The Digital Age

31 12 2009

As 2009 and the first decade of this new millenium comes to a close, there comes the flood of retrospectives on what the last decade “means” and how life has changed.  Much of what’s out there focuses on terrorism and foreign affairs (rightly so given that the decade has been essentially bookended by 9/11 and the would-be underwear bomber, with a couple of wars in between).  However, in tech/business circles, much of what I have read focuses on the decade being the dawn of the “Digital Age”.

Fortune recently had Steve Jobs on its cover, naming him the CEO of the Decade (The decade of Steve), which, I think, is apropos as Apple has been on the forefront of this digital convergence of entertainment and life.  In fact, after Jobs came back to Apple in 1997, he began the “digital lifestyle” strategy that resulted in the iPod, iPhone and the soon-to-be-released iTablet.  The result, as reported by the Fortune article, is that Apple “was worth about $5 billion in 2000, just before Jobs unleashed Apple’s groundbreaking “digital lifestyle” strategy, understood at the time by few critics” and ”[t]oday, at about $170 billion, Apple is slightly more valuable than Google”.

Such Apple products helped, in part, the spark and accelerate the advancement of the Digital Age, as more and more digital products that can work together came onto the scene.  And now, a consumer has the ability to use various different interrelated lifestyle digital products such as:  cell phones (including smartphones), computers (including personal, laptop, netbook and business), televisions (especially HD), television recording devices (e.g. DVR’s and Tivo), game consoles (e.g. PS3, Wii, XBox), and media players (e.g Blu-Ray).

I’ve been fortune enough to have lived through some pretty exciting technological ages/revolutions before this digital revolution:  the 1980s with the development of the PCs (which, incidentally, Jobs/Apple also had a hand in sparking; and the 1990s with the develop of the Internet.  Only now can I see how those two previous innovative jump-starts were the foundations for this new digital age, which makes me excited for the future when I find out what the digital age is a foundation for.

- Gregg J. Lallier

P.S.  Web 3.0, a blog by Independent Software, has a bunch of different posts about the digital convergence, which people might want to check out, including:


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Good Riddance 2009…Hello to a Better 2010 in the VC Market

23 12 2009

As most know, throughout 2009, I’ve posted about the dismal VC market in ConnTIP.  The drying up of exit opportunities, with fewer M&A’s and even fewer IPOs, didn’t help matters much.   Here’s a chart posted by the WSJ which is a pretty way of showing the awful 2009 VC market:

[VCYEAR]

 Still, an article posted today on WSJ suggests that 2010 may be a pretty good year in the VC market (After Dry Year, Start-Ups Are Poised to Get Cash).  Some encouraging observations made by VCs in the post:

  • Geoff Yang, a general partner at venture firm Redpoint Ventures, is quoted:  “When the year started it couldn’t possibly have been worse…Now there’s a significantly more optimistic view” .
  • Tom Baruch, of CMEA Capital, says that with the IPO window now appears to be opening, and expects up to half a dozen of his firm’s start-ups to file to go public in the foreseeable future.

Bottom line is for everyone in the field to chalk up 2009 as a learning experience, and, hopefully, start ramping things up to 2010!

-Gregg J. Lallier


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Categories : Start-Ups, Technology, Uncategorized, Venture Capital

Universal Broadband (Continued)

23 12 2009

As a follow-up to the ConnTIP post from last month (Universal Broadband on the Horizon?) about the upcoming FCC plan to bring universal broadband to the U.S., the WSJ is reporting that FCC officials are looking at to set the floor for Internet speed in the 2-4 mbps range (See FCC Eyes Average Internet Speeds for Rural Areas).  Pretty modest goals, which won’t do much for rural areas.  But, considering that the FCC estimates that the cost of providing universal broadband is $20 billiion for 3 mbps, $50+ billion for 50 mbps, and $350+ billion for 100+ mbps, it’s not hard to figure out why they’re looking at slower bandwidths.

-Gregg J. Lallier

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Categories : Legislative Affairs, Technology

Government Flexing Muscles in Obama Administration: FTC Suing Intel

17 12 2009

About a month ago, I wrote a post about how healthcare and the economy were not the only areas where the Obama Administration was looking to expand governmental involvement.  In Universal Broadband on the Horizon?, I explained how the FCC is looking into bringing universal broadband to the country, in a much more active way than the Bush Administration.  It looks like the FTC’s enforcement of trade laws may also be reinvigorated under the Obama Administration, as the U.S. Federal Trade Commission Wednesday sued Intel Corp. claiming, according to the FTC Press Release, that Intel “has illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly.”

