Category Archives: Venture

“Syl’s Stance: Forget Employment, Be an Entrepreneur”

The old model of ‘study to be a technocrat, graduate, then work as an employee’ is gone, and likely not to return. It emerged, peaked and ebbed over the last 100 years. Yet our education, personal planning and government policies are stuck in the irrelevant 1950s/1960s model. History shows us that all economic models evolve and many disappear. The game is new people!

The guiding principles for today’s environment in my view are: ‘grow your own’, ‘eat/keep what you hunt’, and ‘passive income rules’. This is why people are well off to consider to create and own their own business. Available pathways to viable economic health today include entrepreneurship, network marketing and stock ownership. Of course, success requires due diligence, constant learning, self development, ‘smart work’ and progressive results.  And for your financial peace ‘spend much less than your total income’. And the bonus is that when you earn more than what you spend, you have capacity and can choose the joy of sharing with others and paying it forward.

Be well,
Syl

© Strategy Dynamix, LLC All Rights Reserved

What is your perspective?  Please share your thoughts in the comment section below.

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture advisor and interim executive. Syl  has empowered hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle. Learn more and connect with Syl at http://www.strategydynamix.com/aboutus/executives.php

Top 7 Benefits of a Business Plan

Many wonder why a business plan? Well, here are the Top 7 benefits in my view:

1) Forces you to summarize the business model

2) Establishes goals, direction, gaps and action plans

3) Forces alignment

4) Establishes performance metrics and accountabilities

5) Helps prioritize budgets and hiring decisions

6) Creates core content that can be repurposed for VC presentation deck, prospectus and sales collateral

7) All serious businesses have a business plan whether it is de-facto or intentionally stated.

More: Most customers, investors and other stakeholders will demand to see a business plan – on paper and/or permeating your business.

Many corporations do a three year planning cycle with annual updates.

Most investors require five year financials – which need justification with a business plan.

Now better get on with it to update your business plan!

© Strategy Dynamix, LLC All Rights Reserved

What is your perspective?  Please share your thoughts in the comment section below.

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture advisor and interim executive who delivers venture accelerator solutions, He has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle and helped to raise  $300 million of capital. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php.

Do VCs Have Money to Invest? Usually Not!

One of the more perplexing aspects of venture building is figuring out how to finance your technology and company. A common mistake is assuming that Venture Capitalists (VCs) have money to invest in your venture when you need them. The reality is that VCs at most times have no money available to invest in any new venture. Intrigued? Then read on.

While many entrepreneurs strive to connect with VCs, it is really somewhat of a waste of time in most cases. That is, unless you understand the inner workings of the ‘VC world’, selectively choose the right VC and have good timing.

All private equity funds, including venture capital funds, are run in a similar pattern. They raise money for their fund, invest in companies, wait a while, and then exit those companies for the purpose of trying to make a bundle of money. Each fund has a portfolio of typically 10 to 15 companies with an investment time horizon of about 10 years. Success is measured on the entire portfolio’s performance.

The fund raising period and the initial few years of investment are quite frenzied. This is when the pipeline is built, term sheets signed, due diligence conducted and expectations are high. Then comes the hard work and the wait. Earliest exits are during years 3 to 5, and these are often winners. Years 5 to 8 are when the majority of invested companies are exited and then the laggards after years 8 through 10 (or longer). Of course some sectors have much longer horizons – like pharmaceuticals; while some investor approaches have exits based on milestones much earlier in the technology commercialization or business development  stage.

To use a baseball analogy, the goal for the VC fund portfolio is to hit at least one home run, with the expectation that there will be a handful of singles and doubles. Walks will happen, but most feared are the fouls, or bad bets, that bring down the entire portfolio’s return. The goal for each invested company is 35% or higher ROI – depending on the fund.

So we can see that it is primarily in those first two to three years when a fund has money to invest. During that earlier period, initial investments are made, but also funds are committed or reserved for follow on investment rounds for the same portfolio companies. Thus, as a general rule, from year four onward (or 60-70% of the time), VCs have almost no money left to invest from a particular fund.

