A VC in Vacationland

Seeking the next gen supply chain technology breakthroughs

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  • Book Review: The Dawn of Innovation

    English: Main locations of the War of 1812 bet...English: Main locations of the War of 1812 between the United States and the United Kingdom Français : Principaux théâtres d'opérations de la Guerre de 1812 entre les États-Unis et le Royaume-Uni. Español: Principales teatros de operaciones de la Guerra de 1812 entre los Estados Unidos y el Reino Unido. (Photo credit: Wikipedia)

    Charles Morris' The Dawn of Innovation chronicles the first industrial revolution in the United States. In the first decades of the 19th century, America went from a largely rural economy, with little internal transportation infrastructure, to an industrial powerhouse. Morris details three uniquely American innovations–universal male suffrage, the shift of political power from the elites to the middle classes and the move to mechanized mass production–that resulted in the world's first democratic, middle class, mass consumption society. 

    He starts his narrative in an unusual place–the Great Lake at the brink of the War of 1812.  America and England are locked in a battle of oneupmanship, seeing who can build the biggest and most powerful fleet of ships to control the lakes. The wierd thisng is that the navies rarlely battle, due to a combination of weather, unfair advantage and conservative commanders. But the shipbuilding boom does set the stage for many innovations, including mass production of warships, that served as a precurser for industry changes that set the stage for the revolution.

    Morris crosses a wide range of industries in his journey–the role of steam engines in the mill waterworks in Lowell, Massachusetts, the global markets won by American gun makers, like Samuel Colt, building western steamboats to open midwest agriculture to new markets and mass produced clocks by Henry Shreve, which quickly took over the English market due to low cost and high reliability.

    Publisher's Weekly summarizes his primary lessons well: “Morris's analysis shines brightest in the final chapter as he compares the United State's past economic growth with the current hyper-expansion of China. Only then, by examining the hurdles China faces in its ascendance to economic superpower, does Morris show how truly innovative the transformation of America was and why it will be impossible to repeat in the future.”

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  • Managing Start ups: Business Model Development

    Business Model TriangleBusiness Model Triangle (Photo credit: Alex Osterwalder)

    I often get asked for a simple template for developing a business model for a start up.

     

    Here's one that makes you get your idea onto one page–an important reality check for any new idea:

    http://www.businessmodelgeneration.com/canvas

     

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  • Marketing & Sales Innovators: Zillabyte

    Zillabyte bills itself as “Pandora for sales leads.” Built off a database of wto billion pages and 11 million unique companies, Zillabyte’s engine helps businesses search for prospective customers.
    “The technology connects buyers and sellers more efficiently in the business-to-business space,” said founder and COO Roger Huffstetler in an interview at their booth. “I used to work in sales for Twilio, and I know cold-calling sucks when you are selling technology. We are taking an anecdotal understanding of sales and making it analytical.”
    The site first prompts visitors with the question “Find me more companies like… .” It then prompts sales professionals to answer “yes or no” to potential clients to create a list options, based on the input. These results are further filterable by geography, size, and so on. Huffstetler said that the really exciting feature, however, is the alert system that notifies businesses when a new customer is found that satisfies their criteria. Zillabyte is based in Palo Alto.

  • Supply Chain Innovators: Boxbee-Solving the Urban Storage Problem?

    .@jason's perspective during the boxbee.com pr....@jason's perspective during the boxbee.com presentation. #launch2013 #launchfestival (Photo credit: kate.gardiner)

    According to xconomy, the San Francisco-based Boxbee took home the best overall new startup award this year at the Launch Conference based on its plans to breathe new life into the messy offline world of urban storage. Simply put, the service aims to simplify the storage process so that users can just box up what they want to store and let it take care of the rest.

    For those who are moving, traveling, or are just looking for extra space at home, the startup’s “secure storage hive” allows you to order boxes, which it claims it can deliver to your doorstep within the hour.

