Category: Entrepreneurship

Burrill Business Plan Competition 2010 and a Look Back

Category : Entrepreneurship
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The 2010 Burrill business plan competition was held yesterday at UW.  One year ago today, Jesse and I won the students choice award for Entrustet.  Writing the plan, talking to the judges and presenting at the competition helped us launch the company.  Almost one exactly year later, we had our launch party in Madison and we’ve been featured on Mashable, The Financial Times and tons of other media.  It’s amazing what a year of hard work on a cool idea can bring!

I went to the 2010 public exhibition yesterday to check out the new companies and invite participants to join Capital Entrepreneurs.  It’s safe to say that the entrepreneurial spirit is alive and well on campus.  There were some really cool ideas this year, with the top prizes going to im-Bed Biosciences ($10k), Sector 67 ($7k), ProPov ($4k) and MycoLogyx LLC ($1k) with Student Spill taking home $1k and free office space in the Metro Innovation Center.  Buffalo Shoals took home the Green Credit worth $1k.

I took some pictures of some of the cool new businesses I checked out.  I only had my iPhone camera, so the picture quality does not match the business quality.  Sorry for that.

Sector 67 – Chris Meyer

Sector67 is a start up TechShop / Hacker space / Makerspace / Collaborative Environment in Madison, WI dedicated to providing members the opportunity to work on tomorrow’s technology; to build, collaborate, learn, and teach about next generation devices.  It’s basically a place for engineers and others who are trying to improve products or create new ones to use shared equipment and shared space.  Sector 67 is a non-profit and will be an awesome addition to the Madison community.  Chris is also one of the original members of Capital Entrepreneurs.

Student Spill – Heidi Allstop

SPILL is “an anonymous network of students who have formed a venting outlet for college problems that everyone seems to go through, but few people want to LISTEN to. We’re an email based support system FOR and OF college students …just to provide a place to spill your guts or console others who need to vent.”

Allstop started Spill as a student organization and has successfully helped students all over campus.  She has the potential to expand to other campuses across the country and won $1k plus free office space for a year.  Heidi is also a CE member!

ArcherVision Concepts – Raul Correa, Rahul Kamath, Alexander Jacobs, Divya Seethapathy, Sriraman Santhanvaradan

This team has a really cool product.  Many bikers use helmet mounted mirrors to see what’s behind them.  The team created a prototype that updates this system for the 21st century.  They have a camera that goes on the back of the helmet which transmits to a front mounted LCD screen.  They are in the early stages, but have a cool prototype.  Their goal is to embed the camera and the wiring into the helmet so that it will not hurt you if you crash.  Bikers love to spend money on the latest  gadget, so if done right, I could see it catching on and becoming profitable.

Flyboy Carnival – Kevin Burgess, Christopher Martinez

Flyboy Carnival is a cool tshirt company based out of the UW business incubator in the Univesity Square building.  They have some cool shirts, but my favorite part is their creative packaging.   They sell their tshirts in red and white striped popcorn boxes with their tshirts inside. Check out the picture below.

ProPOV – Jon Mumm

Jon has a really interesting backstory. Originally from Milwaukee, he got really good at the first person shooter Counter Strike.  He was so good that he was able to turn pro and earns money playing the game on the pro circuit.  I know many of you are thinking, “what? turning pro to play video games?” but there is actually a well developed professional video game circuit in the USA and an incredibly popular one in Asia.

Jon always had people asking his for tips on how to get better at the game, so he started a website called JuanSource to help teach counter strike players the tips they would need to get really good at the game.  He saved video of him playing the game and commented over the action, helping people get better.  Naturally, he charged money for the commentary and started to have a profitable online business.

His new software the he developed, ProPOV, takes in game commentary to the next level, allowing gamers to comment live over the game.  ProPOV has a nice niche that could be very profitable as it gets rolled out.

Summary

Overall, I was impressed by the quality of this year’s ideas.  You can watch all of the presentations in full on the Burrill website.  I’ve been involved in the competition as a participant or viewer since 2006, and it seems like the ideas keep getting better each year.  30% of this years entries had at least one female on the team, which I believe is a big improvement over past years.  What was even more impressive is that most of the women who entered the competition were doing so outside of fashion, which is a great improvement.  Imagine how many more cool companies there would be if women started startups at the same rate that men do?