The lesson for entrepreneurs is first to be aware of the private equity investment lifecycle. Second, entrepreneurs should try to identify where a particular VC is in their lifecycle. This is not a simple task. One must read the news, ask around in networking circles and perhaps pose the question to the VC. Given the nature of the investment lifecycle the best times for entrepreneurs to connect with VC are when a VC is raising  its next fund or else in the first few years of the new fund. Of course always be cordial as VCs are always building their pipelines. Also, remember that the VC community is a small one and you never know when one VC might introduce you to another who is in the sweet spot of their investment lifecycle.

What is your perspective?  Please share your thoughts in the comment section below.

© Strategy Dynamix, LLC All Rights Reserved

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture advisor and delivers venture accelerator solutions. He has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle and helped to raise  $300 million of capital. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php.

Newsweek Print is Dead, Long Live Digital Media

This morning, The New York Times online edition announced: “Newsweek To Cease Print Publication at End of the Year”. Closing date 12/31/2012. This story led me down memory lane reflecting upon my relationships with Newsweek and the evolution to digital media. Was it my fault?

The world is a changin’.. I remember “Newsweek” was the only ‘textbook’ for my high school sophomore social studies class in the 1970s. I waited for it each week and read it on the bus and in class.  In 1997, when I started reading the Wall Street Journal online (for free) at my desk in a Fortune Global 1000 firm – others raised their eyebrows, with their fingers smudged with ink from the print edition. Today, our daily banking, shopping, dating, marrying, socializing as well as business procurement and church donations are all started or handled on the web. The digital revolution continues…and is proof that the “dot com” era succeeded …magnificently!

Many dot.com web 1.0 era businesses are flourishing today – including the big brands of eBay and Amazon, as well as many eBusinesses that my Scient/Razorfish colleagues designed and built – like MLB.com, Hotwire.com, LMVH.com and major banks’ online sites (probably yours). Other eCommerce and eProcurement transaction and digital sites that Scient built were acquired and integrated into other technology business platforms. For example, during web 1.0, I was involved at the launch of a Digital Print eProcurement Platform for a traditional printing company that was recently acquired by a VC backed company led by a Scient alumnus.

I remember in the late 1990s (internet ground zero) spending hours online with Time Warner media portal site to my great enjoyment. There was tremendous content across all their brands; but they did not know how to monetize their assets and keep user eyeballs sticking to their sites. Time Warner took down their branded sites and did the AOL deal – then dropped to the back of the pack. What a shame.

A similar thing happened to Newsweek  – namely “a decline in advertising and circulation” (aka users) led to its demise. What is regrettable is that Newsweek (Owned by the Washington Post until 2010) did not learn long ago from AOL’s missteps on the one hand, nor from the Wall Street Journal’s successful business model pivot to revenue on the other hand.

Today, online content reigns and customer stickiness, usability and subscriptions remain vital to success. With people’s addiction to real time…well, anything, personal updates and news must all be relevant, juicy, riveting…and yes, digital!

What is your perspective?  Please share your thoughts in the comment section below.

© Strategy Dynamix, LLC All Rights Reserved

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture accelerator and venture consultant who has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle for digital, health and technology businesses. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php.

Note: For The New York Times online article “Newsweek To Cease Print Publication at End of Year” click here.

“Differences Between Accelerators and Incubators”

There is great interest in venture creation these days and many are wondering about the opportunities and differences between accelerators and incubators.  Let me share some recent history and some specific comparisons from my direct experience.

The new generation of accelerators was spurred on by the USA President’s “Start Up America” initiative a few years ago when he called upon Michael Dell, the Kaufman Foundation, TechStars and others, and asked them to replicating their efforts across the country. The goal was to stimulate start-ups to help the economy based on the understanding that two-thirds of all new jobs in the USA are created by small businesses.

Other players, the Angels and Venture Capitalists (VCs), who earn money from financing successful novel and risky technologies and business models, view accelerator programs as an answer to addressing the constant challenge of the VC system – which is how to find and effectively evaluate the most innovative and promising teams and technologies.

