Managed Video Goes Mainstream

Posted on | July 26, 2010 | No Comments

Last week, I had the pleasure of attending and speaking at the inaugural Managed Video as a Service Summit, hosted by Envysion at the St. Julien Hotel in Boulder (for those of you not familiar with the concept of managed video as as service, you can read my explanation here).   There was great turn-out for the event, and a very thoughtful discussion around the future of the industry.

A few quick observations from the conference: 

  • The leaders in the managed video space continue to be those moving beyond surveillance to develop analytic tools that help organizations better understand everything from operations work-flow to customer feedback.  In other words, video is no longer just for the loss prevention department.
  • Video technology is moving quickly.  While the concept of managing video from a remote location has been around for a while, advancements like searchable analytics, point of sales integration, exception based reporting and new user interfaces continue to push innovation, expand the product offering, and increase the number of potential customers.
  • It all comes down to ROI.  The willingness of customers to invest in a managed video system (often requiring a roll-out across thousands of units) usually depends on their ability to generate a quick return on investment.  Based on what I heard at the conference — where customers spoke of 10% to 15% bottom line improvements at the store level — the adoption curve should be accelerating.

Despite the stiff economic headwinds, the MVaaS industry has made incredible strides in the last couple of years.   This conference — where the first order of business was agreeing on a name for the space itself (i.e., MVaaS) – is another huge step. 

Congrats to Envyision and all of those participants who were involved in making this first annual summit a success.

Category: Portfolio Companies, Technology

News From the Portfolio

Posted on | July 8, 2010 | 2 Comments

  • Congratulations to Taligen Therapeutics, who was recently named the University of Colorado Bioscience Company of the Year.  You can read about it here.
  • Victors & Spoils released a new campaign for Virgin America to mark Virgin’s first move into Canada.  The promotion allows Virgin to use crowdsourcing to identify their new brand ambassador.  You can read about the campaign here, and visit the Virgin promotional site here, where you will be greeted by Sir Richard Branson himself.
  • I joined Toby Murdock and Mike Lewis of Grogger on w3w3 Radio to discuss their company and the venture capital environment in general.  You can listen to that interview here.
  • Finally, High Country Venture, the entity we use to manage our Fund, has a new logo (see below).   Naturally, the logo was crowdsourced.  We used the platform of our friends over at CrowdSpring and recieved abut 60 submissions in the matter of a week.  Hope you like it.

                         

Category: Chris Marks

A Conversation with Todd Woloson

Posted on | July 1, 2010 | 3 Comments

Todd Woloson is a Boulder based serial entrepreneur with a unique perspective on the relationship between venture capitalists and the companies in which they invest.

After graduating from Denver University Law School in 1994, Todd was a founding partner at Canyon Capital, an early stage venture fund located in Denver.   After working with several start-ups in the internet and technology spaces, Todd left Canyon Capital in 2002 to form IZZE Beverage Company, where he developed a line of all-natural sparkling fruit juices.   Todd served as President and CEO of IZZE until its sale to PepsiCo in 2006.

Following the sale of IZZE, Todd elected to go back into venture capital and became a Managing Director of Greenmont Capital Partners, an investment fund focusing on early-stage companies in the Lifestyles of Health and Sustainability (“LOHAS”) market.

Not only have we co-invested with Todd when he was at Canyon Capital, but we have invested in Todd when he was the CEO of IZZE.  As a result, I have seen Todd in several different roles, and have a lot of respect for his skills as both an investor and operator.  In addition, I grew up with Todd, and we have been friends since our high school days (those stories will have to be the subject of a different post.)

Recently, I sat down with Todd over a burrito and asked him some questions about IZZE, and his perspective on the VC/entrepreneur relationship. 

                              _____________________

Q:  What caused you to make the move from investor to entrepreneur?

TW:  It was a combination of fear (the internet bubble had burst along with a certain amount of my confidence), an interest in the Natural Products industry (interesting people making a difference along with its importance to the town of Boulder), and a desire to get better operational experience (I had some success as an entrepreneur, but not in building an organization).  Finally, it was a chance to put into practice a number of things I had picked up from my exposure to successful entrepreneurs while at Canyon Capital.

