed solution, market size and segmentation, customer acquisition, revenue model, and competitive advantage and defensibility. The judges will ask questions and give feedback on each presentation and, along with the audience, narrow the group of contestants down to 8 companies who move on to “Make or Break Beach”, which will focus on execution plan, financial projections, capitalization requirements, and exit strategy.

The final challenge, “Climbing Kahuna Mountain”, will pit the top three finalists presenting to an elite panel of investors at CEPCO’s annual awards banquet, October 29th at CSU-Chico’s Bell Memorial Union auditorium.

Pandora Won

2009-07-07T16:04:00.000-07:00

Looks like there's finally an agreement in place to permit internet radio stations to operate profitably. The New York Times reported this morning that SoundExchange has agreed to a royalty plan. Under the new arrangement, webcasters with revenues in excess of $1.25 million will pay a per-song fee ranging over time from .08 to .14, or 25% of revenue, whichever is greater.

Our old friend Tim Westergren said "This is definitely the agreement we've been waiting for."

Venture Island Starts With A Splash At the Whole Pina Colada

2009-07-02T13:39:00.000-07:00

To kick off the Venture Island Northstate competition series this year, we hosted the Whole Pina Colada June 23 at Canyon Oaks Country Club in Chico, the home of many classic Golden Capital Network events over the years, (and also the site of a great many hacks on the golf course by GCN staffers).

It’s a pastoral canyon setting and perfect for this type of loose business networking affair. Unfortunately, the Canyon Oaks bar was out of Pina Colada mix, so Sierra Nevada Pale Ale was the able fallback for those wishing to imbibe. (In truth, Mai Tais are really a better rum drink anyway -- 2 parts light Bacardi, 1 part pineapple juice, 1 part orange juice, a dose of Cointreau, and a dark Myers floater on top…mmmm).

The evening began with intros from Stewart Knox, a great resource and advocate for Northstate business through his work with the esteemed Charlie Brown at NorTEC, our regional workforce investment board. Stewart and Charlie are two of the most innovative workforce guys in the business, which is interesting since they represent the most rural, underpopulated regions in the state. They are the local overseers of the Northstate WIRED program, an innovation catalyst initiative brainstormed by former U.S. Dept. of Labor assistant secretary Emily DeRocco, and apparently gaining some traction in the Obama administration.

Our own President and CEO Jon Gregory was next up with the outline of how the Venture Island competition series will work this year: Three events with business challenges and eliminations each time until we get the final three showdown.

July 23, Trading Post
All the companies from the last event, plus any others that make the cut before then, engage in a 2-minute pitch off. Top contenders move on.
Sept. 10, Snake Pit
Role-play event to really get into the heads and hearts of the entrepreneurs and test not only their business savvy, but also their leadership, communication and decision-making skills
Oct. 29, Make or Break Beach
Five minute business presentation with q&a
Oct. 29, Climbing Kahuna Mountain
Secret challenge for the final three. This is the final showdown, and will take place at the Chico Economic Planning Corp. business awards dinner. We'll crown 1st, 2nd and 3rd, and all three will ascend to the California Business Ascent State Championships Nov. 17-18 in San Diego.

Sandy Baruah, former assistant secretary of the U.S. Economic Development Administration (EDA), was on next. Sandy is the Honorary Co-Chair of the California Business Ascent Challenge, as well as a Senior Fellow with the U.S. Council on Competitiveness. His remarks centered on recent conversations with colleagues at the Council, and it comes as no surprise here, but according to some of the smartest economists in the world, innovation and entrepreneurship are the keys to U.S. economic recovery and competitiveness into the future. How can we invent and produce more of the products and services the world needs and wants here on our own soil?

In this vein, Sandy indicated that during a conversation with high-level officials in the Obama White House there was continued support by the new administration for the WIRED innovation initiative started by Dept. of Labor about four years ago. The WIRED initiative funds Venture Island and other GCN business catalyst activities, along with many other important innovation efforts across the country, so this was good news for us, as our current grant expires the end of this year.

The first panel of the night was the one I was most looking forward to, and I wasn’t disappointed. Titled simply, “Business Success,” this panel featured five successful North State entrepreneurs telling their stories and imparting some gems of wisdom they’ve picked up along the way. The panelists included Rob Innes, from Innespace Productions, Matthew de Bord from Origami Foods, Kendall Bennett from A Main Hobbies, Todd Radke from ATC Hardware Systems and Andy Keller from Chico Bag.

Perseverance and passion are the words that come to mind when I try to generalize the session. Specific advice I recall included:

Protect your intellectual property (get the international patents, too)
Maintain customer satisfaction (you'll have a problem someday. You'll be judged by how you handle it)
Be ready for challenges with manufacturing quality control (in China, esp. You'll have to take many trips to stay on top of it)
Focus on the right market (identify what you really do best and avoid the temptation of the latest bright, shiny object)
Find the right talent (there's a lot available cheap right now. Be cautious with stock incentives)

Each of these founders have experienced success and failure along the way and clearly love what they do. All of the company products were very cool. It was an inspiration, even if it did get a little long-winded.

The final session of the night had by far the most energy, and rightly so. Thirteen early stage entrepreneurs standing before the world (or at least the 200 people or so in attendance) making their two minute pitches for capital, talent, advisors or whatever it is they think they need to get to the next level. The top five are granted automatic pass through the first elimination round of Venture Island: The Trading Post.
The five winners were:

Jim Philips, Inovius Software, Redding
Jim Crummett, Telecom Lifters, Browns Valley
Joe Andrew, Novasyte, Chico
Julie Atlas, Bumblebee Transport, Paradise
Steve Heumann, Cable Master, Paradise

There were a couple crash and burns, but almost all the competitors in the field showed well. You could tell which had availed themselves and actually listened to the coaching advice Jon gave them the week prior. Julie Atlas from Bumblebee Transport was the standout from the winners. Not so much because of her on-call large item moving service business model (which isn’t bad) but more because of her sheer energy, perseverance and authentic passion.

My two favorite picks from the also-rans were CleanTraks and the grill lid lifter – probably because I could use both of them yesterday.

CleanTraks has a product that incorporates a doggie bag holder into a retractable leash. It includes waterless hand soap, and no, this is not for leftovers from the restaurant, but for what the dogs themselves leave behind. The company is pretty much pre-product and pre-revenue, so they’ve got a long road to travel, but CleanTraks was a neat, innovative, well presented concept, and with something like 75 million dogs in the U.S. and a corresponding $500 million annual addressable market in dog accessories, they could have something big on their hands with the right marketing.

Grill lid lifter was yet another case of an intrepid inventor solving one of American’s most vexing problems: how do you keep a beverage in one hand, a basting brush in another, and get the grill open when you need to sauce the ribs? The answer, of course, is the grill lid lifter: Step on a button with your foot and the grill lid lifts. This one’s just on paper, but Jason Darrow from Yreka has some nice business chops and I wouldn’t bet against him to make a compelling case for this baby as the competition unfolds.

Our next Venture Island event is July 23 at the Enloe Conference Center, when all the companies from the Pina Colada, plus whoever else comes on board between now and then, face-off in the Trading Post.

As always, more information about our Business Ascent challenge events, our investor judges and panelists, and the company profiles and video of the elevator pitches are available for viewing on our web portal, in this case at VentureIsland-Northstate.Com

Liquidity Launches

2009-06-22T11:16:00.000-07:00

June has seen the start of three new liquidity markets for private equity assets. The IPO market dried up very quickly after the turn-of-the-century dotcom market bust, and most exits since then have been in the form of mergers and acquisitions.

Indeed, it has been one of the biggest challenges for companies raising capital. An absence of a public market for shares has diminished the flow of private capital into technology startups. If the economy is to recover robustly, it is entrepreneurial companies, fueled by angel and venture investment, that will lead the way.

Now some of the leaders in the private equity industry are becoming

entrepreneurial themselves, creating new models for trading equity in privately-held concerns, as a mechanism for investors to take smaller positions in companies, and for employee shareholders to cash out some of their holdings.

Launched on June 1st, InsideVenture offers what it calls a "hybrid public-private offering", or HPPO (pronounced "hippo", lamentably). It works very much like a conventional IPO, with investment bank underwriters making a market, with the exception that InsideVenture member investors enjoy privileged early access to the shares before the public at large.

Our old friend Tim Draper also soft-launched XChange in early June, "The Private Stock Market. Done Right." This new firm offers four distinct service categories. XOM - Open Market is a trading platform for both new issues and aftermarket sales of privately-held shares. XPO - XChange Provate Offering is a private auction where valuations are defined and shares are allocated. XIQ - InQuest matches buyers with sellers, and XBP - Business Platform offers social networking capabilities for collaboration.

Rounding out the new private equity exchanges this month is Sharespost, "We make private equity liquid". This is a fairly straighforward trading post for buying and selling shares in private companies. It seems particularly targeting towards employees of companies that received stock in their companies as incentive compensation (and a "loyalty leash"), but that have no likely pending liquidity events. It lets founders and their early hires cash out some of their equity, and can enable a company to extend its runway before being acquired.

All three trading posts are a welcome addition to the venture ecosystem. Investors can diversify their holdings, shareholders can harvest appreciation, and companies can raise operating capital for growth.

The Sound of Web 3.0

2009-05-23T07:22:00.000-07:00

We've long been fans of Tim Westergren and the Music Genome Project. In 2003, at our East Bay Venture Capital Conference, Savage Beast Technologies (as his company was called then) was honored as the best presenting company at the event.

The business model was very different then. The inference engine SBT built around their proprietary musical attribute database was furnished to music retailers, to recommend music to their customers based on their previous purchases. It turned out that music retailers were going to need a lot more help than that.

So Westergren and his team repurposed the code to create the streaming internet service Pandora, which has become one of the most popular "personalized radio" sites on the web.

Meanwhile, there has been a lot of discussion about the next era of internet evolution, the so-called "Web 3.0", and what it will look like. Observers professing expertise in the matter say it will be "semantic" and "distributed" and "mobile". Indeed, it may be inaccurate to call it "web" anything. The term of art in play lately is "stream". The web is a network of sites using a shared protocol, whereas the stream is a constantly updated delivery of rich media content to a variety of user devices, not just the personal computer.

One indication of this evolution is the .tel top level domain. It's a directory where users store and publish via granted privileges their personal, professional, and social contact information. When this service was still in beta, we were informed that it was "beyond the browser". It is accessible by mobile devices directly, and can be utilized by location-aware services.

We submit that Pandora is an early example of this new network paradigm. It is semantic, inferring preferences from user behavior. It's distributed, and can be used via internet appliances such as the Vudu set-top box. And it's mobile, with clients available for the iPhone and other hand-held devices (although, lamentably, not for the Palm Treo, alas).

One other evolutionary dimension in the social media world is the "freemium" business model, and Pandora has been a pioneer in this, as well. Pandora is free to use. You just go to their site, start a station by citing a few artists or records, and it plays music that you will probably like -- and may never have heard before -- based on your selections. Because Pandora pays royalties on these plays, it stops once per hour to confirm that you are still listening. And, as with most free content services, it comes with display advertising on the site.

But you can upgrade to a premium subscription, which eliminates the ads and the interruptions. We've had a premium subscription for awhile now, and at $36/year (less than a dime a day), it's one of the best deals you'll find.

Well, earlier this week, Pandora took it up a notch. The premium subscription is now branded Pandora|One, and offers several improvements, the most immediately noticeable being a higher bitrate, up to 192Kbps, which is audibly superior if you have the broadband to support it. But the coolest thing is the new desktop client, that runs on the Adobe AIR stack, a development platform that boasts that it is also "beyond the browser".

It's an elegant looking utility, with an instantly comprehensible interface, especially if you're already quite familiar with the browser-based version. Like a number of other Adobe AIR-based products (Seesmic Desktop, e.g.), it combines graphic, multimedia, text, and controls in a very compact package. From the default view, you can play or pause, adjust volume, "like" or "unlike" a selection, or call a menu for more options, including help, bookmarking, station info, and the ability to email a station to someone, or purchase the content from iTunes or Amazon. You can also set preferences, including display, notification, and quality parameters.

It is released as version 1.0.0, bucking the trend with many services soft-launching as "Preview" or "Beta" versions, with the implication of "unexpected results". So far, we've been using it for several hours, and it appears to be quite stable and ready-to-ship. Kudos to Westergren and the Pandora team for this excellent new product/service bundle. They've weathered some rough times with the copyright and royalty battles, and like many companies had to reduce their workforce to remain viable. With this latest development, they've taken a major step in the direction of a fee-for-service revenue stream (pun intended) that is affordable and sustainable. Seriously, a dime a day. You just can't beat that.

Cliffhanger

2009-04-21T10:37:00.000-07:00

It's interesting how two different analysts can interpret the same data and come to very different conclusions. For example, TechCrunch, with a flair for the dramatic, concludes that venture capital is "falling off a cliff". Author Sarah Lacy rejects the conventional wisdom that:

“Recessions are the best times to start companies! We always invest in downturns! There are fewer competitors, and you get a better caliber of entrepreneur! Dollars can stretch further because salaries and rents are lower! We’re not looking to take a company public for years, so why would we run our companies based on the public markets and macro economy?”

Her thesis is that because VC performance is evaluated on ten-year cycles, they never really corrected after the public market bust in 2001-2002. With declining returns, VCs are reluctant to write checks without a resilient growth category defying the current conditions. Certainly she is not alone in this opinion.

On the other hand, however, the respected ReadWriteWeb's COO Bernard Lunn takes the diametrically opposite view and declares in his headline "VC Investment in Internet Deals Did NOT Fall Off A Cliff".

How can that be? Writes Lunn:

What interests us at ReadWriteWeb is the small subset that is (a) seed- and early-stage, and (b) Internet-specific. So we drilled into those numbers. Q1 2009 saw 34 deals, with a total of $138 million invested. Is that good or bad? Well, 34 companies getting their first investment round is one helluva celebration for 34 entrepreneurs, their teams, and their investors.

