Entrepreneurial

The coming brick wall in venture capital

– Mark Suster is a former serial entrepreneur and a partner at Los Angeles-based venture capital firm GRP Partners. This article originally appeared on Suster’s blog “Both Sides of the Table”. The views expressed are his own. –

This is the final part of a three-part series on the major changes in the structure of the software and the venture capital industries. Read Part One and Part Two.

Or the Cliff Note’s version:

    Open source and cloud computing (led by Amazon) drove down tech startup costs by 90 percent The result was a massive increase in startups and a whole group of new funding sources: both angels and “micro VCs” With more competition in early-stage many VCs are investing smaller amounts at earlier stages. Some are going later stage to not miss out on hot deals. I call this “stage drift.” The opportunities for tech startups today are more immense than they’ve ever been with billions of people now connected to the Internet nearly all the time.

But …

Downsizing Venture Capital

The venture capital business itself is going through an even more fundamental change than just the entry of a new category at the earliest stage. The industry is shrinking back to a mid-90′s level in terms of both dollars and numbers of firms.

The doubling of the industry size was caused by the euphoria of the dot-com bubble and since funds take 10 years or more to dissolve the bursting of the funding bubble has taken its time. We all know the result of the over-funding of the asset class – poor returns in aggregate for the industry. The best firms have still delivered results, though.

The rise of “micro VCs”

– Mark Suster is a former serial entrepreneur and a partner at Los Angeles-based venture capital firm GRP Partners. This article originally appeared on Suster’s blog “Both Sides of the Table”. The views expressed are his own. –

This is the second in a three-part series on the changes to the software industry over the past decade that has led to changes in the venture capital industry itself. Read Part 1 here.

If you don’t want to read that post, the summary is:

    Open source computing drove computing costs down 90 percent, which spurred innovation in technology Open cloud led by Amazon with their AWS services drove total operating costs down by 90 percent. This led to an explosion in startups. Amazon in turn led to the formation of an earlier stage of venture capital now led by what I call “micro VCs” who typically invest $250,000 to 500,000 in companies rather than the $5 to $7 million that VCs used to invest.

These trends have put pressure on traditional VCs. Some have done earlier-stage deals and done well. Others have chased earlier-stage but lack the skills or relationships to do this effectively. Some have moved into later stage investments in an effort to “put logos on their websites.”

How the cloud changed venture capitalism

– Mark Suster is a former serial entrepreneur and a partner at Los Angeles-based venture capital firm GRP Partners. This article originally appeared on Suster’s blog “Both Sides of the Table”. The views expressed are his own. –

In this three-part series I will explore the ways that the venture capital industry has changed over the past five years that I would argue are a direct result of changes in the software industry, not the other way around. Specifically, Amazon has changed our entire industry in profound ways often not attributed strongly enough to them.

I believe the changes to the industry will be lasting rather than temporal change. Venture capital is in the process of its own creative destruction with new market entrants and new models of innovation at the precise moment that our industry itself is contracting.

What the Mob can teach the startup industry

– Connie Loizos is a contributor to PE Hub, a Thomson Reuters publication. This story originally appeared here. The views expressed are her own. –

Forty-four-year-old Louis Ferrante hasn’t led a life that might naturally lead to business consulting. As a teenager growing up in Queens, New York, he stole car batteries that he “sold for $10 to get a slice of pizza and play video games.” Later, Ferrante moved on to stealing cars for joy rides, then taking orders from body shops looking for cheap parts. From there, it was a short leap to hijacking trucks and selling their contents through a neighborhood “fence.”

Eventually, Ferrante ran his own crew as an associate of the Gambino family. “When you’re hijacking trucks on the street in Queens, the Mafia is going to hear about you,” he tells me. “It’s not like they come down and say, ‘We’ll kill you if you don’t pay us.’ They take you under their wing.”

Startup Toovio offers “Minority Report”-type ad service for retailers

Big Brother has the capability to watch – and respond to – your every spending move. That’s the premise behind Toovio, a startup that has created technology to help retailers and other consumer-facing companies market personalized offers to their customers in real time.

Think of the scene in the film “Minority Report”, when Tom Cruise’s character is walking through a mall while his eyes are getting scanned and he is being bombarded by a slew of personalized 3D ads.

“We call it offer orchestration,” said Toovio’s CEO Josh Smith, 31, of the capabilities that allow companies to communicate custom offers over a range of channels that include checkout, website, kiosk and customer-service call centers.

10 must-have travel apps for summer

Kara Ohngren is a writer and editor at SecondAct. This article originally appeared here. The views expressed are her own. –

Summer’s here and more than likely you’ll be driving, flying or cruising somewhere soon. From planning to packing to dealing with airline delays, there’s no doubt that traveling can be stressful.

To make things easier, be sure to upload these practical apps before you leave town.

Flipboard founder on venture capitalists: “Take their money”

– Connie Loizos is a contributor to PE Hub, a Thomson Reuters publication. This story originally appeared here. The views expressed are her own. –

Many entrepreneurs privately disparage venture capitalists as egoistic, autocratic, and increasingly unnecessary. Not serial entrepreneur Mike McCue. He believes in VC.

Case in point: McCue’s newest startup, Flipboard, a 20-month-old iPad application that transforms social media feeds into an elegant, print-like magazine. Though the Palo Alto, California-based company has yet to develop a business model — McCue is contemplating running full-page ads and allowing publishers to charge subscriptions to their Flipboard-rendered content — Flipboard has already raised $60 million in venture capital from Kleiner Perkins, Index Ventures, and others.

Top 7 moonlighting businesses

– Melinda F. Emerson, known as the SmallBizLady, is an entrepreneur, professional speaker, small business coach and the author of “Become Your Own Boss in 12 Months“. This article originally appeared on SecondAct.com. The views expressed are her own. –

In today’s economy, even if you have a job, your money doesn’t go as far as it used to. You’re probably thinking a lot about how you can make some money on the side.

I am a firm believer that the only way to build wealth in America is to build a business, but getting started can be challenging for people who need a weekly paycheck. That’s why it’s best to stick your toes in the entrepreneurial waters with a moonlighting business. It usually takes 18 to 36 months for a new business venture to break even.

Angels vs VCs on business pitches

– Tim Berry is the president and founder of Palo Alto Software. This post originally appeared on his blog, “Planning, Startups, Stories“. The views expressed are his own. –

Recently I caught Business Insider’s “Five VCs Explain What They REALLY Think About Your Pitches“. It’s a great post, gathering points together from discussions with several high-end venture capitalists. If you’re looking at venture capital, read it.

Part of what they said reminded me that angel investors and VCs have a lot in common. For example, these important points:

What your area code says about your business

The choice of area code carries more weight in consumer perception than zip code, according to more than 70 percent of small companies polled in a survey conducted by communications and messaging service company j2 Global Communications Inc.

Nearly the same percentage of business owners said having the right phone number gives them a competitive edge.

“Reinforcing that you’re the right person to be working with, building that credibility is the most important thing (owners) have in building a small business,” said Mike Pugh, j2′s vice president of marketing communications, adding that a San Francisco area code was more likely to be seen as optimal for tech startups, while a Detroit number would be preferable for someone in the automotive industry.

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