We’re in the midst of fund raising now. It’s been an educational process.
Two weeks ago, we spoke with a placement firm which helps funds raise money from institutions. We were told that we are too small for institutions to be interested.
They apparently want to invest at least $10MM into a fund. This is because of their own size, which many institutions are now in the billions of dollars. It simply does not make sense for them to place money into another vehicle at less than that amount. They need to put larger amounts of cash to work, at one time.
The next constraint is that they want to be no more than 10% of any venture fund. This means that any fund they invest into must be at least $100MM in size.
With us at $25MM, we’re too small for them. We’re thinking about this as we continue our talks with other potential investors.

On my trip to Shanghai, I met a journalist working on a book about venture capitalists working now in China. It will be published in Chinese which kind of stinks since I can’t read Chinese, and I can’t wait until it gets translated to English. The journalist asked me what kinds of things a potential reader might be interested in, and I sent her a list:
1. What are the pros/cons of being in China?
2. What are the difficulties in working in China?
3. What makes it easy to work in China?
4. Where are the dollars being invested now? It would be great to show some stats, as they are extremely hard to get. As you interview the VCs, they might be willing to share an industry breakdown with you.
5. What are the current opportunities?
6. What are the trends?
7. What are the risks?
8. How is money extracted from China?
9. What are the corporate structures that enable foreign investments or ownership in China?
10. How does one deal with the chaotic environment, ie. Business climate, inconsistent legal/political system, etc.?
11. How does one deal with trust issues?
12. How does one become a VC in China? Are there legal and regulatory issues?
13. Is fund raising possible within China? Asia? Or does most of the money come from overseas?
14. Show case studies of successful/unsuccessful investments. How/Why did they succeed/fail?
15. Top 10 things to do to increase chances for success, Top 10 things not to do.
16. How do you deal with language issues?
17. What are the notable cultural differences to watch out for?
18. How receptive are entrepreneurs for help beyond money? Examples?
19. How would you characterize investors in China today? How would you characterize entrepreneurs in China today?
So much is a mystery to Westerners about China, similar to the days when I worked extensively in Japan building the Quicktake 100 for Apple with Kodak Japan and Chinon. Culturally, Chinese people are similar in many ways as they are different; it’s the differences that sometimes confound Westerners who try to work overseas. The subtlties get tripped over, often with disastrous results.
And now, with billions of dollars going into China, the stakes are much higher. So many variables, and so many things moving so fast. Will the government institute legal systems to make it more stable to do business there? Will the currency be an attractor or a hinderance? Can the Chinese people emerge gracefully from their Communist roots and support capitalism? Can the people resolve the class differences between those who have and those who have not?
All questions to ponder, and to watch history in the making over the next few years, as we watch China emerge truly into the 21st century.

Seen on the onramp to 90, from Marina Del Rey, a sign stapled to a telephone pole:
Business Plans
Grant Funding
Business Funding
50K – 1 MM
Call this 800 Number
Which venture fund do you think this is?

Last night, I went to the Silicon Valley Meetup held at Draper Fisher Jurvetson (DFJ) in Menlo Park. These have become wildly popular following a New York Times article about the New York Tech Meetup, which was standing room only due to its new publicity.
I found the meeting to be an interesting group of people. I was only 1 of 2 venture fund folks there, the other person being the DFJ guy who donated the conference room. The rest of the people were all entrepreneurs and seemed to span the range of experience, from novice to those who had done many startups.
It started out by everyone giving a short introduction (which was when I found out I was 1 of 2 venture fund folks). Then they began the presentations. The 4 companies were very interesting and ranged from very early-test phase-virtually no users to more developed business plans and lots of funding. They are:
Meetro.com – a location based IM client
Zooomr.com – a location based photo sharing service
Rrove.com – a tagging service for physical locations
Prosper.com – a community managed service which allows individuals to provide lending capital to others
Some impressions of the meeting:
1. Why aren’t there more VCs at these meetings? I need to ask around and find out why. Maybe they don’t want to get inundated by entrepreneurs. Me, I like to build things and like to hang out with people with great ideas.
2. It was interesting to see what Web 2.0 has wrought. Lots of tools and functions to build but hard to define a business model.
3. Naming is a real problem. Rrove was an example of that. I am certain we’ll see lots of names like that.
4. There seems to be many people attempting to be entrepreneurial these days. It’s nice to see, but also I can see where the learning curve can be really tough without guidance and experience. I did find a whole bunch of resources for new entrepreneurs. I hope to hit a few of these to see how they operate – My thanks to Chris, an entrepreneurial engineer who sent me these, in his own words:
SVASE.org
This one is pretty good. I’ve seen entrepreneurs, angel investors and VCs attend these events. There’s a StartUp-U group that helps entrepreneurs in different areas in the startup process.
eBig.org
This group has several SIGs and each SIG concentrates on specific areas. Since you’re into web opportunities for your fund, you may want to look at the Blogging & RSS SIG, Java SIG, Start Ups / VCs SIG and the Web Development SIG.
TVC (techventures.org/)
This one really helped me understand the Startup world. They have this one program made up of 6 events which helps entrepreneurs start their ventures. Entrepreneurs, angel investors and VCs attend these events. This group is funded by Lockheed and is more organized compared to the other groups in events. This has probably helped more than any other group and usually has a bigger audience than any other of the listed groups.
VC Task Force (vctaskforce.com)
This one seems to be popular in the VC world, I haven’t attended any of their events because it’s a little pricier compared to the other groups.
Stirr.net
This is a new one.
Very exciting time to be an entrepreneur now.