How about 15 deals worth $76 million in Q2 2003? That was actually the lowest in the 53 quarters tracked by MoneyTree.

If you want to be positive, then, our position now is twice as good as it was in Q2 2003. So here is an alternative headline:

"VC investment in Internet startups is up 100% from last downturn".

So this is sophistry, but there is a point to it. This most recent boom cycle, at its peak in 4Q07, recorded $454 million investment in early-stage internet deals, as contrast to $4.5 Billion in 1Q00. Less than 10% is in play this time around, so, as Lunn puts it, "we don't have as far to fall".

No one is denying that the trend is down, but we're inclined to the RWW view that while total number of deals and amount invested have both declined from the peak, there's far more reason to be optimistic than otherwise.

Monterey Bay Innovation Showcase Webcast

2009-04-10T09:25:00.000-07:00

We had a great time in Watsonville last week with the launch of our live video webcast series showcasing great companies from communities throughout California. As part of the California Business Ascent business competition, we will be presenting more than 300 of the greatest companies you never heard of.

Each company will have the opportunity to present to a panel of investors in a casual cafe setting, get feedback and advice, and perhaps have follow-on meetings. The companies then go on to a regional final to determine who will be among more than 50 companies competing at the statewide final in San Diego November 17-18.

The next showcase webcast is April 23, from the Davis City Council Chambers, featuring some exciting companies from the Yolo County area. Follow the excitement!

California Business Ascent: The Solution to Create Sustainable Jobs

2009-04-10T06:30:00.000-07:00

News about the economy seems gloomier. Unemployment rates rising, small businesses and multi-national corporations failing, foreclosure numbers increasing, the banking industry in turmoil, and the stock market unstable. What is needed is sustainable job creation to stem the tide of this difficult economic cycle. Yet many economic think-tank leaders and policymakers talk at the 50,000-foot level about innovation and federal stimulus funding as the panacea for our woes but don’t provide much in terms of a practical solution to accelerate economic recovery at the grass roots level.

It is important to point out that an economic recovery solution exists. The solution, as it always has been in this country, rests on the shoulders of innovative, locally owned businesses run by visionary entrepreneurs. They exist in every region and community in the United States, rural or urban, inland or coastal, northern or southern. Golden Capital Network has coined a term to describe these companies: GLOBIEs. GLOBIEs are businesses that provide products and services that create new industry categories, grow existing ones, or capture more of an industry’s market share, thereby growing their businesses, generating revenue, creating jobs and stimulating new tax revenue. GLOBIEs can be startup companies, emerging growth companies, or mature enterprises with existing international or global market presence. They all start small, but many of them grow big and become market leading companies in their industries.

Some historic examples of GLOBIEs include companies like Hewlett Packard, Intel and Computer Science Corporation. Hewlett Packard was founded by Stanford classmates Bill Hewlett and Dave Packard in a Palo Alto garage. The first product they built was an audio oscillator. They sold eight their first year to Walt Disney, generating $5,369 in revenue. Many know the story of Bob Noyce and Gordon Moore, who founded Intel after leaving Fairchild semi-conductors. They decided to write a business plan and asked Art Rock, who helped start Fairchild and became an early venture capitalist, for funding. In 2 days, they lined up $2.5M. Their first commercial product was a memory chip which was mildly successful. Soon after, Intel was approached by a Japanese calculator company, asking them to make 12 chips. Intel ended up making one chip, performing like 12, revolutionizing the computer industry forever. Computer Science Corporation was founded in 1959 by Roy Nutt and Fletcher Jones with $100. They wanted to make it easier to use computers. The company quickly became highly reputable amongst computer users, and in 1961, contracted with NASA, launching CSC in the space business. These three companies each had very humble beginnings that went on to become long-standing industry leaders, creating thousands of jobs in California and globally. It is the next wave of GLOBIEs who will bring California out of its current economic downturn.

Where do GLOBIEs belong in the discussion about economic recovery and growth? Very high! These are the companies that can transform the local economic landscape. But, there seems to be little or no talk about making these innovation-based entrepreneurial businesses the focal point of our economic development strategy at the local, state or national levels. That is disturbing, in that there are thousands of multi-billion dollar global markets these businesses penetrate every day with their goods and services. Every time a GLOBIE makes a sale in a national or global market, new revenue is brought back to the GLOBIE’s home community.

A recent survey of Golden Capital Network alumni GLOBIEs confirmed that they have had substsantial job creation impact in their communities over the past several years, and are still doing so today. Whether an economy is in an up or down cycle, there are four opportunities for GLOBIEs to emerge and excel, including:

Tapping into a geography that has a growing need for a GLOBIEs product or service
Creating a new industry category, or capturing a larger share of an existing industry sector
Providing a compelling solution for governments, businesses or consumers that either saves money, increases value, or makes things more efficient
Creating a diversion from the day-to-day grind of life

For example, Santa Rosa-based Tri-Access Technologies demonstrates that GLOBIEs are tapping into new geographies when it recently opened an office in Opoh, Malaysia. This fabless semiconductor company is accelerating the rapid deployment of advanced digital video and high-speed data in CATV,Telco and Wireless networks. The company’s products enable economic and system design efficiencies through integration and higher performance. It opened its Malaysia office to facilitate its global operations and further strengthen its relationships with suppliers, packaging houses and customers located in the Asia-Pacific region. Many of the company’s supply partners and more than half of its customers are located in or have major operations in the Asia-Pacific. TriAccess' growth plans include key personnel additions at its headquarters in Santa Rosa, such as highly-specialized RF applications engineers, internal operations specialists, and customer-facing sales professionals.

Another company, Sentilla Corporation, a provider of demand-side energy management solutions for commercial and industrial facilities, recently announced that it has opened its first European office in London, UK. The move strengthens Sentilla’s global presence and gives enterprises in the UK and Europe direct access to the company’s innovative technology, which can dramatically cut carbon footprint and energy costs. Sentilla, backed by Wavepoint Ventures and others, recently secured $7.5 million in Series B financing, after launching its patent-pending energy management technology in May 2008. Its platform can be embedded into virtually any system to provide insight into real world conditions at the source of power consumption.

Brammo Motorsports of Oregon is part of a group of innovative GLOBIEs that are creating a whole new industry category: electric motorcycles. Brammo is gearing up to begin production on its Enertia electric motorcycle. The Enertia is a carbon fiber-intensive two-wheeler that stores its power in large format, lithium-phosphate battery packs from Valence. The company has doubled its workforce to 28 and will build up to 50 or more employees soon as its gets ready to begin assembly. Starting in May, five Best Buy stores near the west coast will begin stocking the Enertia.

In Anderson, California, a rural community located 2 and ½ hours north of Sacramento, a high tech start-up company called Shasta Crystals estimates it will create up to 80 jobs in the near future. The company has created a revolutionary approach to making crystals that are used to create “visible lasers”, used as light sources for miniature projectors in products like cell phones, laptops and game consoles, and saves its customers significant time and money on manufacturing crystals.

These alumni companies provide just a few examples of how GLOBIEs are positively impacting the economy by reaching new geographic markets; creating new industry categories; saving businesses, consumers or governments money; or by enhancing our quality of life. Now consider that at GCN we deal with just a small number of GLOBIE companies, almost exclusively in California. Imagine if there was a focus on adding value to these companies in communities, regions and states across the entire U.S.! The impact would be phenomenal. Local, state and federal job creation efforts should focus on GLOBIEs because they represent by far the greatest opportunity for accelerating economic recovery and growth and creating sustainable jobs.

GLOBIEs have very clear needs:

access to all forms of risk capital
access to talent, from skilled technicians and labor workers, to executive management, to boards of directors and informal advisors with specialized industry or functional expertise
access to professional services such as those associated with intellectual property, finance and accounting, risk management, marketing and sales, executive search, web development, and many others
access to business development whether it be through channel partners, VARs and other strategic partners all the way up to customers themselves
access to peers to share war stories, offer strategic advice, and form new alliances.

The common denominator is people. Businesses successfully start, and successfully grow, when the right combination of people with complimentary skill sets come together with a shared vision to capitalize on a market opportunity.
The challenge for GLOBIEs is four-fold. This is where economic development efforts can step in and add value. First, the GLOBIE “ecosystem” does not naturally self-align in a community or region. GLOBIEs frequently operate in isolation without access to the critical resources they need.

Second, GLOBIEs require access to very specific domain expertise and talent. The essential critical mass of expertise and resources does not exist within specific industry sectors in most communities.

Third, most of a GLOBIE’s customers exist outside of their community, as well as the strategic resources and investment capital necessary to get to the customers.

Finally, most GLOBIEs are hard to find. Press releases posted on their websites and issued to the media rarely reach their intended audience. GLOBIEs almost never appear in their own local media. In most cases, individuals, organizations and businesses who could add value to these companies don’t even know they exist, even though they are located right in their own back yard.

A mindset shift about economic development approaches and a repositioning of energy and resources to focus on this sector of the economy is required. A city, county, local economic development organization, chamber of commerce or other community-based organization can enable GLOBIEs to become more visible. Find your established GLOBIEs; create methods to draw out the new ones; segment GLOBIEs by industry sector; use events to bring GLOBIEs together with capital sources, professional services, and executive talent; create local media partnerships to generate visibility for them; establish a web portal through which GLOBIE profiles and information can easily be accessed; create a system to track the connections that emerge through your efforts along with basic economic data on the GLOBIEs so you can measure progress; and align with a broader statewide effort to provide critical non-local connections and visibility. You can have a major impact on your local economy by helping GLOBIEs in this manner.

Golden Capital Network has spent years serving as a virtual bridge between policymakers and private sector ingenuity. Through this unique relationship, GCN is able to deliver a solution for local policymakers, civic and business leaders: The California Business Ascent.

Golden Capital Network, in partnership with the California Business Transportation and Housing Agency and CALED, has launched the California Business Ascent initiative as an easy-to-implement, cost effective solution that enables community leaders to help GLOBIEs in their community. We strongly believe that a community’s path to economic recovery and sustainable job creation will accelerate through the Business Ascent initiative. To find out more about how to become a California Business Ascent community, visit www.goldencapital.net

Lights, Camera, Action!

2009-03-31T12:55:00.000-07:00

We’re very happy to announce the public launch of the California Business Ascent video webcast series, showcasing the most exciting startups you’ve never heard of. For ten years we’ve introduced more than a thousand early stage ventures to our network of active investors at dozens of Golden Capital Venture Capital conferences throughout California and Nevada, and more than $1.6 Billion has been invested in our alumni.

Now we're taking it to the web, live and direct. We are planning an ambitious program of 50 entrepreneur showcase webcasts in 2009 from locations throughout California, culminating in a final competition in San Diego this November with 50 regional finalists vying for cash awards, investor traction, and the title of the Most Innovative Startup in California.

“We’ve been showing recorded elevator pitches on our Business Ascent social network, and some other sites have followed suit,” said Jim Mikles, Executive Producer of the webcast series, “but this is the first program that presents entrepreneurs pitching their companies in a real-time, competitive format to potentially hundreds of investors screening the deal flow online.”

Our first live program is this Thursday, April 2, starting at 4PM PDT, from the Monterey Bay Innovation Showcase in Watsonville, in the heart of the Monterey Bay region. A panel of six leading angel and venture investors will discuss “Raising Capital in Challenging Times”, followed by ten-minute presentations by seven sensational startups.

If you want a ringside seat to learn more about the next wave of entrepreneurs emerging from the nation’s most innovative state, join the webcast by visiting http://businessascent.com/go/webcast

88X ROI

2009-03-21T08:41:00.001-07:00

We've been watching some talks from the recent TED conference. For those who may be unfamiliar with this program, it is an annual colloquium of the brightest and most imaginative thinkers, thought leaders, and overachievers from the worlds of Technology, Entertainment, and Design, discussing "Ideas worth spreading".

Juan Enriquez, Managing Director with Excel Medical Ventures and the CEO and Chairman of Biotechonomy, gave a fascinating presentation examining the economic meltdown, specifying strategies for recovery, and concluding with a look at some emerging innovations in life science technology presaging the emergence of "homo evolutis"; a humankind that takes an active role in its own evolution.

In the course of his talk, about seven minutes in, he made a remarkable observation about the impact of venture investment in the economy. He said that investment in startups represented about .02% of GDP, whereas venture-backed companies produced 17% of GDP. He mentioned it in passing as he transitioned from a laundry list of necessary cuts to public expenditure to areas where spending must be increased, but it certainly caught our attention.

Then we saw a similar observation in the Economist special report on entrepreneurship we discussed last week, and we tracked down the source. As it happens, it comes from VentureImpact, a research paper commissioned by the National Venture Capital Association, and prepared by Global Insight with data provided by Content First. The actual proportion of GDP invested in early stage companies in 2006 was .2%, and the output was 17.6%, which translates to a staggering 88x return on investment.

The study also documents

that these companies

produced more than

10 million jobs, and over 2 trillion dollars in revenue that year, and the trend over the previous 6 years was consistently increasing. Venture-backed firms also significantly outperformed the economy as a whole, producing more than three times the compound annual growth of jobs (3.6% vs. 1.4%) and nearly twice the growth in revenues (11.8% vs. 6.5%).

We've been on the lookout for solid evidence of our central thesis -- that the most effective strategy for economic development is innovation and entrepreneurship -- and this research certainly provides meaningful support for it. The study was published in 2007, and analyzed more than 23,000 venture-backed companies. An update to the study is in process, and is expected this June. We look forward to it with eager anticipation.

Required Reading

2009-03-18T10:53:00.000-07:00

When I was in college, guys usually pretended they were in a band. Now they pretend they are in a start-up.

In the March 14th edition of The Economist, a special report on entrepreneurship offers a comprehensive analysis of our favorite subject. Authored by Washington bureau chief Adrian Wooldridge, the report is a collection of nine articles examining virtually every facet of innovation-driven new enterprise. Wooldridge cites our friends at the Kauffman Foundation in defining entrepreneurial companies as specifically innovative, as contrasted to replicative, businesses.

