Successful Web 2.0 Consumer Business Models

FountainBlue's April 9 High Tech Entrepreneurs' Forum was on the topic of Successful Web 2.0 Consumer Business Models

From our January event, we heard the following about Web 2.0 companies:

• Aggregated data makes it easy for people to create rich content collaboratively
• Aggregated users in community impacts possible business models for organizations
• Investments decisions are more difficult because it's easier to start a company (investments are lower, infrastructure is established so it's cheaper and easier to get, companies are easily replicated) so it's hard to differentiate companies

So what's the buzz and what's the real thing around Web 2.0 solutions? In this FountainBlue High Tech Entrepreneurs' Forum, our facilitator Steve Bengston from PriceWaterhouseCoopers will share some statistics about Web 2.0 investments and successes, and we have also invited several entrepreneurs to tell us about their successful business models.

• Facilitator, Steve Bengston, Director, PricewaterhouseCoopers
• Panelist Keith Rabois, VP Business and Corporate Development, LinkedIn
• Panelist Jeffrey Walker, President and CEO, Atlassian
• Panelist Karsten Weide, Program Director, Digital Media and Entertainment, IDC
• Panelist Peter Ziebelman, Founder and Partner, Palo Alto Venture Partners

In this session, we helped entrepreneurs to better understand what it takes to grow a successful Web 2.0 company, and the business and partnership opportunities ahead. Below are follow-up notes for your reference.

Below are a summary of remarks on Successful Web 2.0 Consumer Business Models for your reference.

Web 2.0 defined as:

• The next wave of internet products/services based on web links/Second coming of the internet
• Companies that grow independently and don't require business development relationships with larger, more established companies
• The savvy entrepreneur who understands the new opportunities available with the internet - from the growth of the marketplace to the targetting of the audience to funding opportunities, technology tools, funding methods and location flexibility.

Revenue Models for Web 2.0 Companies

• Content, including blogs, wikis, communities
• Subscriptions
• Advertising
• Audio and Video Distribution
• Mobile Internet - Greatest opportunity as it's anticipated that 2/3s of Americans will be using mobile devices

Advice for successfully marketing your web 2.0 company:

• Make a great product/service that addresses the need of a large target audience
• Price the product/service attractive, particularly initially as you're gaining traction
• Leverage word of mouth marketing, selling to 50 people at a time for example. Continue building momentum on your own.
• Partner with the bigger firms to continue gathering momentum where possible. To get that opportunity, remember that there are people running businesses and target the right decision-maker, and sell them based on their interests and needs.
• Provide proof for your revenue model concept. Not necessarily substantial sales dollars, but real paying customers who pay for the solution.
• Partner with analysts like IDC and Forrester for marketing and PR opportunities where possible. It can help build the buzz and the mindshare.
• Actively participate in viral marketing efforts - participating in regular blogs, encouraging others in your community to blog on related topics, etc., Be open, hones, and not self-promoting if you do so.
• If you're aiming for advertising dollars for your site, track site usage and understand your target audience. Advertisers will invest in web sites with large volume of visitors and companies who know in detail who those visitors are.
• If you're entering a crowded marketplace, you can still succeed with a great product/service, but you must be very strategic and competitive.
• Providing software to strategic partners may help build momentum quickly, and also provide ongoing marketing/PR opportunities. Example: Atlassian gave away their software to open source foundation, which continues to generate awareness and interest to their target audience.

If you're seeking funding for your Web 2.0 company:

• Show your target market - 500 million dollar market size and more if you're seeking vc funding
  Use metrics and show exponential growth, not linear growth, for visitors, customers, dollars.
• Show a great team - at least 2-3 executives who 'get it', and are able to grow the company to 10-50 million; not solo technical genius or business development person with mediocre idea
• Show that your technology has defensible competitive advantage. It's OK to leverage existing technologies, but you should know what's unique and defensibly yours.
• Define your fundable milestones including timelines, making sure that you offer buffer time.

Positioning Your Life Science Company for Outside Funding

FountainBlue's March 19 event was on the topic of Positioning Your Life Science Company for Outside Funding.

Last month, we had a conversation about corporate investments in life science companies, and stimulated thinking and discussion about how corporate entities are partnering with investors and entrepreneurs to support their corporate R&D strategies. This month, we will continue that conversation and talk about how to position your life science company for outside funding. Our conversation will feature entrepreneurs who have successfully received outside funding from investors, from corporations, etc., Our panelists will share their challenges, their successes and their advice on how to best position your company for outside funding.