Today, my partner went down to Wall Street to meet with a banking buddy of his.
Somehow, he got wind of our venture fund, Neuron Ventures. And it’s now the buzz of him and his Wall Street friends. Apparently, they are really excited about what we’re doing and how we’re doing it. Wonders of wonders.
Not sure why that happened. But I would think it’s a good thing that the word is out about us and it could help us if, when we meet them, they know about us already and have already did their research on us.

Colleges – a place where our future generations emerge and develop the new and cool.
Nowhere is this more true than for Web products and services.
We, who have been through the Internet boom/bust years, are now in our 30s and 40s. We have fused the internet into our lives, but we did not grow up with it. We had to integrate it slowly, deliberately, and smartly throwing away old habits…or not. Sometimes we can’t let go of the old ways of doing things because we’re old farts.
On the other hand, the teens and tweens of today have grown up knowing only the Internet in their lives. They have used every bit of it and have no experience of life without it.
A growing belief is that this generation is really where the next generation Web products will emerge. They see and experience the Internet in ways that we are too old to know. And thus, they can see holes and opportunities in the spectrum of Web services that we can’t.
We need to tap into this resource and nurture the next set of great entrepreneurs. College internships? Consulting gigs? Or even simple conversations? All of these and more can be utilized to really figure out what products and services will be necessary and vital for the future Net generations.

PPM= Private Placement Memorandum.
A long document describing what we’re offering and what the terms are for investors. It’s got a ton of legalese and some basic language too. We lucked out by hiring a boutique law firm in NYC who only works on venture funds. They also were able to put together a PPM which was very easy to read even though it has the usual disclaimers and such.
It took a little time to work this out. So many little details on what we are selling to potential investors, but I suspect that we took less time than most.
We wanted to be very standard and not do anything unusual which could raise uncomfortable questions amongst our investors. I figure this saved us a couple of weeks for sure.
In any case, we’re done and ready to go sign up investors!

The other day I was talking to a entrepreneur friend of mine about how to get acquired by a Yahoo! or Google.

This person had noted that they had tried to get in many times to show something they were working on and could not. It wasn’t their technology; I took a look at it and it was pretty cool on its own. But for some reason, Yahoo! and Google just would not give this company some time to present their technology. I noted to this person that it may be a “lost cause”.

By “lost cause” I don’t mean that Yahoo! and Google are lost causes as businesses. What I meant was that it may be a lost cause for the entrepreneur in trying to get air time with the Yahoos and Googles of the world.

What could cause it to be “lost cause”?

I find that there are two reasons for the “lost cause” label. The first being organizational defects, and the second being the people themselves.

Organizational defects:

Basically, too much work and unaligned goals. Sometimes an org places so much work on an individual where he just can’t think clearly about anything else but what he has to get done now. So all future, innovative stuff goes down in the dumper. He can barely get the stuff he has now done, let alone freeing up brain space to process new stuff.

As for unaligned goals, here is an example. At a major internet company, the goals of a general manager of a business unit were very numbers driven. I make my numbers, I get a raise. I don’t, no raise. Anything that clearly helps me make my numbers gets first priority. Anything else that is unclear in driving towards me making my numbers (hence my goals) is shoved down the priority chain. So you show up with your nice tool, but there are about hundred other things that this GM knows could make his numbers faster in the short term and decides he doesn’t have time to talk to you.

People defects:

Some people just can’t grasp the big picture. They can’t see broadly where things could fit in. They may be smart, and great operations folks and get lots of things done, but sometimes can’t figure out how to integrate a new thing. This relates to multi-tasking ability, ability to handle information overload, general creativity, and physical/mental/emotional energy. When you’re in a place like a Yahoo! or a Google, you’re running at 1000 MPH. You get the physical/mental/emotional energy sucked out of you, and you can’t multi-task or handle all this information and you are back to just doing what is placed on your desk at that time.

Again, new, innovative stuff just falls off the plate.

The entrepreneur suffers because he could be selling his technology to a prominent company; the company suffers because they may be missing something they should be integrating.

How do we, as a society of businesses, do better?

How funny was the site Fucked Company back in the day.
But now it seems very quiet on the personal attacks and sensational content front. It is filled with rumors, but it seems so dry. I find that Valleywag is much better at the fun, outrageous stuff you want to know about each internet company. Think gossip magazine for Web 2.0.
But I did find something useful. I dug up my copy of F’d Companies by Philip Kaplan who is the founder of the fuckedcompany.com site.
I love his brash and cutting style on writing about these dot-com boom era companies. Companies that had such ridiculous, or no business models and were getting unbelievable funding. As I thumb through its pages, I reminisce about those days where us naive Internet pioneers thought that anything should be tried, and who knew what would work and what would not. And all these money people tried to jump on the bandwagon, fund any company whatsoever, and try to take the most ridiculous companies IPO in an attempt to score big.
But now, I find I am drawn back to some of the businesses in that book. In today’s Web, things are different. Now some of these businesses that failed could realistically be tried again. In fact, I just read an article about some venture fund guys who were precisely “mining” old Industry Standard and Wired magazines just for that reason. Sometimes a tweak is all it takes.
I am hoping to find some ideas in F’d Companies and see if they work today. But I also think that some of the ideas were truly F’d and should never again see the light of day!