Entrepreneurial

Entrepreneur, VC offers shortcuts to help startups be more successful

Image courtesy of Mark Hopkins.

Suggesting there are shortcuts entrepreneurs can take to improve their chances of success would appear to refute Malcolm Gladwell’s popular “10,000 hours” theory.

But instead of picking a fight with the “Outliers” author, entrepreneur and fund manager Mark Hopkins is just trying to be provocative to get people to pick up his own book: “Shortcut to Prosperity: 10 Entrepreneurial Habits and a Roadmap For An Exceptional Career”.

“I’m not at all refuting Gladwell’s 10,000 hours,” confessed Hopkins, 53, who actually references Gladwell in the book. “The shortcut is really a way to get people to pick up the book and for me to say: ’If you do these things then you have a good shot at it, but it’s going to be a lot of work.’”

As far as the 10,000 hours goes, Hopkins has put in his time as an entrepreneur. After a career with Hewlett-Packard (NYSE:HPQ), Hopkins started his own medical device manufacturing company – Peak Industries – in 1996 and sold it nearly a decade later in 2004 for $44 million to Delphi (NYSE:DPH).

After that success, Hopkins, who describes himself as an “operations guy,” was looking to share his knowledge with other entrepreneurs and started up his own Denver, Colorado-based private equity firm – Crescendo Capital Partners.

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:

Best practices for raising a VC round

An employee counts money at a foreign currency exchange in Tokyo. REUTERS/Yuriko Nakao

Chris Dixon is co-founder of Hunch and founder of Founder Collective, and an investor in many early-stage companies like Skype and Foursquare. Previously he co-founded Siteadvisor, which was acquired by McAfee. This blog originally appeared on cdixon.org. The views expressed are his own. –

Having raised a number of VC rounds personally and observed many more as an investor or friend, I’ve come to think there are a set of dominant best practices that entrepreneurs should follow.

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.

Alignment between entrepreneurs and VCs

–- Jeff Bussgang is a general partner at Flybridge Capital Partners, an early-stage venture capital firm in Boston, and author of the book “Mastering the VC Game”. This post originally appeared on Bussgang’s blog www.seeingbothsides.com. The views expressed are his own. –-

Alignment.

You hear this word thrown out frequently in business conversations. It’s a wonderful thing to aspire to, but very hard to achieve. Perhaps even harder to achieve in entrepreneurial settings between the venture capitalist and the entrepreneur, where the stakes are so high and the ever-present risk of dysfunctional behavior leading to a “Start-Up Soap Opera”.

Ever since I began the research for my book, I have been spending time thinking about why VC-entrepreneur alignment is so elusive. And so when the Kauffman Foundation asked me to give a presentation to their recent class of young VCs, I decided to take the opportunity to develop a few thoughts that teed up the key issues.

VCs, meet the new sheriff

Relatives of victims of the June 5 fire at a day-care centre wear angel wings during a protest against federal and local authorities in Hermosillo, in the Mexican state of Sonora. REUTERS/Alonso CastilloMove over venture capitalists, there’s a new sheriff in town: the angel investor.

As VC and private equity firms pulled back from the number of deals they made with entrepreneurs during the recession, it appears angel investors – wealthy individuals funding startups on a much smaller basis – have moved in to pick up the slack.

Last month Fast Company ran a blog titled, “Angel investors more powerful than VCs“, wherein author Brian Javeline, the founder and CEO of MyOnlineToolbox.com, stated angel investors “who used to promote entrepreneurialism have been acting more like traditional VCs.”

Will VCs really stop funding startups?

If the American Jobs and Closing Tax Loopholes Act is passed there will be a lot of unhappy venture capitalists, who say they may stop investing in startups.

The new legislation, co-drafted by democratic senator Max Baucus and democratic congressman Sander Levin, aims to re-classify the returns fund managers and venture capitalists receive as ordinary income and not capital gains, as it has been for much of the last decade. This amounts to a much larger income-tax hit for VCs, jumping from 15 percent to nearly 40 percent.

Proponents of the bill, such as angel investor and blogger Paul Kedrosky, say that since VCs, like hedge fund managers, don’t invest their own money when funding startups, that they should have to pay the same tax rate as the rest of us.

VCs invest in fewer startups

So far this year both the number and size of deals by venture capitalists are down over the final quarter of 2009.

A total of 681 deals for $4.7 billion were completed by VCs in the first quarter of 2010, according to a MoneyTree Report released by the National Venture Capital Association and PricewaterhouseCoopers. That dollar amount is down about 10 percent over Q4 2009, but up nearly 40 percent over the same period last year.

Dan Primack, the editor of PE Hub – a Thomson Reuters publication – told Reuters TV the decline from Q4 ’09 was mostly “seasonal” and he expected the numbers to increase over the next quarter, as VC firms secure funding from investors and more term sheets are signed.

Some entrepreneurial advice from U2

Mark Solon, the managing partner and co-founder of Boise, Idaho-based Highway 12 Ventures, wrote a blog post – “Don’t Let the Bastards Grind You Down” – offering some entrepreneurial advice he gleaned from one of U2′s more underrated tunes. Now we highly doubt Bono had entrepreneurs or venture capitalists in mind when he penned the lyrics to “Acrobat,” but let’s roll with it.

Solon thought of the song after he recently rejected a funding request by a young entrepreneur, who he said “took it fairly hard” and Solon spent the next 20 minutes attempting to explain himself. When he sensed it wasn’t helping to soften the rejection, Solon piped up “Who the hell do you think I am to tell you that your business won’t be successful?” Solon then recounted his own ordeal in moving from Boston to Boise to start his VC firm and the ensuing 18-month span where he was rejected over and over, before launching Highway 12.

Nearly a decade later, Solon said he still remembers “almost everyone who said ‘no’ to me and proving them wrong still motivates me to this very day.”

The VC gender gap: are VCs sexist?

Jeff Bussgang

– Jeff Bussgang is a General Partner at Flybridge Capital Partners, an early-stage venture capital firm in Boston. This post originally appeared on Bussgang’s blog www.seeingbothsides.com. The views expressed are his own. –

I find the preponderance of males in VC an annoying and stubborn phenomenon. When I first entered the start-up game as an entrepreneur in the mid 1990s, I didn’t think much of the “VC gender gap” as there were plenty of women executives around. In fact, between one third and one half of the executive teams at my two start-ups (Open Market and Upromise) were women.

As the father of a capable, ambitious daughter, perhaps I’m over-sensitive to the issue, but since becoming a VC seven years ago, I find it amazing that only 5-10 percent of the VC industry is made up of women. Only 25 percent of all VC partnerships have a single women partner and only 7-8 percent has more than one women partner. Anecdotally, even fewer women are “management company GPs” as opposed to “employee GPs” – in other words, true owners of VC funds as opposed to deal partners. What other major industry remains 90-95 percent male-dominated? What’s the deal?

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