new dog old trick

Angel Investors Taking up the Slack?

Link: RED HERRING | Angels Fund More Deals in '05

Red Herring reports on a survey that indicates that angel investors are funding a higher percentage of the startups that approach them seeking funding.  It suggests that angel investors are filling a gap in the market created by the retreat of traditional venture capital funds from providing seed or first round funding for startups. 

The upswing in angel support comes as VC firms are shunning early-stage “seed” investments in favor of later-stage deals. Venture financing for seed-stage investments, as a portion of total venture investment, has fallen to its lowest level since 1999. Less than 2.9 percent of all VC investments in the first half of 2005 went to seed startups, down from 8.1 percent in 1999.

Of course, this research relates to those segments of the entrepreneurial economy where traditional venture firms prowl, e.g. software, semiconductors, bio-tech, medical devices, etc.  Outside those segments, angel investors (private investors investing their personal funds) have always been a major source of seed stage (and later stage) funding.   

In the software world, where my personal experience lies, I know quite a few entrepreneurs who now no longer even consider trying to approach the traditional venture funds for early stage funding.  Their model is to get the product (or service, which is the business model most "software" companies are shifting to) up and running, gain initial customers, and then leverage angel investors for at least the first round of external funding.  Traditional v.c. are not even considered until and unless the opportunity is demonstrated for sufficient growth that a B or even C round is needed of a scale beyond the ability of angels and strategic investors to fund. 

Happy Birthday Carnival of the Capitalists!

Link: BusinessPundit: Carnival of the Capitalists Turns Two!.

The Carnival of the Capitalists is celebrating its second birthday this week (and next).  BusinessPundit, one of the two proud parents of the carnival, is hosting this week.  As always, it is an interesting collection of the best of business, economics, and management blogging. 

Creating a culture of winning

For some reason, lots of executives and CEOs get all squirmy when someone says the phrase "corporate culture".  It's just too touchy and feely and squishy.  Yet it has been demonstrated over and over that improving a corporate culture (or establishing it right in the first place for you entreprenuers) is one of the most highly leveraged ways for a CEO to improve overall corporate performance.    As a case in point, yesterday's Wall Street Journal had a good article on the importance - and lasting impact - of establishing a solid culture in an organization. 

The article is an interview with John Schuerholz, the General Manager of the Atlanta Braves since 1990.  When Schuerholz went to Atlanta, the Braves had been losers a lot more than winners for as long as anyone could remember.  Shortly after he arrived, they began a streak that has now reached 14 years of making it to the playoffs, which is a streak of sustained excellence that few sports teams - or businesses - have matched or exceeded.  The interview allows Schuerholz to speak about a number of things, including some of the keys to transforming a losing culture into a winning culture.

Some of the key points he makes revolve around the importance of people.  Getting people on board who share your vision, communicating clearly to everyone in the organization, letting everyone know they are important to the success of the organization, creating trust, etc.  For example:

I have a goal for this organization, and it's clear. And I have a game plan about how we can reach that goal. Did we have to change some people? Sure. Did we have to alter some programs? Absolutely. But the most important thing was to create a level of confidence and reliability and trust. Honoring each other, respecting each other. So that the rookie-league manager knew we cared for him and relied upon him as much as we did on [Manager] Bobby Cox.

And also:

It really turns on one significant principle, and that is surrounding yourself and filling your organization with quality people and providing them with a clear vision, an uncompromising game plan.
<snip>
We don't have some magic dust that we sprinkle on our organization. My responsibility is to hire the guys who sit across the hall from me who run our scouting and player-development functions....You hire the right people in those positions, and you trust them in their ability to hire and to construct processes and programs and motivate people. [If you] communicate with people in an honest and clear and forthright way, you're going to have good results....Sure, we make mistakes. Sure, we make bad judgments. But fewer of them, I think, than is expected in this business.

Some of these comments, and others in the interview, will really resonate if you are a fan of the book Good to Great.  And if you are in any business where people are your key assets, where their talent and energy are what make the difference between winning and losing, you should go Read the Whole Thing (as they say).  If you're a WSJ subscriber, that is. 

Coming soon: The Real Story of Informix Software and Phil White

Just saw this on Jeff Nolan's weblog.  I'm jealous that he got a pre-publication copy for review.

