When Talking About Business Models, Remember That Profits Equal Revenues Minus Costs
http://www.avc.com/a_vc/2009/01/when-talking-about-business-models-remember-that-profits-equal-revenues-minus-costs.html

More excellent insight from Fred Wilson about Internet startups, online business models, and revenue vs. cash. Important insight for anyone in business that needs to understand how next-generation economics are not what Wall Street was doing, but what the Web is doing today.

o a business is worth the sum of all of its future profits, discounted back to a net present value (buffet thinks this is the intrinsic value). its a lot easier to decrease costs than increase revenues. forget that ROE is so high for companies like craigslist. have a 1B company on 30 employees. any need to get big and grow.

Good article on Web based business profits, costs and revenues

Raising money is never easy, but in a recession it gets even harder. Here's a quick guide to raising money in a down economy.

Start a business

Lean startups - a lesson in bootstrapping.

Marc Andreessen discusses his new venture fund with Charlie Rose, as well as talking about why Twitter is a good thing

Pretty good list of options for burgeoning game developers.

Several weeks ago, we took a look at the founders’ pie. I noted that frequently the founding team divides 100% by the number of founders. I also cautioned that this is the WRONG WAY! I then went on to identify the factors that should be considered when making these decisions. Since then, I have had several people tell me that while what I wrote certainly made sense, it wasn’t very helpful. They said that when it came to “rug cutting time,” absent an alternative method, equal shares was the only method that seemed to be “fair.” As a public service, I have “invented” a Founders’ Pie Calculator. As you will soon see, this calculator is not particularly profound. In fact, I’m sure I haven’t “invented” it, but, at the same time, I have never seen it before. [Caution: perhaps there’s a fatal flaw that I haven’t considered.] Its primary benefits are that it provides a way to quantify the elements of the decision making process, and that it appears to be logical and fair.

Equity Calculation between founders

When we sold our startup in 1998 I thought one day I'd do some angel investing. Seven years later I still hadn't started. I put it off because it seemed mysterious and complicated. It turns out to be easier than I expected, and also more interesting. The part I thought was hard, the mechanics of investing, really isn't. You give a startup money and they give you stock. You'll probably get either preferred stock, which means stock with extra rights like getting your money back first in a sale, or convertible debt, which means (on paper) you're lending the company money, and the debt converts to stock at the next sufficiently big funding round.

nor tactical advantages to using one or the other. The paperwork for convertible debt is simpler. But really it doesn't matter much which you use. Don't spend much time worrying about the details of deal terms, especially when you first start angel investing. That's not how you win at this game. When you hear people talking about a successful angel investor, they're not saying "He got a 4x liquidation preference." They're saying "He invested in Google."

How to Be an Angel Investor

Notes from Paul Graham on angel investing. Actually pretty interesting. The key, as he describes it, is to pick the right companies... the terms you get when investing don't matter much and can even hurt your chances of success if you're strict enough.

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Google Ventures seeks to discover and grow great companies - we believe in the power of entrepreneurs to do amazing things. We're studying a broad range of industries, including consumer Internet, software, hardware, clean-tech, bio-tech and health care. We invest anywhere from seed to mezzanine stage and embrace the challenge of helping young companies grow from the garage to global relevance.

Venture Capital - by Google. We seek to discover and grow great companies - we fundamentally believe in the power of entrepreneurs to do amazing things.

1. How will you reach a massive audience? - Every Net entrepreneur should answer these questions: How do we get to one million users? Then how do we get to 10 million users? Then how will you get deep engagement by your users. 2. What is your unique value proposition? 3. Will your business be capital efficient?

ages. How does a company rise above the noise to attract massive discovery and adoption? YouTube did it through existing channels like MySpace, which already reached millions. Yelp had strong SEO, which found them a mass audience searching for restaurants and nightlife. Facebook’s University-centric approach landed them 80% adoption across a campus within 60 days of launch. Every Net entrepreneur should answer these questions: How do we get to one million users? Then how do we get to 10 million users? Then how will you get deep engagement by your users.

Free term sheet generator from leading Silicon Valley law firm.

This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents. Because it has been designed as a generic tool that takes into account a number of options, this version of the term sheet generator is fairly expansive and includes significantly more detail than would likely be found in a customized application.

This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents. Because it has been designed as a generic tool that takes into account a number of options, this version of the term sheet generator is fairly expansive and includes significantly more detail than would likely be found in a customized application.

