TLP Investor Showcase: An panel and mentoring event with 7 of Boston’s most knowledgeable early-stage investor-mentors

Credits: Photos by Praveen Yajman

Speakers/Panelists/Advisors
Shawn Broderick, Managing Director, Techstars Boston (Moderator)
Todd Hixon, Managing Director, New Atlantic Ventures
Jonathan Lim, Principal, Polaris Ventures & In-charge, Dogpatch Boston
Elon Boms, Director, Launch Capital
Eric Paley, Managing Director, Founders Collective
Chris Sheehan, Managing Director, CommonAngels
Josh Tolkoff, Ironwood Equity

April 7, 2010 was one of our most engaging and vibrant events in recent memory, primarily because it was our first ever organized showcase of TLP’s product: its Fellows. We brought seven of Boston best known seed and early-stage investors to meet 20 outstanding Founders and CEOs. It wasn’t pitch day. It was a chance for founders and CEOs to give brief overviews of their companies, and then to ask questions about solving specific business problems. It was a standing room only session.

Shawn did a great job moderating a panel and extracting questions out of the panelists. Here is a sample of the points raised at this event, in no logical order.

Teams
The team question came up. Eric reminded everyone that when you look for feedback for being turned down, the real reason may actually be the team itself. But its never something one will hear from investors. They don’t want to hurt any feelings. When you ask us for feedback, there is a difference between asking for genuine feedback and really asking the question about “what does it take to write us a check”. Those are two different questions, and the latter is a far more difficult answer that investors are not likely to give.

Jon is wary of overconfident management teams. He doesn’t like to invest when he thinks “They don’t know what they don’t know”. Elon reiterated that many times his decisions are based on going with his gut feel. There are times when there is no clear reason why he’s uncomfortable. Eric had similar anecdotes. One of his investments had everything going. Everyone liked the market, the product, everything seemed right. His team spent half a dozen meetings, but in the end walked away because they just could not get comfortable with the entrepreneur.

About Changing Your Business Plans
Eric reminded Founders to carefully think about whether the insight and vision they started out with still stood even if the markets were changing. He was looking to see how quickly can these entrepreneurs make these changes needed. Eric was less enthusiastic about this approach, using the term pivoting. He warned about CEOs “pivoting” too much around their original business plans, reminding him that pivoting was dangerous. It wasn’t always a strategy. While there was a desire for tech CEOs to iterate quickly, it is never the preferred alternative to “we have a good plan going in”. Todd reminded the Fellows that every pivot is a swing, and there are just so many swings that one gets, and ended by saying “One definitely doesn’t build a great business by infinitely iterating on bad business cases” which drew some nervous laughs from the audience.

Make Investors lives easy
Jon reminded the Fellows that they should try to make lives easy for the investors. Make a one pager (excel or word) so they can go to the partners meeting. Josh advised entrepreneurs to guide the diligence process. “We’re lazy.” We’ll take the path of least diligence that shows our world. You understand that we’re busy. Get us in front of people who can corroborate your story.”

How long does it take to get funded ?
Josh offered a very important tip based on statistics that reminded us that getting funded is even harder. He said that statistics show that it takes 18 months & 36 meetings to get funded early stage.

Business plans versus Pitch Decks
There was a clear split between people willing to read pitch decks and business plans. Everyone agreed that less is more; no one has the time to read long plans.

Josh advised Fellows to entertain by telling a story that would make it interesting. What’s happening now. What will the future look like. “Tell me a story that gets me interested.”. As a lifesciences investor, he also reminded the crowd never to forget that biology is really hard.

Todd was quick to point out that there was a difference between a pitch deck and a business plan. A pitch deck is a communication tool. Jon and Eric clearly had no interest in anything but pitch decks. Elon pointed out that while its great to write the plan to get everyone on the same page, which drew support from the other investors. However, Jon argued that business plans are static documents, and are not updated, so they quickly become irrelevant. Regarding a question about putting together a list of frequently raised objections, the panel agreed that this was a good idea, but cautioned against giving it out to the investors unless the questions were asked. But the preparation was a good thing.

