BeyondVC

NOVEMBER 25, 2003

It looks like the economy in Q3 grew even faster than we initially thought , 8.2% annual rate versus 7.2%. It was not too long ago that the Department of Commerce released numbers showing 7.2% annualized GDP growth for Q3. If you take a closer look, “equipment and software” spending was at a 15.4% annualized rate. I obviously have concerns about the revised 8.2% GDP growth and certainly do not believe that is sustainable due to one-time factors like tax cuts and mortgage refinancings

Forecast 60

Forecast Software Review Portfolio Security 60

BeyondVC

NOVEMBER 16, 2003

I was at the TIE Tri-State annual event in New York yesterday and participated on a venture capital panel helping young companies refine their pitches and business strategies. There were some interesting software and BPO (Business Process Outsourcing)companies that presented. On the BPO side, it was quite fascinating to hear about the types of services that companies were willing to outsource-for example, in the finance sector, basic credit analysis and research, analytics, and even some financi

Offshore 60

Offshore India Europe Japan 60

BeyondVC

NOVEMBER 19, 2003

Yesterday I participated on a panel at the Mid Atlantic Venture Conference on the current venture capital market and how to raise capital. While this was a plain-vanilla panel about venture investing, there was one theme that was echoed by a number of my fellow panelists from Rho Ventures, New Venture Partners, Edison Ventures, and Cross Atlantic-today’s world requires software companies to have a capital-efficient business model.

Business Model 84

Business Model Offshore Venture Capital Software 84

BeyondVC

OCTOBER 17, 2003

As everyone knows, Linux has grown dramatically in the server market capturing 20+% market share in a few years. Many of you also know that there have been a number of attempts to bring Linux to the desktop. Eazel founded in 2000 wanted to make a Linux GUI as easy to use as a Mac. While many of these attempts failed, I believe we are ready for another wave to bring Linux back to the desktop for the following reasons: 1.

Security 74

Security Internet Software Cost 74

Speaker: Nick Noreña, Innovation Coach and Advisor, Kromatic

Every startup and innovation project exists within an ecosystem that either helps or hurts that project. As innovation managers, we need to keep a pulse of that ecosystem and make sure we're helping those innovation projects we're managing every step of the way. In this webinar, Nick Noreña will walk through an Innovation Ecosystem Model that he and his team at Kromatic have developed to help investors, heads of product, teachers, and executives understand how they can best support innovation in

Startup

BeyondVC

DECEMBER 23, 2003

Besides taking a brief time out to celebrate the Expertcity deal , I have spent a fair amount of time interviewing VP candidates for one of my portfolio companies. As with any smart executive who cares about the value of equity, the question I am often asked is, “What is your exit strategy.” My answer is quite simple-every company we invest in must have IPO potential (IPO potential as defined by non-bubble metrics) but along the way if someone makes an offer for the company because i

Exit Strategy 68

Exit Strategy Balance Sheet IPO Valuation 68

BeyondVC

OCTOBER 21, 2003

Yesterday, I was in a meeting with an early stage company reviewing the product development plan with the management team. While the plan was well thought out and defined by process, there was one major problem-it would take too damn long to get a product in GA (generally available to sell!). There were 2 problems-an overemphasis on process and a burning desire to build the ‘perfect product’ at the expense of getting to market.

Early Stage 68

Early Stage Product Development Developer Sales 68

BeyondVC

DECEMBER 18, 2003

Congratulations to Expertcity and Andreas, John, and Klaus. It has been great to work with you from a board level over the last 4 1/2 years. When the transaction closes, I look forward to writing a little more about how you were able to persevere through some tough times, launch new product, stay focused on leveraging the core screen sharing technology, and build a high growth business in a completely new market.

IPO 60

IPO Acquisition Revenue Technology 60

BeyondVC

DECEMBER 16, 2003

So Checkpoint is going to buy Zone Labs for $205mm. Here are my thoughts on the deal. Zone is expected to do around $28mm of revenue in 2003 and $42mm in 2004. The revenue multiple is 7x for 2003 and 5x for 2004. That is pretty much in line with existing security multiples of 6-8x revenue. The more significant point is that Checkpoint made its first, meaningful acquisition.

Acquisition 60

Acquisition Security Revenue Networking 60

BeyondVC

DECEMBER 10, 2003

Om Malik (ex-senior writer for Red Herring) has been writing about the commoditization of hardware. In a recent article in Business 2.0 titled “The Rise of the Instant Company,” Om talks about how hardware has become commoditized to the point where hardware expense as a cost of goods sold is de minimis. In other words, companies can now cobble together off-the-shelf-hardware with proprietary software to create companies that can quickly and cost-effectively go after large incumbents.