Brilliant Idea: Let’s Make It Harder For Startups to Raise Money!

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According to John Maudlin, startups and new small businesses are “the job-creation engine of the US.” He is right.  In a report by the Kauffman Foundation using US Census Data, start-ups and businesses less than five years old created all of the net new jobs over the last 25 years.

It is incredibly easy to start a business and find funding in the United States compared to the rest of the world.  You can start an LLC in Wisconsin in less than 10 minutes, compared to up to over year in some developing countries.  The US has the deepest and most well developed network of Venture Capitalists and Angel Investors anywhere in the world and if new businesses are looking for angel investment, they can obtain it with minimal paperwork.   According the the Kauffman Foundation, over the last 25 years, “angel investors were responsible for up to 90 percent of the funding these businesses received.”  This angel funding allowed these startups to create jobs and bring innovative ideas to the marketplace. In 2008, angels invested $19.2 billion in over 55,000 companies.

The US innovation and “job creation engine” is the envy of the rest of the world.  So what’s the best way to destroy this engine?  It sounds ridiculous, but it seems like the politicians who drafted the Restoring American Financial Stability Act of 2010 asked themselves this question when they were writing the bill.

Hidden inside the 1300 page bill are a few paragraphs that have the potential to kill job creation and innovation in the USA.  Currently, new businesses can raise money from Angel Investors fairly easily if the investors meet a few criteria.  Investors must have at least $1m in net worth or make $250k in income per year.  If your investors meet the criteria, they are considered Accredited Investors and startups can accept their money with a simple 5 page informational filing that goes to the SEC.  Startups can potentially raise hundreds of thousands of dollars in weeks if they have an amazing idea and find the right investors.

If this bill passes, it will raise the accredited investor net worth criteria to $2.3m in net worth or $450k in annual income, eliminating close to 60% of the potential angels in the USA.  I’ve raised close to 500k in angel investment between both of my businesses and we wouldn’t have been able to accept ANY of it if these rules were in place. If anything, the rules should be changed so that the net worth requirement is lower.  We allow anyone to invest in stocks, bonds, options, futures and other exotic investments, but not in new businesses.  Says John Maudlin:

Why should 95% (or maybe soon to be 99%!) of Americans, simply because they have less than $1,000,000 (or $2,500,000?), be precluded from the same choices available to the rich? Why do we assume those with less than $1,000,000 to be sophisticated enough to understand the risks in stocks (which have lost trillions of investor dollars), stock options (the vast majority of which expire worthless), futures (where 95% of retail investors lose money), mutual funds (80% of which underperform the market), and a whole host of very high-risk investments, yet deem them to be incapable of understanding the risks…”

The other change in the bill is even more damaging.  The bill requires that all startups register with the SEC and implements a 120 day waiting period so that the SEC can approve new businesses.  Startups move in minutes and hours, not weeks and months.  Entrustet has been live for just over 1 month now and we’ve gotten real users and made real money.  A 120 day waiting period would kill companies before they even get off the ground. But the waiting period isn’t even the worst part.  Registering with the SEC would cost up to $100k in legal, accounting and other fees, not to mention lost productivity when startup founders could be working on their idea instead of battling the government for access to capital.

And what if a small project like Facebook started to grow rapidly?  It could take weeks to draft all of the legal paperwork, plus another 4 months of waiting around on the SEC.  And this is assuming the SEC doesn’t get backed up like the US Patent Office.  I also don’t want some government bureaucrat processing SEC applications while I am hurting for investment.  Facebook could have very easily died in Zuckerberg’s Harvard door room if he had to wait 120 days for SEC approval before getting his first round of funding. I have no doubt that if this bill passes, the waiting period will be over 200 days within 2 years.  After all, it takes an average of 34 months for the patent office to review new patents.

The last change in the bill devolves some of the power to regulate angel investors to the states.  This change means that instead of one filing, every state will be different.  For Entrustet, we have investors in multiple states.  We would have had to file new paperwork in each state if the rules change.

