Crowdfunding: A Conflict for VCs or a Path to Economic Recovery?

I attended an event on crowdfunding recently. Entrepreneurs are dabbling in anything and everything "crowd" lately - from attracting vendor and engineering talent to volunteers and now, funding. I've had friends test out Kickstarter which is an interesting model if you don't need a lot of cash to jumpstart your project.

It's easier to get low-level investors on board since the commitment on the part of the 'investor' is minimal (mostly zero) and there's a reward kick back. I've contributed as little as $5-50 to a Kickstarter project and did it because it was a cool idea and just wanted to help. You'd need a helluva lot of "me's" to make it worthwhile at that level but there are others who will invest $100, $1K or $10K into the pool depending in their interest and wallet size.

Other reward based crowdfunding platforms include IndieGoGo and RocketHub, all of which are operating in the new paradigm without a lot of rules and regulations, aka pre the implementation of the 506c Act.

In a conversation on crowdfunding and alternative funding for start-ups, below are two videos (Part I and Part II) that discuss the pros and cons. Note that it IS a VERY Silicon Valley viewpoint and I haven't met a whole lotta venture capitalists from major firms who want to deal with the aftermath of early investors no longer being one or two angels but being 25 random no-names instead. There are complications AND implications.

On the panel included Gerd Goete, Siemens Venture Capital, Partner, Don Ross, HealthTech Capital, Managing Director and Founder, Sand Hill Angels, Board Director and Life Science Angels, Member Carol Sands, The Angels' Forum, Managing Member, Graham Burnette, SBV Capital Partners and Red Planet Capital, General Partner and Royse Law's Roger Royse.  

I didn't get the sense that VCs (or at least traditional VCs) would be in full support of coming in after crowdfunders, largely because of what's involved: complicated, too many heads at the table, dillution and more. Silicon Valley focused, their mantra was more around the traditional tools that make a startup successful in the long term: domain expertise, access to the right people, advice and coaching and the amount of due diligence that goes into a deal.

There's no question that access to the right people and being 'aligned' with the right people accelerate deal flow and increase the likelihood of a successful exit. If you're Kleiner backed, your chances of success go up regardless of what kind of "useless" app you have.

There are the notorious three risks, which include:

1. Technology Risk - do you have a kick-ass technology? (my words, not theirs?). Can it do what it says it will do? Will it live up to the promise?

2. Market Risk - is there a big enough market for your products?

3. Expansion Risk - this comes into play as you start to scale. Can you make a big enough return that is attractive for YOU and for them? (aka, your investors)

Their argument was that dozens or possibly hundreds of 'crowdsourced' investors can't help with 1, 2 or 3. That said, my argument would be that there are a ton of businesses who don't need to go through the traditional Silicon Valley funding route and while crowdfunding may not give them millions, they still may be able to find advisors for a point or two who can leapfrog them into the right 'tribe' so they can be successful without giving away the store to a traditional VC firm.

It is indeed an alternative and some business models and businesses will work and some won't.

Points for considration include: public solicitations and use of social media, advertising terms of offer being restricted to the fact that the issuer can only direct investors to a broker/funding portal, the additional costs invovled with disclosure and reporting, use of an intermediary, risk of fraud (goes up as this model expands), and the point that the VCs and angels on the panel referenced again and again: the high number of unsophisticated investors (which leads to fiduciary duties to all investors and as our Silicon Valley finance pals pointed out, all of "it" a concern for VCs for future fundraising rounds).

We learned a bit more about new guidelines under the proposed 506 regulations.

For example, it would allow for public advertising and general solicitation in Rule 506 offerings, provided that the issuer takes reasonable steps to verify that potential investors are accredited, and all investors are accredited (or the issuer reasonably believes they are) at the time of the sale of securities.

This results in all sorts of issues we haven't faced before under traditional models, including the nature and terms of the offering which are unique. Is it a low verus high investment? What are the terms? Who has a voice and doesn't? And of course bearing in mind that there will be more steps needed to verify 'accredited' status. 