• Facilitator Geetha Rao
• Panelist Brian Boyer, Perkins Coie LLP
• Panelist John Cornwell, Sand Hill Angels, and Life Science Angels
• Panelist Ken Martin, Onset Ventures
• Panelist David Miller Founder, InnoSpine
• Panelist Don Ross, Life Science Angels

During this session, we helped life science entrepreneurs to better understand how to partner with investors and corporate partners and to better manage and grow their life science concepts and organizations.

Below is advice for preparing your life science company for funding:

• Ensure that there is a big market opportunity, more than 500 million, and have a clear understanding of the market, the competition, your unique value.
• Focus on developing a fully integrated business plan, explaining the business and describing the team, as well as the product/technology. (Many entrepreneurs are so enamored of the technology, they don't explain the business opportunity when many funders look for the business and team information as much as the technology/IP.)
• Build relationships with angels, VCs and other funders as they will be your advocate for funding, and also can coach you, make introductions for you.
• Build relationships with others who could introduce you to funders - like start-up lawyers.
• Network with people who can make the connections for you.
• The angel funding process is similar to the VC funding process, only the due diligence is not as vigorous. The due diligence helps to address the risks investors may face with an investment. Minimizing those risks prior to seeking funding will increase the likelihood of a funding event.
• Adopt the perspective of the funder - does it make sense to fund your company, and if so, why? What is the strength, potential, market opportunity for the company?
• Select a funder you are willing to work closely with as it will be a very close relationship, and not always easy.
• The founder must be prepared to give up leadership of the company as it approaches a later, more advance stage, which may require a different skill set.
• Consider the exit early, as it forces strategic thinking and execution.

After a funding event:

• An organization is forced to be more focused. The funded company will be held accountable to more people, who may not be as receptive to their ideas.
• There may be more operational formality, particularly if there are regulatory requirements.
• Funders may now have board members who are more likely to 'hold your feet to the fire'.
  Management team may change.
• Patent strategies may be more proactive.

International Partnerships in Clean Energy Companies

FountainBlue's April 2 Clean Energy Entrepreneurs' Forum was on the topic of International Partnerships in Clean Energy Companies.

Clean energy is hot and different countries are building expertise and experience in the many different industries in clean energy opportunities:

• Renewable energy like solar, wind, bio-energy, and environmentally-friendly hydroelectric technologies
• Energy efficiency and demand response—electricity end-use, buildings and grid applications
• Environment-enhancing technologies—advanced flue gas clean-up, ultra-low emissions generation such as fuel cells, environmental remediation, and exceptionally efficient generation
• Enabling technologies—power electronics, storage, low-loss cables and wires, sensors and instrumentation, control systems, materials and manufacturing technology, and integrated clean energy applications.

In this FountainBlue Clean Energy Entrepreneurs' Forum, we will hear success stories from three different regions and discuss the business opportunities for partnering with international associations and organizations for mutual economic benefit.

• Facilitator Brad Rock, Partner, DLA Piper
• Panelist Adam Browning, Executive Director of VoteSolar
• Panelist Almaz Negash, Managing Partner, EntwineGlobal LLP
• Panelist Peter Winarsky, Innovation Center Denmark

Below is advice and information about working with international organizations in support of clean energy entrepreneurs locally:

International Energy Usage Needs and Patterns

• Energy usage patterns are in reverse relationship with worldwide population levels
• Liquid petroleum is prevalent in North America, with coal prevalent in Asia and Africa and hydroelectricity in South America.
• Although solar technologies were first introduced by Bell Labs in the 1950s, Germany and Japan have strong solar energy markets, subsidized by the government.
• Danish companies have successes in wind energy, biofuels for transportion, water purification, and building installations.
• African countries with stable political infrastructure friendly to outside investments might provide an opportunity for clean energy entrepreneurs and investors alike. Example is Jathropa oil. Info from http://www.jcmiras.net/jcm/item/85/ Jathropha (some news articles used to spell it as “jathropa” is a genus of approximately 175 succulents, shrubs and trees (some are deciduous, like Jatropha curcas L.), from the family Euphorbiaceae. One of the species of jatropha, the Jatropha curcas, also called physic nut, is used to produce the non-edible Jatropha oil, for making candles and soap, and as an ingredient in the production of biodiesel. The trees produce 1600 liters of oil per hectare (http://en.wikipedia.org/wiki/Jatropha).