The leading article, Global Heroes, explodes the "five myths" about entrepreneurialism. These include:

Entrepreneurs are "orphans and outcasts"; solitary, antisocial nerds making widgets in isolation

Entrepreneurs may be more independent than the usual suits who merely follow the rules, but they almost always need business partners and social networks to succeed.

Entrepreneurs are young.

The Kauffman Foundation examined 652 American-born bosses of technology companies set up in 1995-2005 and found that the average boss was 39 when he or she started. The number of founders over 50 was twice as large as that under 25.

Entrepreneurship is driven by venture capital

Monitor, a management consultancy that has recently conducted an extensive survey of entrepreneurs, emphasises the importance of “angel” investors, who operate somewhere in the middle ground between venture capitalists and family and friends. They usually have some personal connection with their chosen entrepreneur and are more likely than venture capitalists to invest in a business when it is little more than a budding idea.

Entrepreneurs must create world-changing new technology

Sir Ronald Cohen, the founder of Apax Partners, one of Europe’s most successful venture-capital companies, points out that some of the most successful entrepreneurs concentrate on processes rather than products. Richard Branson made flying less tedious by providing his customers with entertainment. Fred Smith built a billion-dollar business by improving the delivery of packages. Oprah Winfrey has become America’s richest self-made woman through successful brand management.

Entrepreneurship cannot occur in large companies

Many big companies work hard to keep their people on their entrepreneurial toes. Johnson & Johnson operates like a holding company that provides financial muscle and marketing skills to internal entrepreneurs. Jack Welch tried to transform General Electric from a Goliath into a collection of entrepreneurial Davids. Jorma Ollila transformed Nokia, a long-established Finnish firm, from a maker of rubber boots and cables into a mobile-phone giant; his successor as boss of the company, Olli-Pekka Kallasvuo, is now talking about turning it into an internet company.

Just as importantly, big firms often provide start-ups with their bread and butter. In many industries, especially pharmaceuticals and telecoms, the giants contract out innovation to smaller companies. Procter & Gamble tries to get half of its innovations from outside its own labs. Microsoft works closely with a network of 750,000 small companies around the world. Some 3,500 companies have grown up in Nokia’s shadow.

As we've pointed out before, an economic downturn is a good time to start businesses. Wooldridge notes that it is also an opportune time for growing entrepreneurial businesses. Citing a study from Endeavor, entrepreneurs surveyed forecast that "their businesses would grow by 31% and their workforces by 12% this year. Half of them thought they would be able to hire better people and 39% said there would be less competition."

In addition to this overview, additional articles in the report include:

Managing entrepreneurship
Time for entrepreneurship
The United States of Entrepreneurs
Entrepreneurs in India and China
Lands of opportunity
The formula for entrepreneurship
Entrepreneurs doing good
The entrepreneurial society

Anyone professing an interest in innovation and entrepreneurship will be significantly better informed after reading this authoritative analysis.

Tom Hayes Stimulus Package

2009-02-26T09:20:00.000-08:00

Our old friend Tom Hayes is at it again. In an op-ed piece in yesterday's Wall Street Journal, he and Michael S. Malone critique the new administration's stimulus strategy, and offer suggestions for an innovation-based approach that certainly sounds more promising than propping up failed industries.

Readers of this page know that we have long argued that the best and most valuable jobs are created by entrepreneurs and the private investors who fund them. And we've certainly celebrated the occasions when the public sector has recognized and supported entrepreneurial efforts, even while noting our disappointment in how little of that is evident.

Hayes and Malone rehearse the same catechism of entrepreneurship, innovation, private investment, and economic vitality, and go one to make some specific recommendations for policy makers to give serious attention. Some highlights:

- First, kill Sarbanes-Oxley or make it voluntary. Right now.

- Allow entrepreneurs to more easily tap tax-free retirement accounts -- or better yet, let them create tax-free accounts specifically to fund themselves.

- Eliminate payroll taxes, which unnecessarily burden young companies.

- Make the tax system more forgiving for Angel investors -- or allow the creation of tax-free investment vehicles similar to what we now see with nonprofit foundations or 529 college savings funds.

- Lower capital gains taxes on investments in early stage companies and higher taxes on later stage deals.

- Help big business think small.

- Convene a presidential summit on entrepreneurship and small business. The last president to do so was Ronald Reagan in 1982.

Hayes and Malone elaborate on these points, and we highly recommend their article as "required reading".

In the "Q"

2009-02-24T13:18:00.000-08:00

As long-time subscribers to McKinsey Quarterly's email newsletter, we enjoy the in-depth analyses featured on their website. We'll continue to alert readers to useful and relevant content we encounter through this channel (links back to the Quarterly site require free registration for access to the entire article.) We cited a report from the "Q" earlier this month, and now we are delighted that today's inbox brings credible third-party validation of one of our central theses: invention is science, innovation is economics.

Excerpted from his recent book, Amar Bhidé makes a compelling case that despite falling behind rapidly emerging BRIC economies in secondary and higher education in STEM competencies and pure research generally, the United States enjoys a competitive advantage in applying discoveries from the laboratory to real-world uses.

Technological innovations, especially high-level ones, usually have limited economic or commercial importance unless complemented by lower-level innovations. Breakthroughs in solid-state physics, for example, have value for the semiconductor industry only if accompanied by new microprocessor designs, which themselves may be largely useless without plant-level tweaks that make it possible to produce these components in large quantities. A new microprocessor’s value may be impossible to realize without new motherboards and computers, as well.

New know-how and products also require interconnected, nontechnological innovations on a number of levels. A new diskless (thin-client) computer, for instance, generates revenue for its producer and value for its users only if it is marketed effectively and deployed properly. Marketing and organizational innovations are usually needed; for example, such a computer may force its manufacturer to develop a new sales pitch and materials and its users to reorganize their IT departments.

Bhidé makes these observations in the context of anxieties in the policy and media communities about America losing it's "edge", and his concerns about resorting to protectionism or diverting scarce resources to pure research activities, or "what the economists Sylvia Ostry and Richard Nelson call techno-nationalism and techno-fetishism".

Techno-nationalists and techno-fetishists oversimplify innovation by equating it with discoveries announced in scientific journals and with patents for cutting-edge technologies developed in university or commercial research labs. Since they rarely distinguish between the different levels and kinds of know-how, they ignore the contributions of the other players—contributions that don’t generate publications or patents.

They oversimplify globalization as well—for example, by assuming that high-level ideas and know-how rarely if ever cross national borders and that only the final products made with it are traded. Actually, ideas and technologies move from country to country quite easily, but much final output, especially in the service sector, does not. The findings of science are available—for the price of learned books and journals—to any country that can use them. Advanced technology, by contrast, does have commercial value because it can be patented, but patent owners generally don’t charge higher fees to foreigners. In the early 1950s, what was then a tiny Japanese company called Sony was among the first licensors of Bell Labs’ transistor patent, for $50,000.

In the current economic climate, it is critical that resources and regulations be more closely aligned with the successful commercialization of new science, rather than deep, long-range investments in adding to the store of human knowledge. As we have seen, the economies that benefit most from commercial application of new technology are not necessarily the ones in which it was patented. License revenue and royalties create few new jobs.

Since innovation is not a zero-sum game among nations, and high-level science and engineering are no more important than the ability to use them in mid- and ground-level innovations, the United States should reverse policies that favor the one over the other, and it should cease to worry that the forward march of the rest of the human race will reduce it to ruin.

Immigration policies that favor high-level research by preferring highly trained engineers and scientists to people who hold only bachelor’s degrees are misguided too. By working in, say, the IT departments of retailers and banks, immigrants who don’t have advanced degrees probably make as great a contribution to the US economy as those who do. Likewise, the US patent system is excessively attuned to the needs of R&D labs and not enough to those of innovators developing mid- and ground-level products, which often don’t generate patentable intellectual property under current rules and are often threatened by easily obtained high-level patents.

Even factoring in outsourced manufacturing and back-office services, the most (and best) net new jobs are created by innovators who find a crying need and fill it with creative solutions fashioned from new discoveries and existing technologies alike. As we've pointed out elsewhere, an innovative company isn't necessarily introducing widgets, but is also applying novel thinking and imagination to improving established business processes for greater effectiveness or efficiency. Cloud computing, for example, offers familiar software capabilities, but in a new form factor and delivery model. That's not the sort of thing you invent in a lab.

Silver Lining Dept.

2009-02-23T07:00:00.000-08:00

We wrote last week about the ComputerWorld item discussing big corporations acquiring smaller companies. Cesar Rojas with ANTs Software commented on that item, pointing out that smaller companies aren't always looking to get bought out.

I think there are exceptions to the rule when it comes to small tech companies. In this down economy there are real needed innovations that are very critical to significantly reduce IT costs. That empowers smaller companies to negotiate with the big guys because the technologies they develop can really jeopardize critical revenue streams of these firms while providing huge OPEX reductions for customers.

We thought this was an interesting perspective, and when we inquired with Mr. Rojas, we got a call back from Ken Ruotolo, ANTs' CFO, who explained a little more about why ANTs is sanguine about remaining independent.

For one thing, the company is publicly traded (OTC:ANTS), and has gone through several episodes of repurposing. They sold their high-performance database line of business in 2005, and are now delivering a middleware solution for migrating databases to new platforms without having to modify applications.

Having some experience in data migration (we worked on the team at SynOptics that migrated from Oracle Financials to SAP R3 in 9 months, and led the team at Bay Networks that implemented a Scopus-based call center database on top of Informix in 11 weeks), we were particularly interested in this solution. As Mr. Rojas continued in his comment:

We recently moved a 3,000 user call center app for Wyndham Hotels from Sybase to Oracle where the customer didn’t need to change a single line of application code. The whole migration lasted one week compared to the multi-month/multi-year application migration process that Wyhdham might have embarked without deploying our product.

Very cool stuff, indeed. So why wouldn't ANTs want to be acquired by a giant like Oracle, say? Because they have the potential to become a big player in their own right. Mr. Rojas again:

I truly believe that smaller/innovative companies that can significantly reduce IT costs in this economy are the exception to the rule and we will be in the driver seat when negotiating alliances with big IT vendors.

As Mr. Ruotolo explained to me, ANTs Compatibility Server product enables a company to migrate large enterprise-wide databases from costly proprietary platforms such as Oracle or Sybase to an open source platform like MySQL, reducing cost of ownership to a fraction of current operating expense.

As data center managers increasingly try to squeeze more efficiencies from operations through consolidation of hardware and software solutions, ANTs Compatibility Server bids fair to be enormously disruptive. By employing platform companies as channel partners, they have every reason to expect that the potential for growth to be substantial.

California Business Ascent Announced

2009-02-18T14:57:00.000-08:00

MEDIA CONTACTS:

Josh Morgan for Golden Capital

(916) 941-0901

josh@morgandorado.com

FOR IMMEDIATE RELEASE

Golden Capital Network, California Business, Transportation and Housing Agency, California’s Small Business Advocate, and California Association for Local Economic Development Announce Statewide Initiative to Help Growth Oriented Businesses Climb Out of Economic Doldrums

Private and State Groups Coming Together for California Business Ascent Statewide Business Mentoring and Competition

Sacramento and Chico, California - Feb. 18, 2009— Golden Capital Network (www.goldencapital.net), along with the California Business, Transportation and Housing Agency, California’s Small Business Advocate, and the California Association for Local Economic Development today announced the California Business Ascent (www.businessascent.com), a statewide competition and mentoring program to identify, assist and encourage innovation-based, locally-owned companies throughout California.

“Local-businesses focused on growth are the key for California to lead the way out of this economic downturn,” said Dave Sanders, chairman of Golden Capital Network and managing partner of WorldBridge Partners. “The Business Ascent is all about identifying the companies with the best chance of success and giving them as much help as we can, to try and make them successful, for the benefit of the companies, the employees and the people of California.”

The California Business Ascent will include regional competitions in up to 25 communities throughout California, culminating with the top two companies from each community competing in the California Business Ascent Finals to be held in San Diego at the Catamaran Resort on November 17-18, 2009.

"California has a long history of innovative entrepreneurs creating jobs and unparalleled prosperity driving new industries to global leadership, with entrepreneurs working in collaboration with government," said Secretary Dale E. Bonner, of California's Business, Transportation and Housing Agency. "It's going to take the collective effort of everyone in the state to rise out of our current economic situation and we can do it together by proactively supporting our next wave of innovative entrepreneurs."

The initiative is a unique new type of public/private partnership that includes both State government and local government leaders, and new types of private sector partners including entrepreneurs, angel investors, and venture capitalists. Through this process contestants will make important connections with investors, bankers, professional services providers, executives, policymakers and other entrepreneurs on a statewide basis. In-kind professional expertise and a substantial cash prize (amount TBD) will be provided to the winner of the competition.

“The California Business Ascent provides a new economic development tool for cities, counties and local economic development corporations to add value to their locally-owned growth companies,” said Wayne Schell, president and CEO of the California Association for Local Economic Development, ”These companies represent a critical and growing part of California’s local and regional economies, and until now have been difficult to assist with more traditional types of economic development activities.”

Wavepoint Ventures (www.wavepointventures.com) is participating in the California Business Ascent by helping to engage California's venture capital and angel investment community in the effort to accelerate economic recovery.

Cities and regions throughout the state including the Yolo region, Greater Stockton and San Joaquin County region, Greater Chico and surrounding counties, and Greater Redding and surrounding counties, have already begun scheduling events as part of the California Business Ascent.

Other cities and regions interested in participating should contact the California Business Ascent initiative organizers at Golden Capital Network, 530-893-8828.

For more information about the California Business Ascent, please visit www.businessscent.com.

ABOUT GOLDEN CAPITAL NETWORK

Golden Capital Network is a non-profit networking, training and consulting group that fosters growth entrepreneurship and early-stage investing as an engine for economic growth.

