Showing posts with label startup. Show all posts
Showing posts with label startup. Show all posts

Sunday, March 12, 2023

Silicon Valley Bank

Tomorrow, the FDIC will allow access to Silicon Valley Bank (SVB) accounts up to the insured amount of $250,000. FDIC insurance is something that's not available in the crypto world (just ask SBF and FTX). I'm guessing that all of SVB bank accounts will probably recoup at least 80% of their deposit when the dust settles. This is why billionaires buy many obscenely expensive homes since those investments can be insured to 100%.

Last week, the CEO of SVB sold $3.6 mm in stock as part of a trading plan. I don't think there's much to see with the CEO's stock sales if the cash ended up in SVB, not some other bank. If not, he'll have a tough time explaining that. 

Although I haven't had any personal experience with SVB, a good friend of mind did when he, as CEO of a startup, raised $2.5 mm about 15 years ago. Part of his fund raising deal was that SVB would loan his company $500K provided that all the funds were kept in a SVB account, which he did. In 2009, when times became tough, my buddy's startup had $600K in cash. This wasn't a problem until SVB invoked their MAC clause (material adverse change), swooped in, and pulled his $500K. Unfortunately, the corporation's fellow board members didn't want to fight SVB because they had other deals with the bank. In other words, these directors put their own business interests ahead of the corporations. But what can you do?

My buddy didn't have kind words for SVB when I asked him for comments on Friday. 

Monday, May 9, 2022

Before the Cloud

Circa 2003
I was reminiscing through some old photos this past weekend and I came across these pictures of my old server farm…

In the days before the cloud, I hosted a server farm at home using five static IP addresses on a DSL circuit with 5 Mbps downstream and 512 Kbps upstream (that was the fasted DSL I could find in 2002). Utilizing old laptops was great since they effectively had built in UPS (uninterruptible power supplies).

At Apple, when an employee left the company or upgraded hardware, the old hardware would pile up in closet until it was overflowing and then we'd be given the greenlight to take home whatever we wanted before it was thrown in the recycle bin. By that point, the hardwas was several years old, but still very useful to me. Eventually, after I left Apple, I moved to Mac minis which ran headless with an external UPS.


Circa 2009

Servers
Web server (Apache)
App server (WebObjects)
Database Server (OpenBase)
Mail server (running on Windows 2000)
DNS server (QuickDNS)
File server (AFP)

I typically named the servers after places I had lived: Capitola, Nairobi, Djibouti, Carlsbad, Huntington, etc. This setup served me well for more than a decade. 

Wednesday, June 15, 2016

Startup Fundraising Idea

I heard an interesting startup fundraising idea from a well know VC. He made the point that he always takes at least 20% of a company. This has led to long discussions with entrepreneurs who, at times, had fought hard for the difference between 19% and 21%. He highlighted that most CEOs, looking to raise funds frequently show up at his door with two other cofounders, each with 33% of the company. His point: You've already given away two-thirds of your company and now you're fighting me over a 2% difference. Instead, consider keeping 100% and then give 10% to the first few people you hire for key positions. They might not technically be cofounders, but they're getting an excellent deal.


Wednesday, March 4, 2015

Kickstarter Secrets, One Year Later

Kickstarter secrets from a master videographer (standing).
Kickstarter is the premier crowdfunding platform for products and over the past year I have coordinated the San Diego Kickstarter Meetup. The lessons I've learned from others who have succeeded and failed are priceless. Our Kickstarter meetup has been so successful that an inventors' club has been spun-off from it. The two communities meet at 3RDSPACE in University Heights; the Kickstarter group convenes monthly in a panel format while the inventors' club will begin meeting weekly in a workshop environment. The two separate, but overlapping communities are the brainchild of Peter McConnell who's the founder and owner of the 3RDSPACE coworking offices.

How successful have our members and presenters been? Last year, I listened to Patrick Lehoux speak about his successful Kickstarter campaigns which have turned into a million dollar business. Pat works a couple hours a day, with one full time employee and one part-time employee. I've also seen two notable campaigns pass through our meetup, Billetus and The Undress, which launched this past fall and both raised serious money.