Software 60

Software Harvest Sales Cycle Channel 60

BeyondVC

DECEMBER 4, 2003

There were 2 conferences yesterday addressing cybersecurity. One was the National Cyber Security Summit in Santa Clara and the other was a smaller event in DC. While I was not in attendance, I did speak with a couple of people who participated in the events. The takeaway is that 85% of the critical infrastructure in the US is owned and controlled by the private sector.

Government 60

Government Security DC Internet 60

BeyondVC

DECEMBER 4, 2003

Jeff Nolan from SAP Ventures has some interesting insights on building sales teams. One other I would add is pay commissions when you get paid. The post Building Sales Teams appeared first on BeyondVC.

Sales 60

Sales 60

BeyondVC

DECEMBER 2, 2003

Hackers like to go where they can cause the most pain. As 3G rolls out in the US, you can bet that hackers will go there as well. There was a great article last Friday in the New York Times about viruses and other security issues on cellphone and hand-held devices in Japan (free site but registration required). It is clear that we should look at how Japan is dealing with this issue as their wireless infrastructure is much more advanced than ours at this point.

Security 60

Security Japan New York Software 60

BeyondVC

NOVEMBER 14, 2003

Congratulations to netForensics! We are excited to have Nomura as a new investor and look forward to them helping us with our international expansion. For those of you who are interested in security, please see an earlier posting on Microsoft and Securing the Perimeter. The post netForensics raises $12 million appeared first on BeyondVC.

Security 60

Security Venture Capital 60

BeyondVC

NOVEMBER 12, 2003

I had the opportunity to speak on a panel today at the Corporate Venture Capital Summit. There was an interesting crew of speakers representing corporate-related venture activities for companies such as Hitachi, Intel, Nokia, Panasonic, Siemens, and Kodak. While one moderator cited numbers showing that the amount of corporate venture investing in terms of dollars is down 50% from 2000, in my mind, that does not seem that different from the change in the general VC market.

Strategic Investors 60

Strategic Investors Due Diligence Early Stage Exit Strategy 60

BeyondVC

NOVEMBER 10, 2003

A number of my portfolio companies outsource development to India and other locales. When offshoring it is important to think about what can and cannot be offshored, whether management can handle it, and whether or not you open your own office with your own infrastructure or outsource completely. Given that an increasing number of companies that I come across either currently utilize offshore resources or plan on using offshore resources, I thought it would be beneficial to share some of my thou

Offshore 60

Offshore India Architecture Portfolio 60

BeyondVC

NOVEMBER 5, 2003

Novell to buy Suse. “This is not about competing with Microsoft. This is about addressing the impediments holding Linux back,” says Chris Stone, Novell’s Vice Chairman in the office of the CEO. What a great quote! I have worked with Chris in the past having invested in his prior company, Tilion. Chris is a smart guy and thinks big.

XML 60

XML B2B .Net Acquisition 60

BeyondVC

NOVEMBER 4, 2003

Like individuals, every company has its own DNA. Every company possesses a unique team with a unique culture, rhythm, and way of doing business. What many of us forgot during the last few years is that it is awfully hard to change one’s DNA. What do I mean by that? Well, a number of companies big and small attempted to recreate their business models by morphing from either a consumer-focused company to an enterprise-focused company or from a hosted software company to a licensed software c

Hosting 60

Hosting Business Model Software Sales 60

BeyondVC

OCTOBER 31, 2003

We all know that there have been a number of issues with Microsoft’s security. We have all been bothered by the daily ‘Windows Update Available’ alert. Steve Ballmer has stated that making their products more secure is their highest priority. In fact, MSFT’s CFO mentioned that security-related issues had a negative impact on its most recent quarter delaying some very large licensing deals.

Security 60

Security Romania SQL Acquisition 60

BeyondVC

OCTOBER 27, 2003

It is easy to blame China for our domestic problems. The argument from Bush and the US Goverment is that because China is keeping the Yuan artificially low against the dollar, the US is losing jobs and running a huge trade deficit. The US Government is asking the Chinese to float its currency against the dollar to help solve this fundamental problem.