So why is Congress attempting to change the one part of the US economy that is creating jobs?  The US currently regulates angel investors as if they were investing in hedge funds.  We do need more regulation on hedge funds, but the problem is that angel investors are getting caught in the net.  This is a huge mistake.

There is a fundamental difference between hedge funds and startups.  While both are risky, hedge funds generally shuffle money around to make money and don’t create much, if any, value, whereas startups spark innovation, create jobs and improve society as a whole.  Startups use the money to create new jobs and innovate.  Think betting that the South African Rand will fall in value vs. funding the next Google.  Here’s Maudlin’s solution, which I agree with 100%:

Here’s what needs to happen. Get rid of the disastrous rule requiring filing with the SEC. It makes no sense and will cost hundreds of thousand of jobs and divert the SEC from their main tasks. Angel investing has not been a problem to date, and there is no need to fix something that is not broken.

Second, if you really think we need to raise the accredited investor limits, then carve out an exemption for venture capital.

And keep the clause that gives startups federal exemption.

And, if you really want to create jobs, then cut capital-gains taxes on new ventures and angel investing to 10% or less. Let’s create some incentive to get America moving!

If passed without any amendments, these rule changes will be a huge detriment to the US economy.  They are short sighted and attempt to protect us from ourselves.  By lumping angels with hedge funds, the government is painting with a broad brush and there will be all sorts of unintended consequences.  This issue is not a republican vs. democrat issue either.  Everyone should want to make it easier for startups to create new businesses and new jobs, especially in this economy.  This bill does the exact opposite and would be terrible if it passes.  I hope that there is enough negative publicity so that this part of the bill never makes it into law.

Do you think this bill will pass as is?  Do you think hedge funds and angel investors should be treated the same way?  What do you think will happen in your own startup?

HT: Forrest Woolworth and the PerBlue Blog

SXSW Recap

Category : Entrepreneurship, Entrustet, Travel
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SXSW 2010 was my first SXSW experience.  I had heard amazing things from friends who had gone before and from people on my previous trips to Austin, so I had high expectations.  It did not disappoint.

For those who do not know, SXSW stands for South By Southwest, which is a combination Technology, Film and Music festival held each year in Austin, Texas.  It is one of the biggest in the US, if not the world and brings some of the smartest and most interesting people together to listen to panels, network and go to parties.

I was lucky enough that my first time going to SXSW also included the added experience of launching Entrustet into beta, with Jesse giving a talk called “People Die, Profiles Don’t.” I met some great people and attended some really interesting sessions and will share my best of SXSW.  Check out our Entrustet blog for more info on what we did at SXSW.

Entrustet

We launched our beta version early in the morning on Friday March 12th, a day before our panel.  Everything’s been going really well and we’ve started to get some good traffic and user sign ups.  Our panel got some traction, especially online on Twitter.  Our stat that over 285k US Facebook users will die this year caused a stir and was used by our friends over at The Digital Beyond at their panel on the 16th.

More and more people are asking the question “what happens to my digital assets when I die?” and this attention is starting to reach a critical mass.  Everyone from Guy Kawasaki to the American Bar Association is starting to think about it.  Hugh Forrest, the founder of SXSW raised this question in an interview with NPR:

Yeah, we did one session on that last year and we create this virtual presence more and more with our new technologies. What happens to that presence when you pass away? Do you will that on to someone else to essentially keep on your virtual existence or how does that work? And there are lots or there are some services that help you with that process now.

Now, the other session you mentioned was My Right to Delete, which is, again, in this brave new world we live in, the things we say or do often get onto the Internet and it’s impossible to get rid of them. How do we move on, if and when we want to move on?

Gizmodo is dedicating an entire week to looking at what happens to your digital assets as people pass away, including an article called What Happens Online When We Die? and many other publications have been writing about this issue.  The Digital Beyond’s panel was well attended and Adele McAlear’s blog Death and Digital Legacy has been gaining strength.

I believe that 2010-2011 will be the year that consumers really start to think about what happens to their digital assets when they pass away.  What do you want done with your Facebook?  Your email?  How will you protect your family photos or all of your blog posts?

