Benjamin Kuo’s Blog

Entretech, one of the organizations in Los Angeles which is focused on helping out high tech entrepreneurs and other high tech companies here, has just invited technology companies to apply for their Fifth Annual Entrepreneurship Awards. The awards deadline is November 29th.

The parameters behind the awards, according to Entretech:

This years’ awards will honor leading-edge companies in three categories based on annual revenue: 1) Start-up - under $1 million; 2) Emerging - between $1 million and $8 million; and 3) Growth – over $8 million.

Companies may self nominate or be proposed by a third party or organization.  Applicants must demonstrate a significant market potential for their product or service and a strong likelihood for achieving that potential.  Likely winners will be:

*     technology companies, owning and developing proprietary technology

*     in business 2-10 years

*     located in the Greater Los Angeles six counties region (Santa Barbara, Los Angeles, Orange County, San Bernardino, Riverside and Ventura)

The award is sponsored by PricewaterhouseCoopers (which is also a sponsor of socalTECH). Prior award winners include LegalZoom, Snap.com, Prolacta Bioscience, NextAce Corporation, Guidance Software and Evolution Robotics. The awards also go hand in hand with Entretech’s “Hot Companies Breakfast” in January, when the finalists will be announced; the winners are announced in March.

There’s actually a lot of opportunities for Southern California companies to get recognition for their efforts; there’s a broad range of organizations who are doing their best to get the word out about the successful companies in the region.  Among the other groups with their own awards events: The Los Angeles Venture Association (LAVA); the Technology Council of Southern California; Ernst & Young’s Entrepreneur of the Year program (OC, San Diego, and Los Angeles); several programs from the AeA, including a program in Orange County/Inland Empire and one in San Diego.

(disclaimer: I’m on the board of directors of Entretech, and often help out with several of the other awards listed above…)

There’s a interesting article in the New York Times today talking about the ingredients of why Silicon Valley spurs so many startups. There’s a funny quote from Craig Johnson, a Bay Area VC, who says:

MR. JOHNSON, the venture capitalist in Palo Alto, noted that the greater Los Angeles area also has a pool of talented engineers (working at aerospace companies like Lockheed, Northrop and Hughes) and great universities (notably Caltech and U.C.L.A.) and plenty of money to invest. “But in Los Angeles,” he said, “people are scattered across a wide area; everything is more spread out.”

It’s harder for entrepreneurs to meet with one another and with investors, he added. And that means connections take longer, deals move slowly, fewer companies are formed. “Like a gas, entrepreneurship is hotter when compressed.” he said.

I found the entire article amusing because it demonstrates the “perception lag” we have here in terms of our technology activity. There’s a lot more, entrepreneurial companies here supplying the “raw material” for Southern Californias tech industry than Lockheed, Northrup, or Hughes. In fact, I don’t see a whole lot of crossover from the defense engineers to join startups. What I do see, is the people who have worked for successful progressive companies - Overture, Broadcom, Qualcomm, LowerMyBills, Pricegrabber, MySpace, etc. - driving the growth in the industry.

Willl Johnson, a Southern California entrepreneur and blogger, recently posted about the perceived lack of interest in working for startups here, saying:

..we probably’d don’t have the: a) same support infrastructure (meet-ups, networking events, etc.); b) history of success; and c) abundance of start-up companies (so if one fails there is another to jump on).

I’d argue that it’s all a perception, rather than a reality. There are more than enough meet-ups and networking events; we’ve got plenty of examples of successes in the area; and there are plenty of startups to jump to in case of a startup failure.

In terms of meetups and networking events: the major problem here is not so much the number of events — it’s the fact that there is a fragmentation in the market. I regularly run into people promoting events who don’t realize they are running an event on exactly the same night as someone else approaching the same market. LA is so spread out and populous, that you don’t end up with a single community–you end up with multiple communities who may or may not be aware of each other. In terms of networking opportunities, just looking at the past couple of weeks, there was Thursdays In The Mix on October 4th, on the same night as an Entrepreneur’s Mixer, which was followed by VentureNet on the 5th; then a OC Innovation Mixer on Monday in OC at the Hive from the Digital Coast Roundtable;  then there was Lunch 2.0 on Friday the 12th at Yellowbot. And those are just a fraction of the networking events and opportunities here.

With the “history of success,” the issue is purely one of perception. There have been an astounding number of very successful companies spread across Southern California–but, because of the limited high tech press attention to this geography, you do not get the “branding” and awareness companies in Silicon Valley gets. Reading the local newspapers, all of the technology coverage is on Silicon Valley startups — at the expense of well funded, highly regarded local startups — because the local papers are pulling from the technology AP feeds which are based from mostly Silicon Valley writers. My favorite example (which I’ve mentioned before) is the folks at Applied Semantics (the company which developed the engine behind Google Adsense, purchased pre-IPO by Google). No one knows them. Even the bigger names - the Overtures, LowerMyBills, PriceGrabbers, ValueClicks, etc. — are not household names.