China 60

China Japan Stock Government 60

BeyondVC

OCTOBER 25, 2003

Yes, this is old news and much anticipated. Just one word of caution for us venture capitalists and entrepreneurs-let’s not equate this to a return to the mid-to-late 90s IPO boom. According to many investment bankers I have met with, today’s companies, unlike yesterday’s, need to have $10-20mm of revenue a quarter, be profitable now and not in 8 quarters, come from an established and not an emerging sector, and have a valuation based on real earnings and growth and not one on

IPO 60

IPO Investment Bankers Venture Capital Valuation 60

BeyondVC

OCTOBER 23, 2003

In an earlier post , I talk about 2004 as a year where Linux begins to make inroads on the desktop. Here is a recent article from Infoworld suggesting the same. In the article Nat Friedman, cofounder of Ximian which was recently sold to Novell, makes some interesting points. 1. It is not a David vs. Goliath battle where Linux fells Microsoft with one swift blow; 2.

Cofounder 60

Cofounder Security Employee Cost 60

BeyondVC

OCTOBER 21, 2003

Having met with a number of NYC entrepreneurs recently, I am refreshed to see that many of them are utilizing offshore resources to develop their products. Yes, this is not a new phenomenon, but in a city that lacks hard core developers willing to work for options instead of cash like the Wall Streeters, it is significant. New York has always been known as a strong new media capital and not known for development of real hard core software.

Offshore 60

Offshore New York Entrepreneur Software 60

BeyondVC

OCTOBER 15, 2003

Siebel Buys UpShot, Motiva. If you can’t beat ’em, join ’em. On an earlier post , I commented on the return of the ASP model. It looks like Siebel is jumpstarting its efforts on the ASP side with its purchase of Upshot for $50mm + $20mm of earnout for 2003 and 2004. For an industry-changing hosted CRM play, that does not seem to be a hefty price.

Forecast 60

Forecast Hosting Revenue Operations 60

BeyondVC

OCTOBER 14, 2003

I recently spoke with Richard Adams, founder of Referral Networks, which was later sold to Peopleclick. He has started a new venture, RipDigital , which does the dirty work of converting CD collections into MP3 libraries. Basically all you have to do is place an order on the website and the company ships a box to you, you pack your CDs into the box, RipDigital does the conversion, and then ships your new library on either a DVD or portable hard drive along with your CDs.

Cofounder 60

Cofounder Software Conversion Operations 60

BeyondVC

OCTOBER 12, 2003

I have been helping a friend of mine who is moving into town get access to local resources such as carpenters, painters, and restaurants. An email I received from him today had the standard list of questions on utilities but the one that surprised me most was, “Who is your cable provider and do they offer VOIP?” This was a surprise since he is not the most bleeding-edge technical guy.

New York 60

New York Email Programming Marketing 60

BeyondVC

OCTOBER 10, 2003

Do you remember the name Jonathan Cohen? Jonathan, who was negative on Internet stocks in the late ’90s, was replaced by none other than Henry Blodget at Merrill Lynch. Henry’s $400 call on Amazon.com put him well on his way towards equity research fame or infamy. As I was catching up on my reading and looking at top performing funds for Q3, it was great to see Johnathan Cohen’s Royce Technology Fund top the charts.

Stock 60

Stock Equity Internet Naming 60

BeyondVC

OCTOBER 8, 2003

I had breakfast with a friend the other day, and he was in the process of a bankruptcy filing for his startup. We started talking about why his wireless company had failed and one of the main reasons he cited was that the price was too high. Many of you may ask why is that a problem. Isn’t getting a high price a great thing? The term sheet that the company signed was led by a strategic investor and contingent on finding another VC as a co-lead.

Sweat Equity 60

Sweat Equity Term Sheet Bankruptcy Salary 60

BeyondVC

OCTOBER 7, 2003

Court lets ‘do-not-call’ list go forward. In this fast-paced world, I have to admit that having dinner with my family is sacred time. During dinnertime, the last thing we want is a seemingly endless, annoying barrage of telemarketing calls. We never really had a problem until we moved from the city to the suburbs and got on every credit card list known to man due to our new mortgage.

Naming 60

Naming Security 60

BeyondVC

OCTOBER 6, 2003

Siebel and IBM team on hosted CRM service. It feels like 1999 again when the ASP (application service provider) business model was all the rage. Why is Siebel trying this again when their most recent foray was a complete disaster ? Bottom line: Salesforce.com is eating their lunch. Siebel’s enterprise license revenue model is coming under real pressure as large enterprises are getting tired of spending millions of dollars upfront with no real ROI.

Burn Rate 60

Burn Rate Business Model Hosting Revenue 60