10 X 10 X 10 – Synopsis of the 9th Annual Early Stage Investment Conference Hosted by the CSA
In-Vision, the 9th annual early stage investment conference hosted by CSA on September 17th, offered entertaining and informative insights into the state of entrepreneurship and venture capital for the next year. Starting with William Reichert, President of Garage Technology Ventures, the keynote presentation tracked changes in the new venture landscape with ten points of comparison between the yesterday’s world and today’s, and ten points to consider as we move forward into the next era. Following his excellent speech, ten firms presented their firm, each seeking less than $3 million in early stage financing. What follows is a brief synopsis of this event’s 10 comparisons, 10 admonishments, and 10 firms.
Mr. Reichart’s comparison of the state of venture financing and entrepreneurship of yesterday and today was full of analogies and quips highlighting the shift from euphoria to business driven decisions. His ten points of comparison are:
1. Yesterday, VC firms were in the maternity room giving birth to new ventures. Today, they are in the emergency room trying to staunch the flow.
2. Yesterday, the key applications of a new venture manager were PowerPoint and Excell. Today, it debuggers and the contact database.
3. Yesterday, market validation was a quick search through IDC and Gartner. Today, it is measured by customers and revenues.
4. Yesterday, competitor analysis validated the value proposition of a new venture. Today, competitors are a sign that it is too late.
5. Yesterday, due diligence was represented by a term sheet. Today, due diligence is 6 to 12 months of investigation as the venture capitalist live with the entrepreneurs.
6. Yesterday, new venture management was by Cereal Entrepreneurs, kids still eating their Trix. Today, venture capitalists are demanding Serial Entrepreneurs, experienced managers with a track record of success.
7. Yesterday, the drug of choice was XTC in the new venture market. Today, it is Viagra.
8. Yesterday, bridge financing was a manner for venture capitalist to get their foot in the door. Today, bridge financing is provided by insiders only.
9. Yesterday, the golden rule was the first money in makes the rules. Today, the golden rule is the last money in makes the rules.
10. Yesterday, critical success factors were brand, bucks, and the bull of hype. Today, the critical success factors are technology, team, and market traction.
Moving into tomorrow, Mr. Reichert provided the audience with limited hope and reality checks.
1. The ecosystem metaphor, not the bubble metaphor, is at play. As the water was fertile, the high-tech industry was marked by an algae boom. Now that the money has dried up, much of the algae are dying but there is still room for life.
2. The focus in new ventures must be on creating value, not creating wealth.
3. Managers must plan for the worst.
4. If you build it, they probably won’t come.
5. Not all small companies can become big companies. Revenue goals might need to be set at 10 to 15 million.
6. Not all good firms are venture fundable. Venture capitalists are looking for firms that can grow rapidly, grow large, and achieve disproportionate profitability.
7. VCs are devolving to boutique firms with specialization.
8. Innovation is not dead, but it is slower than we think. It takes time for new technology to make its way through the market.
9. There are real, big problems to solve.
10. People trump technology.
In the Q&A, Mr. Reichert added that a manager of a new firm is “like an actor, their passion drives their work.” As to venture capitalist, their job is not to be risk takers, but investors that can achieve disproportionate returns.
Following the keynote, 10 firms presented their case for funding. While each firm presented an overview of their value offering, marketing plan, management team, and financial expectations, what is provided below is a brief version of each firm’s market proposition.
1. EMNS is targeting the chemical, food, and pharmaceutical industry with a document management system to improve the supply chain.
2. ComputerProx is targeting the health care industry with post-authentication of workstations to ensure that data access is restricted when a worker leaves their computer.
3. Applied Payment is targeting small and mid sized businesses with on-line transactions in payer authentication for Visa and MasterCard charges
4. NSC TechWorks is targeting businesses with a document management web service.
5. Civilian Capital, the sexiest company, is targeting consumers with a combination of Hollywood and High Finance.
6. My Footpath is targeting consumers and high schools with a web service for identifying appropriate colleges for graduating students.
7. iWarranty is targeting the automotive industry with an automation of their warranty management businesses process.
8. Topiary is targeting financial services, government, medical, and education verticals with a knowledge management and decision support tool.
9. Liquid Generation is targeting advertisers and market researchers with a web site that attracts youth audiences.
10. Neoclone is targeting the pharmaceutical and research industry with a new method to make monoclonal antibodies.
Creating a new venture has repeatedly proven to be a high risk endeavor. In this economic environment, the achievement of sufficient revenue for positive cash flow operations is taking longer and more effort as well as the achievement of financing to build the necessary infrastructure. The In-Vision conference provided a means for all of us to see the matchmaking process in action between entrepreneurs and their financiers. Moreover, events, such as this one, demonstrate that progress and risk taking will continue. It is in our nature ten times over.
Also Appearing in
The May Report, TECH BUSINESS BRIEFS, Sept. 25, 2002
CSA Source Code, Oct. 3, 2002