Implications for Clean Energy Entrepreneurs in Silicon Valley

• If the US can leverage the growing consumer attitudes in support of solar energy, and if it is successful in managing the state-by-state policy, regulatory and business barriers to having an efficient model for solar energy generation and distribution, solar energy solutions in the US will become more competitive.
• The problems in solar energy in the US are more related to distribution than the technology development itself.
• The power companies within the US are frequently siloed, state by state, and are not sufficiently incentivized to promote having entrepreneurs and their technologies widely available to consumers, who are increasingly interested in getting access to it.

For more information:

• Find out more about VoteSolar and support them in creating a blueprint for putting together the processes and partnerships necessary to support solar energy adoption, state by state. http://www.votesolar.com
• Contact Brad Rock from DLA Piper regarding their legal services for clean energy (or other) early stage entrepreneurs. http://www.dlapiper.com, Brad.Rock@dlapiper.com
• Contact Gunnar Larsen or Peter Winarsky from Innovation Center Denmark regarding their efforts to support entrepreneurship both in the US and in Denmark http://www.innovationcenterdenmark.com
• Contact Almaz Negash directly about her work with Jathropa and bringing the economic opportunity to Ghana. almaz@entwineglobal.com

Positioning Your Life Science Company for Outside Funding

FountainBlue's March 19 event was on the topic of Positioning Your Life Science Company for Outside Funding.

Last month, we had a conversation about corporate investments in life science companies, and stimulated thinking and discussion about how corporate entities are partnering with investors and entrepreneurs to support their corporate R&D strategies. This month, we will continue that conversation and talk about how to position your life science company for outside funding. Our conversation will feature entrepreneurs who have successfully received outside funding from investors, from corporations, etc., Our panelists will share their challenges, their successes and their advice on how to best position your company for outside funding.

Facilitator Geetha Rao
Panelist Brian Boyer, Perkins Coie LLP
Panelist John Cornwell, Sand Hill Angels, and Life Science Angels
Panelist Ken Martin, Onset Ventures
Panelist David Miller Founder, InnoSpine
Panelist Don Ross, Life Science Angels

During this session, we helped life science entrepreneurs to better understand how to partner with investors and corporate partners and to better manage and grow their life science concepts and organizations.

Below is advice for preparing your life science company for funding:

• Ensure that there is a big market opportunity, more than 500 million, and have a clear understanding of the market, the competition, your unique value.
• Focus on developing a fully integrated business plan, explaining the business and describing the team, as well as the product/technology. (Many entrepreneurs are so enamored of the technology, they don't explain the business opportunity when many funders look for the business and team information as much as the technology/IP.)
• Build relationships with angels, VCs and other funders as they will be your advocate for funding, and also can coach you, make introductions for you.
• Build relationships with others who could introduce you to funders - like start-up lawyers.
• Network with people who can make the connections for you.
• The angel funding process is similar to the VC funding process, only the due diligence is not as vigorous. The due diligence helps to address the risks investors may face with an investment. Minimizing those risks prior to seeking funding will increase the likelihood of a funding event.
• Adopt the perspective of the funder - does it make sense to fund your company, and if so, why? What is the strength, potential, market opportunity for the company?
• Select a funder you are willing to work closely with as it will be a very close relationship, and not always easy.
• The founder must be prepared to give up leadership of the company as it approaches a later, more advance stage, which may require a different skill set.
• Consider the exit early, as it forces strategic thinking and execution.

After a funding event:

• An organization is forced to be more focused. The funded company will be held accountable to more people, who may not be as receptive to their ideas.
• There may be more operational formality, particularly if there are regulatory requirements.
• Funders may now have board members who are more likely to 'hold your feet to the fire'.
• Management team may change.
• Patent strategies may be more proactive.

Corporate Investments in High Tech Companies

The theme for FountainBlue's March 12 High Tech Entrepreneurs' Forum was on Corporate Investments in High Tech Companies

Converging factors are leading to an increase in corporate investments in high tech companies:

• The marked decline in IPOs
• The rapid product development cycles, and the corresponding pressure to innovate quickly and well
• The increasing costs of internal corporate R&D efforts
• And other factors.

We invited several corporate executives to tell us about their internal R&D strategies and how they partner with early stage start-ups to support their overall corporate strategy.

• Facilitator, Antony Awaida from StartLeap Corporation, is a corporate executive and serial entrepreneur.
• Panelist Lisa Lambert, Managing Director, Intel Capital, Software and Solutions Group
• Panelist Cliff Reeves, Emerging Business Team at Microsoft
• Panelist Ray Wu, is Director, Strategy and Corporate Development at HP

Entrepreneurs in attendance better understood what it would take to partner with corporate executives in support of their strategic development efforts.