Q:  What surprised you the most about life as the CEO of a start-up?

TW:  It gave me a much clearer picture of the physics of plumbing. It really does flow downhill. It also gave me a much deeper appreciation of organizational inertia. There are far more moving parts to a success than I ever appreciated. The day-to-day is always more complicated than it appears at the board level. 

Q:  If you were starting IZZE again, what would be the one thing you would do differently?

TW:  Most of the glaring mistakes I made were related to misjudging people. I would like to think I could have done better, but hiring employees and partnering in general is tricky.  I am sure I would make similar mistakes if we were staring again.  In addition, I would not have spent as much time worrying about where we wouldn’t sell IZZE, and more time just selling.  At the time, the four years we spent on IZZE seemed like an eternity.  In hindsight, it was quick and I am sure we could have gotten bigger with a more targeted sales approach.  Finally, I would have built out the management team earlier.  Recruiting experienced managers made my job so much easier, but we didn’t really get it right until the end.

Q:  What is the biggest lesson you learned from the IZZE experience?

TW:  It’s hard to build a company, even when almost everything goes right.

Q:  What made IZZE a success?

TW:  Luck and timing, and an understanding that when you have the first two, bet the ranch.

Q:  What advice do you give entrepreneurs who are just getting started?

TW:  Stress test your idea over and over before taking other people’s money.  Once you take capital, you are in and cannot walk away even if you want to.  Also, for young entrepreneurs, I usually suggest getting a job in their industry before starting a company.  It provides key perspective, access to potential mentors, and increases their chances of eventually attracting capital.

Q:  After the success of IZZE, why the transition back to investor?

TW:  I love venture capital.  It provides the opportunity to get involved with a variety of businesses at a strategic level and work with very smart people. 

Q:   How has your investment criteria changed based on your experience at IZZE?

TW:  As you might suspect, I have more of an emphasis on management.  It is essential that management understands how to handle adversity (it always comes) and can adapt to it.  Any good strategy always has a back-up plan.

Q:  What is the one quality in a CEO that you need to see as an investor?

TW:  Not really a quality, more of a character flaw. Specifically, the ability to be simultaneously optimistic and fearful, as well as confident and humble.  It will drive your spouse nuts, but it’s a key ingredient for entrepreneurial success.

Q:  What mistakes do you think VCs make in the way they interact with their portfolio companies?

TW:  They often don’t communicate how venture capital works. It is not for everyone and has many limitations.  However, for the entrepreneur who wants to build a company to an exit within a handful of years, venture capital is a great source.  If an entrepreneur wants to control the story and build a company to hand down to their children, venture capital is a nightmare. 

Q:   How would you describe the ideal relationship between VC and CEO?

TW:  Mutual respect. The CEO can’t do their job without capital, and the VC cannot produce a return for their limited partners without successful CEOs.

Q:  What would it take for you to be an operator again?

TW:  An idea with as much momentum as we had at IZZE.

Q:  What is the best thing about owning a farm?

TW:  Driving the tractor (by far).

Category: Venture Capital

The Need For Intellectual Honesty

Posted on | June 24, 2010 | No Comments

Most venture capitalists will tell you that when they invest, they are investing as much in a management team as a business plan.  Nowhere is this more true than in the world of early stage investing, where management must possess both a commitment to vision and an ability to adapt to constantly changing circumstances.

When we make an early stage investment, we fully expect that, over time, if that investment is successful, there will be major changes in everything from product offering to strategy.  The changes can be driven by anything from customer feedback to the competitive landscape, but one thing is certain: the business world will not stand still while you build a company.

Being able to step back from day to day operations, assess the need for change, and implement the right strategic shift is difficult for many reasons.  It is difficult because the life of a start up CEO is incredibly hectic.  Taking the time to lift one’s head up at all is a challenge.  It is also difficult because the direction and strategy of the business are usually based on the original entrepreneurial vision of the founder/CEO.  For an entrepreneur to admit the need for change, whether to the team, the investors, or to himself, can feel like admitting failure.  Finally, change just flat out takes work. It usually means tough decisions, tough conversations and operating outside of the comfort zone.