I had to rub my eyes to make sure I wasn't imagining this -- a term sheet generator from Wilson Sonsini? I love it. Makes them more accessible. There are also so many "viral term sheets" out there this will be useful. Another form of thought leadership marketing.

Online Term sheet generator from Website: Wilson Sonsini Goodrich & Rosati -

Great video & slides from Davie McClure's talk at 'Presentation Camp SF' -

Larry Cheng: So, here’s a more difficult than expected attempt at pulling together a global directory of blogs written by current VCs. To help put the blogs in some context, they are ranked by their # of Google Reader subscribers. In addition, some blogs despite having subscribers have not posted in 3 months and they are denoted by an *. This directory will be updated quarterly highlighting any new blogs and the movers/shakers based on subscriber growth. If you don’t have the time to sort through all of the blogs, I will write a bi-weekly summary highlighting the “best VC blog posts” from the VCs in this directory.

List of top VC blogs. Look through and add to my reader.

VC blogs

top venture capitalist blogs. One of which is Guy Kawasaki

A very unique type of investment

In Bloomington, IN, the SproutBox team is taking four startups at a time and pumping around a quarter of a million dollars into each one over the course of ten months. In addition to all that mouth-watering lettuce, the 'Box is also investing teams and resources. Although they just launched this year, they plan to start a new cycle every three months. How They Invest: SproutBox gives funding and resources in exchange for equity. Startups They've Helped: DecideAlready, CheddarGetter

illiquid asset

Under no circumstances should you...Write A Long Business Plan

# Who are you? # What is the problem you are going to solve? # What is your solution? # Why will the market accept your solution? # What does the competition look like? # Who are your customers? # What are the details of your product? # How will you acquire customers? # What is your best approximation for the financials of the business? # What are the risks/challenges? # What’s the timeline? # Bonus: What’s The Exit Plan?

While business plans are important, writing a long one isn't such a good idea. It makes sense really, especially for new businesses there is so much uncertainty that big complex models of revenue and cost projections can be nothing but farcical.

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good article on basic terms of a first round investment

My last 2 posts were about things to avoid, so I thought it might be helpful to follow up with something more positive. Having been part of or observed about 50 early stage deals, I have come to believe there is a clearly dominant set of deal terms. Here they are:

here are some terms included below that are needed in larger deals and which aren’t absurd for VCs to ask for. So both documents are highly relevant. Start with the Y Combinator docs for your first early angel round, an

If you're an entrepreneur thinking about getting funding, this is a must-read. It outlines very fair guidelines for a first-round term sheet. Often, first-time entrepreneurs only concentrate on the big terms of a term sheet (e.g. round size, valuation) and neglect the "smaller" but often equally important things like stock preferences and triggers.

Now, a lot of people, including prominent angel investors and venture capitalists, are starting to listen to him. Tomorrow Ressi will announce a new, basic term sheet for use by investors and founders. The goal is to protect founders and reduce legal fees, which average $50,000 or more per venture round. (This is an excellent idea. "Free" at work.)

Hilarious!

37 signals smartly mocks the new Twitter valuation and the hoopla surrounding it by valuing itself at $100 billion: http://j.mp/2yfvs [from http://twitter.com/JMaultasch/statuses/4367035641]

"you should see the spreadsheet models we’re making up. Really breakthrough stuff"

In order to increase the value of the company, 37signals has decided to stop generating revenues. “When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation,” said Mr. Fried. “Once you have profits, it’s impossible to just make stuff up. That’s why we’re switching to a ‘freeconomics’ model. We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!”

nice one

CHICAGO—September 24, 2009—37signals is now a $100 billion dollar company, according to a group of investors who have agreed to purchase 0.000000001% of the company in exchange for $1.

How much money to raise and what to do with it: using mint as a case study

In order to get that seed round, you'll need to understand your competition, and come up with projections. Everyone knows this will change...but you need to show your thinking around it anyway. As an example, MINT originally projected $30/user/year for lead-gen and CPA. (Aaron noted that the company is pretty close to this today. But this is the exception rather than the rule.) Know how the business model works. People do X behavior and it turns into $Y income, add up those $Ys and it's a $Z business. If you can walk people through these assumptions convincingly, you'll get that seed round.