    Once you’ve packed your boxes, Boxbee helps you to schedule a pickup, taking the lifting, truck-packing and transporting out of your hands. On top of that, the startup claims to go the extra mile to adapt the whole storage process to its busy customers, by allowing you to schedule pickups and returns on the Web or via its mobile app and promises to complete pickup and returns in less than two hours. Well, two hours for “carloads” and next-day pickup and delivery for storage that requires a cargo van or truck.

    The service then stores your possessions until you need them again, and provides complementary services to sweeten the deal, allowing you to ship your boxes elsewhere from its app or web dashboard or have them donated. To streamline the process of pickup and returns and offer more flexibility, Boxbee’s dashboard keeps an inventory of images for the contents of each box in your account, including tagged descriptions, which allow you to choose the particular box you need without requiring someone to open it and rifle through its contents. It will then return the box to you in two hours.

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  • Supply Chain Innovators: SpeedyRoute–free multi-stop routing software

    The M4 had opened all the way to Bristol in 1971The M4 had opened all the way to Bristol in 1971 (Photo credit: brizzle born and bred)

    My good friend Adrian Gonzales had the following news item on Logistics Viewpoints. Interesting freeium model to penetrate the SMB routing marketplace? We'll see:

    Out of
    the UK, an interesting startup called Speedy Route launched a free, online
    multi-stop routing solution. Here are some excerpts from the website:

     

    Speedy
    Route calculates the best route when visiting multiple locations and then
    returning back to the start. It is ideal for delivery drivers, sales people on
    the road, or anyone who needs to make multiple stops. Speedy Route re-orders
    the locations you enter into the best optimal order, so that every location is
    visited once before returning to your start location in the shortest and
    quickest way possible. Speedy Route also provides full driving directions
    between all stops.

     

    Speedy
    Route is brought to you by Magic Hat Solutions Ltd. Speedy Route is currently a
    free web service, but we reserve the right to charge a fee to use the
    service in the future     [emphasis mine]. Speedy Route incorporates
    Google Directions in its results, and uses portions of the Open source software
    OpenOpt to help calculate the optimal route.

     

    On the
    one hand, you can dismiss this solution as a "toy" compared to more
    sophisticated routing and scheduling solutions. But on the other, this solution
    coupled with a freemium business model (it's clear the company plans to charge
    users in the future to solve more complex routes) might be an effective
    approach to penetrate the low end of the market. To me, this is another example
    of how software companies continue to experiment with go-to-market strategies
    and deployment models to cost-effectively service the SMB market.

     

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  • Supply Chain Strategy: Slow Pay–Suppliers as Capital Lenders??

    Cincinnati's Procter & Gamble is one of Ohio's...Cincinnati's Procter & Gamble is one of Ohio's largest companies in terms of revenue. (Photo credit: Wikipedia)

    P&G announced today that they would be extending payment terms for suppliers from 45 to 75 days. The goal is to raise $2 billion per year for new capital expenditures. JC Penny and Walmart, among others, have already implemented slow-pay programs to save cash.

    Two questions: Is it fair? Is this a strategy that will further confuse payment terms in supply chains?
    For the fair perspective, what's fair? Oligopolists, meaning global consumer products companies with lots of desired brands in this case, have a lot of market power,especially with smaller suppliers. These suppliers will have to approach their already leery bankers for an increase in their AR lines, or seek other financing options to cover the extended float. Fair? It's all in the eyes of the beholder, but those who have the gold makes the rules. It does seem a bit cheesy on the part of P&G who can probably borrow money for less than 5%, compared to twice that interest rate for an AR loan for their suppliers.
    Is this the start of a new trend in the supply chain financing? Manufacturers and retailers have historically extended payment terms in times of economic stress. This move feels different. If the P&G move sticks, and there is no reason to think it will not, many others will follow, opening a whole new credit source for financing supply chain transactions. If the move is transitory, which it has been in the past, due to supplier pressure, then the supply chain financing options will return to some semblance of the past. P&G and others will work to make this stick. Where else can you get $2 billion in free cash without any work? Genius move on the part of the finance guys.
    We'll see if this happens, but it does not look good for downstream providers, including software and hardware suppliers.