In places like New York City, Mayor Bloomberg and the Angel and VC communities support the accelerator concept as one method to ramp up innovation across NYC’s fashion, media, finance and other sectors and to position the City to compete head to head with the long standing venture creation ecosystems of Silicon Valley, CA and Boston, MA.

In the past 18 months the buzz and momentum for accelerator programs in NYC and across the country has exploded – with some franchises expanding globally.  It is an extremely exciting era – again!

So now, here is my view of the key differences between Accelerators and Incubators:

ACCELERATORS:

  • Mostly private, profit-driven, and private equity/venture capital owned
  • Offer short term programs of about 90 days
  • Each program has few participants (typically 10 to 12 teams/companies)
  • A few participants may have funding before they start the program, but most participants do not have funding when they start
  • Offer cash (equity) for ownership in amounts of between US$6,000 to US$30,000 for equity ownership of between 4% to 10%
  • Most suitable for IT, web, mobile businesses; emphasis is on building an app  or prototype during the program; not necessarily to build a full business model
  • Programs end with a demo day (the big test)
  • After demo day – participants are out in the street (since only temporary space provided) but some programs continue to support alumni by introductions and with an accelerator alumni network – though activity levels and value vary by organization
  • Most accelerators have a few lead service providers (sponsors) along with the sponsoring angels/VCS who have first pick of the talent and ventures
  • Most have a list of mentors prepared by the Accelerator– who may or may not be investors, and who are matched up and then accepted, or not, by each participating venture based on fit, etc.
  • Mentors are usually not compensated during the accelerator program
  • Accelerators are criticized by some entrepreneurs for low valuation (example: $20,000 for 10% share = $200, 000 valuation – post money)

INCUBATORS:

  • Most are university or government agency run* (though some private sector models exist)
  • Driver is economic development by Economic Development Agencies (for job creation benefit) or else technology transfer driven by Universities (for licensing revenue benefit) and the federal government agencies (about 700 in the US Federal Lab Consortium for Tech Transfer)
  • Allow “slow development” incubation, and multi-year approach for technology commercialization
  • EDA and University models usually offer a three (3) year tenancy/lease – though some tenants stay longer, if vacancy at the location,  progress or other factors
  • Usually suitable for highly engineered product or technology that requires long term R&D (5 to 20 years) and are capital intensive (i.e. life sciences, medical devices, engineered product or system, energy solution, etc.)
  • Services and programs are typically provided by outside service providers on behalf of the incubator– some on paid basis, and some on pro bono basis
  • Offer some introductions and guidance for transition from incubator to new location
  • Criticized for being real estate driven

In my opinion the verdict is out about which model is the most successful for creating venture value. I predict a new model will emerge soon to displace both incubators and accelerators as they now exist. Until then I encourage entrepreneurs and investors to continue the beneficial community building through networking, meetups, incubator activities and accelerator programs. Through such cross-pollination we will inevitably create the next iteration.

I would love to hear your observations in the comments section.

Onward and upward!

© Strategy Dynamix, LLC All Rights Reserved

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a  venture consultant  He has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle. Syl also provides services through Incubators and Accelerators to their tenants and participants, managed an incubator fund, worked in an accelerator and is active forming new accelerators. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php.

12 Ways to Avoid ‘Dead Weight’ Founders and Partners

For various reasons start up ventures often end up with ‘Dead Weight’ Founders and Partners. These are people with misaligned expectations from yours who often become an energy zapper and in the worst cases become an obstacle to technology development, capital raising, strategic alliance formation, etc. In my last article I advised you to “Dump Dead Weight’ Founders and Partners Overboard”. In this article I offer my recommendations about how to avoid taking on ‘dead weight’ founders and partners. Here we go.

1,  Recruit people to help with your venture in an intentional manner.

2. Address expectations about contributions, compensation, etc. from the initial point of involvement.

3. Hold discussions with each person in a scheduled and formal manner – not just at the bar or in the car.

4. Start documenting discussions and mutual understandings early on. And continue this practice.

5. Clarify roles and compensation understandings according to each area of contribution by a person.  It is ok to have one person serve in several roles, but you should delineate different compensation schemes for each distinct role – for example, programming (fee based) and sales (fee plus commission).