Proposed crowdfunding regulations are slated to be released in January 2013. Videos below in Part I and 2 of the panel (roughly 20 minutes for each video - feel free to view the whole thing or catch snippets in stages to get an overview).

The event was part of iHollywood Forum, and their new brand Angel Launch, which produces dinners, venture forums, and seminars for entertainment, Web, Internet, mobile and tech ventures and startups.  

Also refer to a Forbes article on crowdfunding where they also talk about the above legislation and a bill that had full bipartisan support this year called JOBS (Jumpstart Our Business Startups) Act, which is a series of 6 bills tied together designed to make it easier for startups to gain access to capital.

Photo credit: Forbes.

Remembering the Strong Female Forces In Our Lives

This week, I couldn't stop thinking about them. Among "them" was not THE woman in my life who guided me, took care of me, shaped me. That was my grandmother and like most grandmothers of women in their forties, they're no longer a phone call away.

The benefits of being raised by your grandmother is that you are surrounded by older, wiser women at a much earlier age, all of which have stories, many of which remind you not to take the world....and everyone in it so seriously.

In my grandmother's circle was an incedible group of women who got together for lunches, martinis, and shopping, even in the 1930s and 40s when they were all healthy, raising children and had husbands that they 'navigated.' (see My Mother's Kitchen -- 2004 blogging days) and a dedication to mothers).

All of them strong, yet sweet...the kind of women who didn't tolerate weak character or housewives without some other mission or job. It wasn't the south, yet a couple of them have moved north for some reason or another. Most of us were "baked" in a small town in upstate New York and with that came things like country fairs, football games, horse farms, 4H, piano lessons, and more sewing and craft afficiandos than wine snobs.

Learning the basics of being a 'woman' of that time was part of living in a small town...you know, the traditional stuff: sewing a button, baking a cake, rolling pie dough the 'right' way, dance lessons, serving tea. Yet, they absolutely tolerated if not encouraged sports for women. While I regularly played many a' sport in school, none of these stronger older women who influenced me in my life played a thing.

In their walled garden, which I used to eavesdrop on from time-to-time, they often talked about navigating their family unit. Many women relied on my grandmother's advice (today, they'd call her a 'coach'), to help them negotiate things at home, whether it was getting their husband to purchase something to make their lives easier, or being able to work and play more while raising a family of 5, and so on. She was also the master peacemaker and networker.

The constant, common thread woven into all of their personalities was spunk and perserverance. I think about them often now more than ever, three gone, four still living. I dreampt about one of them a couple of nights in a row recently and woke up with my heart racing. "How old is she now?" I thought. "Could my dream be a sign that she's sick and in her last days" I thought. "Is she already gone and she visited me at night to say goodbye?" I thought.

The number I had for Bernie was disconnected which is never a good sign. She was with my aunt and uncle in the driveway waiting for me the day my grandmother died. I was too naive to believe my grandmother would actually die despite a long battle with cancer -- remember no one talked about stressful situations then...they just smoked and drank more martinis. They didn't tell me the news in the driveway that day nor did they go with me to the hospital. I drove alone and heard the news alone from some fatigued nurse who didn't know who I was and released the information about my grandmother's passing in a not so gentle manner. I was 16. I had no reaction until I belted in the elevator moments later but without shedding a tear - where was everyone I thought?

Among the faces that came in and out of my mind were all the strong women in my grandmother's life...my life. I imagined their pain learning the news I had just been given, knowing that not all of them had known yet.  

My grandfather wasn't in the driveway that day but Bernie had been. Perhaps she wasn't 'authorized' to tell me? I'm highly intuitive and yet something blocked me from connecting the dots after seeing Bernie's red blotchy eyes on that very sad and long summer afternoon when I was "sweet" 16.

I learned a lot about Bernie and these strong female forces in my life, almost all intuitively. When we visited her house, I had to pass time while the 'grown ups' played their cards and drank martinis. It was the 70s - there were no cell phones, online games on TV or computers.