A recent episode of the Techstars program “The Founders” addresses this very issue.  They call it the need for intellectual honesty (see video below).  In the video, Toby Murdock, the CEO of Grogger (where we have made a seed investment) talks about the feedback they have received from the market and the changes they are making as a result (the dreaded “pivot”). It is worth watching, and another example of why Techstars is such a great resource for early stage entrepreneurs.

Category: Portfolio Companies, Venture Capital

The Shifting World of Advertising

Posted on | June 11, 2010 | No Comments

If you have watched any TV at all in the last couple of weeks, then you have probably seen the new ad campaign by DISH Network.  It is a clever campaign that features two astronauts floating in outer space while they flip the “Free H.D.” switch on the DISH satellite (see video below).  The campaign has been well received, and is part of what appears to be a fairly robust media push by DISH (based on how many times I saw it during the Stanley Cup Finals alone).

The coolest part of the DISH ads is not that they are funny (which they are), or that they cleverly introduce a strategic and competitive shift by DISH (which they do), but that they were created by Victors & Spoils, the first ad agency built on crowd-sourcing principles.  

When we helped launch V&S last fall, the outcry from the traditional agency world was fast and furious.  As someone who had never been part of that world, I was shocked by the angry and personal nature of the response.  Among the most repeated claims was that crowdsourcing, although fine for the creation of logos and such, could never be applied to larger, more complex projects.  The use of the crowd, the argument went, would result in weak specs, low quality work and brand dilution.  Even more disturbing was the claim that crowdsourcing was merely a way of exploiting the creative talent pool with little or no pay.

In the first six months, V&S has let their work speak for itself.  In doing so, they have established three indisputable facts.  First: given the right level of curation, the crowd can develop as good of, if not better, work then any other agency.  Second: a focus on providing the creatives with quality assignments, good tools and fair compensation, results in a happy crowd that is eager to participate in the V&S system.  And third: by removing the bloated overhead that exists at large ad agencies, the work can be done far more efficiently (i.e., clients save a lot of money, which they tend to like).

All of this is adds up to an impressive start for the folks at V&S as they continue to navigate their way through the challenges of being first. 

The more intriguing question is what does all of this mean for the traditional ad agencies who continue to operate in the world of scarcity and non-transparency, charging clients outrageous amounts to support a business model that now appears out of touch and out of date?   Only time will tell.  But if they are slow to adapt, then they may just end up on the outside looking in — swapping war stories with newspapers, tv networks, and other relics of yesterday’s media world.

Category: Crowdsourcing, Portfolio Companies

HAWKS WIN!

Posted on | June 10, 2010 | 1 Comment

                                                      
Growing up in the Chicago suburbs, my buddies and I lived and died with the fate of the Blackhawks.   When we were young, we would spend hours on the ice or out in the driveway, mimicking the moves of our favorite players, and echoing the radio calls of Pat Foley and Dale Tallon.

Throughout the eighties, the Blackhawks stubbornly refused to televise their games locally.  As a result, tickets to the old Chicago Stadium were a hot commodity.  Rarely did a birthday or Christmas go by when Hawks’ tickets were not at the top of my gift list.  I vividly remember celebrating my 13th birthday in my hand stitched Al Secord jersey (apparently, I fancied myself a power forward, despite the fact that I didn’t weigh 100 pounds until high school), watching my beloved Hawks battle Wayne Gretzky and the Edmonton Oilers.   

The Hawks had a lot of great players through the years, from Tony Esposito to Doug Wilson, and from Dennis Savard to Jeremy Roenick, but they could never get that elusive Stanley Cup (which they last won in 1961).  It is for this reason that it was so much fun to watch the Hawks hoist the Cup last night in Philadelphia.  It was a celebration for generations of Chicago players and fans, and a giant release for a great hockey town. 