Elevator Pitches
Todd offered a great tip on elevator pitches. Convey three things:
1. What it is
2. Why is it exciting
3. Why are you credible

Some other feedback
During the event, Todd remarked that the entrepreneurs did a great job giving feedback to each other; at one point he felt that Shawn and he were moderators of the session. Everyone thought that the quality of presentations was very good. Josh sees a lot of plans, but he is astounded to see how few plans are any good, so he was actually quite happy to see the quality from the Fellows. There were several suggestions – to give more flexibility to investors to move around, to give more information before this event next year, to give more time to each investor, and finally, to always send the decks and two pagers in advance.

A remarkable event with a ton of learnings. Thanks to Rich Kimball and his team at Edward Angel Palmer and Dodge for hosting us, to Ariel, Brian, Chase, and Parul for all their hard work organizing this, to Praveen Yajman for taking the pics, for the Panelists and Moderator for their insights, and the Fellows showcasing and listening, for making this a success.

SLP: Investor Event and Startup Showcase/Advice Session

April 7 was a very interesting event with a chance for our panel to provide useful advice to 20 TLP startups and a few selected guests in a mentoring environment, and then follow-up with a broader panel session. A remarkable room full of energy and excitement thanks to a panel of Boston's most prolific early-stage investors, and people extremely well connected to the startup scene here.

Speakers/Panelists/Advisors
Shawn Broderick, Managing Director, Techstars Boston (Moderator)
Todd Hixon, Managing Director, New Atlantic Ventures
Jonathan Lim, Principal, Polaris Ventures & In-charge, Dogpatch Boston
Elon Boms, Director, Launch Capital
Eric Paley, Managing Director, Founders Collective
Chris Sheehan, Managing Director, CommonAngels
Josh Tolkoff, Ironwood Equity

Shawn Broderick, Techstars
A successful entrepreneur, Shawn has spent over a dozen years building Internet companies focused on community, security, and privacy. In 2005 he recognized the need for a company to create a reputation layer for the Internet and founded TrustPlus . Shawn has over 20 years experience in technology firms and cut his teeth hacking on TRS-80s in the early 1980s. In 1996, he founded Genetic Anomalies, the first company to commercialize virtual property on the Internet which went on to sell tens of millions of pieces of virtual property. He has also held positions at THQ Inc., international strategy consultancy Monitor Company, and Feld Technologies. Shawn is an early-stage angel investor in various tech startups, and currently serves as an advisor or director to Speranza Systems, Arcadios, xLr8d Brands, RideOnTime, and TradeVine. He has previously served as advisor or director to Red 5 Studios, CoreStreet, iFactory, DigitalShares, Voxx, Govedo, and Troba. He received his BA in Computer Science from Brandeis University.

Elon S. Boms, Managing Director of LaunchCapital LLC, has led LaunchCapital in making 25 investments across a broad range of industries.  Since co-founding the company in 2008, Elon has developed LaunchCapital’s presence across the US, opening 3 offices located in Boston, New Haven, and San Francisco.Elon joins the Venture Capital community with significant experience in structuring biotech, consumer products and technology deals.  Prior to establishing LaunchCapital, Elon was a Management Consultant at Fidelity Investments where his work focused on strategy initiatives for investments in emerging markets. Elon also worked in Corporate Finance for Citigroup.  He began his career as a brand manager at Georgia Pacific Company’s Dixie Foodservice division.  In this role, Elon assumed responsibility for a $125M business, orchestrated $25M in capital investments and engineered a complete profit turnaround for the paper cup business. Elon earned his M.B.A from the Yale School of Management where he graduated with distinction in Venture Capital and a concentration in Finance and Strategy. Elon completed his B.A. in Economics from George Washington University. Elon is an avid golfer, skier, and gourmet chef. He lives in Boston with his wife Stephanie and dog Bogey.

