Benjamin Kuo’s Blog

Here’s the weekend roundup of some of the recent coverage elsewhere in the technology/Silicon Valley press of Southern California startups. Guy Kawasaki profiles MatchActivity (Los Angeles). StartupSquad profiles ElephantDrive (Los Angeles). The alarm:clock comments on the VMIX (San Diego) deal. Slacker (San Diego) gets mention on TechCrunch,  VentureBeat, CNET and everyone else.  Idealab’s Aptera gets techie attention at engadget.

We’ve covered this in socalTECH before, but it looks like the private equity world is finally waking up to the fact that Southern California is now consistently #2 in terms of venture capital funding. Dan Primack, a journalist for Private Equity Week, the Thomson Financial publication that covers private equity and venture capital, mentions in his PE Week Wire email this morning:

*** NVCA president Mark Heesen gave a speech in Colorado last month, in which he mentioned that New England was in danger of losing its traditional position as the #2 regional recipient of venture capital funding (behind perennial leader Silicon Valley). So I looked it up, and he’s right. If the first quarter were to end today, New England would rank just behind Southern California in terms of amount of capital raised (although it has more companies funded). One big reason: VCs are funding as many, if not more, big pharma deals in San Diego as they are in Cambridge/Boston. Final numbers in a few weeks…

(emphasis mine…)

Josh Kopelman at First Round Capital has an interesting post on his blog entitled Failing Cheaper talking about how it’s cheaper and easier now to prove or disprove your business ideas, a followup to comments by Benchmark’s Peter Fenton. First Round has made local investments in BiggerBoat. Mazen Araabi, who recently joined First Round Capital, helped with the post (Mazen was most recently an MBA student at UCLA, where he was President of the Entrepreneur Association–and was at MySpace, ResponseBase, and XDrive, all in Los Angeles).

Slacker, a San Diego startup, is getting lots of press today across the Silicon Valley blog landscape. Coverage in: TechCrunch, PaidContent, VentureBeat, CNET, as well as widespread AP coverage. The firm has received funding from Mission Ventures, Sevin Rosen, and Austin Ventures.

Some recent coverage of local companies elsewhere in the world:

Michael Eisner’s Tornante Company announced its new media studio Monday, with coverage from the Wall Street Journal, Marketwatch, and even USA Today.

GigaOm covers free SMS services–including Los Angeles-based Teleflip (funded by GRP), and Michael Robertson’s San Diego-based Gizmo SMS service.

San Diego-based Eyespot received some attention from CNN/Fortune, which covered the firm’s web video editing software last week.

PricewaterhouseCoopers is holding its quarterly event tomorrow in Los Angeles that covers the last quarter of venture capital funding results and trends. It’s always an excellent event to attend. I’d encourage people to attend–it’s not only a great chance to hear about the latest venture funding trends, but there’s always a great set of people worth networking with at these events. Randy Churchill at PWC, who is very involved in the local technology community, always has a great lineup of speakers for the event.

Please join the Los Angeles Venture Association, PricewaterhouseCoopers and a distinguished panel of industry experts and VCs for their insights on the 2006 year-end results of the PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial.

The MoneyTree Report is a quarterly study of venture capital investment activity in the United States. As a collaboration between PricewaterhouseCoopers and the National Venture Capital Association based upon data from Thomson Financial, it is the only industry-endorsed research of its kind. The study is a staple of the financial community, entrepreneurs, government policymakers and the business press worldwide.

Tuesday, March 13, 2007

The Regency Club
10900 Wilshire Blvd.
Los Angeles, CA 90024
7:00 a.m. – 8:00 a.m.  Registration, Networking & Breakfast
8:00 a.m. – 9:00 a.m.  Program & Panel Discussion
The MoneyTree Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. The report includes the investment activity of professional venture capital firms with or without a U.S. office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing.

(PwC also happens to be a sponsor of socalTECH).