Corporate investors can provide start-ups with:

• Access to their presence in local markets around the world.
• Creating a broader, more global insights into emerging markets.
• Introductions to their larger-company customers, which may be customers to the start-up.
• Connections to VC partners.
• Grow an ecosystem for development or for technology customers. Example: Microsoft's investment in China.
• Strategic investments to accelerate product development, market penetration, etc.,

Start-ups can provide companies with:

• Great partnership/M&A opportunities - because of technology, business model, customer base.
• Different view/perspective on technologies and business models.
• Opportunity to move into new vertical markets, particularly useful when the new markets are a logical extension of existing ones.

Entrepreneurs may find it easier in some ways and more difficult in other ways to launch a business:

• It's no longer necessary to spend a million dollar on hardware and software infrastructure before launching a company and producing a product. With Intel software, open source technologies, and other modern solutions, an investment of 10s of thousands may now be sufficient.
• Although there are less financial barriers to launching a business, the marketing and customer acquisition challenges are more severe - no more 'if you build it they will come' philosophy.
• Although advanced technology tools make it easier for entrepreneurs to produce new solutions, customers are also more demanding about having quality, integrated products and packaging, delivery etc., become more important.
• There are more investment monies, more experienced investors, and less hype.
• There are more experienced entrepreneurs to partner with, but choose your partners carefully.

Government Policies and Investments in Clean Energy Companies

Our March 5 forum was on the topic of Government Policies and Investments in Clean Energy Companies

Since the dawn of the industrial revolution, governments have been keenly aware of the strategic importance of energy to national interests. But it took the oil embargo of the 70’s to catalyze non-OPEC governments into action. Since the 1970’s, more regulations, government agencies, oversight and direct intervention has taken place then ever before. This involvement encompasses the entire value chain in the sector from safety rules regarding extraction and production all the way to government labeling of products through programs such as "Energy Star".

In FountainBlue's March 5 Clean Energy Entrepreneurs' Forum, we had a conversation about the role of government policies including clean energy research, incentives to promote product adoption and distribution, and how best to navigate that process. The session helped clean energy entrepreneurs understand the objectives of local, state and national authorities and the related policy objectives as they build their clean energy efforts.

• Our facilitator Brian Reidy, Partner of Growth Process Group framed our discussion by covering how governments have been working with clean energy companies through all of recorded history.
• Panelist Steve Churchwell, Partner, DLA Piper provided his perspective on the types of clean energy companies out there and how each has different challenges.
• Panelist Kelly Fergusson, Mayor, City of Menlo Park, brought her perspective from a civil engineering/community leader background, sharing her plans for making Menlo Park a hot-bed for clean energy companies.
• Panelist Judith Ikle, Program/Branch Manager Procurement, Renewables & Climate Strategy Branch from California Public Utility Commission, brought her perspective both from the national and now the state regulatory angle.

Below are links to additional information about each of these organizations.

• California Public Utilities Commission http://www.cpuc.ca.gov
• DLA Piper's Energy: Government Affairs and Regulatory Practice http://www.dlapiper.com/energy_gov_affairs/ and Steven Churchwell's bio: http://www.dlapiper.com/steve_churchwell/
• Solar City to host a 3/11 and 3/17 event in Menlo Park
  

Other information of interest: NREL's clean energy investor's directory http://www.nrel.gov/technologytransfer/entrepreneurs/directory.html

Corporate Investments in Life Science Companies

Our Monday, February 20 Life Science Entrepreneurs' Forum was on the theme of Corporate Investments in Life Science Companies

Because of the government and other regulatory standards for life science products and services, whether they are pharmaceutical, bio-devices, bio-nano, etc., because of the experience, education and other personal characteristics of the entrepreneurs and executives within the industry, and other factors, the pace, culture, mind-set and expectations for decision-makers in the life science industry are much different than those in the high-tech sector.

However, with the convergence of bio, nano and information technologies, many high-tech corporations are branching into more life science solutions and investing in R&D efforts in the life science space. In addition, many larger life science and high tech are adopting an 'R&D-outsourced model', which helps them partner with VCs and early stage companies in support of their corporate R&D efforts. This month's meeting will feature speakers from both the high-tech and life science industries to investigate corporate R&D strategies and their implications for today's life science entrepreneurs.