Panels

I went to some great panels this year.  My favorite one was about Seed Combinators and featured a who’s who of entrepreneurship forces.  The panel included Paul Graham, Naval Ravikant, Marc Nathan, David Cohen and Joshua Baer and they spoke about their efforts to create successful seed combinators across the country.  I think that Madison, WI has to potential to have a very successful seed combinator and am going to post about it in the next week or so.

Another great panel talked about Social Media in China.  In China, websites are not able to sustain themselves on “advertising” as a business model, so they have had to create innovative business models in order to survive.  I hadn’t realized how big TenCent is (1.5B in revenue, 40% profit margins) and all of it is based on virtual currency and virtual goods.  The Chinese version of Match.com charges $450 for 6 months, equivalent to 1 months salary for the average Chinese citizen.  Like match.com, the service matches you up with potential matches and you go on dates.  After the date, you call into their call center and rate how you thought the date went, what you liked and didn’t like about the other person and if you want to date them again.  The next day, the service calls you back and tells you what the other person thought of you.  It gives you the chance to improve your dating skills and cut through some of the awkwardness.

Another dating site allows you to create an avatar of yourself and go to a virtual “dance club” where you dance with potential partners.  You talk, exchange personal info and get to know each other.  The site makes money when the people buy drinks, gifts and other virtual goods for each other.  After awhile, if you like the other person, you can meet up in person.

Advertising has been a crutch in the American Internet space that is being removed as we speak.  I think you will start to see more innovative business models, like Mint.com and others come to the US in the near future.

I also attended Student Startups to hear about others experiences starting a business in college (nice job by the panel, including Ellen Chisa), The Third Coast, by the founders of Crowdspring and many others.  If I had to do it again, I would attend more core conversations, rather than panels, as there is more give and take and you have a better opportunity to interact with the speakers.

Food, Parties, Fun

I could write an entire post about each of these topics, but a short recap will have to do.  I had some amazing food in Austin, but the best came from a food cart called Texas Picnic.  I had one of the best pulled pork sandwiches I’ve ever had and their white BBQ sauce on their chicken was unlike anything I’ve ever tried.  I’m somewhat of a BBQ connoisseur, so that is high praise.  The Whole Foods we went to was the biggest I have ever seen, with a crazy amount of selection.  If I had unlimited money I’d shop and eat there all the time.

The parties were really fun, with the highlight being the Mashable party.  We had to wait in line for at least an hour, but we made the best of it, creating a new check in location on Gowalla that served as the unofficial Entrustet Launch party (8 people checked in).  We grabbed some beers from the liquor store across the way and made friends with the people around us and had a great time.  The Thrillist party on our last night had some great live music, although we missed the DJ.

I also met some great people who I hope to stay in contact with in the future.  One of the interesting people was Geoff Hamrick, a 19 year old entrepreneur from North Carolina.  Geoff and his partner George have a cool site called Group Story that lets you share photos and collaborate to create photo books.  They’ve got a really cool idea going.

Overall SXSW was a great experience.  I will definitely be back next year and hope to see many of the cool people I met this year again and hear about their successes in the year apart.  I learned a ton, including some lessons that will lead to direct improvements in Entrustet.  It was a week well spent.

Introducing Entrepreneur 101

Category : Entrepreneurship
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A few different people have asked me “what sorts of things should be taught in a college level beginning entrepreneurship class?”  I always had a few answers, but never came up with a comprehensive syllabus.  After speaking in a class earlier this week at the UW Business School, I decided to write up a basic syllabus for a 16 week college course that I’d call Entrepreneur 101: A Practical Guide to Starting A Business and added it as a page to my site.  I would love to teach a class like this on the college level for interested entrepreneurs.

Introduction to the Course

Too many classes focus on theory and large, overarching issues instead of practical things that you will need to know to start a business.  Hopefully this class will prepare you to actually start your business by giving you the tools to do all of the nitty gritty work that is necessary to get started.  At the end of the semester, students will compete in a business plan competition in front of a panel of judges.

Week 1 – Introduction to Entrepreneurship

Class: There are many types of entrepreneurship, not just high tech.  It’s easier than you think and college is the best time to start. How to Live Before You Die.