Todd Hixon, New Atlantic Ventures
Todd invests broadly in information technology businesses, with emphasis on companies that use “deep” technology to create commercial value.  Currently Todd serves on the Board of Directors of GateRocket, MPowerPlayer, Ember, Velox Semiconductor, and EveryScape. Before co-founding New Atlantic Ventures in 2006, Todd was a managing partner of DFJ New England Fund from 2000 to 2006, and previously a Senior Vice President with The Boston Consulting Group, where he managed two venture portfolios, built the Technology and Communications Practice to $100 million of revenue, and managed the firm’s information technology and knowledge management functions. He earned his BA in Physics from Princeton University (summa cum laude and Phi Beta Kappa) and he holds his MBA from HBS, where he was a Baker Scholar. Todd is married to Pam and has two children and two grand-children.  Favorite non-work activities include summers in Maine, boating, skiing, travel, photography, cooking, and playing with digital toys.

Jonathan Lim, Polaris Ventures & Dogpatch Boston
Jon Lim is a Principal based in our Boston office.  He joined Polaris in 2007 and focuses on early and expansion stage investment opportunities in technology and healthcare. Prior to business school, Jon was an associate with Summit Partners where he was responsible for sourcing and executing various growth equity investments across industries.  Jon worked previously at Medtronic in their cardiac rhythm and disease management business.  Jon also has prior experience conducting research and co-authoring several published materials at Harvard Business School. Jon was part of the investment teams responsible for Polaris’ investments in Egnyte, KISSmetrics, Ocular Therapeutix, Phytel, SustainX, and 1366 Technologies.  Jon is also an active member of the Dogpatch Labs community. Jon is an observer on the boards of Egnyte, Phytel and Ocular Therapeutix. Jon received his MBA from Harvard Business School and his AB, magna cum laude, in East Asian Studies from Harvard College.

Eric Paley, Founders Collective
Eric Paley is a Partner at Founder Collective, an early stage fund started by a team of entrepreneurs that launched companies and led them through successful exits. These founders are focused on helping the next generation of great entrepreneurs build important and lasting businesses.Previously, Eric was the CEO and a co-founder of Brontes, which was acquired in 2006 by 3M Company. Investors in Brontes included David Frankel (Founder Collective), Bain Capital Ventures, Charles River Ventures and Flybridge. Eric is an angel investor in a number of companies including Magazine Radar, Positive Energy, TrialPay and Link Medicine and also served as a senior advisor to Flybridge.Eric was also co-founder and CEO of Abstract Edge, a web application and marketing company in New York. Eric holds degrees from Dartmouth College and Harvard Business School.

Chris Sheehan, CommonAngels
Chris is a managing director of CommonAngels, joining the group in 2005, and is currently either a board member or observer at Carbonite, Outside the Classroom, Most Effective Media, Xconomy and GateRocket. Within CommonAngels, Chris manages deal flow, due diligence and the investment process. He also guides the group's strategic direction and works closely with portfolio companies. He is also a managing director of the group’s two $10M venture funds.Previously, Chris founded Newburyport Partners, a consulting firm that works with investors and their portfolio companies. Chris also served as a venture partner at Industry Ventures where he was actively involved in the acquisition and management of secondary venture investment portfolios. Prior to starting Newburyport Partners, Chris was a Director of Corporate Development for BEA Systems, a leading enterprise software company with over $1B in sales. At BEA, he was a key member of the corporate team responsible for all venture capital investing and M&A activity. He was also part of the executive team for one of the company's product divisions. Prior to BEA, Chris led the private equity practice for the Cambridge based research firm, Stax Inc. Chris also spent six years with the top ranked investment bank in Australia. He started his career as an equity analyst focusing on the oil and gas sector. He holds a Bachelor of Commerce degree from the University of Queensland, Australia.