Since 1999, GCN has coached and showcased more than 1,000 companies to more than 500 active angel and venture capital investors. GCN’s venture capital showcases are the largest and most robust events of their type. The GCN event formula has resulted in more than $1.3 billion raised by presenting companies. More information on Golden Capital is available at www.goldencapital.net.

ABOUT THE BUSINESS, TRANSPORTATION AND HOUSING AGENCY

Led by Secretary Dale E. Bonner, the Business, Transportation and Housing Agency includes 13 departments and several economic development programs and commissions consisting of more than 44,000 employees and a budget of $20 billion, a budget larger than that of almost half the states in the nation. The Agency's portfolio is one of the largest and most diverse in the State of California. Its operations address myriad issues that directly impact the state's economic vitality and quality of life including transportation, public safety, affordable housing, international trade, financial services, tourism, and managed health care.

Corporate Liquidity Pools

2009-02-18T14:16:00.000-08:00

The conventional wisdom since the dot com meltdown at the turn of the century is that the IPO is effectively a nonstarter as an exit strategy, and that M&A is the most probable means for an early stage company convert equity into yield. While this is not news, there are some new wrinkles in the current economic climate.

Eric Lundquist, on his ComputerWorld blog, examines the emergence of the large technology companies as an important source of liquidity during the current economic distress. The most dominant companies in this space are laden with cash, and quietly going on a buying spree as other sources of cash dry up and valuations decline.

When I look at some of the investment areas including digital medical records, energy management, transportation and infrastructure, the big four (Oracle, Cisco,Microsoft, IBM -- MICO), okay big five if you include Hewlett-Packard, are not strong across all those areas and do not have enough time to build that expertise in-house.

This is exciting not only because of the potential for exits in a tough climate, but also becuase these acquisitions are strategic, strenthening the parent company, and creating new opportunities for innovative firms to emerge.

While the returns to investors may be less than hoped for, it does free up capital for investment in other promising companies, and frees up the founders to start new enterprises.

All Your Face Are Belong To Us

2009-02-16T10:47:00.000-08:00

Lots of churn on the interwebs about Facebook's new Terms of Service (TOS). The new user agreement asserts an irrevocable, non-exclusive license for any content users add to the service.

The key change is that there used to be a clause about the user's right to remove content, and that's been removed.

It's probably not as sinister as many bloggers infer. Because of Facebook Connect, content is being stored outside Facebook's span of control. This new language absolves the service of liability if a user's content is misused elsewhere. It's increasingly common on other social networking and search sites, including Google.

As ever, the prime directive of the net -- never post anything (including in email) that you wouldn't want to see on the front page of the New York Times tomorrow -- applies. Discretion isn't just the better part of valor, it's a requirement in the neworked economy.

State of The Venture Capital Industry

2009-02-11T11:12:00.000-08:00

Excellent analysis of the Venture Capital business on the NY Times site. Alan Patricof of Greycroft Partners makes a compelling case that VCs need to innovate to compete in a dramatically changed investment landscape. With angels increasingly sitting on the sideline, funds need to invest earlier, in smaller tranches, and with realistic expectations for smaller exits. The good news is that they can exit sooner.

I believe that most of the companies that venture capitalists are funding today will find an exit through merger or acquisition. And if we expect to achieve a return in a reasonable time frame of three to five years, we are probably looking at a sale price of $20 million to $100 million. This is the valuation range where most young companies are being acquired.

To compensate for these lower gross return expectations, we must establish initial valuations, usually in the single digits, that can provide an adequate multiple return and internal rate of return. Inevitably, this suggests that a true venture capital firm should be reverting to smaller-scale funds and restricting individual investments in early-stage companies to accommodate the realities of the exit opportunity.

This strategy aligns well with both LP expectations and entrepreneurs' best-case scenarios.

Entrepreneurs themselves seem to be catching onto the new risk/reward equation and seem far more willing, at an early stage, to opt for a sale at a lower valuation and lock in their gains, figuring that they are young and can repeat the process later with another start-up.

If the scenario I have described strikes a chord of reality, then until someone solves the cost of going public and increases the liquidity in aftermarket trading, we as an industry have to downsize our expectation for exits as well as downsize the size of our funds.

Patricof's viewpoint is refreshing, even optimistic, in these uncertain economic conditions. It's certainly a breath of fresh air, and we can only hope that VCs pay attention to his sage counsel.

That Vision Thing

2009-02-10T14:40:00.001-08:00

It's five years old, but some things are timeless.

Nowsourcing

2009-02-09T14:30:00.001-08:00

The practice of outsourcing is evolving, according to Tom Abate's column in the Sunday San Francisco Chronicle. Large corporations have long moved entire departments and functions to locations where labor costs were more affordable, especially assembly and customer service processes. While offshoring has been controversial, wage rate differentials in emerging economies have been irresistible to multinational companies competing for customers, capital, and components on a world-wide scale.

What's changing is that smaller companies are now taking advantage of the global market for talent, by utilizing web-based labor exchanges such as eLance, oDesk, crowdSPRING, and Guru.

This is especially relevant to entrepreneurs, who typically must outsource everything except core business functions, as much to remain focused on strategic imperatives as to manage their burn rate. And as more Americans are turning to freelance work to cope with the recession, a lot of this casual employment is remaining onshore.

Natasha Levitan, a San Jose filmmaker, is part of what work-site operators say is a new wave of U.S. freelancers who are going online to bid for contract work. Levitan, 31, has worked as a freelancer for most of the past several years, using local contacts and word of mouth to get jobs.

She joined eLance in April to help her build her client base and has gotten a few assignments through the site. She said it isn't easy to continually hustle for work, but at this point in her life, while she is single and can travel between jobs, "the positives outweigh the negatives."

According to Fabio Rosati, eLance's CEO, more than 60% of the service providers in his network are US residents.

This trend is also having an impact on large corporate IT departments, as well, as noted in a recent report in McKinsey Quarterly. While cost considerations will continue to make contractors in BRIC countries appealing, the expansion of the contract talent pool here in the US will be an attractive alternative for some businesses already feeling competitive pressure in distant labor markets.

A shake-up in the vendor landscape will likely follow the huge capacity increases of recent years, the current downward pressure on aggregate demand, and massive uncertainty in currency markets. Adding to the pressures are the strategic, government-sponsored initiatives launched by China and other nations to grab market share. Major mergers are more likely than not. New entrants will grow rapidly and some players could experience significant reverses. Successful CIOs will manage their vendor relationships as a portfolio so they will be well positioned as new winners evolve.

It's encouraging that American ingenuity and resourcefulness offer a competitive advantage in the evolving market for technology professionals, and for the promising startups who employ them.

Where Angels Fear To Tread

2009-02-06T10:00:00.000-08:00

In an article published yesterday in the New York Times, Claire Cain Miller and Brad Stone provide a pretty good snapshot of the state of angel investing in the current economic climate. Although the headline writer claimed that angels are "fleeing" from tech startups, the article explains that angels are indeed still investing, if less, and more selectively.

Some angels who are still investing have become pickier, making demands of start-ups that they would not have a year ago. When David Levine started Wireless Environment, which makes motion-sensor light-emitting diode bulbs, in November 2006, he quickly raised $135,000 from family members and business school friends, with few questions asked.

The angel investors he met with this fall, though, were far more demanding. “I could not believe the complexity,” he said. “For small investments compared to their net worth, they brought in financial advisers and a whole list of questions.”

They are also investing more of their time and acumen, getting directly involved in the operation of their portfolio companies.

Some angels are considering only low-cost companies that could become profitable without venture financing. Others are acting less like angels and more like venture capitalists, spending much more time than is typical advising companies, including taking seats on boards.

Aydin Senkut, a former Google employee who has invested in 40 companies, is serving on the board of one of his investments, ImageShack, a media hosting site, and spends two hours a week working at the start-up. “Where I can really help is building the next growth stage,” he said.

Angels are also heeding the wisdom of the adage "safety in numbers", syndicating with other angels to reduce their individual exposure, while still getting the deal done. While the caution about "too many cooks" has some relevance here, the entrepreneur undoubtedly benefits from the advice and counsel of many partners, and can leverage the "wisdom of crowds".

Some angel investors are putting less of their own money on the line by finding other people to invest with them. Co-investments increased in 2008, according to the Center for Venture Research, and half of those surveyed by the Angel Capital Association said they would increase co-investing with other angels this year.

While some of this restraint and prudence has the benefit of weeding out the knuckleheads and marginal deals, giving the stronger startups a quieter marketplace for seed money, the reduced pipeline is likely to result in fewer Series A opportunities for venture funds to consider.

Angel investors are a critical element to a healthy innovation economy. It's not for nothing that their money is called "seed capital"; they water the economic garden when it first sprouts. But they're also a vital source of expertise and experience many early stage entrepreneurs lack, giving their companies more of a chance of survival to the next round. Indeed, the counsel of angel investors may be more valuable, in the final analysis, than their operational funding. Fortunately, angels are organized into networks, so that they can not only spread the risk, but alert each other to opportunities they uncover. In a down market like this, the benefit of having multiple eyes on the horizon is an intelligence asset.

The angels, and angel groups, that have been involved with Golden Capital Network over the past decade have been critical early support for the alumni from our programs that have gone on to lucrative exits. While many angels are banking their fires and exercising more caution, they're still risk-tolerant by nature. Why do they go out on a limb? Because that's where the fruit is.

Industry Cluster Engineering

2009-02-05T07:00:00.000-08:00

Interesting take today by Sacramento Bee opinion writer Daniel Weintraub about industry clusters leading the charge to bring California back from the brink of total economic meltdown.

As California's economy struggles to rebound from the collapse of the housing bubble, it is difficult to imagine what will lead us out of this hole. We had the dot-com boom and bust, and then a housing-led recovery that turned out to be a mirage. Is there some industry, some idea that can reignite sustainable growth in this once-golden state?

Maybe not. And maybe that's the wrong way to think about the problem.

It could be that there are six or eight or 10 major industries that together will form the foundation for the new California economy.

He is speaking about regional industry clusters, and he uses the example of Akron, OH, which led an economic revival by rallying around innovation within its faltering rubber industry, and the Central Valley, CA, which is positioning itself to be a leader in clean technologies like solar, wind and water.

Peter Weber, a retired corporate executive and civic activist from Fresno, has studied what makes economies tick and is promoting a regional approach as a long-term strategy for California. He thinks local governments and the state should make the development of regional economic clusters their top priority.

We completely agree that cluster development within regional economies is at the core of regional economic development. We would add the cautionary note, however, that industry clusters are formed by innovative, entrepreneurial people identifying a competitive advantage and capitalizing on it.

You cannot wish one into place, nor invent one by merely by declaring it as such. Networks of people are the backbone of any industry cluster. If you don’t have the right people with the right knowledge and right access to a strategic business network, you won’t have a cluster form anytime soon. Innovation will sit on the shelf until someone with the knowledge and access identifies the opportunity and brings it forth. Take any notable example, including Silicon Valley, San Diego, Austin, TX, Research Triangle, NC, and you will find that human networks were at the core of the phenomenon.

This precisely why we say that any region wishing to develop any type of industry cluster should focus as much effort on cultivating general networks of innovation and entrepreneurship as deciding which cluster they want to be. Yesterday was biotech. Before that was nanotech. Today it’s clean tech, but yesterday was hydrogen and today is water, wind and solar.

This is an exaggeration, of course. All of these industries are still vibrant and active and provide expansive opportunity for companies and regions to capitalize on. The point is, private industry responds primarily to private market demands and technology flux, and it moves too fast and changes too quickly for government to easily influence it.

Policymakers should be aware of clusters, but understand to build one requires that economic policies help your entrepreneurial people with an affinity for the region find what works best there. Be aggressive to provide them access to things they need most: capital, talent, market intel and strategic relationships. Then let them be entrepreneurial. Let them find the industry that works best for what is available in the region in terms of people, technology, markets, innovation and opportunity.

On Feb. 26 leading technology cluster expert Doug Henton, from Collaborative Economics in Silicon Valley, will present a report on Solano County’s Life Science Cluster, anchored by biomedical giant Genentech. Another story about some smart people with an idea, the right knowledge and the right connections who decided this was a good place to build a company. Is that a cluster? It is now.

New Rules for Policymakers

2009-02-04T07:09:00.000-08:00

Rule #1: Don’t Get Bogged Down in the Minutiae - Take Action Now!
By Golden Capital Network CEO Jon Gregory

In President Obama’s inauguration speech, he made a statement that will resonate with many local policymakers and civic leaders in cities and counties across the country seeking to make proactive change in their own communities: “The time for standing pat has passed.”

When it comes to economic development, which is a highly compelling current issue, it is clear the time for standing pat has also passed. Numerous studies and reports issued by credible organizations in the U.S. and abroad point to business innovation as the leading contributor to jobs and wealth creation, community prosperity, and economic competitiveness. Based on these reports, policymakers and civic leaders across the country, in metropolitan areas and small towns alike, are anxious to implement innovation-driven economic development initiatives to accelerate local economic recovery and growth.

The innovation-driven model represents a new approach for many communities and economic development practitioners that have historically focused on industrial attraction campaigns as the stimulus for economic development. While the industrial attraction approach -- and others like tourism development, downtown revitalization and micro-enterprise development -- are important components of an overall strategy, they should not represent the “end all” solution in today’s dynamic global economy where new industries rapidly emerge and grow (and other industries conversely decline). Because of this modern-day reality community efforts to support and add value to promising entrepreneurial companies similarly need to be high on the action agenda for economic development.

You’ve by now read all the compelling reports about innovation. And are enthusiastic and ready to move forward with your strategy to improve the local economy, today!!! Whoa bubba. Wait a minute. Sit down, relax and take a deep breath. I know I don’t have to tell you this, but bureaucracies can be resistant to change and slow to act. Fortunately, I’m here to tell you that you don’t have to play by the old rules. Local policymakers and civic leaders have within the realm of possibility a means to start fostering an innovation-focused economic agenda that doesn’t require a lot of financial resources or council approvals.