The straight shot: Why should you raise money, and how much? * Step 1: When you're ready with an Idea: Raise $100K from friends and family, and use it to build a prototype. * Step 2: Once the prototype is done: Raise < $1M in seed capital, and get into market with an alpha launch. * Step 3: After that initial launch has traction: Raise $5-10M, and use it to prove/scale the model.

Interesting

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It’s hard to express just how much settling those questions has galvanized Redfin to attack the monsters under our bed. Sure, we were dimly aware of those problems before, but we existed in a state of seething, unacknowledged tentativeness. Weeks of contemplating what it will take for us to win prepared Redfin to swallow the red pill, stuff the TaunTaun, hack the Kobayashi Maru. At very few moments in a company’s history does it makes its way so deliberately. Like the recovered patient who saw while sick everything she had always meant to do, we want to make the most of our new lease on life.

For me, the most important point is that whatever questions others ask about your business are worth recording, cataloguing and quantifying

" the questions VCs asked Redfin that changed how we think about our business."

Most advice to entrepreneurs focuses on what they should do: build a great product, assemble a great team, provide great service. All are “duhis

A wealth of resources for business owners — videos, articles, blogs, and expert advice to boost your business, sponsored by American Express OPEN.

Good article!

My partner Ben Horowitz and I are delighted to announce the formation of our new venture capital firm, Andreessen Horowitz, and our first fund -- $300 million in size -- aimed purely at investing in the best new entrepreneurs, products,...

Marc Andreessen's blog

My partner Ben Horowitz and I are delighted to announce the formation of our new venture capital firm, Andreessen Horowitz, and our first fund -- $300 million in size -- aimed purely at investing in the best new entrepreneurs, products, and companies in the technology industry.

These are an even better idea than the Common Application for college.

open source term sheet templates and share contracts created by Marc Andreessen's company.

Open Source legal documents for startups from Andreesen Horowitz

Free templated – but flexible – legal documents for entrepreneurs to use for seed-stage deals.

The Startup Lawyer gives some advice

Issue list for launching a startup company

Try and make sense of this

Last night, I attended an inspiring talk by Nick Hanauer of Seattle-based Second Avenue Partners. The venue was Seattle University, and the topic was

—If everyone thinks it’s a great idea, it probably sucks. —If people understand it, you’re too late. —If people don’t like it and don’t understand it, it probably still sucks.

How to spot breakthrough ideas

As for social disruption, Hanauer gave a quick summary of what he meant: —If everyone thinks it’s a great idea, it probably sucks. —If people understand it, you’re too late. —If people don’t like it and don’t understand it, it probably still sucks. So entrepreneurship is a dangerous field, he said. “The difference between being an idiot and being a genius is very, very thin.” And keep in mind, he pointed out, “you can be very successful without being socially disruptive. Great fortunes have been made doing incremental things. Burger King, which came after McDonald’s, was not transformational, despite what they tell you…But they made a great fortune.”

Notes from a great presentation by Nick Hanauer, early investor in founder of aQuantitve, Amazon, Insitu (AUV) ... lots of insightful thoughts on quantifying disruptive technology, entrepreneurship, etc.

The key elements of a breakthrough idea, Hanauer said, are value creation and social disruption. “Value is difficult but possible to quantify—it’s the ratio of benefits to cost, divided by those of the alternatives,” he said. Benefits are things like a product’s durability, speed, and appeal

A collection of high-level tips for startup investor pitches, including Guy Kawasaki's 10 slides / in 20 minutes / with 30pt font rule.

How to Pitch to a VC or Angel

Why startup pitches fail

the stage of your business—for example, some businesses are just getting started with an idea, while others are printing money. Focus your pit

Pitches usually fail because they answer the wrong questions. The right questions depend on the stage of your business. post by Eric Ries, a founder of IMVU and an advisor to Kleiner Perkins.

Un VC et son explication : être un orchestrateur pour les utilisateurs avec une interface bien pensée et l'apport régulier d'innovations (et non toutes à la fois.

Union Square Ventures is an early stage venture capital firm based in New York City. The partners invest in young companies that use information technology in innovative ways to create high growth business opportunities in the Media, Marketing, Financial Services, Telecommunications, and Healthcare industries.