Finally, the fallacy that there aren’t many startups here is again, just another perception problem. There are an ample number of high tech startups here, it’s just not that many people are aware of them–again, because there isn’t the same, widespread coverage of companies here than of the latest Silicon Valley darlings.

There’s an interesting post this morning by Mark Davis, a VC at DFJ Gotham on Silicon Alley Insider, talking about name dropping — which is the habit of (usually green) entrepreneurs of mentioning someone famous/influential in hopes of making their idea or company sound better. Other similar things to avoid if you’re an entrepreneur:

1. Mentioning that you’ve “just met with (tier 1 VC) yesterday” or “have a meeting scheduled with (notable VC investor) tomorrow”. Lots of companies and people with not-so-great ideas can set up meetings with VC firms–that doesn’t validate your idea unless they actually fund you.

2. Including non-customers (and logos) in your PowerPoint. The typical use of this is including Oracle/IBM/Microsoft/Google/Yahoo on a slide labeled “Customers” — and after you dig in a bit into their presentation you realize these are “potential” customers on a “prospective target list”. btw — NEVER do this when a VC is on the board of your “proespective company”, you’ll never get funding when they ask their CEO what they think of your company. This also tends to be abused in “Sales Pipeline” slides.

3. Probably an LA thing, but if you’re a company selling enterprise software, the fact that you have (insert Hollywood celebrity here) on your board of directors isn’t so flattering. I run across dozens of companies who have random Hollywood actors on their board — yet, I can’t think of many Hollywood actors who are well known for their business acumen.

One of the questions I often hear listening in on pitches to angels and VCs are some of the questions about assumptions behind their financial model. In particular, there’s often a question of how an entrepreneur determined the cost of employees–which are usually the biggest expense for a startup.

Guy Kawasaki has just posted some numbers from Glenn Kelman, CEO of Seattle real estate startup Redfin, on real estate costs, recruiting costs, and other expenses at the firm, which might be useful for startups building their financial plan.

Toni DasGupta, a local angel investor at the Tech Coast Angels, has an interesting post asking whether entepreneurs have ADD.

We’ve just posted a new article in our startup section, where we are featuring contributed articles from experts on various topics of interest to entrepreneurs.

The article, Selling a Business: Ten Tips For Enterpreneurs,  comes from Scott Edward Walker, a corporate lawyer located in Los Angeles.

Hopefully these articles are useful. In case you missed it, last week’s article was Basic Information About Patents from SoCal IP Law Group.

We’re trying to build up a good library of unbiased, useful information to entrepreneurs and the local technology community with our Startup section. To that end, we’ve just posted a good primer on patents from Steve Sereboff, Mark Goldstein, and Michael Harris at SoCal IP Law Group to our contributed article section.

Sid Mohasseb over at Venture Farm (and who is also an active angel investor) has a good post on what a lifestyle business is. One thing which I see (and I’m sure lots of angels see, as well) are businesses which — although they may be profitable and growing — are better defined as lifestyle businesses than something venture-fundable. Generally, these businesses don’t have the possibility of rapid scaling, quick merger/acquisition, or other exit that a venture investor would be interested in; however, that doesn’t mean it isn’t a good business. It just means you’re unlikely to attract outside investment.

I recently emailed out information about the Technology Council’s upcoming VentureNet event (www.venturenet.org), which is a great opportunity to get exposure for your company to venture capitalists, angel investors, and others in the community. Interestingly enough, one of the companies that I’d provided with information about the event treated my email with quite a bit of paranoia, asking on a public forum if “this is a scam”.

Unfortunately, I’ve noticed that “new” entrepreneurs–that is, people who haven’t built a business before, raised money, or worked much in a business role–tend to be fairly paranoid.

I can’t count the number of times I’ve been asked (as a journalist) about signing an NDA — which absolutely no journalist, and no self-respecting venture capitalist–would ever do.  I’ve had entrepreneurs ask for news coverage, but don’t want to release details on what their companies actually do in fear of someone else learning about it; companies asking us not to include news coverage on their firms; and other asking to have full “approval” control over what we write on them.

Successful entrepreneurs know that:

1. You’re never going to get VC funding if you ask a VC for an NDA
2. Journalists will write what they want, and they absolutely won’t let YOU drive their coverage.
3. It’s not your idea, it’s your execution, and finally
4. You’ve got to have a level of trust in human beings to succeed

Perhaps I’m just naive, but it seems to me that the bulk of people in the technology industry — at least here in Southern California — are honestly looking to help out new entrepreneurs and companies.  For those with a vested interest in growing the community, they are willing to refer people to others, offer guidance and help, and nudge others along the path to funding and success. There might be some out there (though no one comes to mind) who are just in it to scam you out of money, but the community here is very, very supportive of new entrepreneurs.