Kickstarter Secrets


1. Money. How much should you raise? This is the mother of all Kickstarter questions. For starters, keep in mind that Kickstarter is all or nothing. If you don't reach your goal then you don't get any money. Compare that to Indiegogo where you have the option of getting whatever you raise. This can be good or bad. If you figure you need $30,000 to hire software engineers then only raising, say $15,000 could be disastrous if you get the money and can't deliver the goods. On the other hand, you might choose the Indiegogo platform if you're raising funds for a play or musical where any amount will do.

Make sure you're raising enough money, too. I've seen people hit their $15,000 goal only to put another $15,000 of their own money into delivering their product. The key, when figuring out your expenses, is to calculate how much it would cost someone to do all the work that needs to be done. Sure, you may be willing to ship orders, yourself, for free. But, what if your campaign goes viral, did you calculate how much it would cost to pay employees to do the work that you were willing to do for free?

Also, don't forget that Kickstarter will take a total of 8% – 10% for its own fee and its payment processor's fee. And, don't forget about your shipping costs. Think long and hard about shipping internationally since you can only choose a single international shipping price to charge your customers. It's best to figure out what's the most expensive country to ship to and use that figure.

Last, but not least, don't forget about taxes. How will you account for the money you get through Kickstarter? Will it be part of your personal (sole proprietor) income or your company's revenue?

2. Rules. Before you get too serious about Kickstarter, be sure to read the rules. We're talking about three basic rules spelled out in less than 200 words. The key things to know is that your campaign must create something to share with others. Think: products, both physical or virtual; not services. Kickstarter is designed to take a prototype to market. They don't want photorealistic mockups. They also don't want you to raise marketing funds for a product that's already in production. Additionally, raising funds for charities or investments is a no-no. Be sure to check their list of prohibited items, too.

A local college student once reached out to me for feedback on his Kickstarter video. His team was selling a fashionable product and they had a decent video. My only warning was, since their video mentioned a portion of the funds would be used for charity, that it would violate the Kickstarter rules. His reply, when they went live, was that Kickstarter had accepted their project. Great, right? No! They raised nearly $16K of a $20K goal only to be shutdown before the campaign ended because the charity aspect was a violation of the Kickstarter rules. Of course they were "in shock" when their "dream was being taken away from" them. Know the rules. But, that doesn't mean the rules won't change, which they do, from time to time.

3. Video. This is where the rubber meets the road. Our meetup group has studied many Kickstarter videos and we've learned the best practices. Your video should be about three minutes long. It should state the problem you're solving followed by your solution and a personal story. It needs to look professional. The video is your key marketing tool to close the sale. But, you don't want it to look too professional. In other words, you don't want to seem like a big corporation, but, rather, a passionate mom and pop shop with a track record for success.

Also, it's a good idea not to sprinkle the word Kickstarter throughout your video. You may end up paying $500 – $5,000 to have your video made. What if Kickstarter doesn't accept your campaign? If you want the word Kickstarter in your video, then add it at the very end where it can be easily edited out if you need to switch to another crowdsourcing platform.

4. Duration. How long should your campaign be? Your choice; up to 60 days. There is no right answer. Shorter campaigns create a sense of urgency. But, longer campaigns give you more opportunities to generate buzz, press, and PR. In my experience, I've heard very few people say they wished they had run a shorter campaign.

5. Marketing. If you build it, they will come (but only if you do lots and lots of marketing). The key is for your Kickstarter campaign to kickoff with a lot of momentum. You'll need to prime your e-mail marketing list, create a website with pre-launch info that directs people to your Kickstarter campaign, and learn the ins and outs of Facebook marketing. Facebook, more so than Google Adwords, will give you great marketing and demographic analytics. You don't need to know it all, but you will need to learn how it works along the way. You should follow bloggers in your market leading up to your launch. Then, when you launch your campaign, reach out to bloggers and reporters, with a nearly polished piece that they can publish.

6. Rewards. Keep your rewards as simple as possible. A large graphic with the price of each reward will go a long way. And don't offer t-shirts as rewards unless it directly supports your campaign. If your campaign is supporting most anything other than clothes or the performing arts then t-shirts are probably a bad idea. You don't want to be in the t-shirt designing, printing, and shipping business.

