Entrepreneurial

A call to arms on the IPO malaise

– Jeff Bussgang is a general partner at Flybridge Capital Partners and an Entrepreneur-in-Residence at Harvard Business School. He is the author of “Mastering the VC Game”. This article originally appeared on his blog www.seeingbothsides.com. The views expressed are his own. –

I almost never agree with a single thing written on the Wall Street Journal editorial pages. Yet, I found myself muttering “amen” a few times as I read this morning’s editorial on “Whatever Happened to IPOs?”. It’s just stunning to me how little interest there seems to be on the part of a supposedly pro-business Congress and (more recently) Executive Branch on this one simple thing that would unleash innovation and jobs – watering down Sarbanes-Oxley.

The IPO market has improved somewhat in 2011 and so perhaps that has taken some pressure off, but the fact is that the regulations and costs associated with an IPO are so overwhelmingly daunting for our young venture-backed companies that they simply avoid them altogether. I used to hear from investment bankers that a company north of $100 million in revenue and consistently profitable can find a welcome public audience. But recent conversations that I have had with bankers has carried a different, even more depressing message.

I am now being told by investment bankers that if a company’s revenue is less than $200 million and the projected market capitalization less than $1 billion, they are at risk of being relegated into the “public company ghetto” – a sad corner of the public markets where you have no analyst coverage, no float and so no liquidity. Your stock simply drifts down and down without any institutional support. And so even $50-100 million companies in our portfolio and others – growing profitably and creating real value – look at the IPO as an unattainable goal. I profiled a number of companies in New York and Massachusetts that fit this criteria in response to Bill Gurley’s excellent piece (IPO Anxiety) from a Silicon Valley perspective a few months ago. But when I talk to CEOs and board members at these companies, they roll their eyes at the IPO prospect – it feels simply too unattainable.

Some complain that the source of the problem is the lack of mid-tier investment banks. Others complain that the lack of analyst coverage is the issue. In both cases, it’s a cause-and-effect problem. The cause is Sarbanes-Oxley and the lack of volume. The effect is that bankers and analysts follow the money. If the rules were more relaxed, there would be more bankers and analysts, for sure. This is the Information Age – analysis and bankers will follow opportunities. They may not be as well known, but banks like Jeffries & Co, Needham & Co, GCA Savvian and now BMO are aggressively courting companies to help them go public and would be all over a more robust market for companies in the $300-600 million market capitalization range.

Will startup visa boost entrepreneurship?

– Stephanie Rabiner is a contributor to FindLaw, a Thomson Reuters publication. This article originally appeared here. –

The immigration debate continues: Senators John Kerry and Richard Lugar have reintroduced a startup visa bill into Congress.

The bill, which has been modified since it first burst onto the scene last year, is designed to encourage partnerships between U.S. investors and immigrants in a way that benefits the national economy. The Senators hope that the StartUp Visa Act will attract innovation and innovators to the country, creating jobs and propelling the United States back to the top in the realm of technological development.

Realtime search engine Topsy raises $15 million

– Alastair Goldfisher is the Editor-in-Chief of the Venture Capital Journal and contributor for PE Hub, both Thomson Reuters publications. This article originally appeared on PE Hub. –

BlueRun Ventures, Ignition Partners, Founders Fund and angel investor Scott Banister (co-founder of Zivity) joined a $15 million Series C round for Topsy, the San Francisco, California-based company announced today.

Western Technology Investments joined the round, which brings to $30 million the amount of equity and debt that Topsy, a provider of real-time search engine services, has raised since 2008.

Entrepreneur says youth must create their own jobs

When Brown University student Walker Williams had difficulty finding part-time job listings, his response was to launch his own job-search website, Jobzle.com. But a crucial factor in transforming the website from a hobby to a business was the funding it got through startup accelerator Betaspring.

“It gave us the money, the offices, resource space and mentorship to focus on the product 100 percent,” the 22-year-old Williams said.

The Young Entrepreneur Council is one organization that aims to support entrepreneurs through ways such as education. Given the high youth unemployment rate – more than half of Americans aged 16 to 24 were unemployed according to a July 2010 report by the U.S. Bureau of Labor Statistics – founder Scott Gerber is a firm believer that youth must create their own jobs.