Marc Averitt, who is a local venture capitalist at Okapi Venture Capital, was also at the Montgomery Conference last week, and just posted a great piece that goes into detail what VCs are looking for in entrepreneurs. I mentioned how the team is really the most important part of what venture capitalists are looking for in my post last week, and Marc and I apparently had the same thoughts after the conference:

…most VCs invariably serve on a variety of panels on any given year and, inevitably, are asked what we look for to make our investment decision. We all typically give the same canned reply about the size and nature of the market being addressed… the technology and/or competitive advantages the company will have relative to its competition in such market… the financial strategy and risk profile associated with building the business in question… and then all agree that the biggest emphasis really is on the people before moving on to another question.

This is completely off topic from Southern California high tech companies, but I thought I’d post this anyway. I spent the last week without a printer, which suddenly failed on me last week. As usual, the unit was out of warranty and more expensive to fix than to replace.

So far in the last year or so, I’ve gone through:

• Two hard drives (1 Maxtor - complete failure, 1 Seagate - under warranty)
• Three printers (1 HP, 1 Epson, 1 Canon)
• Two telephones
• Two DVD players
• One in-car stereo
• One iPod shuffle
• One iRobot Roomba (within a couple of weeks of buying it - within warranty)

Unfortunately, it seems like there’s no durability in consumer electronics nowadays (or any compelling reason for consumer electronics firms to care that their products last beyond the warranty period), and you’ve just got to assume you’ll be replacing whatever electronic item you’re buying today in 6-9 months. I just wish I wasn’t filling a landfill with all the stuff I have to continually replace!

I spent the last few days at the Montgomery Technology Conference, a venture capital event put on by Montgomery & Co. The conference — which was held in Santa Monica – included a number of both private and public companies, presenting their companies to both early and later stage investors.

For those who have not been to a venture capital conference, these conferences offer a way for companies to tell their story to a large group of high quality investors (plus, in this case, to also watch Tim Draper of Draper Fisher Jurvetson rap onstage). The audience here included most of the top tier venture capital firms from throughout the country. It’s an extraordinary opportunity to pitch your venture to VCs who you’d otherwise have difficulty getting to. Of course, it’s tough to be selected to present at these conferences; in most cases you’ve got to have shown some momentum, have some good investors either behind your firm or who have recommended you to the conference organizers.

However, sitting through the sessions, I was amazed at how many companies — including some with great venture capital backing — fail to cover some of the basics that venture capital firms rely on to decide whether they’d be interested in a company. Many companies focus too much on their technology; and not enough on the team, sales and marketing, or execution. I have yet to meet a venture capitalist who doesn’t look first at the team — who are you, what’s your experience in the industry, and your track record–and why should they bet their dollars on your company, first. Time after time, I saw companies who spent 80% of their pitch trying to go through the intricacies of their technology, and glossing over the team, go-to-market, and execution ability.

It’s my observation that although technology is a very important piece of the puzzle, which VCs are also looking closely at, there’s also several other key pieces that investors look to evaluate investments in a firm. A couple of these include:

1) Your Team - who are you, and why are you the right people to make this happen?

2) Go To Market - how do you sell your product, who buys it, and what’s your market. And by market, not how big are the IDC numbers–but who are your buyers, and why do they buy?

Given the amount of focus that venture capitalists give to how important a team is in their decision to make an investment, I was surprised at how many companies tried to explain their complete technical architecture to the VC folks, instead of talking about the team, the market, and their ability to execute.

I’ve recently noticed a new trend in firms focusing on moving very, very early stage startups from either an idea or a very early, seed stage firm, to a real, fundable venture. These companies focus on taking seed stage companies — typically with a couple of founders or very early on in developing a product — and building them out to the point that a venture capital firm will fund them. In the process, they might invest some dollars, but the key point generally is they apply their operational experience to the companies to make them fundable. These either take the form of an accelerator organization, or in many cases seed stage angel/VC fund with a very operational (rather than financial) focus.

In the wider venture world, this might be a Y Combinator or a Techstars.  InSouthern California, there are actually a number of companies also pursuing this type of operationally focused, venture acceleration model, including Venture Farm and Momentum Venture Partners. There are also a number of early stage funds which take the same approach–with more operational than financial focus–such as Groundwork Equity, and Great Pacific Capital.

I ran an interview with Sid Mohasseb at Venture Farm Friday, and I’ve also spoken with Andy Wilson at Momentum Venture Partners about their companies.