Here it is, midnight, and I just got home from our quarterly Capital Connections event. Wow, what a night. I am completely spent, so I’ll make this post brief!
We’ll have a full wrap-up posted in the next few days (along with tons of photos), but here are a few short observations:

• Despite the really terrible weather and apparently horrible accidents that backed up traffic on most of the major highways, we still managed to get over 200 people in the door - not bad. We had over 300 on the RSVP list, but I got calls from several investors and entrepreneurs shortly before the event telling me that they had diverted planes from Hartsfield Airport, and that the roads were seriously backed up. Several out of state VCs had their flights to Atlanta sufficiently delayed or cancelled. Yay. Nevertheless, 200+ entrepreneurs and investors in a room filled with gourmet crab cakes is never a bad recipe. It is probably a good thing - had the weather and traffic permitted, we would have quite likely been elbow-to-elbow. I think we may need to cap attendance at 250 or so for future events. 300 would have been brutal.
• It was good to see new deals and new investors in the room. Keeping the event “fresh” is something that is always at the top of our mind.
• It was also very encouraging to see established Atlanta entrepreneurs such as Chris Klaus coming to participate. We need more of this. Guys with ideas rarely become emerging growth companies without the mentorship, guidance, and wisdom that can be provided by those that have tread before them. Those of you who have experienced a great deal of success, and who are not sufficiently engaged, know who you are.
• The happy moment for me came when I looked across the demo area and saw literally dozens of entrepreneurs hunched over their laptops showing investors and other entrepreneurs what they were up to. This sort of transparency is very healthy.
• I saw some folks who participated in our recent PitchCamp showing off their new pitches and one pagers. Very cool!
• Despite repeated invitations, the Atlanta Journal Constitution still refuses to attend (or even write me back for that matter). Too bad. You would think that something as revolutionary, grassroots and impactful as these events would be newsworthy. Oh well. Thankfully, there is the Atlanta Business Chronicle, who realizes that this event represents a unique nexus between ideas and capital.

Thanks to everyone who came out and participated! A thanks to our sponsors as well! Your collective support allows us to continue providing a remarkable quarterly opportunity to drive change. The event continues to evolve, and we are grateful for your patience!
We’ll soon begin planning our Q4 event, which will be in early December. Should be a great time to gather around the holidays ….

Cheers.

Click to share via social bookmarking sites, email, etc.

I have been contemplating writing this post for about 2 years, and have been jotting down various notes for it for at least a year.

There are lots of ways to unethically nudge your fledgling company along. For example, you can artificially inflate your numbers. “You’ll love our site! Millions of other people are already using it!” Faux-Guerilla marketing, is another example (e.g. posting a message on a forum somewhere pretending to be a user in love with your product or service). “Procuring” copies of your competitor’s proposals by pretending to be a customer is also something I’ve seen before. The sky is truly the limit when you operate with little or no regard to ethics.

However, the widespread use of pirated software among startups is probably the most prevalent problem that I’ve seen.

I routinely deal with various early-stage entrepreneurs (increasingly not just here in the Southeast, but all around the world.) Based upon my very non-academic study, I would venture to say that somewhere around 40-60% of the companies I’ve met with over the past few years have used, or are using, pirated software in some part of their organization. That’s a pretty big number, and I’m convinced that number probably goes higher.

How bad is the problem? Well, in many of the cases I see, usually it’s just 1 or 2 people within the organization that are the primary offenders. However, there are companies that are quite literally “powered by pirates”, from the dozens of illegal copies of Windows XP and Microsoft Office to the software running the CRM database, the accounting platform, the software development tools for the engineers, the email servers, and even the phone system.

It’s a big problem, and has been for a while.

I have made a few observations:

1. It comes down to money, at the end of the day. The unethical bootstrapper’s mindset is squarely around this premise: If I have a choice between paying the rent or plopping down $1,000 for desktop publishing software, I’m paying the rent. Bootstrappers are always seeking new ways to save money and hit milestones - while illegal and unethical - using pirated software certainly accomplishes both.
2. Convenience is also a matter, although on a smaller scale. It is much more convenient to download pirated software than it is to buy it and wait a week, or get in the car and visit the computer/office store.
3. Despite the increases in computer security and rights management techniques, stealing software is easier than ever. A cursory search on common file sharing networks revealed current versions of Microsoft Vista (and XP), Oracle Enterprise, Quickbooks Pro, etc.
4. Usually, the piracy stems from the IT shop, not the management team (unless the founder is a particular technology-savvy individual).

