Entrepreneurial

The No. 1 predictor of startup failure: Premature scaling

— Joanna Glasner is a contributor to PE Hub, a Thomson Reuters publication. This article originally appeared here. –

In the wake of Solyndra’s revelation of an impending bankruptcy filing, the latest report from The Startup Genome Project makes for a timely read.

The report, published this week, crunches data from a set of more than 3,200 companies, seeking to identify the qualities that make startups most likely to either succeed or fail.

Researchers found that certain factors – such age and gender of founders, location, and previous entrepreneurial experience – have little bearing on a startup’s likelihood of failure. The most consistent predictor of failure, rather, was a startup’s propensity to engage in premature scaling.

What is premature scaling? The authors define it as “focusing on one dimension of the business and advancing it out of sync with the rest of the operation.”

Sittercity founder to launch “social recommendation engine”

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

Genevieve Thiers is not a household name in Silicon Valley, but many Chicagoans know her as the founder of Chicago-based Sittercity, a 10-year-old online subscription-service that marries families to caregivers around the country for help with their children, pets, and aging parents.

Thiers is also among a small, but growing number of second-time entrepreneurs beginning to emerge from Chicago’s young, but maturing tech scene. Next month, Thiers officially launches her newest startup, Contact Karma, with co-founder Maureen Wozniak (no relation to Apple co-founder Steve).

The entrepreneur’s equivalent of “10,000 hours”

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

50 coffee meetings. It should stick in your head as a metaphor for networking. For getting outside of your comfort zone. For starting relationships today that won’t pay off for a year. It’s the entrepreneur’s equivalent of “10,000 hours.”

Anybody who has spent any time with me in person will be tired of this advice because I give it so frequently. It’s a piece of actionable advice that if you put into practice starting next week, will start paying dividends in the near future. There’s a direct correlation to your future success.

Flickr founder looks to strike lightning again

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

Stewart Butterfield has it made. He’s famous for co-founding the popular photo-sharing service Flickr in 2004. He lives comfortably in Vancouver, having sold Flickr to Yahoo for a reported $35 million in 2005. And investors including Accel Partners and Andreessen Horowitz have thrown $17.2 million behind his two-year-old game company, Tiny Speck, even though the Flash-based multiplayer game it’s been developing, Glitch, hasn’t launched publicly yet.

So why does Butterfield confess to living in “perpetual fear” these days? The truth is Butterfield is under enormous pressure. Expectations for Glitch, which Butterfield describes as a “shared, perpetual game with its own ecology,” are exceedingly high, both because of Butterfield’s personal brand and its ephemeral launch date. (Even after two years of alpha and beta testing by roughly 20,000 gamers, Butterfield declines to disclose when he plans to release the game. “We haven’t finalized (the release date) yet, though the end of September is likely,” he says.)

A look into Carbonite’s IPO

As an entrepreneur, David Friend has been around the block a few times. The 63-year-old has built and sold four companies and raised a ton of venture capital along the way. That still didn’t prepare him for the wild ride he experienced in taking his company public.

After the dust cleared, Friend was the CEO of his first publicly traded company, but one with a significantly reduced share value and market cap, as Carbonite (CARB) became the lone U.S. tech firm to IPO last week.

“Everybody was betting against us,” said Friend, whose Boston-based online backup company reduced its debut share price from $17 to $10 in order to get out, in one the worst trading periods in nearly three years. At the close of trading on Wednesday, Carbonite’s share price had jumped to more than $15. “We kind of proved everybody wrong, but it was definitely a high-wire act.”

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 …

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.”

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.

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