Link: Venture Chronicles by Jeff Nolan: Book Review: The Real Story of Informix Software and Phil White.

Steve Martin (the author of this upcoming book) is an old buddy who worked in sales at Informix for a number of years before moving on to even greater success as a sales VP and now as an author and speaker.  My company was an Informix OEM and Steve was our sales rep.  Phil White was a  charismatic leader who fell prey to the "dark side" in his quest to keep Informix growing.  I'm looking forward to reading Steve's take on the rise (and fall) of Phil White and Informix and will report in more detail once I'm able to get a copy of the book.   

Disaster Planning and Recovery

A few thoughts on disaster planning and recovery for business...

FEMA checklist

Entrepreneurial Mind on disaster planning

Chubb insurance recovery checklist from Inc.com

There are other good resources around the web - find them.  Now.  Use them.  Now. 

A few other thoughts come to mind after reflecting on the recent hurricanes.

1.  Planning is one thing, practice is another.  Football teams don't just create a game plan in a conference room and then teach it to their players in a classroom - they go out and practice the plays.  The military doesn't just engage in creating war plans - they train their people to execute the tactics used in the plans and then the practice at the individual level, the squad level, the platoon level, the ship level, the squadron level, up to theatre-scale maneuvers involving units from navy, marines, army, and air forces plus forces from allied services.  And, after the game or the exercise, they review and debrief, looking for lessons learned and ways to improve their performance the next time they execute this play or this plan. 

Plans created in a conference room to satisfy a requirement (e.g. for when the insurance inspector asks to see your company's evacuation plan for earthquake or fire preparedness) or to qualify for funding (when a city or state has to tick a box on a FEMA form to qualify for Federal matching funds or grants - hello New Orleans) which are then never practiced (or even communicated) are useless - maybe even worse than no plan at all. 

If you are serious about having your facilities, your information, your staff, your customers protected and prepared for a disaster you MUST combine planning with instruction and practice. 

When was the last time you ran an unannounced dry run of your facility disaster plan to simulate a fire or earthquake that destroys the building during the night?  Would your people know where to report?  How would they be informed of what happened?  Who would be responsible for getting your systems back up and running?  Who would communicate key information to customers - and how would they do it?  If your staff can't answer those questions you are not prepared.  What about if it were a broader problem than just your facility?  What if it were an earthquake that leveled an entire section of your community?  What if it were a suitcase nuke that required an open-ended evacuation of your entire city?  If there is anything that Katrina and Rita should remind us it's that these low probability events do happen and that we are responsible for being prepared. 

2.  Do you have an information back-up plan that has been rigorously tested - on a regular basis?   Where is your off-site storage?  If it is in the same town where you are based - what happens to your ability to recover your data and get your business back up and running if the disaster that hits is one that impacts an entire community or region a la Katrina?  Oh, and by the way, if you use systems that are hosted elsewhere, figuring that this gives you an additional level of protection, have you checked where and how your service provider backs-up all of your data and systems?  You wouldn't want to find out after an earthquake or tornado that your backup data site was across town and leveled in the same disaster that destroyed your building.  Or, even worse, imagine that you were sitting high and dry and safe in your offices in Omaha the morning after Katrina and then found out that your offsite data backup vendor's servers were sitting unusable in windblown, waterlogged facility in New Orleans.  Is your information in multiple, widely separated physical locations?  The critical backbone of so many companies today is their information - could you recover if your data were destroyed even if your physical facilities and staff were unaffected?

3.  Have you done an insurance review recently?  If not, why not?  Waiting for more evidence that it might be a good idea?  You are on the remedial program, aren't you. 

4.  Don't rely on government - not local, not state, not federal.  You - and only you - need to have planned and prepared for how to protect your business.  If it turns out that government executes on its responsibilities well - that's a great extra benefit.  If it turns out that government resources can be substituted for yours (e.g. an SBA loan or a FEMA grant) after a disaster, great.  But don't count on it.  Cynical?  Maybe.  Realistic?  Maybe you should ask business owners in New Orleans, Gulfport, Biloxi. 

"The Science of Opportunity"

ooooohhhh...Jeff Cornwall is going to love the title of this interview from BusinessWeek. 

Link: "The Science of Opportunity".

There's a lot to be said for careful planning and cautious review when starting a small business. But there's another side to the story, say some entrepreneurs, and that's following up a good opportunity and seizing it.