Three statements you may hear at the beginning of your efforts to make change should serve as red flags. The first statement is: “Let’s schedule a meeting with all of the nonprofit partner organizations in the community who deal with economic development.” The goal of such a meeting – to the start the process of creating collaboration – is, of course, good. But are the “usual suspects” the right partners to have involved in the collaboration? What resources do they bring to the table? What is their current agenda and is it in alignment with the objective of this effort, or will it really serve as an impediment or roadblock? And, perhaps most importantly, how long will it take them to obtain the necessary approvals from their board to participate? After all, your goal is to move quickly!

The second red flag is: “This sounds like a good idea, let’s hire a consultant and do a feasibility study.” As I’ve already stated, numerous reports, studies and articles have concluded innovation is an integral part of the process for any community or region seeking to enhance its economic condition and competitiveness. If you go down the traditional feasibility study route, the process is likely to take a minimum of 6 months, at best, to cycle through. Can you afford to wait that long?

Venture capitalist and angel investor Roger Akers of Akers Capital suggests a different approach: “To begin this process, I would first call on successful entrepreneurs and CEOs, and all of the regional lawyers, investment professionals, senior University leadership, venture capital companies, angel group leaders, appropriate non-profits and economic development leaders to attend a two-day workshop to be educated in the current and needed capabilities of the region relative to new business formation and development and why it is so important.” A single focus group with 8-12 private sector leaders in the innovation sector can get you the information you need to move forward in 2 weeks (at most). There are many projects requiring extensive feasibility studies. This isn’t one of them. You don’t have the luxury of time on your side.

The third red flag is: “Let’s include your project during the next cycle of potential funding applications the city (or county) could consider submitting for a grant later this year or next year.” Leverage state, federal and foundation grant resources to fund high-impact projects in your community. But putting important community projects put on hold while waiting for the big-ticket funding source is wrong.

An excellent example of a proactive civic leader is Charlie Brown, executive director of NoRTEC, a consortium of workforce investment organizations in rural Northern California. Charlie has been very successful accessing state and federal resources over the past couple of decades. He didn’t wait for significant grant funding to get started; he has been building a coalition of leaders around the notion of innovation as a regional economic differentiator, and supporting incremental, smaller activities along the way. When his organization was able to access State and Federal dollars through the federal WIRED initiative a couple of years ago, he was in a much stronger position to maximize the impact of that effort.

Getting started on an innovation-based economic development initiative doesn’t require a lot of money. Don’t underestimate the ability of local sponsorships, contributions and volunteer services to get great things done! Move forward with the grant proposals that your staff or community organization partners want to prepare. But view that as your lever, rather than as deciding factor of whether to proceed or not.

Below are ten activities you can act on tomorrow that can start fostering innovation-based economic development in your community:

1. Recruit a blue-ribbon committee of innovation leaders to immediately give your effort credibility, generate fresh ideas and identify a private sector champion
2. Secure sponsorships from private sector leaders
3. Engage local media in your efforts to generate visibility
4. Re-direct staff time and energy from lower value activities to your new high priority strategy
5. Use your influence to recruit community-based organizations to go to work in support of your initiative
6. Educate your elected colleagues and other civic leaders about the idea of innovation as an economic driver
7. Launch a series of informal network events that occur onsite at your successful innovation-based businesses or other venues in the community
8. Begin a speaker circuit, making presentations about innovation economic development at service club and civic group meetings and local schools
9. Initiate a brown bag lunch outreach campaign: visit with the CEOs of as many innovation-based businesses in your community as possible and find out how you can help these companies
10. Create a Mentor’s Roundtable from your most successful CEOs

Peter Gardner, a partner in the Venture Capital fund Wavepoint Ventures, offers a few suggestions: (1) identify a low-cost office space in the City to provide incubation and shared services for local early-stage companies; (2) organize a local angel investment group that can provide capital and mentoring to local entrepreneurs; (3) initiate a monthly breakfast meeting with local entrepreneurs, business leaders, select City employees and professional service providers to discuss challenges to growth, and potential solutions, and then incorporate this market feedback directly into City policymaking.

Bill Reichert, Managing Director of Garage Technology Ventures says: “I would initiate the ‘Ourtown Innovation Challenge’ calling on all businesses, organizations, and citizens to contribute their ideas and recommendations regarding ways to stimulate innovation and entrepreneurship, ranging from ways to streamline government to ways to attract more resources to the community.”

He continued, “I would start the planning for an Innovation and Entrepreneurship event to be held in one year to celebrate the individuals and the organizations that have done the most to help innovation and entrepreneurship in the area, and to provide a showcase for entrepreneurs seeking to launch their own innovative companies or non-profit organizations.” Reichert concluded with a statement about the impact these efforts can have. “In combination, these initial efforts will create a string of PR opportunities for the ongoing initiative. By enhancing the visibility of the initiative locally (and getting visibility statewide), I would hope to bring a combination of public and private resources into the community to participate in some way – at a minimum, sponsoring the annual event.”

There’s no time like the present to get things moving. Worst case, you will have dramatically elevated awareness of innovation as the true economic driver in your community that sets the stage for many good things to emerge. Best case you will have a fully functioning, sustainable innovation program in place that fosters business formation and growth from your entrepreneurs that doesn’t require a lot of public money. In either case, don’t let yourself get bogged down in the minutiae!

California Business Ascent Slideshow

2009-02-03T15:06:00.000-08:00

A brief (15-slide) deck is available for viewing by anyone who's wondering how California is going to recover from the current economic crisis.

California Business Ascent

(tags: innovation entrepreneurship)

Comments welcomed.

The Cure

2009-01-29T09:53:00.000-08:00

What's the big message for the tech industry coming out of Davos, Robert? (ANSWER: Innovation is only way out of economic hole)

Robert Scoble, via Twitter from the World Economic Forum

National advisors continue to tout GLOBIEs as the key component for sustainable economic recovery.

Reported by Jason Gertzen in the Kansas City Star in a story headlined Innovation “will be the path to revive our economy”, national political advisor David Wilhelm says that nurturing innovative companies with the potential for substantial and rapid growth very well could be one of the most effective strategies for rebuilding tattered regional economies.

“Those of us who are business builders are about to be brought front and center in a national debate over what constitutes honest capitalism, how to best promote genuine entrepreneurship, how to reconnect hard work, achievement and accountability in this great country of ours.”

Wilhelm has advised political campaigns for President Bill Clinton, Vice President Joe Biden and Chicago Mayor Richard Daley. More recently, Wilhelm advised President Barack Obama on innovation and entrepreneurship for economic development.

Innovation as it is Unveiled for the Very First Time

2009-01-28T07:00:00.000-08:00

DEMO 09 • March 1-3, 2009 • Palm Desert, CA

Join us as the momentum continues at DEMO 09! DEMOfall 08 brought you well over 800 guests, including 100+ members of the press and many Venture Capitalists, Angel Investors and Corporate Development Officers. This was the largest DEMOfall event on record and we are keeping up the pace for DEMO 09.

DEMO is the Launchpad for Emerging Technology. We invite you to take part in product launches that will change the market and view 70 six-minute presentations of pure innovation. Palm, TiVo, E*Trade, IronPost, GrandCentral and Glam Media are all products that launched at DEMO events. Over 40 DEMO companies have been acquired by tech giants like Microsoft, Google, Symantec, Motorola, Adobe and Cisco; not to mention the products launched at DEMO that redefined their markets such as WebEx, VMware, iRobot, Linden Labs, Six Apart and Roku.

Don’t worry – 6 minute presentations are not the only time you get to spend with these innovative companies. During the DEMO expo you are free to explore each company’s booth and learn more about their product and business plan. The expo floor is where connections and deals are made, shouldn’t you be there?

Join us at DEMO 09 where the brightest innovators, savviest investors, biggest buyers and most sought after press will all be from March 1-3, 2009.

We are excited to announce our partnership with Golden Capital Network. This partnership means a better deal for you – Golden Capital Network members receive a ½ discount on the registration fee, meaning it will only cost you $1,495 to attend DEMO 09, one of the most innovative conferences. Reserve your discounted seat now by following this link.

Why Now?

2009-01-27T14:06:00.000-08:00

History shows that when incumbents can't innovate, entrepreneurs do. The incumbents then try to legislate or litigate.

-- Shel Israel, via twitter

We've been hearing -- and repeating -- that one of the best times to start up a new venture is during a downturn. This isn't just whistling past the graveyard, or simply wishful thinking. As has been previously pointed out, some of the best companies were started in times of profound disequilibrium.

During the boom times, there's a lot more noise and crosstalk in the marketplace, as more and more frankly marginal ideas get funding and perhaps even some traction. At the Start conference last August, David Hornik noted that "when guys are leaving McKinsey to start companies, you know things have gotten crazy." One of the strategic advantages of launching during a period of economic upheaval is that there are fewer other entrepreneurs battling for scarce capital, media attention, and early adopters.

But it's also true that large companies who might attempt to disrupt competitive initiatives with their market power and political influence have enough problems of their own without diverting their resources to stamping out upstarts. The cat's away.

The New Entrepreneurship

2009-01-23T14:48:00.000-08:00

Everybody's talking about entrepreneurship and innovation these days as the path to prosperity. From the President and the Governor down to your local elected officials, the new mantra of economic recovery is "entrepreneurship and innovation". And that's great, because, as we've been saying for a decade, they really are the best hope any community or region has for developing and expanding its economy.

However, over that same decade, those of us at GCN who have tirelessly preached this gospel have lamented over the manifold defects of the word "entrepreneurship" itself. It's hard to spell, for one thing. And it's looooong. And it's too French.

More critically, it's been misunderstood and abused, to the point that for most people it means merely "small business". As we've pointed out repeatedly, it properly refers to companies that innovate, serve national or global markets, and have the potential to grow into very large businesses, indeed. But getting that point across still requires us to type "entrepreneurship" again and again.

We've searched high and low for a new term that more clearly (and concisely) articulates that unique growth enterprise, to no avail. We've even coined a new acronym, GLOBIE, but that still has "entrepreneur" in it.

Now we think we've found an existing word, that describes vividly why entrepreneurship is so critically important to a healthy economy. It's short, easy to spell, and by happy coincidence is the name of a famously exemplary entrepreneur.

Jobs.

In the final analysis, that's the who, what, and why of entrepreneurship. Yes, it also engages founders, introduces exciting new solutions to vexing challenges, creates sustainable value, and enriches private equity investors. But the thing it does best is create jobs - for the entrepreneur as well as her employees. Importantly, particularly for local economies, it creates good, sustainable, career-grade employment opportunities for knowledge workers, whose demand for goods and services creates even more jobs in the community. This multiplier effect is why smart civic leaders are committing resources to support their entrepreneurial companies.

There simply is no better way to stimulate employment across the industrial continuum spanning from services to production to symbolic analysis. And that growth in employment leads to another important benefit: revenue. The purchasing power of workers employed by entrepreneurial companies drives growth in the retail, commercial, and durable goods markets as they buy homes, cars, decor, apparel, and food and beverage. Those purchases in turn generate tax revenues, especially sales and property taxes that fund critical services, including education, public safety, infrastructure and cultural resources. Innovation is about solving problems and monetizing the solution. When you think of it that way, "Innovation" is another word for "Revenue".

So save your typing fingers from getting tangled up with the conventional nomenclature. Just remember: Jobs is the new Entrepreneurship, and Revenue is the new Innovation.

Beyond ROI

2009-01-23T13:05:00.000-08:00

In a followup post to an earlier item about the availability of seed capital, venture investor Albert Wenger makes a very good point about the positive impacts startup companies have on their communities and human capital networks. Whether a young company succeeds -- or even survives -- it generates benefits that don't necessarily increase the net worth of its founders and investors.

I had mentioned the experience gained by the entrepreneurs. But the human capital benefits don’t end there. All the employees and even the service providers accumulate knowledge and experience that outlives the startup. It goes even further though by having people who have worked together as a team, which means that they are much more likely and capable to work together on a new opportunity.

In fact, much has been written about how there is a significant network effect that occurs when you reach a sufficient density of startups. For instance, AnnaLee Saxenian examined the differences between Silicon Valley and Route 128 and identified network effects resulting from density and attitudes of startups as critical. Bijan has pointed out repeatedly how non-competes in the Northeast have been blocking some of that network effect. Critical here is the recognition that in a network effect setting there is significant value to the network that is not captured by the individual participant.

He goes on to point out that society has a compelling interest in the formation of startups, and that relying exclusively on returns to private equity to generate entrepreneurial activity may be insufficient to create the long-term network effect seen in established technology corridors.

There are powerful benefits that are not reaped by the individual startup. The net result of that is there is not enough startup activity if society relies on individual incentives alone.

He argues persuasively that public-private partnerships are needed to create the conditions which germinate and incubate startups as a stimulus for these secondary economic impacts that are beyond what the founders and seed investors accrue.

Angel Investing Update

2009-01-22T12:49:00.000-08:00

The good news is that angel investors are still deploying capital, and remain the single largest source of capital for early stage entrepreneurs. So says Kasey Wehrum in Inc. online.

The bad news is that they're driving harder bargains, and taking longer to commit their resources.

If you are looking for funds, be prepared for a buyer's market. That means requests for more control as well as lower valuations. "I'm not saying we are going to be angels from hell, but we are not going to be stupid about how to price," says John May, managing partner of New Vantage Group in Vienna, Virginia. On the other hand, says Bill Warner, chairman of the Triangle Accredited Capital Forum in North Carolina, "no angel wants to put an entrepreneur in the position of not being able to reap benefits from a successful exit."

Wehrum also notes that while the total amount of money invested in 2Q08 -- $12.8B -- is up 4.2% over the same period in 2007, the total number of companies funded -- 23,000 -- is down 3.8%. The trend towards increased deal syndication continues as investors put the risk burden on multiple shoulders.

Optimism Lives!