And, no one had a parenting rulebook that said your kids had to be in bed by 8 every night. It was a time loaded with boundaries, an era when adults dicated the agenda, not children.  

I used to crawl on my hands and knees through their attic, unpacking boxes and snooping inside. I'd roam through the closets, dressing myself up in her hats and oversized jackets. Downstairs, I'd hear her strong laughter dominating the table and that beautiful and feminine way she egged the men on exuding her confidence and wit. A gift. I even knew it then but didn't have a label for it. My grandmother had it too.

Audrey was a little more refined in public yet exuded the same strength and gift. She's 95 now and lives in Florida, alone. I managed to get her on the phone for a long chat a few years ago. I feared she'd barely be able to hear me or keep up with my pace, but the first thing she did was drill me, like I was still 18. I smiled as I listened to her first question, which may have come before hello: "are you still playing the piano? I hope you're still playing the piano" suggesting that my grandmother would be shedding more than a tear had I not let her gift and now my gift, pour out into other people's silence.

Truth be told, I had stopped playing but a piano remains in the house and I told her, I can't imagine any house without a piano and will always feel that way. She tells me she's trying to order music online now (online in her nineties -- really?) but some of the music she's looking for is hard to find. I imagined Colony Music in mid-town would have it I told her, a place I visit every time I'm in New York just because.

Then we got onto men. She's dating a younger man (mid-eighties) but his eyesight is failing so she often has to drive on longer hauls (1-2 hours). Without complaining, it was clear she did most of the work and I kept wondering, is there ever a time when strong women like us ever get 'taken care of?" Before we hit the grave? She told me that her biggest beef was that he was a fan of George Bush and she couldn't really get him to change his mind. "These are the compromises you make for companionship," she said.

I was reminded to listen to my inner voice...the wonderful intuition that women have, rely on and use regularly for all sorts of things, yet it's a skill and gift that doesn't list well on paper or in the boardroom.

When I was 18, I lived out of my car for awhile, not far from where Audrey and her husband lived in Florida at the time. A workaholic from the beginning of 'life' itself, I had three jobs, two boyfriends and was eager to save as much as I could for travel. Frankly, rent just seemed like a waste of money when I was working 6.5 days anyway. Somehow my highly intuitive grandfather discovered this through his Sherlock-skills over 1,500 miles away and sent Audrey to deal with me. What was and is remarkable for a woman born at the turn of the century is how much she understood my need to do precisely what I was doing.

They had traveled in academic circles, lived in Paris for awhile and let's be clear, did not and would not ever have slept in her car or on a park bench in her life. Yet, it was okay that I did, for then. She believed in the process of life and that everyone's process is different. Her handwritten letters which I receive every year and have since I was ten demonstrate her perserverance, her tolerance and her inner strength - letter after letter, word after word, you could sense her gratitude and faith in the world, and her positive role in it.

Marcie was a long time neighbor who grew up in the south on a farm. She was #8 in a line of 11, her youngest sister from Pittsburg being the only other sibling alive. She has also lost two children of her own and her inlaws husbands and wives are all gone from cancer and heart disease.

When I couldn't reach Bernie, and countless Google searches didn't pull up a thing, I called Marcie considering it a universal sign and nod that it's time to reach out to these strong female forces in my life. It's these quiet nods that we have to not just listen to, but act on, for it is action on these nods (messages if you like, from our inner voice aka the universe), that allow US to DESIGN our lives, not let someone else design them for us. From this place, we proactively live life, not react to it. We become the creator, not the victim. The designer, not the canvas.

Alongside my grandfather, she taught me to drive. Through the neighborhoods we went in a beat up old Chevrolet. She asked, "I was trying to recall how long ago that was again?" Its amusing how much easier it is to come up with a precise number to that question to someone in their mid-eighties than it is to the hot 30 year old man you just met from Argentina.

Three things were on her mind: how much harder it was to do physical things, the climate, remarking how much warmer it was this winter and how odd the weather has been in recent years, and the economy.