Venture capitalists are not your friends

– Steve Blank is a teacher, writer, and serial entrepreneur. He teaches at Stanford University, U.C. Berkeley’s Haas Business School and at Columbia. He is the author of “The Four Steps to the Epiphany” and “Not All Those Who Wander Are Lost”. This article originally appeared on www.steveblank.com. The views expressed are his own. –

One of the biggest mistakes entrepreneurs make is not understanding the relationship they have with their investors. At times they confuse venture capitalist’s with their friends.

At Rocket Science our video game company was struggling. Hubris, bad CEO decisions (mine) and a fundamental lack of understanding that we were in a “hits-based” entertainment business not in a Silicon Valley technology company were slowly killing us.

Can VCs serve the medical device market?

– John Lonergan is the managing member of Mach Ventures. This article previously appeared on PE Hub. The views expressed are his own. –

Traditional venture capital firms are struggling to remain relevant to new company formation, the development of new technologies, and the capability of bringing new medical device technologies to market. Although my comments are specific to medical device venture investing, my friends in Silicon Valley will agree, if even only in a quiet moment of reflection, that the same applies in biotechnology and general technology investing.

There are four reasons the traditional venture capital model has failed with regard to backing medical device companies.

Cloud storage company Cirtas raises $22 million

– Alastair Goldfisher is the Editor-in-Charge of the Venture Capital Journal, a Thomson Reuters publication. –

Venture capitalists and cloud storage companies are picking up in 2011 where they left off in 2010.

San Jose, California-based Cirtas Systems, a provider of cloud storage hardware, announced on Tuesday it has raised a $22.5 million Series B round that was co-led by Shasta Ventures and Bessemer Venture Partners and included previous investors New Enterprise Associates, Lightspeed Venture Partners and Amazon.

Hot healthcare investing trends for 2011

– Dr. David J. Brailer is the chairman for San Francisco-based venture firm Health Evolution Partners and served as the National Coordinator for Health Information Technology under President George W. Bush. The views expressed are his own. –

2011 will be a chaotic and unpredictable year for investors.

We will see the first big changes of health reform play through – regardless of what the incoming Congress does. No one can predict what health reform means, particularly alongside the dwindling of the financial crisis and the ongoing jobs bust. The only sure thing is that 2011 won’t be a replay of the last two years where safe deals got done and a lot of companies traded from investor to investor.

Here are a few trends – and a few pitfalls – to pay attention to:

1. Please, no more meaningful use. Health information technology has been hyped into the stratosphere, and every entrepreneur is trying to raise capital while they can. Many are spinning their wheels because they mistake the investment bubble for their own shrewdness. The market will figure out in 2011 that federal subsidies will happen far slower than planned or that they may be cut back by a deficit-hawk Congress. Once the bubble pops and people get their feet back on Earth, deals will start to happen again. There are some very good health information technology companies coming to market in 2011 and they are going to rock healthcare in the coming years.

Grow revenues before seeking VC funding

– Russell Rothstein is the founder and CEO of business social networking site SalesSpider. The views expressed are his own. –

Small businesses owners want to grow their companies, but their ability to expand operations is limited by their own profitability or otherwise lack of capital.

Faced with this dilemma, many turn to venture capital firms (VCs), which embrace high-risk, high-growth startups and offer the money and management they desperately need to meet the growing demand for their product.

Top 5 funding mistakes by entrepreneurs

– Adam Hoeksema is the founder and CEO of startup consultancy firm ExecutivePlan. This article appeared on Under30CEO. The views expressed are his own. –

For most entrepreneurs these days, funding is nearly impossible to come by.

According to the report titled, “Important Things for Entrepreneurs to Know about Angel Investors” and distributed by the Angel Capital Education Foundation, only 1 to 4 percent of applicants successfully raise angel investment capital. So before you ruin your chance at securing investors, make sure you have not committed any of the following deadly mistakes.

1. Wait until you need it. So many entrepreneurs make the mistake of waiting until they need the capital “tomorrow” to begin the process of seeking funding. Make no mistake about it, the process of raising capital can take months and months. Even a simple loan will require enough paperwork to kill a small tree. Ironically bankers and investors are more likely to provide you with additional capital when you don’t need it. So don’t wait until you have an immediate need to begin the funding process.

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