The feeling was best summed up by Jeremy Roenick, who happened to be doing the post-game show for NBC (see video below).  When he was asked for his thoughts, the scrappy forward who played 8 long years as the face of the Hawks became too choked up to talk.  ”It’s the Blackhawks, man…This is so unbelievable.”    It is unbelievable.  It is the Hawks, and finally, we can call them the Stanley Cup Champions.

Category: Chris Marks

Time Kills Deals

Posted on | June 7, 2010 | No Comments

While it is one of the most over-used phrases in the business world, I was reminded again last week that it is also one of the most true.

The bottom line for anyone trying to get a transaction closed, is that momentum is your best ally.  Whether you are on the buy side, the sell side, or simply trying to hire a member of your executive team, the passage of time almost always increases your risk of failure.

The biggest reason is basic human nature.  People are inherently resistant to change, and given time to over think the consequences of a disruptive transaction, will almost always drift back towards the comfort of the familiar (see ”buyer’s remorse”). 

In addition, the world never stands still.  New alternatives are always just around the corner, people’s personal circumstances change overnight, and we live in an age of very short attention spans.  

Creating a feeling of momentum around a slow moving deal, however, can be a challenge.  While time lines and closing checklists can help, I have found the most effective tool to be simple (over) communication. Don’t let silence suck the energy out of your deal – pick up the phone (even if you need to make up an excuse to check in).

So, I move forward, committed to following my own advice and with a renewed appreciation for an old saying:  time kills deals.  Don’t let it kill yours.

Category: Investments, Venture Capital

If A River Runs Through It…

Posted on | May 23, 2010 | 2 Comments

On Thursday, I attended a conference in Steamboat Springs, Colorado.  Since Steamboat is a good three hour drive from Boulder, I left home around 6:00 am for a 10:00 am start.  On my way out the door, I decided to throw my fly fishing gear in the back of the car — after all, a guy never knows how a day in the mountains may pan out.

Despite some snow through Summit County, I arrived in Steamboat around 9:30.   Having some time to kill, I took a quick spin by the Yampa River where it flows through downtown Steamboat Springs.  Unfortunately, the run-off had arrived, and the Yampa was big, muddy and unfishable.  Undeterred, I headed for the conference and began formulating Plan B.

The conference wrapped up around 2:00, and I jumped in my car and headed for Stagecoach Reservoir, which is about 30 minutes southeast of town.   Immediately below the dam, there is a short stretch of tail water (created by the regulated flows out of the dam)  that can be fished year round. 

Although I have never been to Stagecoach, the entire stretch of river is only .6 miles long, and I knew it didn’t accommodate many rods.  In fact, the word from the locals was that any more than 8 cars in the parking lot meant no vacancy.

Despite being the 11th car to arrive, I decided to give it a go.  After all, the temperature had now risen to close to 70 degrees, and I wasn’t looking forward to the 3 hour drive back to Boulder. 

A few hundred yards downstream from the dam, I found a good looking pool, tied on two very small (size 20) midges, and began to work the deepest part of the run.   As with most tail waters, the trout who live and feed below Stagecoach Reservoir tend to get big.  They also tend to get fished pretty hard, and, as a result, are fairly picky eaters. 

I fished for about 2 hours — never moving more than 20 yards in either direction.  Due to the number of fishermen, real estate was at a premium, and high levels of fishing etiquette were required (I’m talking to you, green hat guy).  Nevertheless. the fishing was great.  I caught several nice size rainbows, and each one was healthy and very colorful for this time of year. 

I was back on the road by 5:00, and home in time to put the kids to bed. 

Only in Colorado.

I’m not big on the grip and grins, but I tried to snap a couple of pics of the beautiful rainbows I found up there.  In fact, these may be the last pictures ever taken with my iPhone.  As it turns out, those suckers are slippery when they get wet.