7. Goal. You've reached your goal? Great! When your fundraising campaign officially ends your Kickstarter campaign webpage will be frozen in time. The keen Kickstarter campaigner will already have an e-commerce website launched and operators standing by to take orders. Of course, orders taken on your website will be more expensive and ship later than your campaign contributors who believed in you before you reached your goal. A few minutes before your campaign ends, the super-savvy Kickstarter campaigner will update their Kickstarter page with info on where customers can now order the product. See the "About this project" section of this campaign. Even though this campaign ended 18 months ago, it's still an active sales channel.

8. Expectations. The hallmark of good customer service is managing customer expectations. You may even consider briefly educating your customers as to how Kickstarter works since more people don't know about Kickstarter than do. The first-time Kickstarter backer may think it's just another e-commerce site where they pay and then the item ships.

Kickstarter projects are notorious for shipping products late. The key is to communicate with your customers. Don't tell them the earliest possible ship date, rather tell them the latest. This goes in line with under-promise and over-deliver. I recently had an unpleasant experience from a company shipping their second product. Their first product was a successful Kickstarter project that validated them as a viable company. This allowed them to iterate on their MVP. From there, they were able to market and sell their second product directly to consumers. The problem is they were late with their second product. For 60 days, after they charged my credit card, they kept underestimating when my order would ship and sometimes they simply didn't respond to me. In the end, their product met my expectations, but it was a lousy customer experience as I nearly asked my credit card company to run a charge back.

The Future

If you're looking for investors then consider launching your MVP on Kickstarter. Even if you're not, it's a great way to mitigate risk regardless if you're trying to build a corporation backed by VCs or simply a life style company. The bottom line is don't be afraid to try, learn, and try again. I've seen entrepreneurs fall short of their Kickstarter goal, only to come back and succeed.

Friday, February 6, 2015

Bitten by the MAC

I've seen different funding terms and conditions for startups. One that I haven't read much about is the material adverse change (MAC) clause. It's a contingency legal provision often found in investment or M&A contracts. The challenge is that it gives the funder the option to walk away from a deal at some point in the future. It's rather nebulous to say the least. When it's invoked it can be catastrophic for the other party since it's coming at the worst time, under the worst conditions.

I saw a MAC implemented in 2007 and then executed a couple years later. A high tech startup raised about $2.5M from angels and VCs. Part of the syndication involved a bank based in Silicon Valley. Since retail banks don't traditionally invest in startups, their portion came in the form of a $500K bank loan. One of the bank's conditions was that the startup had to bank only with this Silicon Valley bank. Also, the bank's half a million dollars was to be the last money the startup spent. The bank's contract also included a MAC clause.

Enter the recession of 2008. The startup was down to their last $620K and managing their burn rate accordingly. Then the bank indicated they were going to invoke the MAC clause. The CEO discussed fighting this with the company's board of directors. Unfortunately, the board was mostly made up of outside VC directors and they didn't want to fight it. Their reason was that they were involved in many deals with this prominent Silicon Valley bank and they didn't want to rock the boat.

Did the bank go off the reservation when they invoked the MAC clause? Probably not. But, the outside board of directors were certainly looking out for themselves rather than their investors.

Tuesday, September 2, 2014

Crowdsourcing


Kickstarter Meetup at 3RDSPACE: "The video is key."

Go Lean, Kick Start

When launching a startup, go lean. Brant Cooper describes this technique in his New York Times bestseller, The Lean Entrepreneur.

When launching a product, crowdsource. Most businesses design, build, and market a product hoping it'll sell. Crowdsourcing, on the other hand, cuts the risk. Crowdsourcing entrepreneurs build a prototype first. Then they sell it before mass producing it. The lean startup method is the opposite of what happened in the Dot-com era. In the late 1990s, VCs funded many businesses based solely on an unvalidated idea.

3RDSPACE Kickstarter Meetup

I co-organize a monthly Kickstarter Meetup at the 3RDSPACE coworking location in University Heights. I've seen people launch projects that fell short of their fundraising goals. I've also seen teams make their goal and then discover they severely underestimated their costs. Crowdsourcing isn't an alternative to entrepreneurism. Crowdsourcing is entrepreneurism, done smartly, with all its risks and rewards.