  • Reverse Logistics: Phone Recycler EcoATM raises another $40 Million

    Image representing ecoATM as depicted in Crunc...Image via CrunchBase

    According to Xconomy, San Diego’s EcoATM, which operates automated kiosks that
    enable consumers to recycle their mobile devices, says it has raised $40 million in debt
    financing from Boston’s Falcon Investment Advisors to expand beyond
    its existing network of 300 kiosks in 20 states.

    In the statement, EcoATM chairman
    and CEO Tom Tullie says, “There’s still a large percentage of the country that
    doesn’t have access to a convenient recycling solution for their mobile phones
    and other personal portable electronic devices. We raised this money to help us
    deploy ecoATMs nationwide and help people recycle their old phones, tablets, or
    MP3 players, regardless of where they live.”

    EcoATM plans to install an
    additional 600 to 700 kiosks by the end of the year. (Information about the locations of EcoATM kiosks is here.)

    EcoATM kiosk

    The technology needed to
    recycle mobile devices is more complicated than you might expect. Each kiosk
    uses machine vision and artificial intelligence to scan, identify, and evaluate
    each device being recycled. Once identified, the kiosk checks spot prices to
    determine how much cash or store credit to offer for each trade-in. EcoATM
    takes a cut from each deal.

    EcoATM says it resells about 60
    percent of its collected devices and responsibly recycles the rest.

    In a note last week, an EcoATM
    spokeswoman told me the startup had added technology that enabled its kiosks to
    accept tablets for recycling.

    The company has deployed most
    of its kiosks in large shopping malls located in big cities. The new financing
    is intended to get ecoATMs into smaller cities and other areas where foot
    traffic is high.

    EcoATM has raised more than $31
    million in venture capital funding since 2008, when three out-of-work techies identified a potential business
    in recycling cell phones.     EcoATM tested the idea with a prototype in
    an Omaha, NE, shopping mall in late 2009. Since then, the company says it has
    paid out millions of dollars to hundreds of thousands of customers, and has
    diverted hundreds of thousands of devices with toxic components from American
    landfills.

    The company’s venture investors
    include San Diego’s Tao Ventures and Moore Venture Partners, along with
    Coinstar, Claremont Creek Ventures, PI Holdings, AKS Capital, and Koh Boon
    Hwee.

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  • Managing Start ups: Don’t Take Dumb Money

    Right WhaleRight Whale (Photo credit: Joseph Wu Origami)

    In recent months,I have had two startups faced with the decision of deciding whether to take dumb money. No, not Uncle Frank's friends and family round check, although that one can be a problem as well, but mostly over bad feelings if the startup fails. 

    No, I mean money with strings attached. Strings attached to convertible notes or preferred stock rounds can come in a variety of flavors. The ones I have had to deal with recently are supra pro rata rights and unqualified financing conversions in convertible notes. And why the Right Whale to the left, you ask? Dealing with these terms can be a whale of a problem for the entrepreneur in later financings.

    Supra pro rata rights are basically the right to invest in the next funding round, regardless of who leads it or whether other investors would welcome them. In the case of a convertible note, it would allow an investor to buy a certain percentage of preferred stock or invest a certain amount of money, regardless of valuation and the desire of new investors to limit participation. They are often attempted when a new VC firm finds a hot investment and wants to be guaranteed that they can invest in the next round. It is a rare term, one that can irritate the next round of investors, sometimes so much that the new investors can try and make the supra pro rata rights go away before they invest. This can be costly and make the entrepreneur give up additional ownership to satisfy the rights before financing, or have a sugar daddy who can pay off the earlier investors.

    Unqualified financing clauses are usually inserted by investors who want their money back if there is a down round (meaning the valuation of the company is below the previous valuation) in the next tranche of funding. In this case, the legal clause says that the holders of the note have the right to ask for their money back if the valuation drops from say, $5 million to $4 million. The VC looking to finance the down round could then see their money go right back out the door to previous investors, rather than help grow the company. VC's would generally ask the entrepreneur to clean this obligation up as well prior to new funding, meaning the entrepreneur would have to find some way to buy off the holder. Since entrepreneurs rarely have millions in the bank, the buy off can turn out to be giving a significant share of the company to the earlier note holders to clean up the obligation prior to new funding.

