Entrepreneurial

Is ‘Occupy Silicon Valley’ next?

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

There it was on Craigslist – an ad for “young, successful professionals living in America’s most emerging area, Silicon Valley,” ostensibly posted by a “major cable network” that’s looking to cast a Silicon Valley reality show.

No wonder. While many Americans are suffering through an abysmal economy, Internet startups seem impervious to bad news of any kind. Valuations have been rising for several years straight; companies like Zynga, Facebook, and Twitter are minting millionaires left and right; and many young outfits can’t hire skilled, highly paid software engineers or salespeople fast enough.

To get the picture, one only need look to the invitation-only, tequila-fueled industry party that entrepreneur-investor Sean Parker hosted two weeks ago. Split-roasted pigs, Dungeness crabs, and sashimi bars were a mere warm-up to nationally known musical acts like The Killers.

Silicon Valley has much to celebrate. It has the most highly educated workforce in the nation and boasts the highest economic productivity – almost twice the U.S. average, according to the Bay Area Council Economic Institute (BACEI). It also deserves kudos for creating the social media tools that have been empowering revolutions around the world.

But Silicon Valley sometimes seems as tone-deaf as Wall Street to the economic straits that most Americans face, and it’s in for a “shock,” says renowned Silicon Valley futurist Paul Saffo. He likens the Valley’s view of economic protests like Occupy Wall Street as “storms in other men’s worlds.”

“Because (Silicon Valley) has such a monomaniacal obsession to innovate, people tend to overlook things,” observes Saffo. It’s even easier to lose perspective, given that many in Silicon Valley are a part of the top 1 percent that accounts for 24 percent of the nation’s income and 40 percent of its wealth.

Chicago’s startup community sticks by struggling Groupon

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

Not long ago, daily deals giant Groupon was the toast of Chicago, a press darling that received the blessing of Oprah Winfrey, was commended by Forbes as the “fastest growing company ever,” and even reportedly spurned a multibillion-dollar buyout offer from Google.

A Chicago Tribune headline from last December summed up its place in the ecosystem: “Groupon’s Success Adds Luster to Chicago’s Startup Community.”

Things have changed somewhat, of course, with Groupon experiencing numerous setbacks since filing for an IPO in June. Among them, the company has been forced to amend its S-1 three times to satisfy SEC concerns over its accounting practices; it lost a COO who’d joined five months prior; and an email leaked to the press led the company to cancel its IPO roadshow. Early this week, a financial analysis firm released a report suggesting that Groupon may now be on a “self-reinforcing path to insolvency.”

If Groupon suddenly looks to leave a mixed legacy in Chicago, the city’s startup community is loath to acknowledge it publicly or privately. Indeed, talk with regional entrepreneurs and investors and two things quickly become clear: they say they still believe in Groupon; they also think no matter what happens to the company, their fortunes will not be tied to it.

“Groupon put Chicago on the (startup) map,” said one longtime Chicago VC who asked not to be named. But if Groupon should stumble after all its advanced billing, “I don’t think it will blow up the community or cause venture money not to come into Chicago,” he added.

“It’s true that Groupon is closely associated with the Chicago tech scene,” said venture capitalist Steve Miller, co-founder of Origin Ventures outside of Chicago. “But as someone who has been closely involved here for the last 12 to 13 years, I can tell you there’s much more to Chicago than Groupon.”

Entrepreneurship a “series of failures”: Babson study

Deborah L. Cohen

Sep 29, 2011 14:36 EDT

Failure shouldn’t be a dirty word for entrepreneurs.

That’s one of several new findings by Babson College, in collaboration with The Business Innovation Factory, a nonprofit research group, as part of an in-depth look at American entrepreneurs and their attitudes toward business.

“We found that entrepreneurship is just a series of failures,” said Heidi Neck, an associate professor of entrepreneurship and director of the Entrepreneur Experience Lab at the Boston area college, which is known for entrepreneurial studies.

“You need to prepare for failure, you need to tolerate failure and you need to learn from failure,” she said. “Maybe we need to start talking about it as intentional iteration.”

The Lab recently completed the first phase of its examination of 250 startups in several areas around the country, including Boston; Austin, Texas; and the San Francisco Bay Area, part of a longer-term look at their experiences on a day-to-day basis.

“This is a really deep dive,” Neck said. “It’s grounded in ethnographic methods, meaning we observe them, we interview them in detail.”

Employee rewards site raises $24 million from Sequoia Capital

Jon Cook

Sep 28, 2011 07:30 EDT

Prominent Silicon Valley venture capital firm Sequoia Capital is wading into the near $50-billion employee rewards market with its $24.5 million Series C round of financing of online San Francisco-based company Achievers.

The announcement on Wednesday by the venture capital heavyweight signals a heightened interest in the space that Sequoia partner Alfred Lin said is “highly fragmented” and lacks a dominant player.

“We want to be an investor in the most interesting companies of tomorrow and we felt like this would be a company for the ages,” said Lin, who will take a seat on Achievers’ board of directors. Sequoia has had a long history of backing technology companies such as Apple, Oracle, Cisco, Google and YouTube.