The FTC’s administrative complaint charges that Intel used threats and rewards aimed at computer manufacturers, including Dell, Hewlett-Packard, and IBM, to coerce them into buying Intel CPU chips, and not buying rival computer CPU chips, like Advanced Micro Devices, and to prevent computer makers from marketing any machines with non-Intel chips.  The complaint also alleges that Intel secretly redesigned compiler software to deliberately inhibit the performance of non-Intel CPU chips; and told customers and the public that software performed better on Intel CPUs without disclosing that these differences were due to Intel’s compiler design.  Additional allegations in the FTC include that Intel engaged in illegal monopolization, attempted monopolization and monopoly maintenance.

The FTC complaint is under Section 5 of the FTC Act, which is broader than the antitrust laws and prohibits unfair methods of competition, and deceptive acts and practices in commerce.

 - Gregg J. Lallier


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Microsoft Getting Binged with a Trademark Infringement Suit

17 12 2009

As many of you know, Microsoft launched its re-designed search engine, Bing, this past summer.  The search engine was aimed at challenging the market shares of Google and Yahoo (see the WSJ blog article from June 1, 2009, What Do You Think of Bing?). 

It looks like Bing will have more to worry about than just Google and Yahoo, as Bing! Information Designs is alleging trademark and unfair competition against Microsoft in a suit filed Wednesday, December 16.  The suit, Bing! Information Design LLC v. Microsoft Corporation, case no. 0922-AC18341, filed in the Circuit Court of the City of St. Louis, MO asserts claims for trademark infringement, unfair competition and tortious interference with business expectancy.  According to the press release from the law firm filing the suit (see it here on BusinessWire), St. Louis-based Bing! Information Design creates interactive and computer-related illustrations, designs, interactive graphics, animations, technical diagrams and related services, and has used the mark Bing! since at least 2000 and has applications pending to register the mark.  Here’s the quote from Bing! Information Design’s lawyer (Anthony G. Simon of St. Louis’ The Simon Law Firm) from the press release:

For nearly 10 years my client has been using the Bing! mark…My client selected this unique mark to distinguish itself in the marketplace and invested substantial time and effort promoting its business using Bing!.   Microsoft’s use of the identical mark and its aggressive advertising have gutted all of my client’s efforts to distinguish its business and created confusion that must be remedied.

This should be a classic case of David v. Goliath, although, looking at their website, David may have more than just a sling to go to battle with:

http://www.bing.biz/

I have to mention that I mildly amused myself by researching information regarding this case via Microsoft’s Bing! search engine.

-Gregg J. Lallier


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Categories : Intellectual Property, Technology

Some States Doing Their Part: Tax Credits for Venture Investments

10 12 2009

Wall Street Journal has a blog entry from last week about a recently passed law in North Dakota that extends a 45% tax credit to angel investors who back homegrown businesses (North Dakota: More Than A Flyover State).  Two new angel funds, the Grow Dakota fund (estimated $2 million) and Aurora Angel Fund ($5 million) are being created as vehicles for the program, where investors can invest in these funds, and receive the tax credits, and the funds would invest in target companies in the state.  This is a great example of states doing their part to help solve the Need for Seed problem that exists throughout the country.  Some other states have similar tax credit incentives for local venture investment:

  •  Maine Seed Capital Tax Credit Program offers state income tax credits to investors for up to 60% of the cash equity provided to eligible Maine businesses, which may be used for fixed assets, research or working capital.
  • Iowa Venture Capital Credit is allowed for investments made into the Iowa fund of funds.  The Iowa fund of funds makes investments in venture capital funds who make a commitment to consider investments in Iowa businesses (capped at $100 million in the aggregate, and $20 million of credits in one year).
  • Wisconsin has two tax credit programs:  Angel Investment and Venture Capital. Under the Angel Investor Tax Credit Program, angel investors and angel investor networks that invest in qualified new business in Wisconsin can claim an income tax credit on that investment, equal to 12.5% in each of two years. Under the Venture Capital Tax Credit Program, venture capital funds that are certified by the WI Department of Commerce and that invest in qualified new businesses may be eligible to claim a 25% income tax credit on that investment. 

These are great ways for states to help incentive intrastate venture/angel investments, and a direction that Connecticut and other states hopefully will soon follow.

- Gregg J. Lallier


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Categories : Start-Ups, Technology, Venture Capital

University Spin-Offs

10 12 2009

David B. Lerner has a nice summary on his blog (Heard it from the Horses’ Mouth: What Venture Capitalists Like and Don’t Like to See when Doing University Spinoffs) of the annual University Startups Conference arranged by NCET that took place last week in Washington DC .  I especially liked his summary of what VCs don’t like about dealing with university spin-offs.

