Startups

Don't build a company to flip it; build it to last, says Amit Chatterjee, CEO and Founder of Hara. His preferred method for startup financing is to initially take venture funding, and then to take the company public. While a startup can take additional rounds of funding, Chatterjee believes going public is a less trade-off intensive way to finance a high-growth global enterprise.

The "venture capital industry" does not exist, says serial entrepreneur Marc Andreessen. Rather, the landscape is a loosely-affiliated network of over 600 investment organizations, with only about 30 firms performing well and returning profit overall. In parallel, there is a rise in seed funding for new ventures and a rise in latter-stage investing for established companies as well.

The best entrepreneurs know how to talk about and sell their company, and the way they define their enterprise can often be a polarizing sport. Essentially, propelling a young company - either to investors or to talent - is a sales job, and one that a company founder must find compelling. Marc Andreessen, serial entrepreneur, speaks at length about the necessity of a founder to define their company and to establish early on what it is, and what it is not.

Successful user-generated Web plays "tend to harness peoples' passions, rather than harness peoples' greed," says serial entrepreneur Marc Andreessen. He points out that any user-centric Web vehicle that has tried to share revenue with its content-producing audience has failed - and spectacularly. It's not money that motivates people to share their ideas and opinions, says Andreessen. The platform for sharing one's own personal expression is its own reward.

In the age of the lean start-up, one of the greatest advents a fledgeling company can take advantage of is cloud computing. Both viable and cost-effective, paying only for back-end, readymade services as needed, young companies are able to grow faster without the pressure of raising additional dollars to launch, observes Marc Andreessen, technologist and serial entrepreneur. Andreessen goes on to comment and rate the current cloud computing services available.

Many of the most successful technology enterprises were launched as products, observes Marc Andreessen, serial entrepreneur, including Facebook, Twitter, and others. He states that tools created this way are based purely on market demand, making these applications much more compelling. To the contrary, companies that establish themselves first and then work to craft an application have their achievements, but they are more likely to plummet into failure. Entrepreneurs approaching from this angle can too often fool themselves into believing they have a tool of value.

Seasoned serial entrepreneur Marc Andreessen shares his three criteria for a successful start-up. He states that there must be a substantial market opportunity, a product that's a 10x better solution, and an outstanding team. Andreessen goes on to state that there can be some compromise in the product area, but that the other two legs of a burgeoning business must stand firm.

The VC industry is suffering from a severe lack of liquidity, says Intel Capital's Vice President Lisa Lambert. Lambert offers her analysis on the current shape of the investment community - and finds much room for improvement. As an asset class, she anticipates a lot of consolidation in the industry as a whole; offering growing pains at the moment, but providing a healthier market overall.

How much control do you want over the company? What are the finer points of sales and acquisition? What kind of power must a portfolio company give up to accept VC dollars? Intel Capital Vice President Lisa Lambert discusses how some of these negotiations take place between her investment firm and the emerging companies they fund. Lambert also points out some of the differences in negotiating with a first-time entrepreneur versus a seasoned player - often with surprising results.

Lisa Lambert, Intel Capital's Vice President, points out that despite what other independently-run VC firms say, their corporate investing arm can offer the companies in their investment portfolio a lot more than just dollars. Good VC's also open up their circle of contacts and offer useful advice along the path. In this clip, Lambert speaks at length about the matchmaking conferences that Intel organizes for its clientele, its global reach of resources, and the numerous other value-added services and networking opportunities that they offer beyond just a check.

Why take on financial risk alone? Intel Capital, says Vice President Lisa Lambert, most often invests in combination with their network of about two dozen other investment entities. While they have a number of deals that they've embarked upon independently, overall the company prefers to work in syndication with these other top-tier houses - and the partnership reaps rewards for all. Her firm benefits by a deeper purse of dollars to bring to market, and the other venture capital firms share in the access that comes from Intel's broad reach of over one hundred investors in 47 countries.

Intel Capital VP Lisa Lambert discusses a sea change in the investment community as of Spring, 2010. While VC's were formerly more attracted to solely investing in start-ups, she states that her firm has grown more stage-agnostic. Quick returns more often hinge on later-stage enterprises than on business concepts fresh out of the gate. In addition, she reports that Intel Capital has very few plans for acquisition of these firms, estimating that the company takes over less than one percent of those they financially back.