Josh Tolkoff, Ironwood Equity
Josh has thirty-five years of in-depth management experience in research, development, manufacturing, regulatory affairs and general management of medical device companies.  He is a member of the equity fund investment committee. Josh started his career as the Vice President of Research and Development for Medi-Tech, which became Boston Scientific, and helped grow that company from 20 to 500 employees. Josh then went on to start two of his own companies. From 2000 to 2003, he served as a partner of Seedling Enterprises, a medical device incubator that developed early stage device concepts to the point of commercialization. Josh is a graduate of Harvard College and holds an M.S. in Biomechanics from The Massachusetts Institute of Technology.

Banyan Environmental - Needs your vote NOW

Banyan Environmental got selected for the March Madness for the Mind 2010, NCIIA's 14th Annual Conference. In this conference Banyan Environmental is also competing with other teams for an online video competition hosted by Inventors Digest on their website. Vote for us by visiting Inventors Digest. Only 3 days remaining. If you have not done so yet, please hurry.. It is very simple, only 2 clicks.

To learn more about Banyan Environmental and how it is trying to save you from mercury pollution, visit www.banyanenvironmental.com

Let's Do A Deal!

As each successful startup may ultimately find itself making deals with large corporate companies, it is critical that startup CEOs learn the basics of the deal-making process. To that end, TLP Boston held a deal-making competition last Wednesday where a hypothetical medical device startup explored three types of corporate deals: a licensing deal, a commercial distribution agreement, and an acquisition.

The class was split into 8 teams, 4 represented Fortune 500 companies and 4 represented the startup. My team was a Fortune 500 company and we negotiated a licensing deal with the startup. The key deal terms we considered were length of deal (number of years), upfront payment, annual royalty, and minimum annual payment to startup. All these variables impacted the NPV in various ways. Although the startup was interested in maximizing the NPV, it was equally important to find the ideal balance between short-term and long-term payoff, i.e. should one target a higher upfront payment or a higher royalty. Ultimately, the balance is determined by the startup’s confidence in the commercial potential of their technology. One wild card that came up during the negotations was the traunching of the licensing deal based on key milestones. This represents another potential issue a startup has to carefully consider during their deal-making process.

As for commercial distribution agreements, the key variables were the length of deal, margins lost through revenue sharing, and net margins. In these deals, margin distribution is key in NPV determination.

In the acquisition scenario, the key variables are total acquisition price, upfront payment, earnout rate, and escrow rate. Again, an ideal balance between short-term and long-term payoff has to be determined by the startup, which depends on the startup’s confidence in their technology.

WINNERS
Winners were Jay Meattle and Vishy Venugopal (Entrepreneurs from Aloo Techies) for cutting the best deal.
Winning Cohort was Bootstrappers for best overall team performance.

Congratulations to everyone.

Sidd Goyal is March CEO (Boston)

Congratulations to Sidd Goyal, who is stepping up as March CEO for TLP Boston.

Sidd is CoFounder & CTO of Assured Labor Inc. a web-based company that leverages the power of SMS and the Internet to connect employers and workers in emerging markets. Sidd and his co-founders successfully raised funding over the last three months during his fellowship at TLP. Sidd is traveling back and forth to Nicaragua these days supporting the launch of Assured Labor's Latin America job marketplace, Empleolisto!

Sidd has extensive background in mobile and wireless technologies having worked with the co-inventor of the SyncML specification on an early implementation of the protocol as a college intern, co-founded a startup in the enterprise mobile space out of MIT, and most recently before Assured Labor served as a lead architect on Palm's synchronization team.

Sidd holds a Bachelor's and Master's degree in Computer Science from MIT. He's an avid traveler, sports enthusiast, and volunteers his time to various organizations around the Boston area.

Jeff McAulay is February CEO (Boston)

Congratulations to Jeff McAulay, who served as TLP Boston CEO for the month of February.

Jeff is currently working to start a new cleantech Incubator in collaboration with a major non-profit research lab, Fraunhofer USA. As part of this project he is screening potential clients on both technical and business merits before connecting startups with early stage investors or government grants. In this role, Jeff sits at the interface between energy technology, business development and public policy.