The round also included previous investors in Boston-based GrandBanks Capital and Toronto, Canada-based firms JLA Ventures and the Ontario Venture Capital Fund.

Achievers has now raised $38 million since CEO Razor Suleman founded the company in 2002 in Toronto. Formerly named I Love Rewards, the company, which has 150 employees, has since expanded to Boston and San Francisco and Suleman said the latest funding will be put toward hiring in all three markets and extensive marketing of the product.

Suleman said the employee rewards and recognition industry has shifted away from the traditional model of giving workers gifts in the form of watches at the end of an extended period of service. Now he said it’s about employers tapping into the more “intrinsic” motivations  and ambitions of employees through regular performance and engagement metrics and rewarding them accordingly.

One way it does this is through its “social recognition” platform that tracks and rewards employees with points that can be redeemed for gifts from companies like Apple, Visa and Expedia. Achievers customers range from firms with 500 employees up to Fortune 500 companies such as Deloitte, 3M and Microsoft.

Making a case for more candor at startups

– Connie Loizos is a contributor for PE Hub, a Thomson Reuters publication. This article originally appeared here. –

In an age where seemingly everyone in the startup community now blogs, tweets and leaks his or her news, stretching the truth has become de rigueur. But I’d argue that it’s creating distrust; it’s also distorting the way that founders, the real engine of Silicon Valley, see the world.

What can be done about it, if anything? Recently, I asked neuroscientist and best-selling author Sam Harris, whose new Kindle essay, “Lying,” explores our fundamental inclination to lie and self-promote. Our conversation has been edited for length.

Q: In your essay, you say your interest in lying was piqued as a Stanford freshman in a popular ethics course. What was so life-changing about it?

A: The course is surprisingly simple in its format and content. Basically, 10 people sit around giving (professor) Ron Howard — a pioneer in management science — examples of lies they think worth telling, and he just shoots them down. You learn the really poisonous role that lying plays, and that the lies you think people are justified in telling have hidden costs that most people find quite unacceptable at the end of the day. He teaches the course every year and I know many Stanford graduates in tech have been influenced by it.

Q: That’s interesting to hear, given that so many startups continue to operate in shrouded secrecy, or else they exaggerate some aspect of their business.

A: Well, secrecy on its own is a phenomenon that can be maintained without deception. You can ask, ‘How much money do you have in your bank account?’ And I can truthfully tell you that I don’t want to say. What’s deceptive is when a company pretends not to have secrets, or it withholds important information. That’s a problem.

Twilio raises second microfund from angels McClure, Conway

– Alastair Goldfisher is a contributor for PE Hub, a Thomson Reuters publication. He was also part of the judging panel at the Twilio Conference with Paul Singh of 500 Startups and Manu Kumar of K9 Ventures. This article originally appeared here. –

This week at the Twilio Conference in San Francisco, 500 Startups founder Dave McClure announced the launch of a second Twilio MicroFund of $250,000 to invest in companies that are based on Twilio’s Connect platform.

McClure and Ron Conway of SV Angel will each invest $125,000 in the fund. McClure will manage the investments, with Twilio serving as an advisor.

Twilio, a 500 Startup’s portfolio company, provides cloud-based telephony services. The San Francisco-based company, which is hosting a two-day conference, has raised more than $15 million in venture funding from 500 Startups, Bessemer Venture Partners, Union Square Ventures, Lowercase Capital and numerous angel investors.

The first Twilio MicroFund of $250,000 was supported entirely by McClure and launched in late 2010. It has funded 10 companies to date: Callyo, FastCall411, KnockKnock, Magnolia Prime, Order Mapper, Proven, Qwipd, Textaurant, Voicendo and Volta.

Twilio co-founder and CEO Jeff Lawson told me that the idea for the fund came from a McClure tweet, which he posted not long after backing Twilio initially in 2009. In the tweet, McClure said he had invested in his fourth startup based on the company’s platform.

“Dave was already investing in Twilio companies, so we decided to formalize the process,” Lawson said.

TechStars raises the ante in the startup accelerator race

– Mark Boslet is a contributor for PE Hub, a Thomson Reuters publication. This article originally appeared here. –

Interest in seed stage incubators, accelerators and entrepreneurial funds continues at full bore, with companies, firms and universities all getting into the act.

Vodafone early this month opened the doors of its Silicon Valley research center to startups with the hope of encouraging faster innovation on its network.

Carnegie Mellon University, not to be left out, kicked off an accelerator at its Silicon Valley campus last month to give students a hands-on approach to entrepreneurialism. Menlo Ventures showed its determination last week by unveiling a $20 million Talent Fund designed to permit quick fundings of up to $250,000 to promising startups.

Now TechStars is increasing its bets in an effort to keep pace with industry guru Y Combinator. The incubator with locations in Boulder, New York, Boston and Seattle announced today $24 million in new funding from the Foundry Group, IA Ventures, Avalon Ventues, DFJ Mercury, SoftBank Capital, SVB Financial Group, RRE Ventures, Right Side Capital Management, TechStars Alumni, and several individuals.