Biggest Kickstarter Ever

Coolest Cooler's clear rewards.
The biggest fundraiser on Kickstarter is Coolest Cooler. It ended four days ago after raising $13,285,226. I've learned some important techniques while participating in our Kickstarter Meetup. The key to launching a successful crowdsourcing campaign is the video. Don't be cheap and don't put the word Kickstarter throughout the video. If Kickstarter doesn't accept your fundraising campaign you can try another crowdsourcing platform. Also, don't make the rewards confusing. If you're making software, don't give t-shirts as rewards. You're in the software business, not the t-shirt business.

The two leaders in crowdsourcing are Kickstarter and Indiegogo. Since these are new businesses, they're still working out their rules. The key difference between these two companies is that Kickstarter is an all-or-nothing campaign. If you don't hit your fundraising goal then you don't get any of the funds, but with Indiegogo, you do. So, be careful about your reward choices. If you decide to raise $15,000 on Indiegogo but only get $1,500 in pledges can you still deliver your rewards, profitably?

Crowdsourcing isn't the be-all and end-all of startups. Its key benefits keep entrepreneurs focused while validating their ideas. A good story and clear message will go a long way to bring a product to market while minimizing risk and out-of-pocket costs.

Monday, September 1, 2014

CityLite: From failure to success in a year

This morning I discovered that a product I bought last week, CityLite, had been a failed Indiegogo project. When the CityLite campaign ended, earlier this year, they had raised only $4,606 of their $80,000 goal. Somehow, this went from a failed (or perhaps abandoned) campaign in Denmark to a product I bought in Solana Beach last week. That's not bad considering some fully funded crowdsourcing projects, like Tile, can take a year to deliver.

Tomorrow, I'll post what I've learned after being part of a team that runs a Kickstarter Meetup series.


Wednesday, July 30, 2014

A Typical Wednesday

Today I was answering questions for an article interview. The interviewer asked me what my day looked like. I'm fond of saying, "I do nothing," but she deserved a better answer, so I gave her my highlights from today.

8:30 – 10:30: Attended One Million Cups, downtown San Diego.

11:00 – 1:00: Attended Tech Coffee Meetup, where I snapped this photo, Solana Beach.

1:00 – 1:30: Stopped by the San Diego Electric Bike Company to buy a saddle bag, Solana Beach.

1:30 – 3:00: Answered interview questions at Third Space, Hillcrest.

3:00 – 5:00: Fixed Swift syntax bugs as a result of latest Xcode beta release changes, Golden Hill.

5:00 – 6:30: Attended EvoNexus Wing Wednesday Meetup, downtown San Diego.

6:30 – 8:00: Enjoyed an adult beverage at the Tipsy Crow, Gaslamp Quarter.

8:00 – 9:00: Stalked a fellow, former, Apple coworker on Foursquare to a restaurant, South Park.

9:00...: Kicked back with some homemade limoncello.

Update: Here's the published piece.

Thursday, April 24, 2014

Work Life Balance at a Startup


Last April I heard Brad Feld speak at UCSD.


It was a common VC talk. Brad discussed his ideas about growing the San Diego startup community.

Then came the final question from an audience member. It was about maintaining a healthy work-life balance while running a startup. Brad's answer was the most practical relationship advice I've heard.


Nothing is More Important Than Her Call

Whenever Brad's wife calls, he answers. Always. Brad told us that she knows he'll take her call so she doesn't abuse it.

Update: Big thanks to Jerry Jones for pointing out an example of Brad taking a phone call while on the air.

Someone told me they heard Brad take her call during a podcast interview. But that was hearsay. This morning I was having coffee with the Giesen twins who validated that Brad practices what he preaches. The twins watched Brad take his wife's call, on stage, a couple years ago.

Monthly Dinner of Dumping

If something is bothering Brad or his wife then they wait for their monthly dinner. That's when they get to unload anything and everything on each other. The key is to do this every month on the same day. Sometimes this is a simple 20 minute process. Other times the dinner lasts for hours with tears and food servers who won't go near their table until things simmer down.

Life, like work, requires dedicated perseverance.


Author: Joe Moreno