    There are numerous other variations lawyers and lenders have thought up which we will address later. The bottom line is that unless your are desperate, never agree to these kind of rights in a financing round.

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  • Managing Start ups: Be Wrong As Fast As You Can

    English: John Lasseter, Chief Creative Officer...English: John Lasseter, Chief Creative Officer of Pixar and Academy Award winning director of, Toy Story, reviews the 550 films on the National Film Registry with These Amazing Shadows co-producer, Barbara Grandvoinet. (Photo credit: Wikipedia)

    Charlie Rose recently did an interview with John Lasseter, a founder of Pixar (and summarized in the New York Times). The interview focused on Pixar's in-house theory: be as wrong as fast as you can. Lasseter said, that mistakes are an inevitable part of the creative process, so get right down to it and start making them.

    Brilliant thinking, and it struck me that startups should follow the same advice. But the problem is: HOW DO YOU KNOW WHAT MISTAKES TO MAKE FAST? Here are a few thoughts on the process of making startup mistakes.

    1. Figure out who your customers will be–in every startup I have been involved with this has been the key question to determine up front. Who has the pain points? Are they willing to pay (on an ongoing basis) to solve those problems? What will keep them coming back for more? Easy questions to ask, but tough ones to answer. But you better figure it out…and fast. At Placester, we originally thought that our customers would be landlords and that we would help them rent, manage and sell their properties. But when we applied the "show me the money" rule, we realized that real estate agents had the biggest need for an on-line presence and also controlled significant advertising money. We may get around to the property owners later, but the agents had the biggest incentive to make a rental or sale happen, because they were only paid on commission.

    2. Be selective in team building–not only will these people make or break your startup, you have to live with them 12 hours or more a day. Compatibility is critical and shared passion a key. In one case, a co-founder moved back from his beloved Europe to the US to help run a startup. That shows real passion and dedication. In another case, a co-founder ended up with significant ownership, but other career ideas. We were lucky to have an amicable "return of founder equity" in that case.

    3. Only have committed investors–I have seen too many startups take dumb money, either from investors with little knowledge of the space, or investors without access to sufficient funds to carry the company through the development process. It's easy to grab any money coming your way when you desperately need it, but if those investors cannot help you either be successful (via mentoring and industry networks) or gain entrance to the venture capital world, the burden of driving the company forward will fall totally on your shoulders. Cold calling VC's is no fun and its very difficult to get anyone to listen to you without an introduction. So if Uncle Frank is an early investor, that's fine as long as you quickly get a cadre of experienced investors as well to carry you forward.

    Finally, celebrate mistakes. Stand up in front of the team and say " I just wasted a couple of days looking at the wrong marketing/HR/etc. strategy!" Your team will learn from your candor and be willing to do the same when they screw up.  It also saves someone trying to "win at the crap tables by betting their house after they lost all their money"–or sticking to a solution path that is not working.

     

     

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  • Managing Start Ups: The Checklist

    Cover of "The Checklist Manifesto: How to...Cover via Amazon

    The Checklist, a 2007 article in the New Yorker, has become a must read in the start up community. Faced with the high degree of complexity needed to make a new company successful, entrepreneurs have turned to constructing elaborate check lists on how to manage growth. You can read the longer book, The Checklist Manifesto, but gain the same insights from the article, unless you need a lot of help constructing a checklist….

    The "Checklist Manifesto" was written by Atul Gawande, a doctor and writer for the New Yorker. Its premise: A simple checklist can help people manage complex situations. Gawande uses a number of examples across a variety of industries, from medicine, technology and even disaster relief to illustrate his point.

    I am always encouraging my entrepreneurs to work to a list of priorities. There are so many things you could do when building a company, but three quarters of them are probably superfluous or distracting from fundamental goals.

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