From the consumer to the enterpise... This is spot on assesment of where change is occuring. We used to hold not only the data, but the only workable tool to parse the data. that simply isnt the case now. Our current market and the end user market are simply TWO DIFFERENT CHURCHES and in waiting for our current users to get to grip with things, our actual users are leaving us behind. End users aren't smarter, more adept or engaged in info discovery (quite the opposite) it's the that the tools that are out there flatter their abilities to an ubelievable extent. Social engineering solutions (eg Google) are hated by librarians for one simple reason - a succesful soc eng solution removes them from the equation. In going for the end users, do we have to leave the libraians behind?

Today, no one tells you to use Facebook. There are no employer sponsored training sessions on the use of del.icio.us. The burden is on the designer of the system to meet a need, entertain, or inform their users. They also have to seduce those users, hiding complexity, revealing one layer at time, always enticing, never intimidating, until the user one day finds they are intimately familiar with power and the pleasures of the service.

Designing a system that does that is not an electrical engineering problem. It is a social engineering problem. The best social engineers are working today on consumer facing web services. They understand that there is enormous potential leverage in those services. The creators of these services recognize that services like theirs will ultimately disrupt the economics of many, if not most, parts of the global economy in much the same way that Craigslist collapsed the multi-billion dollar classified industry into a fabulously profitable multi-million dollar web service.

The lower the CEO salary, the more likely it is to succeed. The CEO’s salary sets a cap for everyone else. If it is set at a high level, you end up burning a whole lot more money. It aligns his interest with the equity holders. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. In practice we have found that if you only ask one question, ask that.

In a long-ranging discussion today at TechCrunch50, investor Peter Thiel (PayPal, Facebook, Slide) gave his thoughts on what is the best predictor of startup success. At the Founder’s Fund, one of the most important factors he likes to look at before deciding to invest in a startup is how much the CEO is paying himself. (This is also a factor that one of his investments, YouNoodle, looks at to value private startups). Says Thiel: The lower the CEO salary, the more likely it is to succeed. The CEO’s salary sets a cap for everyone else. If it is set at a high level, you end up burning a whole lot more money. It aligns his interest with the equity holders. But [beyond that], it goes to whether the mission of the company is to build something new or just collect paychecks. In practice we have found that if you only ask one question, ask that.

see title

This is a subject near and dear to entrepreneurs, maybe the dearest subject of them all. Founders start out with 100% of the company and every time they raise capital and/or issue stock and options to their management team, that number goes down.

"As the cost of starting a Web company decreases, thanks to cloud computing services and technology that entrepreneurs can rent instead of buy, many founders can finance a new company without the help of venture capitalists, using their savings, money from family and friends and credit card debt, Mr. Hendershott writes. More often, they are choosing to sell small, immature companies instead of taking the longer, riskier path of developing a business that could one day go public. That makes venture capital less relevant."

Interesting read for startups

Do Web Entrepreneurs Still Need Venture Capitalists? - Bits Blog - NYTimes.com http://bit.ly/cvc1i [from http://twitter.com/robinklein/statuses/1825392377]

experienced tech entrepreneurs looking to support and invest in Europe’s most passionate geeks

We're experienced tech entrepreneurs looking to support and invest in Europe’s most passionate geeks. We’re a pre-seed investment company designed to enable great people to launch great ideas. Our start-up and support process accelerates the route to beta, profitability, and success.

check this out. Cool infographic thing pdf.

"We're experienced tech entrepreneurs looking to support and invest in Europe’s most passionate geeks. We’re a pre-seed investment company designed to enable great people to launch great ideas. Our start-up and support process accelerates the route to beta, profitability, and success."

"We're experienced tech entrepreneurs looking to support and invest in Europe’s most passionate geeks. We’re a pre-seed investment company designed to enable great people to launch great ideas. Our start-up and support process accelerates the route to beta, profitability, and success.

“We're experienced tech entrepreneurs looking to support and invest in Europe’s most passionate geeks. We’re a pre-seed investment company designed to enable great people to launch great ideas. Our start-up and support process accelerates the route to beta, profitability, and success.”

I've written up the following directions to help you get there efficiently. Don't do it all in one sitting because you want your mind to digest the concepts over time. I suggest doing it over the course one week, setting aside a half an hour each day to go through this stuff.

Great walk-through of term sheets for startups

Great resource page for all founders interested in dealterms

I've written up the following directions to help you get there efficiently. Don't do it all in one sitting because you want your mind to digest the concepts over time. I suggest doing it over the course one week, setting aside a half an hour each day to go through this stuff.

Great walk-through of term sheets for startups

Great resource page for all founders interested in dealterms

vc suster