- Gregg J. Lallier


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Golden Rule Is Still the Rule

10 12 2009

He Who Has the Gold Makes the Rules

The Golden Rule, as the above is known, is something that I use often when counseling start-ups going through their first round of venture capital/seed money.  It comes into play not only at the term sheet stage of negotiating the preferential privileges of the venture capitalist’s investment (e.g. liquidation preferences, anti-dilution rights, veto rights, board seats, etc.), but also after the investment as the venture capitalist tries to ensure the maximum value of its investment through macro (and sometimes micro) management.   A recent Wall Street Journal article highlights this give-and-take with VCs in Who Has The Gold To Make The Rule – VC Or Entrepreneur?.

The current market environment, where venture (and early stage/seed) money is hard to come by, only helps to reinforce the Golden Rule (which exists also in a good market environment…although, maybe, in a less stringent form).  I recently attended the New England Venture Summit in MA, and the panels of VCs continually brought up the fact that tight venture market is going to continue for some time.  Given that, entrepreneurs need to recognize that, in order to get the money needed, they will need to cede some power and control to their investors.  Still, my advice to these start-ups is to (1) still try to get the best deal that they can get and (2) more importantly, try to look at the increased VC presence as a good thing for their business.   The right VC can add more than just their money:  experience, connections and advice all should come along.  Thus, it’s important to do one’s due diligence of prospective VCs to find one that will fit with the culture and plans of the company.  Jeff Glass, a managing director with Bain Capital Ventures, brings up this point in the WSJ article:

A huge part on both ends is just personal chemistry between management and board; board and CEO; investor and management…I would advise to spend more time diligencing the VC or PE firm. Everyone’s cash is green until you have a problem.

Everyone’s cash is green until you have a problem….maybe that should be called The Green Rule.

- Gregg J. Lallier


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Investment Considerations for Start-Ups

4 12 2009

Just as start-ups are creatively developing ways in which to do more with less money in today’s environment, start-ups and VCs are developing creative plans and alternatives for investment.  Two recent Mass High Tech articles highlight this trend:

  • Three alternate routes to financing a startup, as the title implies, describes three alternative ways that VCs and angels are structuring early stage investment in this tight VC/angel market: 
    • “Pay for Play” is an alternative used by Revolutionary Angels.  Start-ups looking for capital pays the organization $4,995 to present its business plan to the Revolutionary Angels’ board of entrepreneurs and executives as part of a business plan competition (current competition submission period of 10/1 – 12/31 described here).  Revolutionary Angels will accept 100 business plans, and invest up to $300,000 in two winning companies (up to $250,000 for the leading plan and up to $50,000 for the runner-up).   In exchange, Revolutionary Angels takes up to 10% in common equity in the companies.
    • Debt Funding is an alternative used by LaunchCapital Small Business (see previous ConnTIP post LaunchCapital Small Business Product).
    • Customer Financing is where the a potential customer of the start-up’s product pays for the product in advance (i.e. prior to be ready for market) in exchange for an equity position.
  • Four values in family financing of startups, as the name also implies, describes four things to consider when a start-up takes early money from friends/family.   A great alternative to traditional equity investment by friends/family is presented in the first value:  debt which is convertible into equity upon the closing of professional investment.  A hard thing to know, or even estimate, is the price per share/unit of equity that a friend or family member (or, really, any early-stage, non-sophisticated investor) would be charged.  As the post says:

Taking equity investment is complicated and expensive.   At the early stages of launch, a startup can ill afford the legal fees required to generate an equity term sheet.  Dealing with inexperienced friends-and-family investors, it may be nearly impossible to set a reasonable valuation.

By using a convertible debt instrument, you’re basically leaving the valuation process to the professional investors (or, as the post describes, “punting” it).  This is a great consideration that more start-ups should consider.

- Gregg J. Lallier


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Start-Ups Learning (or Need to Learn) to Do More With Less

3 12 2009

As most start-ups looking for capital knows, the availability of such start-up capital has been decreasing over the past 10 years, and has accelerated with the recent economic downturn.  Jill Gambon writes about this on Mass High Tech (Startups learn to stretch their finances).   Any start-up looking for a “reality check” should recognize the following points made in the article:

Gone are the days when ideas sketched on the back of a Starbuck’s napkin or a business existing only as a PowerPoint presentation could woo investors. Venture capital investors now expect thorough business plans, revenue forecasts and even an early version of the product or service with paying customers before they’ll write a check.

“We are expecting firms to go much farther on a short dollar,” said Elon Boms, managing director of LaunchCapital LLC, a Boston-based investment firm that provides early-stage capital to startups and small businesses.

Given this environment, it is now more important than ever for start-ups to efficiently use the dollars that they have, including things like founders deferring salaries, outsourcing developmental work, home offices, and other virtual type business models.

- Gregg J. Lallier


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Categories : Start-Ups, Venture Capital


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