Archive for the ‘Entrepreneurship/Venture Capital’ Category
Advising a Potential Thiel 20 Under 20 Fellow
The past few days have been full of debate around the Thiel 20 Under 20 fellowship, which encourages 20 students to stop out of school and build the next great tech and science companies, and the broader debate about education, and especially entrepreneurial education, in the USA. It started with the TechCrunch piece on Peter Thiel’s view that the real bubble is in education. Then Vivek Wadwa replied with Friends Don’t Let Friends Take Education Advice from Thiel. Then, Dale Stephens, a Thiel finalist himself, replied with his own defense.
As someone who considers 3 of those who received the fellowship as close friends (and, maybe, family!) I’ve been asked directly for advice on whether to accept it. While I don’t know the right answer for each person, I want to make sure I’m helping them think about the right questions to ask themselves and others so they can ultimately decide on their own.
Here are some of the criteria, perspectives, and questions I’ve been thinking about:
- What are you (planning on) majoring in?
If the answer is something fuzzy (i.e. non-technical), then it can probably be learned in other settings, in which case the most important parts of the educational experience are likely the connections, experiences, late-night chats, etc. If the answer is something technical (likely computer science, EE, ME, or environmental engineering), those skills are tougher to learn on their own, but can be done.
- How much schooling is necessary to achieve what you want to get out of it?
Is it one year? Two years? If you are two years in, and you went to the school for connections, experiences, network, etc., is the marginal benefit of another year at the same school greater or less than Peter Thiel’s network? The answer is pretty obvious here.
- If your field is something much more technical and capital intensive, how will you manage that?
Where will you get the capital? Will they help you? Is the Thiel network just as strong in cleantech (if applicable) as consumer internet?
- If you’re sitting in your class at Stanford as a junior having turned down the Thiel Fellowship, will you be kicking yourself?
Yeah, while on Facebook.
- Will this opportunity come again?
Maybe, but probably not for you.
- What’s the upside in the Thiel case?
The Forbes 400 and a real contribution to society.
- What’s the downside in the Thiel case?
Going back to school to finish 1-2 years likely when your current school friends have already all graduated.
- What is the expected value of the fellowship?
An unbelievable experience that cannot be replicated. Peter Thiel is not one to let something like this, which has been hyped and criticized so much in the popular press, fail.
My Takeaway: I’m clearly bullish on the fellowship and think it is a no-brainer for my internet friends. But I do wonder what sorts of guidance will be provided to those who have more technical ideas that may not be as conducive to rapid failure & pivoting during a 2 year stint and would require more capital and technical expertise.
What other criteria would you add if you had to advise the fellowship winners?
New York City Innovation
When we think of where innovation happens in the USA, there is no question that Silicon Valley comes to mind first. But it looks like Mayor Bloomberg – with the help of Stanford, entrepreneurs, and various VC firms – may make it so New York City comes to mind second, in front of the Kendall Square/Cambridge area and Research Triangle Park in North Carolina.
Mayor Bloomberg came and spoke at the Stanford Institute for Economic Policy Research yesterday. His talk/argument on why NYC is and could be a great hub for innovation included:
- NYC is America’s largest college town, with over 600,000 students. Many universities are under renovation and expansion, including Columbia’s new biomedical research campus.
- New York has significant unused waterfront, warehouses, and old tracks on the west side of Manhattan. With subway construction planned there, it could help attract a wave of innovative companies.
- The NYC Entrepreneurial Fund will pair private VC dollars with public government dollars to help jumpstart innovation – the first public/private pseudo-VC of its kind in any major city.
- Incubator programs, which will help researchers and innovators commercialize their technology, have been created in a range of industries.
The big downside of NYC is the lack of technical talent. A good engineer can live in Silicon Valley and never have to move for the rest of his life irrespective of acquisitions, failings, and buyouts, but only a great engineer can do the same in a place like New York. While there are some great early startups in New York (Hunch, Etsy, Foursquare, etc.), the number isn’t nearly as high as Silicon Valley.
I’m hoping that this changes with the increased focus on entrepreneurship, the possibility of a Startup Visa, and the influx of investment dollars from existing VC firms opening NYC offices (like Accel) and from traditional investment banks trying their hand in later stage venture capital (like Goldman Sachs and JP Morgan Chase). Oh, and Stanford potentially opening a graduate R&D and innovation “lab” for information technology in NYC wouldn’t hurt either.
Mobile Printing
The digital world and the physical world have merged in tremendous ways over the past three years. Computing power has become nearly ubiquitious, mobile phone usage is often more pervasive than access to clean sanitation in the developing world, and technologies like Sixth Sense, GPS, and Red Laser are moving us that much closer to eliminating the line between what’s digital and what’s physical. They are also making us that much more dependent too, with many formerly tangible services (phone books, travel agents, journals, and even financial transactions) being moved completely online.
But one connection that still hasn’t mobilized or changed in a meaningful way is printing from computers or mobile phones. Dominated by large, public, dominant companies of the early 2000s (HP, Compaq, etc.), printing hasn’t changed much. Color printing, laser printing, and wireless printing have all happened within the last 5 years, but the actual hardware has remained the same: large, stagnant, and immobile.
Beign able to take laptops and iPhones on trips and into meetings are revolutionary, but if we need to print something and aren’t in our home or office, they are pretty useless. Often, the only time college students, who study all over campuses, need to come back to their room’s desk is to plug their USB cable into their laptops to print.
We need laptops or iPhones with the ability to print small amounts of paper directly out of the laptop or phone itself. Although this may slightly bulk up the design of laptops and be impossible in products like the Macbook Air, I bet cartridges and other components could be designed cleverly enough to make the change hardly noticable.
Mobile printing could be a small addition that could disrupt the printing industry completely. In fact, it could almost eradicate it like cell phones have done to landlines.
Timing and Valuation
I met with a friend, the CEO of a very cool Internet startup in San Francisco who had just closed his Series B. In the current “bubble” of Internet company valuations, I was surprised at the valuation of his growing, hot, revenue generating company. As someone who generally thinks prices are too high in today’s Internet deals, his wasn’t as high as I thought it should and could have been.
As a comparison, a new competitor in the same space just closed their Series A. This competitor is doing less than 1/10 the revenue of this CEO’s company, doesn’t have as developed of a product, yet raised their Series A at the exact same price as the Series B of the first company.
So what happened? Was the competitor’s price too high? Almost definitely. Why? Apparently, they had one of the best pitches most investors have ever seen and had created an amazing hype around the business, engaging two top VCs in a bidding war. But was the CEO’s company undervalued? Almost definitely too.
It turns out that this CEO had gone out to raise the follow on financing too late. He was presenting to firms only six weeks before his company was going to run out of cash. In fact, the price would have been even lower if another VC had not come in and bid up the price to the current level. Generally, with the exception of the stories of VCs not letting CEOs leave pitches without taking a check, it takes VCs at a minimum at least 3 weeks from beginning to money in the bank. And that’s assuming the company is perfect, the valuation is spot on, and nothing goes wrong.
The lesson: it may seem obvious, but seems to be forgotten when CEOs are heads down trying to run their companies. CEOs generally want to start fundraising as late as possible so they can show as much progress as possible, which should value the company higher. But sometimes they start too late. CEOs of young companies should be sure to start fundraising at least 3 months before money is going to expire, with a target of closing at least 1.5 months before, or else risk getting hit on valuation to save the company.
Innovations & Inspirations 