I was thinking about the potential impact of this on the due diligence process for a venture raise. I’ve never seen a VC do an audit of software licenses as part of the due diligence process. I have, of course, seen software licenses roll up as “assets” when a company is being dissolved or sold-off. This is the sort of detail that a VC isn’t typically going to explore during due diligence (an exception might be with certain levels of enterprise software) - but they should, as there are tremendous potential liabilities.

According to the SIIA (Software & Information Industry Association):

If unauthorized software is found, the company must license enough copies of the software, pay a fine equal to three times the cost (MSRP) of the software and adopt and implement company-wide software compliance policies.

…

If the company refuses to conduct an audit, SIIA may sue the company for copyright infringement on behalf of its members.

Hey VCs, there’s a nice way to watch your investment get eaten up. The current damage estimates are $100K per title in a civil suit, and $250K per title in a criminal suit. It wouldn’t take much to kill a young company. All it really takes is a founder who doesn’t feel like he or she is getting an equitable piece of the action, or a disgruntled former employee, combined with a phone call to the SIIA and some reasonable documentation.

Here is a great resource for companies looking to become compliant.

My advice to you entrepreneurs … continue to budget wisely, but be sure to leverage open source solutions. With open source solutions now available for most any problem, there is really no need to have to pirate a commercial product just to accomplish a task.

My advice to investors - hire someone to do an audit of the venture’s base of software licenses. Make sure they are legitimate, and that there is an audit trail confirming their purchase.

Cheers.

Click to share via social bookmarking sites, email, etc.

Stephen Fleming organized a roomful of 20 kindred spirits last night. The purpose? To discuss a new seed fund to be based here in Atlanta. We tossed around a lot of ideas on the structure of the fund, the investment model, the target markets, etc. The discussion was lively and I think we all walked away with a broader view of things.

A great deal of discussion focused around Y-Combinator, Techstars and other similar models. While the group served up varied opinions on the details, we all agreed to the need, and our collective desire to make this a reality here in the Southeast.

It will be interesting to see how this continues to evolve. Whatever form this thing takes, it will serve to fill a big gaping void in the regional venture market.

Kudos to Stephen for taking the lead and organizing this thing … someone had to do it!

More soon …

Cheers.

Click to share via social bookmarking sites, email, etc.

After a couple of years spent casually tracking the company and several months of building a relationship with the team at PlayMotion!, I am thrilled about joining them officially as the company’s CEO (I actually joined quietly a few months ago.) I was honored by their invitation, and we wasted no time in focusing our efforts in on growing the business (with apologies to Mike Blake, “taking it to the next level“).

If you aren’t familiar with PlayMotion!, you probably aren’t alone. The company’s growth over the past few years has been steady, but fueled largely by word of mouth. However, our client list reads like a who’s who (Google, Nike, Atari, Red Bull, AT&T, NASA, Proctor & Gamble, Nokia’s Sugar Bowl, Playboy, WIRED, NBA All-Star Game, etc.) The company is now profitable and growing, and we’re expanding into Asia (which is also something I’m particularly excited about.) Others are talking about us as well.

Greg, Matt, and the rest of the team have done an amazing job of building a great vision engine and a strong full-body gaming platform. Our technology is incredibly captive (and viral), and the stuff we have in our skunkworks is absolutely mind blowing. We will continue to create exciting mini-games and other types of interactive experiences for our customers, but we are moving more and more towards creating fully immersive, 3D, full-body games.

Our web site, which admittedly is horribly out of date, and doesn’t really reflect where we are as a company, will be revamped soon.

I should point out that my new post won’t affect our collaborative efforts at StartupLounge.com. Our podcast and quarterly Capital Connections gatherings will continue. I have spent the past year and a half championing early-stage, fast-growth entrepreneurship in the Southeast, and that passion is still burning brighter than ever.

Cheers.

Click to share via social bookmarking sites, email, etc.

One of the things that we’ve implemented for the upcoming StartupLounge.com Capital Connections event is that we require all attendees to provide us their “one-line” elevator pitch as part of the application process. We limit them to 125 characters. How important is it? Extremely. You have 125 characters to convince our steering committee that your particular venture will be of interest to fast-growth investors.

It is a curse. Most entrepreneurs CANNOT construct a concise, effective pitch for their venture. However, turn them loose on a friend’s deal, and they can work magic.

Below you will find a sampling of a few good one-line pitches that we’ve seen, some bad ones, and some really ugly ones. We’ve anonymized them where appropriate. We also have some from investors, too - wheee!

Also of note - if you want or need some help in this area, and will be attending our upcoming Capital Connections event, check out our free PitchCamp event. This is one of the topics we’ll be covering.