6. Establish goals and performance metrics for each person and each role as soon as practical.

7. Consider offering consulting roles or deferred compensation in lieu of offering equity shares or expectations of employment early on.  When long-term involvement becomes mutually desirable, then, and only then, move on to consider other compensation arrangements with each person– such as salary, profit sharing, stock options or equity share.

8. Describe the conceptual business understanding of functional roles, responsibilities and associated compensation in a general non-binding memorandum before meeting with attorneys. This saves time and money with attorneys.

9. Clarify ownership and equity expectations carefully (and from a long term perspective) and then formalize the understanding with legal documentation and mutual sign off.

10. Revisit roles and compensation arrangements with each person whenever appropriate, as the venture evolves, and document any changes.

11. As you add people to your team you need to balance the overall scheme of roles, responsibilities and compensation on a relative basis by considering the entire team as well as future roles to be filled at the company.

12. Engage a venture consultant or HR consultant who deals with start-ups and ramp-ups and who can guide you with workforce planning, role definitions, expectations setting, compensation approaches and other issues.

By following the above best practices you will be able to avoid many situations which might otherwise result in “Dead Weight” founders and partners. Instead, you will be able to focus your energy and mindshare on technology and product development, gaining customers, etc. – all in a more positive working environment. And there will be clarity for all stakeholders to more smoothly move through transition stages and grow your venture.

© Strategy Dynamix, LLC All Rights Reserved

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture accelerator and venture consultant who has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle and to ReDesign, RePosition, ReLaunch and to Scale technologies, products, services and businesses. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php

Dump “Dead Weight” Founders and Partners Overboard

Too many ventures are burdened by ‘dead weight’ founders and partners. This can seriously sap momentum and even kill a deal for a strategic alliance or for venture capital. If this is happening to your venture then take control today to clean up any tangled messes among partners, no matter what the cost, or else pay the price.

Often a VC or strategic partner is interested in moving forward, but a range of unresolved issues among people involved with the venture are now stumbling blocks to doing a deal – or even to finishing due diligence. These might be misunderstandings, misaligned expectations, or outright disputes about roles, contributions, equity shares or technology ownership.

How Does One Find Themselves in a Founder/Partner Quagmire?
Typically a start up venture has a champion who enrolls their friends, family or other associates to help at the early stage of a venture when the entrepreneur has no resources. Associates offer to help out for various reasons – perhaps out of friendship, or they may have keen interest in the app, technology, product or service. Others have hopes to snag an official role in the venture as it grows and hope to win a big payout if things go well.

The entrepreneur’s motives are usually much simpler and short term. Struggling to develop a product or launch a company, the entrepreneur looks around to pull in any breathing person who can relieve some of the stress to help get 100 things done at once. With little or no money, entrepreneurs respond openly to friends’ and associates’ offers to help with a bit of code, prepare some branding materials or to make a few sales introductions. But all this is often done in a vague manner with very little clarification of expectations or responsibilities and most often with no documentation. This is especially becoming harder to manage as entrepreneurs work at incubators, accelerators and co-working spaces where the thrill of cross-pollination is enjoyed on a personal level, but which may launch the venture into perilous waters in terms of the entity’s corporate interests.

Take Control of Your Venture’s Destiny
As the venture champion, you are the captain of the ship. You must intentionally chart the course, design the team and draw upon experienced start up advisors in order to define and navigate your venture to a desirable destination. Bring clarity to the ownership and management of the venture as soon as possible. By addressing partner confusion you will set the stage for renewed energy and momentum for developing the technology and business. And you will also be able to meet new strategic partners and potential investors with confidence. Finally, you will have smoother exits when the time comes, while still maintaining friendships. So if you find you are now in such a quagmire, by all means, don’t be afraid to throw overboard any dead weight players in order to keep the venture moving onward and upward.

© Strategy Dynamix, LLC All Rights Reserved

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture accelerator and venture consultant who has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle and to ReDesign, RePosition, ReLaunch and to Scale technologies, products, services and businesses. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php