Our facilitator was Geetha Rao, and our panelists were Simon Greenwood, Ph.D., Investment Manager, GenenFUND; Senior Manager, Business Development, Genentech, Inc.; Linda Greub, Business Development, Applied Biosystems and Eran Raber, Director, New Business and Venture Investments, Agilent Technologies. Additional information about the investment strategies for Agilent, Applied Biosystems and Genentech are provided below.

Agilent Technologies

• Proteomics
• Agriculture
• Nucleic Acid Analysis
• Genomics
• Pharmaceuticals - Disease Discovery - Drug Discovery - Drug Development - Drug Manufacturing/QA/QC

Applied Biosystems

• Genetic Analysis
• Genomics
• Proteomics
• Cell Biology
• Drug Discovery
• Drug Development
• Testing and Identification
• Information Management
• Ambion RNA Resources
• Experimental Workflows

Genentech

• List of current BioOncology, Immunology, and Tissue Growth and Repair Products
• List of current researcher profiles

Below are comments and advice from our panel on how entrepreneurs can partner with corporate investors:

Corporate Investors are a vital part of the funding structure for life science companies.

• They help cover the 'funding gap' between pre-clinical and later stage companies.
• They partner with both entrepreneurs and VCs.
• They invite innovative, entrepreneurial ideas which fit the strategic vision for their organization.
• They offer many opportunities for partnership.

Advice for securing partnership with corporate investor:

• From a corporation's perspective, research and development can be created organically (in house), through acquisitions, or through partnerships/collaborations. Decide whether to position your company for an acquisition or partnership/collaboration and plan accordingly.
• If you're working on a partnership, consider all types of partnership opportunities (from in-licensing to joint ventures to M&A and equity investments) and be clear what you want from the partnership and clearly communicate that.
• Understand how your company fits the overall corporate strategy and communicate that.
• Larger companies generally realize that it's easier to be innovative in smaller companies with fewer enforced processes and systems. Even if a M&A event occurs, larger companies try to preserve that entrepreneurial culture where possible as it is in their best interest.
• Corporations focus more on the best strategic investment rather than on price. (Strategy first, economics after.)
• It takes time to finalize partnership agreements so plan accordingly. (It may take an average of 9 months to close a licensing agreement for example, as there is much diligence involved.)

Focus on the latest/hottest emerging technology trends

• With the aging of the baby boomers, what opportunities will arise and how can entrepreneurs and corporations partner to address the needs of this huge market?

What It Takes to Be a Successful Entrepreneur

FountainBlue's March 9 High Tech Entrepreneurs' Forum on 'What It Takes to Be a Successful Entrepreneur' featured facilitator Steve Adelman of Nexus Partners and panelists Naveen Bisht, founder/CEO Ukiah Software, currently CEO/founder of Nayna Networks; Mike Grossman, co-founder/CEO LiveCapital, currently CEO, Tempo Payments, Inc.; Chuck Haas, co-founder Covad, currently CEO and co-Founder of MetroFi; and Wendy York-Fess, co-founder MarketSmart, President Electric Minds, currently VP of Operations with IMMI.

Below are comments and advice on becoming a successful entrepreneur from our panel, and the collective wisdom of the audience.

Decide on whether you are naturally an entrepreneur

• Would you rather have a regular, predictable paycheck with a boss or not know where the next dollar is coming from, and not having a boss?
• Do you dislike the routine, silo-ism, political battles which take place in some larger corporations or would you prefer the uncertain future of start-ups?
• Do you like making a larger impact, being rewarded for innovation? If so, can you find that in a corporate setting or do you need to have an entrepreneurial setting?
• Do you enjoy the responsibility of success and the responsibility of failure?

Focus more on what you're passionate about and whether it is a learning/growing opportunity for you than on making a lot of money

With that said, choose an opportunity in a disruptive industry, where there is a potential for a big win!

Consider other external variables like market trends and directions.

Characteristics of successful companies might include:

• Having a good team with complementary skills; being realistic about everyone's abilities, including your own; being self-aware about everyone's ability and how everyone is working together
• Have a pathologically relentlessness drive to succeed, going around, through, across obstacles
• Be highly adaptable to change and nimble with your business model to take advantage of opportunities through changing conditions
• Strategically narrow the focus for the organization
• Luck/Timing are important. Prepare the other pieces to take advantage of opportunities brought on by good luck and good timing.
• Great Leadership: Passion, Communication, Integrity, Focus on doing what's right for the company, even if you're standing alone; persistence, etc.,