How does strategic corporate investment differ from typical venture capital investment? And how does this affect the types of deals transacted? Lisa Lambert, Vice President of Intel Capital, offers examples of the structural differences typical of Intel's investing arm, including larger dollars to create a broader impact. In addition, Intel Capital deals are often accompanied by a prefabricated business agreement to seal the deal.

Despite the company's growing size, Pandora CTO Tom Conrad states that his company resists the urge to make any long-term plans. In fact, they never plan an operating schedule more than three months in advance. Though this practice makes some operations more difficult, the flexibility allows the upstart enterprise to remain nimble and responsive; traits, Conrad states, every start-up should try to maintain as long as possible for maximum market advantage.

A small impact with a broad reach, or a pressing impact on a select few? Only the former offers the capability to solve big problems and make a lasting impression, says CEO of Miox Carlos Perea, and the field of clean tech is extremely attractive because of it. Entrepreneurs working to solve problems in power and water have the capability to be truly effectual on a massive scale - and thus the payback on this investment has the potential to be enormous.

Frazzled feelings and brick walls are frequently part of the trying path to start-up success. In this inspiring clip from Miox CEO Carlos Perea, he shares in that frustration, and also shares an anecdote that rekindles his company's opportunity to save lives and improve living conditions worldwide. Perea urges other entrepreneurs to find this kind of satisfaction - even at difficult moments.

Improved safety and water quality aren't the only results of displacing chlorine as a water purifier. Carlos Perea, Miox CEO, points out that saving money is the main reason that his private and municipal customers utilize his company's water treatment capabilities. He states that Miox's focus is always on driving costs down, because without this edge - no matter how honorable a clean tech innovation - a disruptive technology cannot ever achieve real market dominance. If an innovation in power or natural resources isn't going to be subsidized or regulated, it still must abide by the structure of the free market, and its relative cost is imperative for its success.

The key problem with venture capital remains simple: You're playing with other people's money. David Heinemeier Hansson, partner at 37signals, believes that using venture capital removes the accountability that's inherent when an entrepreneurs use their own money. When it's your own money, he continues, you want to make more of it faster, so you don't just put out a product without a price. The urgency you get from spending and making your own money is the most powerful driving force for an entrepreneur.

A startup, David Heinemeier Hansson argues, will never have the resources to outspend a Google or a Microsoft in promoting itself. Instead, his own company 37signals tries to out-teach. "We're trying to build an audience; we're not just trying to have customers." Through blogs, lectures, seminars and other teachable moments, he explains that 37signals has created a following of the company that may not use the product today. But at some point, these people will either buy our product or recommend it to someone who will. In the end, all sustainable businesses are built by word of mouth.

Skewed expectations present a major risk when accepting venture capital. Most venture capitalists expect to make a lot of money, and they expect the company they help to become billion-dollar ventures. David Heinemeier Hansson, partner at 37signals, compares this type of risk to putting all of your money on red five in a game of roulette. When you build a business that earns a million dollars per year, you're taking a more calculated risk, analogous to that of a skilled poker player who steadily builds up his winnings. "The fact of the matter is that a million dollars is a lot of money when it goes straight into your bank account," asserts Heinemeier Hansson, partner at 37signals.

Long-term planning, strategic planning, tactical planning -- all of these types of planning are really funny for a start-up, chuckles David Heinemeier Hansson, partner at 37signals. The punch line, he delivers, is that a start-up doesn't even know if it will be doing business in five years, let alone five months. These types of planning suit a stable business, like McDonald's in Northern Illinois. But a new business in a new industry has no clue what it will need long-term. In fact, he adds, most decisions for a start-up are incredibly temporary. What does matter more than planning? Simply starting.

"Nobody is an overnight success," claims David Heinemeier Hansson, partner at 37signals and developer of the Web platform Ruby on Rails. When some product or company suddenly appears out of nowhere, it usually arrives out of 10 years worth of work. He points out that 37signals and Basecamp took just this length of time to become a success. Accelerated growth is a charade, Heinemeier Hansson stresses. It takes time to develop a sustainable, profitable company.