I on my iPhone and she on the same square black GT phone she has had in her kitchen since 1966, we talked about my life in the "bubble", the Silicon Valley eco-system that doesn't seem to subscribe to recessionary issues that affect the rest of the country. That said, it is increasingly becoming harder for people around me to keep up with the accidental millionaires and billionaires who are sprouting up overnight as a result of some freak paranoia acquisition play by an industry giant.

This led us to gratitude and reality checks. She told me about a time in the early forties when she put an apple on her father's tab in the country grocer on her way home from school one day and her reaction to the scolding she received when it was "discovered." Given that she has the same strong, resilient streak that all the women in my grandmother's circle had, she decided to take charge of her own decisions and got a job in an ice cream shop. It was 1944 she recalls and she made just under $3 for two days of work.  

It's hard to imagine numbers like this today, yet despite what salaries have become, the majority of Americans can't pay their bills on time or if you happen to live in a major metropolitan area, afford the $1M+ that it cost to purchase a home today. And so, people don't or they go bankrupt.

It seems as if everything is inflated around me...last time I walked down Fillmore Street, I don't remember seeing so many unremarkable $500 tops and $800 bags. Shopping culture and consumerism despite the economic situation remains high (read my blog post on Qatar's over-the-top growth) and yet, the happiest people I know have less. Only two days ago, I came across a photo with a quote from Justin Wolfers at the Aspen Ideas event saying "Richer countries are overwhelmingly happier than poorer countries." From a viewpoint that poorer countries are full of people with sicker family members and less ability to save them, I agree.

In my experience traveling to 80 countries and living in nearly a dozen, it feels like the people I've met who have had less and live simpler lives with less stuff, are richer in spirit, and are focused on doing rather than earning, less weighted down by money.

So, I'm not sure if I agree with you Justin, but I do agree that communities where economic and social balance becomes far out of whack, depression and a feeling that the world doesn't make sense can certainly be higher.

People from the old world, Marcie, Audrey, Bernie and my grandparents among them, understood contrasts, balance and gratitude and had so much more resilience, kindness and empathy than what I encounter on a regular basis. It's not that the world has become a harsher place, it's that we may all too busy responding and reacting to things being thrown our way (on and offline), that we may have forgotten to tap into what and who we know best - ourselves. 

Returning to and relying on ourselves and trusting our own intution for guidance and our life path may be the best gift we can give ourselves. Refer to my review on Rescue America: the urgent calling to return to what made America great. 

How well I know these women or knew my grandmother is not as relevant as the impact they had on me, and the inner strength they have provided and still do, even those who are no longer walking on this physical land. 

It's always about our journeys and the joy and yes, even sorrow, we leave behind along the way. Within that joy and sorrow are lessons learned and gifts we share and receive, strength, courage and empathy passed on from our tribes, in my case, a tribe of strong fabulous women I think about often. And, when their smiling faces and emphathetic hearts come into clear view, there's sunshine in the house and my day somehow gets breezier and lighter as I think about them weaving in and out of my life. Never gone, just displaced and forever cherished.

A few blog posts on happiness worth referencing:

• What Motivates People Across Cultures
• We're Happier When We Share
• Bhutan's Gross Happiness Experiment  
• On Laughing More 
• Money Doesn't Bring You Happiness
• On Death (but one that will bring you comfort)
• Tony Hsieh on Happiness & Profits

Photo Credits: 

• First Image (women/wind): 3D Art
• Path: Wharton Executive Management Site
• Bird with wings: Society 6

Billfaster Makes it Easy & Fast to Manage Money, Invoices & Your Business

I come across new start-ups on a weekly basis if not a daily one and when you are introduced to as many as I am, its easy to glaze over the details because so many of the pitches sound the same and are in similar categories trying to do the same thing.

I met with the founders of Billfaster recently who are working on a solution for real businesses with real problems around invoicing, accounting and money.