2009-01-21T06:42:00.000-08:00

It's great to see David Hornik posting again on VentureBlog. He's been on hiatus since the end of October, and his perspective on the private equity asset class has been sorely missed.

His latest note offers cautious optimism for the future of venture-backed technology startups. It's a welcome notion after the beating the economy has taken lately.

So why am I optimistic about investing in 2009? Because entrepreneurship is an addiction, it isn't a choice. Great entrepreneurs aren't driven to create companies because it is easy, or because capital is plentiful, or because the public markets are swallowing anything the venture community will throw at them. Great entrepreneurs start companies because they can't help themselves. They see a problem or a solution or white space or an opportunity and they have to do something about it.

Indeed, there may be no better time for an entrepreneur to start a new business. Some of the best and most successful companies were started during downturns, and there are some very important competitive advantages to doing so. "Me-too" competition is stifled, pain in the market caused by economic disequilibrium seeks relief that only innovation can provide, and investors still must deploy capital, even if LPs are thin on the ground.

Beyond Doom and Gloom: New Economic Development Rules for Local Policymakers

2009-01-19T14:52:00.000-08:00

By Golden Capital Network CEO Jon Gregory

Introducing GLOBIES

With Tuesday’s impending inauguration ceremonies there has been a lot of media, economic and political speculation about President-elect Barack Obama’s stimulus package. While debate continues in the beltway about how to rejuvenate the American economy from a macroeconomic perspective, little attention has been given to the equally difficult challenge local elected officials face in cities and counties across America. They are tasked with creating jobs, tax revenues and prosperity in their communities in a period compared to the Great Depression. It is at the local grass roots level where the effects of lay-off notices are exceedingly personal and the impacts on public services most noticeable.

The recent announcement of the closure of the remaining 567 Circuit City stores in the U.S. at a cost of 34,000 jobs, along with major reduction in employment levels at well-known companies like Hertz Global Holdings Inc., WellPoint, ConocoPhillips, Advanced Micro Devices, Saks and Motorola Inc. make the road to economic recovery for local policymakers pretty rough.

Recent studies by economists and academics, along with noted authors and distinguished reporters, suggest that innovation remains the one true economic advantage America possesses over other nations. Excellent publications such as Regional Innovation, National Prosperity by the Council on Competitiveness, and The Innovation Driven Economic Development Model by Collaborative Economics serve as excellent resources on this topic. Yet, despite the increased attention on innovation, discussion among thought leaders about innovation as an economic development strategy has mostly been relegated to the 50,000-foot-level rather than given merit as a practical solution that can be implemented at the grass-roots level.

Even more important is the distinction between long-established national and global businesses with divisions or stores located in hundreds of communities across the country but whose headquarters are located elsewhere, versus innovation-based businesses serving national and global markets with their home base of operations located in the community itself.

I’ve coined a new term for the economic development vernacular to better distinguish these types of businesses from others: GLOBIE (Growth-focused Locally-Owned Businesses run by Innovative Entrepreneurs). Even while major global corporations such as those I mentioned earlier in this article falter or stumble, at Golden Capital Network we are able to regularly observe the under-recognized progress made by hundreds of GLOBIEs. Just last week, for example, alumni presenting company GLOBIEs like Red Condor, Utopy, Alter-G, Inc., and Sentilla reported important business-related achievements, such as new customers, new management team hires, new rounds of capital raised and new technology milestones reached.

The most recent 10-year period of my economic development career has been spent in the trenches on a day-by-day basis with the founders and CEOs of GLOBIEs. It is this subset of the innovation sector that drives ongoing economic growth. Importantly, GLOBIEs exist everywhere in this country. They represent the bright spots in an otherwise struggling economy.

GLOBIEs deserve special recognition and support by local policymakers because they not only serve as the market-leading difference-makers in a community, but also usually have a true affinity for that community and a desire to stay and grow there.

With 25 years directly or indirectly involved in local economic development under my belt, I am concerned that our local elected officials -- and other civic leaders charged with economic development responsibilities -- are not fully equipped with the right knowledge or the most effective tools and strategies to stimulate their economies by focusing on GLOBIEs. Instead, many of the strategies being championed to elected officials in communities across the country today are the same ones touted when I started my career in economic development in 1985. The problem is that the economy of today is nothing like it was in 1985.

It is important to emphasize that GLOBIEs are the businesses that are most vital to the economic recovery and growth of a local economy, and that grass-roots efforts can actually have a positive impact on their success! With companies whose headquarters are located elsewhere, the ability for a local entity to impact their decision-making process is minimal, at best. In fact, the economic development strategies being advocated in many communities and states across the U.S. today offer little value to GLOBIEs. This is disheartening in that it is possible for local policymakers and other leaders of local economic development organizations to have a profound impact on the success of these businesses by helping to address their needs. The organization of a community’s human capital assets is a good example. I am referring not only to the employees who become the workforce for GLOBIE businesses, but all of the human-related input essential to starting, growing and exiting a GLOBIE company; known as the innovation eco-system.

Local policymakers can play a pivotal role in this process. Yet in most community’s economic development efforts exert no energy into proactively cultivating this innovation eco-system. It is this disconnect that has inspired me to write “Beyond Doom and Gloom: New Rules for Local Policymakers” as a guidebook for policymakers and other economic development leaders to implement a cost-effective, sustainable and compelling economic development initiative at the local level that is focused on GLOBIEs.

Over the course of the next two weeks, I’ll periodically release these New Rules seeking perspectives from throughout the extended GCN network. If you have inputs, feel free to respond here. Next we’ll start the journey with New Rule #1 for local policymakers: “Take Action Now! Don’t Get Bogged Down in the Minutiae.”

Jon Gregory
President/CEO
Golden Capital Network
California Business Ascent

Network Capital Golden

2009-01-08T13:55:00.001-08:00

A fascinating paper by Manuel Acevedo of the Open University of Catalonia proposes a relationship between Social Capital and the Network Society that results in a new community asset he calls Network Capital.

With the rapid and explosive growth of social networks and the whole host of Web 2.0 applications, we are witnessing the formation of new forms of community. Howard Rheingold (who tweeted a pointer to this article) wrote The Virtual Community in 1993, presaging the conceptual framework, based on some of the early BBS and real-time messaging tools available to the pioneers of what was then yet to be identified as "cyberspace". Acevedo's paper validates Rheingold's prescience in a compelling fashion.

Communities are no longer defined only by place, but also by interest, becoming organized into social networks. When the interaction takes place among members of an electronic network, which are likely loosely-knit in geographic terms, the resulting social capital is network based. Network capital could then be understood as a measure of the differentiated value in the Information Age that communities structured as social networks generate on the basis of electronic (digital) networks for themselves, for others and for society as a whole.

While Acevedo examines this asset as an accelerant for human development, it seems to be an important resource for innovation-driven economic development. Certainly, Acevedo's example of how Network Capital powered the Open Source movement illustrates its investment in creating value that can be monetized, create opportunities, and generate new wealth.

An early and still paradigmatic example of network capital comes from the creation of Free/Open Source software (FOSS). People from different locations, who may not ever see each other, use Internet and net-based tools to exchange information, generate knowledge, work collaboratively and develop well-defined products, ‘all for the love of it’. These people consider themselves as software artists (even activists), and participate on a voluntary basis. They meet at specific cyberplaces, eg. distribution lists, extranets or project management applications, and sometimes in person as well, at conferences or other public events.

FOSS communities have crafted a culture of sharing and solidarity which not only makes their processes sustainable, but is a stimulus and reference for others to also pursue electronic-based collaboration. The ‘Open-Source’ approach is becoming known for its methods and philosophy in fields outside of software production, as a collaborative methodology. This collaboration helps the individuals who take part in it, and the resulting products help specific personal or institutional users, as well as large sectors of society who in this way have additional software choices made available to them – a good example of knowledge as a global public good.

The graphic at the top of this post is included in the paper as an example of how projects can be enabled with Network Capital, as well. As we develop and implement strategies to create value through innovation and entrepreneurship, it seems evident that raising and deploying Network Capital is as fundamentally critical to success as Private Equity Capital.

Job Creation Study

2009-01-07T10:34:00.000-08:00

A study by John Haltiwanger of the University of Maryland and Ron Jarmin and Javier Miranda of the Census Bureau adds even more credibility to the argument that supporting nimble, innovative entrepreneurs is the most effective, sustainable method for long term job creation and prosperity within communities.

Jeff Cornwall from Belmont University blogged about this earlier this month, and while the data might be further dissected to show that one-off freelancers – with no intention of every creating another job but their own, and local service sector lifestyle companies – with no chance of every growing beyond the 5-10 employee range – could somewhat skew the data, there is enough there to take note.

“In terms of net job creation, the role of business formation is clearly critical,” the authors conclude. “But we also see that businesses that have survived their first few years and have already grown to a mid-sized business exhibit positive (and higher than average) net job creation rates.”

Locally headquartered firms – usually backed by some combination of family, founders, friends, angels, VCs, customers and strategic partners – comprise a significant portion of the small and mid-stage companies this study indicates are the pillars of new net job creation within communities.

From our 10 years at Golden Capital Network working hands-on in the field, we have observed several common characteristics among early stage companies with the greatest chance of growing to become these locally headquartered mid stage firms.

First, we generally characterize early stage companies as: 1) Earning annual revenues in the $0 to $5 million range– depending on the industry; 2) Being developed beyond the concept stage; 3) Being a stand-alone entity, and usually not an affiliated spin-off from an existing larger firm.

We classify these early stage companies with high growth potential as “innovative” in how, through their products, services and/or internal business systems, they: 1) Address new markets; 2) Address new pain or challenges within existing markets; or 3) Offer new solutions to existing customer needs or wants.

We have also consistently observed that while innovation is often technology based, this is not always the case, and innovative companies can be from within any industry.

We consider a scalable company one with the potential to grow or expand into a substantial enterprise, and it is our observation that only scalable companies can quickly grow from small to mid-size businesses. Scalable companies have one or more of the following characteristics: 1) Large, unmet market needs for the company’s products or services; 2) Potential customers all over the country or world; 3) A business model and management team potential that will allow for realistic, significant growth in both market share and revenue.

These companies are also characterized by their most pressing needs, which are access to capital, access to talent and access to networks of expert knowledge, industry advisors and potential strategic partners.

With the findings in this study, and others like them, it seems clear to us that community efforts to improve local economies should focus on helping innovative, scalable, locally headquartered early and mid stage companies to grow, thrive and win.

Entrepreneurship, Innovation and Other Buzzwords

2008-12-17T13:36:00.000-08:00

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

2008-12-16T11:22:00.000-08:00

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

2008-12-14T09:43:00.000-08:00

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

2008-12-01T13:50:00.000-08:00

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

2008-11-13T17:46:00.000-08:00

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

2008-11-10T15:55:00.000-08:00

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!

2008-10-31T09:00:00.000-07:00

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!

2008-10-28T09:55:00.000-07:00

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!

2008-10-23T20:46:00.000-07:00

As seen in the most recent edition of The Economist.

Yeah. Right.

Uptime Chico Coworking Now Open!

2008-10-17T07:00:00.000-07:00

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

2008-10-07T10:30:00.000-07:00

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

2008-09-26T10:18:00.000-07:00

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

2008-09-24T23:30:00.000-07:00

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

2008-09-24T12:42:00.001-07:00

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

2008-09-23T11:05:00.001-07:00

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

2008-09-19T10:39:00.000-07:00

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:

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

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

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?"

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

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."

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?"

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."

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?"

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."

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

2008-09-18T09:15:00.000-07:00

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

2008-09-17T09:21:00.000-07:00

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

2008-09-16T10:23:00.000-07:00

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

2008-09-15T11:23:00.000-07:00

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

2008-09-12T14:31:00.000-07:00

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

2008-09-05T14:40:00.000-07:00

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

2008-09-04T13:23:00.000-07:00

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

2008-08-14T14:41:00.000-07:00

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.

2008-08-11T15:27:00.000-07:00

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

2008-07-28T07:00:00.000-07:00

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

DEMOfall 08 | Sept. 7-9, 2008 | San Diego, CA

2008-07-22T09:35:00.000-07:00

DEMOfall08 is the place to be for emerging technologies, companies, and products. DEMO has acted as a launch pad for some of today’s greatest innovations. From TiVo, Java, E*TRADE, and Palm in the 90s to OddPost, GrandCentral, IronPort, VMware, Salesforce.com, and Six Apart more recently, DEMO has consistently delivered products that change the dynamics of the marketplace.

With 18 years and 1,500 launched products under DEMO’s belt, we’ve witnessed astounding results. In the past four years alone, DEMO companies have raised over $2.5 billion dollars following their debuts at DEMO. Over 40 of these companies have been acquired by tech giants such as Adobe, Cisco, Yahoo!, Nokia, Viacom, Google, Microsoft, Symantec, Motorola, and more.

Executive producer, Chris Shipley, has met with about 500 companies across the globe to hand select the 70 most influential products to launch at DEMO. According to Ms. Shipley, these products must make an impact on their markets.

“I look at technology not with an engineer’s zeal for elegant code, but with a human eye for usefulness, practical advancement, and social change . . . But I can still get jazzed by significant technical innovations that simplify and enhance the lives of corporate, mobile, and personal users.”

Join us and experience innovation as it is unveiled for the very first time. Register here and save $600: http://www.demo.com/F8GCN

Like Talking To Bill Walsh About Football

2008-07-18T11:17:00.000-07:00

I got to spend some time with a hero of mine recently. GCN presented the New California 100 conference in Davis last month, which culminated in a banquet to honor the central valley's top 100 privately-held companies, and to induct the inaugural class of the New California Hall of Fame. As part of that awards ceremony, I gave the "Legacy Market Leadership" award to Fred Franzia, the founder of Bronco Wine Company, the fourth largest winery in the US, shipping more than 20 million cases per year.

The best part, though, was getting to enjoy his company during the dinner, and listen to some of his observations about the winery industry in general.