The Good

COMPANY is an a social network targeting the Harley Davidson crowd.

This is a very solid, ultra-concise pitch, serving up the name of the company, what the company is (a social network), and who their customers/users are (Harley owners). Nice economy of words, and I get it.

COMPANY allows recruiters to quickly find the best candidates based on requirements, not just keywords.

This pitch offers up the name of the company, and then quickly tells you the industry they are in, and how the customer’s pain is solved. This pitch also lays out a nice hook, which will beg logical follow-up questions from a potential investor.

The Bad:

An early stage consumer product company focusing on the mass market.

This pitch tells me nothing. I’ve no idea who they are, what they make or to whom they sell it. All I can tell is that they are a consumer product company. Are they making pork rinds or video games? Or maybe video games about pork rinds? Or maybe edible video games made out of pork rinds? Or, perhaps they make sponges? Who knows.

We’re the leading service provider in our industry in our 3rd year of organic growth, that is moving towards software dev.

If you’re the leading service provider, why are you seeking capital? The rest of the pitch just makes no sense. And again, I’ve no idea what the company name is.

Web based communication platform bringing local businesses and communities together.

Another one lacking a company name, and the description is, well, vague at best. The only thing keeping this pitch in the “bad” category and not the “ugly” category below, is the use of the word “local”, which at least paints it to some degree. There is also no compelling “hook” here. No problem being solved. Take out the word “web” and I’m left with the Yellow Pages. With the word “web”, I envision a “Kudzu.com”. Sell me on why you’re different in the pitch.

The Ugly:

A startup providing interactive directories.

Wow. No company name, no customer/market, no problem being solved, no description of the novelty. Nothing. This is probably the worst (albeit concise) pitch I’ve seen in a while.

Using the Power of the Pico-cell, Fed with Fiber to help bring FttP (Fiber to the Premise) to Consumers and SMBs.

Sounds great. Assuming you know what the hell all of that means. Far too much jargon, and not dumbed down enough for investors, much less an elevator ride.

Bonus: Crappy Investor Pitches

Yep - we asked investor attendees to give us their pitch as well. Just goes to show you that investors aren’t immune to the “curse” of not being able to formulate their own pitch.

The Good

Early stage venture fund focused on technology & healthcare/life science investments in southeast & mid-atlantic.

This is a strong pitch, serving up the stage, industries targeted, and geographical focus.

Seeks investments in communication tech, enterprise software, and IT services at all stages of co. development, 1-20m range.

This is a very strong investor pitch. We see the sectors, stages, and investment range. The only thing that would really round it out would be a geographical constraint, but otherwise, this is a very solid pitch.

The Bad

We invest in early-stage companies focused in the IT, Communications, and power/clean-technology sectors.

This pitch is okay, but could be better. At least here we see the industries being targeted, and the phrase “early-stage”. It would be nice to see an investment range or a geographical constraint, though.

$200M growth stage venture fund investing in healthcare, IT, and industrial technology.

Here, we see the size of the fund, which puts things into some perspective. And we see the sectors in which the fund is active. We don’t have an idea of typical deal sizes (except that they do “growth” rounds), and we don’t know what geographical regions they care about.

The Ugly

Experienced Angel investors and startup catalysts.

I’ve no idea what their investment level (although at least they said “angel”). No idea of their industry focus either.

Seeking early stage tech companies who want to work with angel investors

Wow - this narrows it down (sarcasm intended). Angels that are looking at tech companies. Pretty bad. What kind of tech companies? Telecom? Software? SaaS? web? Satellite communications? Life sciences? Bio? Nano? What about deal sizes? Geographies?

Enjoy …Cheers.

Click to share via social bookmarking sites, email, etc.

We are now at three weeks until the next StartupLounge.com Capital Connections event, and we have sailed past the number of RSVPs for the previous event. Right now there are over 200 people registered to attend, and we expect that it will climb to at least 250-300 before the event date arrives.

I’d like to take a moment to thank the folks who’ve stepped up to sponsor our non-profit efforts:

• Chrysalis Ventures
• Southern Capitol Ventures
• Web.com
• Adams Capital
• Clements-Walker
• Slingshot
• Angus McRae
• ATDC
• Technology Association of Georgia (TAG)

Without their substantial sponsor dollars and influence behind what we do, we’d have to pay for all of this ourselves (again), and let’s face it, that would suck. Each of these sponsors is behind our efforts because they truly believe in what we are doing - and that makes our relationship with them even sweeter.

Cheers.

Click to share via social bookmarking sites, email, etc.