Jeff graduated from MIT in the Technology & Policy Program where he conducted research in the Sloan Automotive Laboratory. While at MIT Jeff was a lead organizer for several student groups including the MIT Energy Club, and the MIT Electric Vehicle Team. Jeff also sat on MIT's Campus Energy Task force to help form MIT's long-term campus greening strategy. Before coming to MIT, Jeff worked as an engineer at Nuvera Fuel Cells where he lead project work and supported the company in reaching several technical milestones for the integrated fuel processor group.

He has a BS in biomedical engineering from Boston University where he won an award for best project presentation for undergrad research on microbial fuel cells, and received the scarlet key for excellence in student leadership.

Upcoming Boston Area Startup Events

MITEF Start Smart Series for Clean Tech

February 9: First session kicks off 10 week series. Series costs $535. Register here. Topics & Dates:

2/9/2010 Starting David Kopans, Energy Climate Solutions

2/23/2010 Positioning Jim Walker, Ameresco

More...

IGNITE Clean Energy Business Plan Competition Begins this Month

February 11: ICE Meet and Greet @HBS, 8-9pm. ICE Website

February 24: Business Plan Competition Official Start: Register Here

HBS Venture Capital and Private Equity Conference

February 13: 8am-7pm. More info and Register Here

Tech Talk Tuesdays: How Successful Entrepreneurs Do More With Less

February 23, 7:30am-9:30am. More info and Register Here

Panelists include Joe Caruso and Michael Sheeley TLP '09 of Runkeeper

MITEF Software SIG Panel: Lean Startups

February 24, 6-9pm. More info and Register Here

Panelists David Cancel (advisory board of Shareaholic), Palle Pederson, Aaron White (DoInk)

Web Innovators Group 25

March 1, 6:30-9:30. More info and Register Here

Forum for website and mobile innovation startups featuring company demos

Michael Mullins

TLP Boston 2010

Shareholic: Finalist for Best Overall Add-On. Needs your vote

For the first time, About.com's Computing Channel is running a coordinated Reader's Choice Award program. During January, thousands of nominations were submitted by readers in a wide variety of categories including Best Overall Add-On. Shareaholic has qualified as a finalist in the Best Overall Add-On category!! Now throughout the month of February, folks will vote for a winner. Winners will be announced March 1. If you could take a minute to vote, I'd really
appreciate it!

Vote Here

How to Build and Sell Great Products

Last Wednesday, our TLP session in Boston focused on "Getting Revenues and Building Great Products". Ajay Kulkarni, Founder of Sensobi (TLP '09) which was chosen for Techstars 2009, moderated the IT panel, which featured Rishi Dean (Co-founder/CTO at Visible Measures, a venture-backed startup in social media), Rama Ramakrishna (MIT Sloan Lecturer in Operations Research, Founder, Profit Sciences, CTO, ProfitLogic - which was sold to Oracle for $250MM), and Mike Sheeley (TLP '09, Co-Founder and COO at RunKeeper, the #1 fitness app on the internet).

Each panelist shared valuable tips from the trenches on what they've learned from their good and bad experiences building products.

Here are some of the key lessons/takeaways from our three panelists:

Build off your passions, interests, and market experience when creating a new product

A startup will consume your life. Make sure you pick a space that interests you deeply so that the ride is enjoyable, no matter what the outcome. If you're not 100% committed and excited about your your idea, it will be hard to carry on when things get tough. Build off your expertise - it is much harder to create a truly great product if you aren't intimately familiar with your target market.

What you value in your product and what your customers value will likely not be the same

Talk to your customers as much as you can to understand what features they care about the most. Focus as much time and energy as possible on the biggest value drivers for them, not all the bells and whistles that you think are going to make the product more interesting. Don't assume that you know what they need - your interpretation of what they need won't always be correct. Watch them use the product in their natural habitat to unlock even more insights.

Know your market economics

Understand what people are willing to pay for - if possible, insert yourself in a pre-existing flow of dollars instead of creating a brand new flow. Show a clear, tangible ROI that people can't ignore or argue with. Figure out as early as possible whether what you're building is destined to be a hobby or a real business.