For those who don't know, Bronco made a pretty big splash a few years back with the introduction of the Charles Shaw Winery brand, the first so-called "super value" wine. You may know it by its more popular sobriquet "Two-Buck Chuck". This is the wine distributed exclusively by Trader Joe's for $1.99 per bottle in the western states.

Someone asked Fred one day "how can you sell a great wine for only $2 a bottle?" He replied "I only make a dollar a case, but I sell a million cases a year. You do the math." He's also on record as saying "No bottle of wine is worth more than ten dollars." This may be hyperbolic, but he may have a point.

I love wine, and I love bargains. The truth is that making good wine is not significantly differentiated from making good paint or making good motor fuel. It's process manufacturing, and assuming you use good ingredients, pay attention to the process, and strive for quality, you should be able to make a good product. Franzia understands this.

The wine industry is actually three separate lines of business; agriculture, process manufacturing, and marketing. Bronco has innovated aggressively in all three areas. For one thing, Bronco has nearly 40,000 acres under viticultivation (and adding a section a year), making it the largest winegrape grower in the world. Secondly, Bronco has streamlined the production process, squeezing cost out of every step. Bronco is building the first new wine bottle plant in decades, further consolidating their vertical integration and controlling both cost and quality for maximum value to the customer.

Finally, Bronco has broken the monopoly of the three-tiered distribution model, which is critical not only for Bronco, but for the industry as a whole. Consider this; a ton of grapes costing $2000 per ton will produce a bottle of wine that retails for around $20. The retailer takes 40-45% on sell, the distributor take 20-25%, and after the cost of goods sold, the winemaker pockets about $3. If he sells that bottle to a customer in his tasting room for "10% off list", he pockets $15.

By negotiating directly with Trader Joe's to carry the Charles Shaw product, Bronco eliminated a critical factor contributing to the high cost of wine.

So getting the chance to sit with Fred Franzia and listen to him talk about his experiences, the history of his family (producing wines in California for more than a century), and his insights into delivering excellent quality at a substantial discount to the prevailing pricing in the industry was a memorable experience.

There are some things no man should know about making wine; Fred Franzia knows all of them.

New California Hall of Fame touted

2008-06-14T09:43:00.000-07:00

Today's Stockton Record chimes in with a preview of The New California 100 event and the New California Hall of Fame:

Hall of fame gets 8 Valley leaders: Business moguls honored Tuesday
Stockton developers Fritz Grupe and Alex Spanos will be among eight business leaders inducted into the New California Hall of Fame in recognition for their legacies of business, philanthropic and civic contributions to the Great Central Valley.
Individuals selected for the hall of fame founded and led companies headquartered in the 19-county Valley region of California stretching from Shasta to Kern County.
They will be honored at a Tuesday dinner at the first-ever New California 100 Conference in the Robert and Margrit Mondavi Center for the Performing Arts at the University of California, Davis. The conference also will name 100 companies that have contributed to regional prosperity by generating revenue and jobs. Sixteen companies in San Joaquin County are on that list.

The others to be inducted are Archie Aldis "Red" Emmerson, founder of Sierra Pacific Industries, Redding; Newton T. Enloe, founder of the Enloe Medical Center, Chico; Ernest and Julio Gallo, co-founders of E&J Gallo, Modesto; Tom Raley, founder of Raley's Stores, West Sacramento; and Fred Ruiz, co-founder of Ruiz Foods, Dinuba.
"These business legends represent what makes California's great Central Valley fertile ground for the next generation of innovation and prosperity, and can serve as continued reminders of how to be successful in business in California and around the world," said Jon Gregory, chief executive officer of Golden Capital Network, a nonprofit networking, training and consulting group that is one of the conference sponsors.
The conference Tuesday will also feature a full slate of speakers and give business leaders the chance to gather to share stories and chart how they can collectively continue to make California golden for business, he said. These companies being honored account for more than $50 billion in annual revenue and support more than 250,000 jobs in the region, he said.
The event will feature industry discussions lead by expert panelists from the finance, venture capital, academic and other sectors. Some top 100 company CEOs will share their stories of challenge, solution and accomplishment, and early-stage entrepreneurs will share their market solutions and paths to success.
Chris Soderquist, general partner with Davis-based Golden Capital Venture Funds, said the conferences will be staged annually to bring together business leaders from top companies, venture capitalists, entrepreneurs in promising new businesses, municipal elected officials and economic development specialists.
The original intent is to celebrate business success in the Central Valley, he said. But bringing together a wide variety of business sector players promises to promote business growth in the region at a time when there's a lot of "rhetoric" ranging from talk about a poor economy to poor air quality, he said.
"Things obviously are growing, but the grounds are a lot more fertile to grow even more so," Soderquist said.
For more information about the conference and the California Hall of Fame dinner, which together will run from 7 a.m. to 9 p.m., or to register, visit www.thenewcalifornia100.com. Cost is $325 per person for the conference and $450 for the conference and dinner.
The following 16 companies headquartered in San Joaquin County were named to the New California 100:
AG Spanos; Grupe Co.; Bank of Stockton; Building Material Distributors Inc.; Coastal Pacific Food Distributors; Collins Electrical; Delicato Family Vineyards; Diamond Foods; Duraflame; Interstate International Inc.; Klein Bros Ltd.; Mid Valley Plastering; Musco Family Olive Co.; Pacific Coast Producers; PAQ Inc.; and the Poly Processing Co.
The conference is being sponsored by Golden Capital Network; the Great Valley Center, a nonprofit Central Valley think tank; Hamilton Lane, an independent, private equity asset management service; and UC Davis.

Entrepreneurs will flood Davis: UCD Conference promotes startups

2008-06-12T20:30:00.000-07:00

In today's Davis Enterprise ... great encapsulation of Venture Communities and the New California 100 event.

Entrepreneurs will flood Davis: UCD Conference promotes startups

By Claire St. John | Enterprise staff writer | June 12, 2008 12:06

Business is booming in Yolo County.

Next week, two events will bring Yolo County to the attention of Central Valley investors and entrepreneurs, creating a synergy here that could lead to more investment, more local industry and more money pumped into local governments, service providers and community ventures.

Davis, which has long been interested in keeping more UC Davis spin-off companies and entrepreneurs within city limits, has spent the past few years focused on economic development. To that end, it created the Business and Economic Development Commission and invested in an Angel Investor Fund, designed to bring investors and entrepreneurs together. Several other Yolo cities and the county also invested.

On Monday, the effort goes public with the launch of the Yolo Venture Community Web site and a workshop for entrepreneurs and business owners.

On Tuesday, UC Davis' Mondavi Center will host the New California 100 Conference, at which 100 Central Valley companies - including nine Yolo County businesses - will be honored, and seven individuals will be inducted into the New California Hall of Fame.

Together, the 100 companies generate more than $50 billion in revenue and employ 250,000 people.

'There are 65 to 70 angel investors and venture capitalists coming to the event, so it's the largest number of investors to convene in the Central Valley at one event,' said Chris Soderquist, a native Davisite and a general partner at Golden Capital Venture Funds.

'There should be between 400 and 600 people at the event, primarily principal executives at the top companies, entrepreneurs and other civic and economic leaders.'

The city of Davis - along with Woodland, Winters, West Sacramento and Yolo County - invested matching funds in Golden Capital Venture Funds to create an Angel Investment Fund, connecting high net-worth investors with budding companies in the region.

The collaboration also allows investors to have confidence in their investments, as Golden Capital Venture Funds vets all start-ups and ensures they have access not just to money, but to intellectual and social resources.

Those local investors and businesses will come together on Monday at the Veterans' Memorial Center, 203 E. 14th St. in Davis. The day will begin at 1:30 p.m. with a business seminar, featuring faculty from UC Davis, University of the Pacific and Sacramento State. Topics will focus on entrepreneurship and the economy, new technologies and the next big thing, business planning, financial planning for startups and pitching a business to Angel and venture capital investors.

At 4 p.m., hosted wine and hors d'oeuvres will be served, followed by a panel of local business founders, including Anthony Costello, consultant for Bazu Media; John Argo of Bloo Solar; Kerry Sachs of Puroast; Cameron Lewis, CEO of VuStik; and Julie Morris, CEO of Marrone Innovation Organics. The panel will be moderated by Meg Arnold, director of business development and entrepreneurship with UC Davis InnovationAccess.

'The future of a healthy economy in Davis is in large part due to us being able to develop these small start-up companies,' said Costello, who is also vice chairman of the city's Business and Economic Development Commission. 'Davis is a great place to start up a business, with a great base of employees, an affluent community, great downtown office space and the university. It's becoming a premier institution in the world for development research ideas.'

Soderquist will introduce the launch of Yolo Venture Community, an online social network and education platform that will enable entrepreneurs, investors and professional service providers in Yolo County to connect with each other and leverage the financial, intellectual and human resources of the greater California Venture Communities network.

'We're trying to organize capital to better support local business,' Soderquist said. 'To me, what's refreshing and rewarding is it's kind of stunting the rhetoric, or shelving the rhetoric, and really moving toward pragmatic ways we can encourage and support entrepreneurs and innovation.

'There's been so much talk about it, and instead of talking, we're actually doing it, we're finding out from the entrepreneurs what do they need, how can we support them, and connecting them with the financial and intellectual resources they need to grow their company.'

There is still time to register for any of the events Monday and Tuesday. Visit http://venturecommunities.com/go/yolokickoff and http://www.thenewcalifornia100.com for more information or to register.

Details
What: Business seminar and Yolo Venture Community kickoff
When: Free seminar from 1:30 to 4 p.m. Monday; Yolo Venture Community kickoff from 4 to 7 p.m. Monday
Where: Veterans' Memorial Center, 203 E. 14th St.
Admission: Free
Info: http://venturecommunities.com/go/yolokickoff

Learn more
What: New California 100 Conference and California Hall of Fame inductee dinner
When: 7:30 a.m. to 9 p.m. Tuesday
Where: Mondavi Center for the Performing Arts at UC Davis
Cost: $195 for conference, $300 for conference and Hall of Fame dinner
Info: Call (530) 893-8828 or visit http://www.thenewcalifornia100.com

Keys to an Entrepreneurial Community

2008-05-29T14:56:00.001-07:00

Four Factors to Help Keep Our Regional Economies Vibrant

By Jim Mikles

(Excerpted from Insights Magazine)

An old college friend of mine was visiting Chico late last year. As we strolled across campus and through downtown, he mentioned, “I love coming home to this place.”

Ninety percent of his life spent in the SF Bay Area, yet Chico to him still feels like home. I suggested off-handedly he should think about moving back. With the equity in his condo, he and his wife could do pretty well here. Just ask the hundreds of other urban refugees who have done the same thing.

In the months since then, he’s thought about it more seriously than I ever expected. He could telecommute to his job at Fortune 500 for awhile, driving back once of week or so, and his wife could probably land something decent at the university or with local government, but ultimately, he expects, “I’d want to start my own thing.”

More and more, there is a sense that opportunity is available for those with the right stuff willing to take a chance, and that they can set up shop wherever they desire.

A very interesting article in a recent Economist speaks to the phenomenon of the New Nomadism. This is great news for communities who have positive “quality of life” attributes and who want to build momentum from the ground up based on innovative entrepreneurial companies.

As communities wrestling with how to make our regions better places to live and work, we can look to various national thought leaders and a current body of cutting-edge research to see that a four-pronged approach focusing on attitude, alignment, talent and companies can help foster entrepreneurship and improved economic prosperity for ourselves and our children.

A lot of it is pure common sense, but if you look at what’s worked in other places, “The keys to success are not complex or mysterious,” writes Jack Schultz in his book about small town success factors, Boomtown USA: The 7 ½ Keys for Big Success in Small Towns. “Rather, they are grounded in common sense and tried principle. What’s most startling about them is that they are not more commonly adhered to.”

Attitude

In his nationwide study, Schultz identified several community personality types. There are the “Mules,” those so set against change they aren’t open to any possibilities (also known as Cave people: Citizens Against Virtually Everything); the “Moles,” those who fear failure and change so much they constantly talk about investing in the future but would never actually do it; the “Jackals,” who deride others for their ideas but will never try to address a challenge themselves; and the “Eagles,” who remain intent on looking forward, minimizing their weaknesses and capitalizing on their strengths.

Every town has each of these. The question becomes one of which type dominates the debate and action.

Successful entrepreneurs tend to be proactive and forward-looking, and “eagle” communities likewise tend to be more entrepreneurial in their approach to problems.

Entrepreneurial communities will find opportunities where others don’t, they will take calculated risks at the right times to achieve their goals and they will not let fear of failure hinder their progress.

Alignment

Visionary leadership is critical for any region wanting to establish or maintain its standing as a desirable and prosperous place to live and work. Collaborative leadership is that much stronger.

The collaborative model has gained momentum across the nation for communities seeking solutions to complex problems. The fundamental underlying theme of these collaborative initiatives is that to improve any one “issue area” requires an understanding all are interconnected: economic prosperity; education; environment and community vitality.

We all know from experience it’s easier to blow something up than build it. Taking a chance to try something new only happens when there is collaboration, consensus, shared risk and shared credit.

Talent

It is my experience that when venture capitalists or private angel investors screen companies for potential investing, the first thing most of them look at is the team. Who are the people involved with the venture? How smart, passionate, committed, knowledgeable, persuasive and coachable are they?

This “bet on the jockey not the horse” approach to screening companies also applies to communities. Who are the people in the neighborhood, and what does that say about a community’s potential?

A steadfast belief that “human capital” is a community’s most important economic asset is a common factor in regions that have a thriving, entrepreneurial economic culture.

A young “creative class” is exactly the key component that keeps a community vibrant and moving forward, writes Richard Florida in Rise of the Creative Class.

The creative class shares a common ethos that values creativity, individuality, difference, and merit, according to Florida. The Creative Class is “a fast-growing, highly educated, and well-paid segment of the workforce on whose efforts corporate profits and economic growth increasingly depend.”