The money will provide an additional $100,000 to every TechStars company in the form of a convertible note. The move appears aimed at matching Y Combinator, which at the start of the year announced that Yuri Milner and Ron Conway’s SV Angel would give each of its startups $150,000.

The TechStars program already offers startups that enter its three-month boot camp up to $18,000, or $6,000 a founder, in exchange for 6 percent equity.

Blackstone looks to advise startups

– Luisa Beltran is a contributor for PE Hub, a Thomson Reuters publication. This article originally appeared here. –

The Blackstone Group wants to advise, not buy, Silicon Valley startups.

So reports Portfolio.com. Blackstone has long had an advisory practice, but the New York private equity firm is known more for its mega buyouts. For example, Blackstone was part of the investor group that acquired Freescale Semiconductor in 2006 for $17.6 billion and also acquired Hilton Hotels in 2007 for $26 billion.

But Blackstone recently hosted an “inaugural” tech forum in Silicon Valley that was intended to match up startups, investors and industry experts, Portfolio.com reports. Ivan Brockman, a Blackstone MD who is based in Menlo Park, admits that Blackstone isn’t known for advising tech companies.

Brockman told Portfolio.com that the buyout shop wants to work with emerging disrupters or those companies that are “disrupting the status quo are those that are tackling current problems in a new way. Given the situation today, sometimes those emerging disrupters aren’t creating the market; they’re making it better,” he said.

In a Blackstone blog post from earlier this month, Brockman said cloud computing and mobility are causing a profound transformation in enterprise IT. Cloud computing is “changing the way we design and manage data centers and applications, how IT departments deliver capabilities to users, and how users access, select and interact with applications,” said Brockman.

Are patent reforms good for small businesses?

– Cynthia Hsu is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. –

President Obama recently signed into law the America Invents Act, a patent reform legislation that does away with the old “first to invent” rule. What does the patent reform mean for small businesses?

Most notably, the new legislation pushes Americans toward a “first to file” system, meaning that those who file for a patent first will get awarded the rights.

So is this change in the patent rules really a boon for entrepreneurs – or is it a bust?

The new law aims to simplify the patent registration process, and in turn aid entrepreneurs and encourage innovation. Patent filers are often met with legal obstacles. And, the “first to invent” rule was fuzzy enough to invite litigation.

Under the old rules, patents could be awarded to those who were “first to invent” the product. Meaning these first inventors could be awarded patent rights even if they never filed for a patent with the U.S. Patent and Trademark Office. And, these first inventors could also take patent filers to court in an effort to gain rights, reports Entrepreneur.

Small businesses filing for patents in the past could get blindsided by a lawsuit that alleged someone else was actually the first inventor.

Stanford entrepreneur: If you’re 20 and you haven’t started a $1 million company, “you’re kind of a failure”

– Connie Loizos is a contributor for PE Hub, a Thomson Reuters publication. This article originally appeared here. –

Recently, New York magazine featured Feross Aboukhadijeh in a piece titled “Bubble Boys”. Aboukhadijeh is a Sacramento-born, 20-year-old computer science student at Stanford who has been characterized as among the school’s most heavily recruited students by a course adviser. The piece suggested he may ultimately be among those geeks to succeed the Mark Zuckerbergs of the world.

While perhaps a stretch, it’s easy to see Aboukhadijeh’s appeal. A year ago, Aboukhadijeh created a small media sensation with YouTube Instant, a site that invites visitors to scan YouTube videos in real time, and which Google was at one point interested in acquiring – along with Aboukhadijeh.

“They were talking about adding (the code) to YouTube and having me come on, but it never really worked out,” said Aboukhadijeh, who speaks quickly and breathlessly, like someone needing to get to wherever he’s next expected. “I’d only been in school for two years at that point. It seemed silly to stop and take a job. Then they said, ‘You can do an internship while you’re in school.’ But I wasn’t really interested in doing that. I knew that to do well (at Google), I’d need more than 15 hours a week. Also, when you join a new company, it takes three or four months before you’re even up to speed.”

Aboukhadijeh has some idea about what happens inside companies. Two summers ago, he scored an internship at Facebook, and it took “two months before I was going all out, doing stuff.” This past summer, Aboukhadijeh snagged another enviable internship, at the question-and-answer site Quora.

Still, Aboukhadijeh said he’d rather start his own company than work for someone else’s. At least, he thinks he knows that’s what he wants. Aboukhadijeh, who is starting his senior year, told me he’s applying for Stanford’s computer science master’s program and that he’ll “then possibly complete it or do something else, like put it on hold to go start a company.” A lot of his friends are making the same choice. “They’re saying, ‘I’d like to take a leave for a year or two and try something risky.’ And if it doesn’t work out, they can come back and finish their master’s degree. It’s kind of nice. Stanford is pretty flexible compared to most schools.”

The school has little choice, evidently. In fact, “probably half” of Aboukhadijeh’s friends are already working on projects that they think could become viable companies, he said.