It is not a widget. It's not a social media or analytics tool and it's not some web app or vertical search engine that is likely to get crushed by Microsoft or Google. 

Billfaster is essentially online accounting software as a service that targets small businesses, startups, freelancers and professional service contractors.

They offer a quick, easy and fast way to keep track of and manage money, as well as handle businesses and individual's accounting. You could say pieces of what they provide compete with QuickBooks yet it cleverly does things a little differently and the interface seems to be incredibly simple, at least from what I could tell from an in-depth demo in Austin last month.

Take a look at an overview of Invoice transactions from their system and you'll see what I mean:

Below is a screenshot of how you enter an expense with Billfaster and note the tax bracket piece that you can customize with a drop down menu:

For people on the go with busy schedules (that'd be me), they provide 7 second invoicing, 3 second expense tracking and automated accounting to enable users to be up and running quickly. (It made me think of the fast food ads from ten years ago - if you're not out in 10 minutes, the meal is on us). This is a compelling pitch and offer for those who struggle with complicated user interfaces that require skills of both an accountant and an engineer to figure out how to use.

They offer a free version that includes unlimited invoicing and clients, with premium versions providing more robust features such as reporting, CRM and inventory management.

Simplicity is their core message and so far, it seems to be working. While still a small company based in Ireland, they already have customers using the Billfaster software in over 70 countries.

Said CEO Rod Condell in an interview, "over 25% of our client base is in the U.S., with the UK, Canada, South Africa and Ireland next in line."

How did they succeed globally so quickly? Co-founder Chantel de Paor says that rather than customize tax forms and processes for each individual country, they have a generic tax form so it can be used anywhere.

Although they have a free version, their paid versions are reasonably priced. For $4.95 a month, you can customize forms by uploading your own logo. You also have access to tax reports, expense reports, cash in and out, and pending invoices. Below is what their cash management page looks like where you can view accurate daily, weekly, and monthly cash, sales, and expense reports.

For $9.95 a month, a mini-CRM system is integrated if you want to keep track of customers and customize invoices. It also includes simple Paypal integration which is useful for small businesses, particularly those doing business in multiple locations and who have a lot of online transactions.

Their top of the line is the Gold Edition, which is only $14.95 a month. Here, you get Accounting Journals, support for multi-users, cash planning, order processing, the ability to add and customize categories, and more. And what's also great is the added benefit of free support. Check out this page for more about their features and pricing plans.

It was refreshing to meet a startup focused on solving real problems and with a business model that makes sense. They actually charge monthly fees yet their fee structure is inexpensive...and, the math makes sense, especially given the fact that they have made it easy to go after global customers.

StockStreak: A Fun Way to Play the Stock Market

Michael MacDougal from StockStreak talks to me about their application at the Dublin Web Summit this past week in Dublin Ireland.

Essentially, its a game that allows you to play the stock market. Predict the stock price of ONE of the listed stocks and whether it will go up or down, and whether the next trading day's closing price will be higher or lower than the prior day's closing price. Votes placed after Noon Eastern Time will be counted towards the next day's session. Listen to how it works.

Technology is Like a Farmers Market: Feel the Peaches & Make a Bet

Thanks to my industry pal David Frank for sharing this with me recently. The quote is spot on and brought a smile.

"Life is a farmers market when it comes to technology; you have to walk the aisles...feel the peaches and make a bet. BUT, but you have to walk the aisles.."

Levy's WIRED Piece: Larry Page wants to Return Google to its Startup Roots

Steve Levy's Wired piece that came out today is a must read. Entitled Larry Page Wants to Return Google to its Start-up Roots, it takes us back to 12 years ago when Google was first funded.

Two excerpts from his piece:

"Now, after a 10-year run in which Google’s revenues grew from less than $100 million to almost $30 billion, Page is finally CEO again, a role he always felt he could handle. The general public may not appreciate the magnitude of the change—to most, Page is just one of the seemingly interchangeable pair of wacky “Google guys.” But Page is sui generis and could potentially have the kind of impact Bill Gates and Steve Jobs have had. Nobody better encapsulates Google’s ambitions, its ethics, and its worldview. At the same time, Page can be eccentric, arrogant, and secretive. Under his leadership, the company will be even harder to predict."