Required reading: How to Start a Startup, What Startups are Really Like, The 3 Advantages of a Startup, Entrepreneurs Come in All Shapes and Sizes

Week 2 – Idea Generation and Business Plans

Class: How do you take an idea to a business plan?  How do you write a business plan? Malcolm Gladwell on Spaghetti Sauce

Required reading: The World is Flat, 9 Business Selection Criteria, 13 Sentences, College is the Best Time to Start a Business

Homework: Start thinking about a business to start for the business plan competition.

Week 3 – Types of Businesses Organization

Class: What type of entity should I use? LLC, Corporation, Non profit?  Learn how how to sign up for LLC.

Required Reading: 18 Mistakes that Kill Startups , The Top Ten Lies of Entrepreneurs

Homework: Sign up for an LLC, but don’t pay for it.  Start working on your business plan.

Week 4 – What are the Necessary Legal Docs Required?

Class: Operating agreements, partnership agreement and their  importance.  Guest speaker: A lawyer familiar with these issues.

Required Reading: Top 10 Geek Business Myths, The PayPal Wars

Week 5 – Taxes, Banking, Accounting

Class: How to setup a FEIN, get a free business bank account and start learning about Quickbooks.

Homework: Go to a bank and get a free business bank account set up (you don’t actually have to sign up), start exploring Quickbooks.

Week 6 – Quickbooks

Class: How to use Quickbooks in a small business or startup

Homework: Create a Quickbooks file for a hypothetical startup.

Required Reading: How to Get Taken Seriously Running A Startup Under 25

Week 7 – Credit Card Processing

Class: Teach how credit card processing system works, fill out forms

Homework: Call multiple resellers and see who can get the best rate.

Week 8 – Servers and SSL

Class: Overview of types of servers, server companies.   What is an ssl? Overview of ssl companies.  Test on first half of class.

Required Reading: Don’t Be Afraid of the Competition, My Rules for Startups

Homework: First draft of business plan due

Week 9 – Overview of Programming

Class: Types of programming languages, how programming works works, explanation of databases, what to look for when hiring a programmer.  How to register a domain name.

Required Reading: The Tipping Point

Homework: Register a domain for under $8.

Week 10 – Legal

Class: What to look for in a lawyer, what you need from them and the importance of a legal advisor.

Week 11 – Mentors

Class: Overview of why you need a mentor, who is willing to help, how you should look for a mentor.

Required Reading: Every Startup Needs a Mentor Team, The Entrepreneurial Push

Homework: Connect with a potential mentor on Linkedin, Twitter, email or phone.

Week 12 – Networking

Class: Why you need to network, strategies for successful networking, how to stay in contact with people.

Required Reading: The Business of Meeting People, Freakonomics

Homework: Get business cards for yourself, check out Brazen Careerist.

Week 13 – Blogging and Online Stores

Class: How to set up a blog, overview of WordPress, Blogger etc.  Overview of online shops.  Intro to Shopify.

Homework: Set up free wordpress blog.

Week 14 – Online Advertising, Social Media, Analytics, Document Sharing

Class: Overview of online advertising, CPM, CPC, Twitter, Facebook.  Intro to Google Adwords, Analytics, Docs and Calendar.

Required Reading: Made to Stick

Homework: sign up for Google docs, share a document with me.

Week 15 – Guide to Raising Money, Office Space

Class: How to value your business? Overview of friends & family, angel investors, VCs.  When is the right time to get an office?  How do you get the best deals?  Where should you look?

Required Reading: The Top Ten Lies of Venture Capitalists, To Office or Not to Office

Week 16 – Business Plan Competition

Final Exam – Business Plan Competition with panel of judges, based on Burrill Business Plan Competition.

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I really think that this sort of course would be incredibly beneficial to a student who is thinking about starting a business or even thinking about working for a startup.  These types of skills will give students a nice foundation so that they can start their own business.  Check out my full list of resources on my Entrepreneur 101 page for links to all of the companies I would use for each of these lessons.

So help me out: What am I missing?  Would you take a class like this?  Do you think universities would be willing to offer a class like this?