       

Category: Chris Marks, Fishing

News from the portfolio

Posted on | May 19, 2010 | No Comments

A couple noteworthy happenings in the portfolio:

  • Victors & Spoils celebrated their six month anniversary (I know, it sounds a little bit like a high school romance, but start ups age in dog years, so six months matters). In this blog post you can read about what they have already accomplished, which includes developing a creative team of over 750 people, attracting several blue chip clients, and working on projects ranging from product design to the creation/production of a television advertising campaign.  Certainly a lot to cram into six short months.  V&S made further waves this week when they announced that Jon Bond, the co-founder and former managing partner of Kirshenbaum, Bond, Senecal + Partners, joined V&S as an investor and strategic partner.  Having spent some time with Jon over the last few months, and having heard his thoughts on the changing world of marketing, I am very excited about what this partnership means for the company.  You can read about the announcement here in AdWeek.
  • High Country Venture recently made a seed investment in a Boulder based start-up company called Grogger.  The founders of Grogger have developed a group blog platform that allows bloggers to crowdsource their content.  You can read more about the company on their website.  Grogger was recently selected to participate in the Boulder Techstars Program, and we are excited about supporting the team this summer as they work with their customers, refine their product offering, and prepare for a Series A Financing in the fall. 
Category: Portfolio Companies

Growing Smart (Part II)

Posted on | May 17, 2010 | No Comments

LIMITING CONSTRAINTS

In the beginning, every start up business has an endless number of hurdles that it must overcome in order to survive.  But as growth becomes a reality, and management is able to look out beyond the next 30 days, there are always a few issues that stand out as the biggest limiting factors between current reality and true success.  There are always a few challenges that cause management to say, “We will only be successful in achieving this plan, if we do these few things well.”  These few things are what I call a company’s “limiting constraints.” 

Depending on the company, limiting constraints can include anything from finding the right people, to forming the right partnerships, to finding a source of capital.  Every company’s limiting constraints are unique based on what they are trying to achieve, who is on the team, and the circumstances in which they are operating. 

One of the most important responsibilities for any CEO is to take the time to properly identify his or her company’s limiting constraints.  A more important responsibility, and often more difficult challenge, is to make sure the company’s resources are allocated in such a way as address those limiting constraints.

While this seems fairly simple on paper, it almost always requires incredible vigilance, persistence, and, ultimately, forced behavior.  The reason is simple:  a company’s limiting constraints often represent the most difficult challenges to overcome.  It is probably one of the reasons they are on the list in the first place.  The natural tendency of people within an organization is focus their time and attention where they feel they can be successful.  If they are more likely to be successful within their own silo, then they are less likely to wander into the glare of the big company challenges.  

One way for a CEO to insure the necessary focus is to develop an organizational structure and budget that reflect corporate priorities. High level talent and a reporting hierarchy that prioritize the limiting constraints is a good start.  In addition, individual objectives should create incentive and accountability towards achieving well defined goals.   Finally, clear out the crap.  Remember, as CEO, it is just as important to take stuff off of people’s plates as it is to delegate responsibility.

Only by blocking out the noise and creating a focused organization will you be able to truly attack your limiting constraints.  And only by overcoming those limiting constraints will you be able to the achieve the long-term success that looks so good in today’s Excel spreadsheet.

Category: Board of Directors, Venture Capital

Growing Smart (Part I)

Posted on | May 12, 2010 | 1 Comment

NECESSARY CHAOS

In almost every start up company I have worked with, there is sense of chaos that pervades the organization – particularly in the early days.  The reason is simple: all of the company resources are focused on the validation of the underlying business proposition (i.e., will someone pay for what we are making/providing?).  As a result, there is little attention being paid to the administration of the business or the development of corporate infrastructure (and by “corporate infrastructure,” I mean systems and processes to support operations).  And this is the way it should be.  As the old saying goes:  “Nothing happens until you sell something.”

Once the viability of the underlying business proposition has been established, the lack of infrastructure must to be addressed – out of necessity.  Sales inevitably lead to, among other things, contract administration, pipeline management, and the need to more accurately forecast future cash flows and capital needs. How a company builds the systems and processes to address these types of issues is very important.