And, on what Google 'could' look like with Page back in the CEO position: 

"If history is any guide, Page’s idealistic impulses could result in a vaster, more sprawling company. In 2008, Google participated in an FCC auction for radio spectrum to be used for mobile broadband. By the terms of the auction, if the spectrum was sold above a certain price, the winner would have to allow other companies to run devices on their networks—something Google strongly favored but that telecom companies dearly hoped to avoid. Google executives worried that the telecoms would conspire to keep bidding below that baseline price. So the company got involved in a high-stakes game of chicken. Google would bid on the spectrum, high enough to get it over the threshold, and then bow out. It left Google potentially vulnerable; if nobody else topped its bid, the company would be stuck with a multibillion-dollar piece of spectrum that it was unequipped to exploit. “Google definitely wanted to lose,” the company’s chief economist, Hal Varian, says. To Google’s great relief, Verizon did top its bid, and the company was off the hook."

Head over to WIRED to read the full article.

 

Floodgate Fund's Mike Maples Talks Money

Floodgate Fund's Mike Maples talks about money, investing and his philosophy on the Demo Conference stage last week in Palm Springs, CA.

Keith Cunningham: The Best in the World are Measuring Freaks

A few insights from business and finance author and coach Keith Cunningham who I had an opportunity to learn from recently.

He is known for Keys to the Vault, which focuses on investment strategies based on lessons he's learned along the way from his wins and his failures.

He says, "most business owners try to get rich from profits rather than thinking about how to sustain their business." Sustainability is the result of measuring the what and the how (skills and tools). He notes that the best in the world are "Measuring Freaks." 

What gets measured, gets done. What gets measured is what gets managed. He says, "if you want to improve your business, start measuring it and you will be stunned. Measure it and then report it." He asserts that there is no better way to grow and sustain your business.

Ask yourself these two questions:

1. How effective am I at converting assets into sales?

2. How effective am I at converting sales into expenses?

He also has a very direct but down to earth way of explaining balance sheets, income statements and cash flow.

What I like most about Keith is his authenticity, his bluntness and his humor. A  native Texan himself, he has no problem making fun of Texan so called culture with jokes and digs. And, audiences seem to love them.

A l'il humor and bluntness all rapped into one and he's right - 'if you're not willing to say what needs to be said to fix a problem or an issue in the business that's not working, then go get a job." In other words, you get what you tolerate, which applies to our personal lives as well, doesn't it?

A few other great insights and reminders that you can apply effectively in your business as well as your lives:

• If you put up with mediocrity, you will get mediocre results in your business. (and your life)
• Good is the enemy of great.
• Great is the enemy of mastery.
• Doing the best that you can is the path to good.
• Doing whatever it takes is the path to mastery.

And, I love this one for those not living out their purpose. "Hell on earth would be to meet the man or woman you could have become." Powerful my friends.......powerful.

Venture Capitalists & Angels Battle It Out On VatorSplash Stage

Listen to an amusing and authentic discussion between angels and venture capitalists on a panel at VatorSplash last week in San Francisco. On the panel included: moderator Duncan Davidson from Bullpen, Shasta's Tod Francis, John O'Farrell from Andreessen Horowitz, David Hornik from August Capital and Rob Hayes from First Round Capital.

Irish Prime Minister Chief Economic Advisor Peter Clinch

Below, the Irish Prime Minister's Chief Economic Advisor Peter Clinch addresses a group of technology movers and shakers at a private dinner in Dublin earlier this month - the dinner gathered Irish entrepreneurs, European start-ups and illuminaries (folks like Michael Birch), venture capitalists, media, bloggers and American superstars, such as Chad Hurley and Jack Dorsey. The talk was given at the historical Iveagh House in Dublin.