Florida says the creative class now includes some 38.3 million Americans, roughly 30 percent of the entire U.S. workforce---up from just 10 percent at the turn of the 20th century and less than 20 percent as recently as 1980. He also writes that regions with more members of the creative class are also some of the most affluent and growing.

Members of this class are more likely to start innovative, entrepreneurial companies because they have the energy and the understanding of new technology that is lacking, by and large, in their elder counterparts.

“Most of all, the creative class values real experiences in the real world,” Florida says. “They crave stimulation, not escape. They want to pack their time full of dense, high-quality, multidimensional experiences.”

Consider conversely the changing demographics of the workforce as millions of Baby Boomers are getting ready to retire, many of them in leadership or senior management positions.

Companies

If the next generation of workers is being groomed to take over when Boomers retire, then what kinds of companies are they most apt to be interested in, and what kinds of companies should a region like ours try to help grow or attract where our young adults and our children will be happy to work?

Exciting companies with great growth prospects where individual opinion is valued and workers can pursue their work as part of a team that shares in a company’s success, says James O’Toole, author of New American Workplace.

He characterized these “high-involvement companies” as firms where employees have higher pay and greater benefits and the companies have lower employee turnover, greater worker productivity and a stronger bottom line.

O’Toole argued that in almost all industries, productive, higher-paid workers can more than cover the costs of their salaries and benefits, if they are managed appropriately.

Prosperous regions can also expect to have higher percentages of home grown innovative companies selling products and services to the national and global marketplace.

These types of companies are a particularly potent addition to regional economic mix because they bring dollars into the community from the outside, they tend to create higher wage jobs, and the owners are locally invested. They started a company here because they want to be here. They are motivated to create something special in their own community.

When the entrepreneur sells the company or has an otherwise successful exit, which is the goal of high-growth firms, the wealth generated stays within the community and the entrepreneur often goes on to start more companies, or seed new ones with early stage risk capital.

These wealth-generating events and the entrepreneurial clusters they spur are a recurring pattern we see in other communities with successful entrepreneurial economies.

In places with these successful clusters of innovative companies, a common factor for success was the existence of a network of people, talent, capital and advisors that could help early stage growth companies establish the relationships and find the capital they needed to succeed.

These growth entrepreneurs may start small, but they have the attitudes, skills, products and aspirations to grow something substantial.

The road for these companies is fraught with peril, as is the road for a community tackling big picture economic issues in times of uncertainty.

As for moving forward to develop a more entrepreneurial regional economy, the question is not whether to do it, but to understand what it means and how to do it, and then have the foresight and fortitude to see it through.

Jim Mikles is co-founder of Golden Capital Network, a Chico-based non-profit that catalyzes grass roots entrepreneurship and investing for regional economic growth.

Blood, Sweat and Tears – Competition Reigns in the Venture Forum Industry

2008-05-08T14:09:00.000-07:00

There’s something about competition that brings out the best in people – especially entrepreneurs. For a long time at GCN, we’ve been incorporating a competitive element into our activities because it’s fun, it draws interest and attention, and it adds value to our events.

We started with the Entrepreneur’s Grill, where we dressed our investor panelists in chef’s hats and aprons, armed them with spatulas and steak knives, fueled them with copious amounts of wine, and set them loose on a group of early stage entrepreneurs seeking capital. That was before the bubble burst, and we dialed it back after things started to get a little out of hand with all the sound effects and arm flatulence, but competition is still a big part of our event model.

Entrepreneurs and Investors at a GCN Entrepreneur’s Grill in Sacramento, CA circa 2001.

The entrepreneur under the knife, Dave Gonsiorowski, went on to raise capital for his company Webraiser, which was subsequently acquired by Flextronics International

At all of our multi-regional venture conferences we conclude the event with a “lightning round” where the top five or six presenters from the 35-40 we typically feature, make a 2-minute elevator pitch to a panel of elite angels and VCs. The panelists determine the “Most Valuable Presenter” awards and everyone flocks to meet them. Accolades, good press and attention from the investment community are the results. These are virtual gold for a young company.

See press release on the finalist presenters at our recent Venture Vineyard event

Venture Island is the GCN “reality entrepreneurship” series where we start with a large pool of innovative entrepreneurs from within a GCN Venture Community region, and put them on the spot in front of a panel of expert judges over the course of several months who score them on a series of relevant business challenges. We partner within the community establish an Entrepreneur Success Fund, which provides a cash award to the winning company, AKA the Big Kahuna.

Tech Coast Angels has adopted a competitive model to generate deal flow as well within its regions with a series of Fast Pitch events where companies get between 60-seconds and 2-minutes to tell their story and a winner is crowned.

See Tech Coast Angels Fast Pitch Competitions

It’s not like the other participating companies receive no benefit from their involvement in the competitive events. They still get visibility, investor and strategic partner connections, and the opportunity to make their business presentations to a high-level audience. Granted, sometimes great companies with poorly presented plans don’t do well at competitive gigs like this, but that’s something every successful CEO learns early on: you are the voice by which your company is judged – and not just by investors, but also by customers, partners, vendors, and anyone else considering entering a relationship with you.

We hear our share of criticism for this competition-based approach. Some say forget the drama, just provide the meat. “It’s just a beauty pageant.”

Winner of Miss Round Lake, Ill., Beauty Pageant

But who would you rather ask out for a date: the passionate, well-spoken beauty or the stuttering beast. Our events are speed dating for entrepreneurs and investors -- a place where each can quickly assess the other from a large group of pre-qualified prospects to determine who they want engage in more serious one-on-one conversations.

Along the way, they get mentoring, introductions to domain and functional experts, and access to a multi-regional collaborative network that can add real value to their endeavors. If there’s a little sweat and a few laughs along the way, what’s the harm in that?

In our experience, what competition does -- besides get the adrenaline up and provide an entertaining package to a potentially dull topic -- is provide a media hook for great PR, and a focus point for our companies and our coaches. In the emerging markets of the western U.S where we focus the majority of our attention, lots of coaching is needed. There are great companies and great entrepreneurs in many places you wouldn’t expect, but they are often very green, and the competitive spirit helps keep things light, fun, but on track to add value.

We were green too when we started this thing the better part of 10- years ago. But in the course of showcasing some 1,200 companies, and with an alumni portfolio that boasts over $1.2 billion in capital raised by our presenters, we have gained a certain amount of inside knowledge into what works and what doesn’t, and what gets funded and what doesn’t. You could say we’re the best in the industry at what we do.

I guess that makes us competitive too.

Panelists at Venture Vineyard

2008-04-30T13:23:00.000-07:00

One of the strengths of Golden Capital events is the consistent quality of panelists we are able to include. Investors participate to help their own visibility and hopefully find new investment opportunities. Here in Santa Rosa at the Venture Vineyard Early Stage Conference is no different.

I'm in the "Software and Internet Services" session right now. The panelists include:

* Allegis Capital, Bob Ackerman
* Horizon Ventures, Bob Dahlberg
* SAP Ventures, David Hartwig
* Claremont Creek Ventures, Randy Hawks
* Ascent Partners, Byron McCann
* Newcastle Capital, Dean McKay

Venture Vineyard in today's Santa Rosa Press Democrat

2008-04-30T10:59:00.001-07:00

The Golden Capital team is in Sonoma this week for the Venture Vineyard Early Stage and Santa Rosa Innovation Investment Forum.

The local paper here today includes a profile of the companies that presented yesterday for the "Regional Companies to Watch" panel.

Companies that presented yesterday in the session, moderated by Jean Hackenburg of the North Bay Angels, include:

Innovation and Entrepreneurship Seen as Key to Economic Prescription

2008-04-16T14:12:00.000-07:00

I presented the Golden Capital Venture Communities model of cross-regional collaboration to catalyze innovation, entrepreneurship and private investing on a panel at a federal economic development forum this week in Alexandria, VA. (hosted by International Economic Development Council).

Never before in all my years of covering politics and economics as a journalist or working with companies, investors and communities to foster entrepreneurial networks, have I witnessed such optimism in the face of such potential calamity. It was a windy day inside the beltway, which I think lent a spirit of hope to the proceedings. It felt unusually fresh and invigorating, not hot and frustrating like Washington wind often does. In any case, it packed a punch.

Congressman Paul Kanjorski, the PA Democrat who chairs the house Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, keynoted the luncheon and sent the strongest message. "This seems to be a very upbeat meeting, which is good. All the indicators, data and forecasts we have indicate, however, that not only are we in a recession, but we might well be headed for much, much worse. It's the kind of data that might make you want to put your head in a cannon and pull the trigger."

The 300 or so attendees -- mainly economic developers, tech transfer pros, and innovation policy wonks from across the U.S. -- nearly choked on their cheesecakes. Kanjorski lightened up some by the end of his speech, and everyone went on with their business of networking and finding out about what's cutting edge in fostering innovation and entrepreneurship for economic development, but I couldn't get his harbinger of "slow spiralling meltdown" out of my head as I flew home to Chico the next day amidst new records announced for a barrel of crude, a gallon of gas, and mortgage default rate.

Bringing innovation to market was a key theme of Kanjorski's prescription for avoiding utter economic catastrophe, and a key theme for the event. I felt pretty good hearing that, since at Golden Capital, we've been of a mindset for nearly 10 years that economic development must focus squarely on innovation, entrepreneurship and investing if it wants to really make a difference in a community. I made the point in my presentation that technologic innovation from universities or national labs --as revolutionary as it may be -- doesn't mean very much unless it can get to market. It takes an entrepreneur to do that. The best researchers and academics are usually not the best entrepreneurs.

What this means for us at GCN is a continued focus on building regional collaborations that involve the research institutions, and that we must also continue to encourage our regional members to reach out to the "most likely to succeed" entrepreneurs and high into the ranks of the private sector within a community to connect entrepreneurs with the capital and advice they need to grow.

Venture Communities is designed to do exactly that and we'll keep beating that drum until see it -- or something comparable -- instituted throughout the nation, or we break under the weight of those who can't see the writing on the wall. Either way the wind blows, we'll keep fighting. Because if you aren't part of the solution...

Missed them in Monterey? Catch them in Fortune Small Business

2008-04-02T23:46:00.000-07:00

If you attended the West Coast Venture Capital Conference in Monterey last month, then you had the chance to see Zero Motorcycles' very cool electric dirt bike. If you weren't there you can check them out in the latest issue of Fortune Small Business. The Zero X was profiled along with very cool bikes from other manufacturers.
Never know when you're going to have a chance to see the next big thing, before it's a big thing. Your next chance to see the next big thing is April 29-30, 2008 at Venture Vineyard.

Passion

2008-03-26T17:02:00.000-07:00

When Bill Reichert of Garage Technology Ventures came to Chico recently to present his "new rules for innovation", he pointed out that while the old model was "build a better mousetrap", the new rule is "build a team of people passionate about killing mice".

I dropped into the hardware store the other day for some BBQ stuff, and the guy at the front counter was doing a new product demo for his colleague. It was a better mousetrap. With conventional mousetraps, you sort of have to hold down the spring-loaded clapper with one hand while fitting a fairly dodgy trigger, then bait it. A lot of thumbs have taken a beating from that setup. And yet sometimes the mouse gets the bait and escapes unharmed.

This new thing has a lever you use to pull the clapper back and cock it. It takes the slightest brush of a soda straw to trigger it, and you can bait it before cocking.

But what really got my attention was how excited the hardware store guy was about it. "The trick," he pointed out with evident glee, "is to bait it without arming it for a few days, let them get fat, and tell all their friends. Then arm it. Gets them every time!"

That guy is really passionate about killing mice. I wanted to buy one, but we don't have mice....

Panhandling

2008-03-25T20:02:00.000-07:00

I met with a company last week that’s on to something. What, I’m not sure – the company is headed in a half-dozen potentially viable directions – though I’m confident they’ll give it a good run.

The pre-revenue, bootstrapped company is being pulled to a fro. Do this, go there, change that advice -- mostly sage -- percolates in droves. Included therein is direction to write an executive summary and business plan. For whom and why?, I asked. (Well, for investors and because we were told that’s what we need to do to raise money, they replied.) Such are the erroneous rules of the game.

My advice was contrarian and, I’m sure, confusing: Cease the game of trying to appease potential investors. Halt any efforts to write an exec summary or bplan, or build a five-year P&L (by now I’m leading my sermon atop a chair in the coffee shop). Invest your energy in two areas: Luring users (it’s a Web 2.0 co) and generating revenue. Assume you will not raise any outside money. Build it – a monetizable community of engaged users – and they (investors; if you desire) will come. Worst case: You have a sustainable business (or, if it doesn’t work, you have not failed on someone else’s dime). My helium exhausted, I sedated into my seat.

Building on the “someone else’s dime” (or OPM: other people’s money), I was reminded of the dissonance between an entrepreneur’s perception and the reality of employing outside capital. I have spent a lot of time on both sides of the dime: either starting or helping companies that require outside capital, or investing directly (or indirectly through funds) in such companies.

Raising capital – in the right situation and from the right investors – is a great thing; the positives outweigh the negatives, and the relative degree of potential success is heightened. Think mass x velocity = momentum, or the running a marathon solo vs. running it with a team analogy.

It’s imperative, though, that entrepreneurs panhandle with open eyes: The accountability, responsibility, and expectations (to your investors) can be daunting, and the organization, governance and decision-making (at the board level and elsewhere) is, well, different. It’s not entrepreneurship in its true sense: It is the formal, professional and fiscally prudent management of resources as a fiduciary. It’s the difference between being a kid and a grownup, which reminds me of one of my idols, Peter Pan (speaking, I’m sure, on behalf of most entrepreneurs; Peter was anything but a panhandler):

I won't grow up,
I don't want to wear a tie.
And a serious expression
In the middle of July.
And if it means I must prepare
To shoulder burdens with a worried air,
I'll never grow up, never grow up, never grow up
Not me.

It’s easy to handle a pan and there are plentiful passersby who may chip in a dime. The true challenge is deciding whether you need to play (and are up to playing) with other people’s money.