Coming from a legal background, my natural tendency has always been to invest heavily in the back office side of a business.  The need to dot the I’s and cross the T’s probably stems from exposure to so many due diligence disasters.  But what I have learned over the years, is that there is a time and place for infrastructure.  Corporate infrastructure should follow the growth of the business (not vice versa), and a tension between a fast growing company and an infrastructure struggling to keep up, is often a healthy tension.

In my opinion, one of the important responsibilities of a CEO (and Board of Directors) is to manage this tension and strike the appropriate balance between growth and infrastructure.  As a company grows, it is essential that key systems and processes are in place.  For example, the management team must have access to the data necessary to manage the business.  It is also essential that the company’s systems are sufficient to handle the addition of new customers and insure that ramped up sales efforts are not counter-productive.  But there is a point where infrastructure investment becomes negative rent.  When do you add to your finance team?  When do you invest in a new CRM system?  What is the ROI on the automated invoicing system?

The bottom line is that growth on the top line is often the mother of invention.  Building systems in an effort to manage the most immediate and pressing needs inevitably leads to both forced prioritization and efficiency.  By contrast, attempting to predict the administrative needs of a high growth early stage business, and get out in front of them, often results in a waste of precious time and resources.

While corporate infrastructure is necessary to keep a company’s trains running on time, it is rarely a limiting constraint to its success.   When (and how much) a company invests in corporate infrastructure is an issue that must be constantly monitored and assessed.  It is a fine line to walk, and for many, the acceptance of a certain degree of chaos can be the biggest challenge to overcome.

Category: Board of Directors, Venture Capital

Al Gore Invented Crowdsourcing!

Posted on | May 3, 2010 | 3 Comments

Well, not really.  But Gore did announce at last week’s Outfront Conference in New York that Current Media, where he currently serves as Chairman, will soon be unveiling a new concept called “Crowdsourced TV.” 

Although no details were offered, it is widely assumed that the new concept will offer creative content generated by Current Media’s existing online community.  Think You Tube in prime time.

This makes perfect sense since Current Media was launched with the goal of democratizing the media industry by empowering the consumer.  It also supports one of our investment theses that technology and increased communication are causing the destruction of long standing barriers to participation across several industries.  As these barriers fall, it is the companies unwilling to look beyond their four walls that will find themselves at a huge disadvantage.

Gore concluded his remarks to the room full of advertising and TV industry executives by saying, “What if we let them [the crowd] create content and advertising?  We’re pretty excited about this.” 

The collective gulp could be heard all the way from New York to Los Angeles.

Category: Crowdsourcing

What’s in your Anti-Portfolio?

Posted on | April 28, 2010 | 3 Comments

One inevitable aspect of being in the venture capital business is living with the ones that got away.  Every vc out there has passed on at least one deal that has gone on to become a big winner.  If they tell you differently, then they are either new to the profession, or in serious denial. 

We all deal with this aspect of the job differently.  I, for example, have convinced myself that the ones that got away serve a purpose.  It is the ghosts of those deals that cause me to a look a little closer at each new business plan that crosses my desk, to treat each entrepreneur with just a little more respect, and to take that one extra meeting a day (just in case).   In other words, my bad decisions have made me a better (albeit poorer) venture capitalist.  You can laugh at the logic, but it has probably saved me endless hours of therapy.

And while we all deal with the trauma differently, most of us share one behavioral trait — we tend to keep our bad decisions to ourselves.  It is for this reason that it was so refreshing to read about  Bessemer Ventures’  “anti-portfolio.” 

Bessemer is widely recognized as one of the top venture funds in the world. Yet, right on their website, for everyone to see, is a list of the ones that got away — and it is quite a list.   They introduce the list with this statement:

“Bessemer Venture Partners is perhaps the nation’s oldest venture capital firm, carrying on an unbroken practice of venture capital investing that stretches back to 1911. This long and storied history has afforded our firm an unparalleled number of opportunities to completely screw up…Our reasons for passing on these investments varied. In some cases, we were making a conscious act of generosity to another, younger venture firm, down on their luck, who we felt could really use a billion dollars in gains. In other cases, our partners had already run out of spaces on the year’s Schedule D and feared that another entry would require them to attach a separate sheet…Whatever the reason, we would like to honor these companies — our “anti-portfolio” — whose phenomenal success inspires us in our ongoing endeavors to build growing businesses. Or, to put it another way: if we had invested in any of these companies, we might not still be working.”