Think big - small ideas require as much work as big ideas

Just because an idea may be more niche-focused and small in scope, doesn't mean that it won't be a lot of work. Developing any product is going to be a significant amount of work, so why cap your upside by focusing on a small problem or small market? Your time is valuable. Spend it developing game changing products if you want to build a truly successful business.

Flexibilty is better than perfection

Avoid the temptation to wait until a product is "perfect" before you launch. Iterate and improve constantly in short development cycles. Get something out the door and be willing to change direction based on market feedback if necessary. The longer you wait, the greater the chance that competitors will steal your thunder. Provide just enough value to keep your customers engaged, and then add more over time.

For more tips, check out Rishi Dean's presentation embedded here:

Building Great Products: tips for non-product executives - Presentation to TiE Leadership Program

View more documents from Rishi Dean.

Tips on Starting Up from Dharmesh Shah of Hubspot

On December 9, the Boston TLP class was treated to a talk by Dharmesh Shah, founder of HubSpot and the popular blog OnStartups.com. The Getting Funded Competition had been a fast and furious VC negotiation round and it was great to have a dynamic speaker like Dharmesh to keep the energy going. Dharmesh has founded several software start-ups and he shared some of the lessons he picked up along the way.

Partnerships with big companies are unequal

He cited his experience of partnering with a big company (which eventually acquired his previous start-up) and described the challenges of working with them. So watch out for big partners, particularly ones that have no precedent of partnering with smaller companies!

Starting a company with family or close friends

Another big DON’T here – based on his first start-up with his younger brother, where they both felt they had to treat each other without regard to the relationship, creating undue pressure.

Power of a modest liquidity event

Two paths lie before most entrepreneurs – to either bootstrap a company by taking no outside capital (which often yields a bigger piece of a smaller pie) or to accept institutional financing (and end up with a smaller piece of a bigger pie). Dharmesh believes that bootstrapping may lead to a better outcome personally, but one should decide based on whether the business can achieve its goal without VC capital.

Risk

Don’t spend too much time on the technology risk; focus on market risk instead!

Don’t scale prematurely

Don’t prepare for potential problems too early by building team and technology for future scenarios (go at the right pace)

Building a great team

Early on in a company’s life, hiring generalists makes more sense than specialists.

Build a following early

Connect with potential users through blogs and LinkedIn, but be careful to limit the commercial spin if you want to build credibility.

Think Simple

Learn to say No (e.g. setting up 2 pricing schemes and optimizing too early usually carries a hidden cost)

Cardinal Sins

1. Losing objectivity (e.g. keep management debating both sides of important issues)

2. Keep investors and employees separate (if you invest in your company, separate the two roles and treat your cash the same way as other angel investors’).

These are just some of pearls of wisdom I took away from the talk – Dharmesh’s blog discusses these issues and more in detail. Visit OnStartups.com for more, and Happy New Year everyone!

TLP Boston Potluck @ Arsenal

Getting Funded Competition

Here are some photos from last night's competition.

TLP Get Funding competition

Hard Skills Session: IP, Incorporation, Financial Models & Survival Strategies !

Thanks to Foley Hoag for hosting us.

The Valley of My Dreams: Why Silicon Valley Left Boston’s Route 128 In The Dust

TechCrunch contributor Vivek Wadhwa chimes in on the differences between Boston's Route 128 and Silicon Valley that lead to SV's emergence as the Global Capital of Tech... and identifies TiE as one of the leading networking groups that were responsible for the area's success! One thing's for sure... with TLP's in Boston and San Francisco, we should add Regional Advantage, a 1994 novel about the 128 vs SV debate, to the TLP reading list.

Excerpt:

"No one disputes that Silicon Valley is the global capital of the tech world. But this wasn’t always so. It is the Valley’s dynamism and networks which have given it an unassailable advantage. Silicon Valley has simply left rivals like Boston’s Route 128 in the dust." Read More...

Michael Mullins, TLP BOS 2010