- Silicon Valley entrepreneur, board member, and private investor. Extensive experience in founding and financing new companies and improving the performance of existing companies.
- Previously served as CEO, Chairman, COO or CFO of four successful startup companies that achieved an exit for investors, either through M&A or IPO.
- Functional areas of expertise include: general management, product development, fundraising, licensing, finance, marketing strategy, and governance.
- Specialties: Managing the start-up and high growth process, research and product development strategy, team-building, and M&A/IPO preparation and implementation.
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Starting a New Venture with Innovations that Create Competitive Advantage in Large Markets
- Funding is now more closely tied Wall Street.
Access to startup capital now tends to be very much a function of what's going in public markets. Wall Street can either encourage or discourage the spirit of financial optimism that drives interest in entrepreneurial ventures.
Also, when the stock market is up, investors have more liquidity, and it's much easier for a small company to raise money. Money is more available now, for instance, than it was when the recession was at its height. At the same time, valuations are also up substantially. Money is not only more available, but is available in greater amounts with less dilution.
Conversely, when the public markets crash, startup funding can dry up almost entirely. Once an offering is launched, it is prudent to close it as quickly as possible. One never knows when an external event will close the funding window.
- In many industries, large corporations are getting out of R&D to focus more on marketing and distribution.
This is particularly true in the medical products space where big pharma and medical device companies' research departments have failed to deliver adequate new products, and investment in consumer advertising of existing products has yielded high returns. The gap is being filled by smaller companies that are willing to take on the risk of discovery, but are forced to license their products to big pharma to pay for later stage clinical studies and achieve worldwide distribution.
Another example is in the natural resources sector where smaller companies do most of the prospecting and wildcatting and then sell their discoveries to the larger companies for development and distribution. To a large extent, this is true in high tech as well. These trends afford a good opportunity for smaller, innovative companies to fill the gap and take advantage of the high prices larger companies are willing to pay for de-risked projects.
This is less the case in industries like transportation where new product developments are more evolutionary and less innovative.
- Funding entities are getting involved earlier in the process.
With the growth of angel groups and other private equity investment organizations, more investors are now taking on more risk and investing at an earlier stage in the startup development process. This trend started with just a few groups in the '90s, but there are now more than 400 such groups in the U.S. They are outside the venture capital arena and different from the more traditional sources such as wealthy individuals and family trusts.
Angel investors tend to be both more active and more sophisticated. They are becoming a more significant source of startup capital. They also can provide expertise and a valuable source of industry contacts and networking.
- The Internet has expanded access to early stage funding.
The Internet has exploded access to information for investors and entrepreneurs and significantly expanded the reach of early-stage fund-raising efforts. Crowdfunding is on the rise and working well for some products, such as software application and consumer electronics.
Crowdfunding is an extension of the angel phenomena that offers smaller opportunities to less affluent investors. It works best for smaller, product development opportunities that are not overly sophisticated and don't require a lot of money to complete. If you have a single product or concept, can explain it in a short YouTube video, and are willing to offer incentives to investors such as early prototypes of the product, it may be a way to raise the money you need.
- More ventures are starting as "virtual" companies and remain virtual longer.
While the concept of starting a company in a “garage” has been part of business folklore since Henry Ford and Hewlett-Packard, the support infrastructure for such an approach is better now than ever. Everything from business cards to Internet marketing campaigns is available online.
More importantly, people are more open to working on reduced or deferred compensation in order to gain an equity position in a promising new venture. If an inventor or scientist can generate enthusiasm for their project, a team can be often be assembled before significant money is in place. It's no longer necessary to have the funding to cover two years of payroll. You can often find better, more experienced people willing to work on an interim basis as the enterprise is getting off the ground. Those who have retired or are between assignments often provide a pool of seasoned talent. Team members need not even be in the same city. The rise in connectivity has made it possible to meet and collaborate online.
- Capital follows technology.
Capital tends to follow new technology, and people making investment decisions tend to be well-informed. If you have invented or acquired a product that does a better job of meeting a need or solving a problem, and have it licensed, patented, or otherwise protected, and have a good team on board to manage it, then chances are, there will be investment available in the form of venture capital, angel investors, equity crowdfunding, or through other private investment means.
- Physical assets are being replaced by cloud-based operations.
The Internet has created an unprecedented ability to access and share information. This has driven a decline in the need for "bricks-and-mortar" assets and a rise in web-based operations and e-commerce. This is affecting every aspect of nearly every industry. The largest taxi company in the U.S. doesn't own a car and one of the largest hotel chains does not own a hotel room. While privacy issues are still shaking out, certain diseases can now be predicted and intervention can be taken, thanks to the rise of metadata. People now "shop" online before they buy, and check their symptoms on WebMD before they see their doctor.
The pace of this change is accelerating, and companies that get and stay ahead of this curve are more likely to succeed.