They go on to discuss several specific examples, including these whoppers:

Apple: BVP had the opportunity to invest in pre-IPO secondary stock in Apple at a $60M valuation. BVP’s Neill Brownstein called it “outrageously expensive.”

Ebay: “Stamps? Coins? Comic books? You’ve GOT to be kidding,” thought Cowan. “No-brainer pass.”

PayPal: David Cowan passed on the Series A round. Rookie team, regulatory nightmare, and, 4 years later, a $1.5 billion acquisition by eBay.

And finally, Google: Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine.” Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?”

So, a big thank you to BVP for their honesty and humor, and for helping the rest of us sleep just a little bit better at night.

Category: Investments, Portfolio Companies, Venture Capital

Angels Fight Back

Posted on | April 23, 2010 | No Comments

As an update to my last post about the Financial Reform Bill, the Angel Capital Association is now reporting that Senator Dodd will be introducing amendments addressing at least two of the three issues relating to early stage investors.

According to peHUB, after word of the original provisions leaked out, “vc bloggers took to their keyboard with furious strokes” and trade groups flocked to Capitol Hill.  Apparently, the noise was loud enough to be heard.  You gotta love when the political system actually works.  

Here is how the Angel Capital Association is summarizing the potential amendments:

Accredited investors: Dodd’s new language would keep threshold limits at their current levels, which is $1 million in personal assets and/or annual income of $200,000 ($300,000 in the case of a joint filing). The only change would be that the value of the investor’s primary residence would be excluded from the personal asset calculation (thus raising the bar, but likely not doubling it).

Regulation D: Dodd’s new language would remove all original reference to Regulation D, thus meaning that filings and oversight would still be in the hands of federal regulators (rather than state regulators, who pushed the original language). The only addition would be the disqualification of Regulation D usage by individuals determined to be “bad actors” by federal and state authorities.

While the legislation is sure to morph numerous times as it makes its way around the Capitol, this is certainly a step in the right direction.  Thanks to everyone who cared enough to get involved.

Category: Politics, Venture Capital

Angels Under Fire

Posted on | April 20, 2010 | 2 Comments

I don’t want to beat a dead horse on the Dodd Financial Reform Bill, but more and more disturbing details continue to emerge as people actually get through the 1,300 page piece of proposed legislation.  John Maudlin, writing in his Frontline Newsletter, points out three provisions that could spell the end of angel investing as we know it. 

The three provisions include:

1.   A requirement that any startup company raising capital must register with the Securities and Exchange Commission and then wait 120 days for the SEC to review their filing. 

2.   A revision to the definition of what constitutes an “Accredited Investor” that would require investors participating in unregistered offerings to have assets of more than $2.3mm (up from $1mm) or income of more than $450,000 (up from $250,000).

3.   Removal of the federal pre-emption allowing angel and venture financing in the United States to follow federal regulations, rather than face different rules between states.

Maudlin does a good job of explaining how each of these provisions could affect the angel community, so I will not repeat his arguments.  I will only point out that Maudlin estimates that over 50,000 new businesses were funded by angels in 2009 alone.  At a time when Congress should be focused on job creation, throwing a wet blanket over the angel community seems somewhat counter-intuitive. 

Clearly, some degree of reform is necessary to stabilize the economy and prevent the type of events that shook the banking industry over the last 18 months.  This legislation, however, targets the wrong piece of the financial system.  By discouraging early stage investing, particularly at a time of such rapid technological advancement, Congress will not only stunt job growth, but will create an environment where some of the biggest and best ideas go unfunded.

Category: Politics, Venture Capital
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