Lauren's Lens

"This Will Never End," Blind Guardian

The Super Angel vs VC discussion is still making the rounds: Michael Arrington, Chris Dixon, Dave McClure, Fred Wilson et al. Must be a slow summer for financing news.  You take the smartest money you can get that's right for your growth stage and capital needs. That's it folks. 

All well and good to talk about taking 100% angel funding until exit for digital companies and sometimes that is the right strategy, but venture capital is required for more capital intensive businesses in life science, clean tech and advanced manufacturing. And even in digital businesses, lots of capital can be required to scale a company and/or prepare for a high value IPO vs going for a quick M&A. We angels need VCs to help carry some of our companies over the finish line. And VCs need angels to do the hard work of getting companies ready for venture funding. Sometimes we have to help them reinvent themselves along the way--the companies that is. VCs are reinventing themselves these days.

The work of an angel investor sometimes reminds me of a summer many moons ago when I worked on an Arabian horse farm. It sounded so glamorous until I realized the bulk of the work after you buy/breed the horses is mucking out the stalls, cleaning up the horses, training them on proper deportment and getting them ready and prettied up for showtime. It took weeks to get my clothes and hands clean. I just threw away my boots!

I'll devote my next several posts to profiling some of the CEOs of my portfolio companies. Some have had all angel, some angel and VC financing. So far, most all of them are doing well. Knock on wood....

"Let's march all day, and clean latrines by night" Bart Simpson & the Party Posse

Bill Gates talked about latrines more than education, entrepreneuring or anything else in his Re-inventing Capitalism interview with Brent Schlender, which wound up a fantastic, 3-day Techonomy conference at Lake Tahoe. The Gates Foundation claims more lives are lost in the developing world due to poor sanitation and open defecation than to any other cause. He said "Latrines are fascinating. No one wants to read about it. It's one of the greatest under investments." Gates talked about flush toilets not having received much investment in the past century,"only the low IQ guys are thinking about toilets" and while they are today's gold standard, flush toilets are neither economical nor water efficient for the developing world. Well engineered latrines are his aim: "We're gonna have a breakthrough in latrines." One of Bill's favorite sourcebooks on "this super-important topic" is 'Water and Sanitation.' "It's quite lurid" said Gates, with a sly smile as if he were describing some especially juicy porn.

While Bill was bullish on latrines, he was pessimistic about our political process. He talked about how complex legislation such as the Financial Reform bill has become, and how there are only a handful of experts who understand such legislation "and they're all biased!" Bill said he is worried what impact this will have on our democracy. He also bemoaned all the hidden taxes in various bills. "The amount of money we are spending [via disguised taxes] in this legislation no one understands is insane."

However, Gates is optimistic about continued world progress. He said if you looked back to the 1800s "when people were knee deep in horse manure and choking on coal fumes, many thought, we're all going down." While Bill clearly had poop on his brain, he is the penultimate techonomist and passionately believes that technology can solve most of the world's problems.

I like the mature Bill Gates so much more than v1. 27 years ago I was a co-founder at a software company with a license and development agreement to help Microsoft release Multiplan for the first Macintosh. We had to deal with a young, smart but sometimes obnoxious crew at MS, including Rob Glaser who'd just graduated from Yale and was completely full of himself, and Alan Boyd who while brilliant was also a piece of work. The MS team kept moving the project goalposts and going "off the deal reservation." In hindsight, we didn't handle the situation very well, and the product, while good, was late to market. Months later we were still trying to get paid. I ran into Bill Gates at Roger van Oech's first "A Whack on the Side of the Head" conference and tried to talk to him about the late payment in hopes of moving Alan along the path to approval. I was quite surprised that Bill was intimately familiar with the project details, and more surprised when he started screaming at me about all of my company's failings in front of 150 other attendees. (later I learned this was one of his more effective communications techniques circa 1984). I was so ticked off, I seriously considering giving him more than a whack on the side of the head. But looking at this skinny kid with huge glasses (I was much svelter then, but even so had a significant body mass advantage and as a former athlete, had way more upper body strength) I decided decking him, however satisfying it might be wasn't worth jail time--especially given the 150 witnesses. At the top of my lungs, I told him to perform a physically impossible act on himself and stormed away. A couple weeks later, our check arrived in the mail. Over the years, I've sometimes regretted my restraint. It might have been worth it to be known as the software gal who decked Bill Gates. But now, as I see how Bill has re-invented himself with a goal of re-inventing both philanthropy and capitalism, I'm glad my better judgement held the line. I'd be ashamed now to be known for having decked the man who will likely do more to save the world than any other in my lifetime.

PS: I stood in line for 40 minutes to say hi to Bill at the Techonomy dinner. He was very gracious but didn't seem to remember me. He did seem to remember the projects (Multiplan and sw we developed for Rob Campbell's Forethought, developer of Powerpoint). The current version of Bill is the best yet!

"Heal the world, make it a better place for you and me" Michael Jackson

I had breakfast yesterday with Talia Leman, who is 15. At 10 she helped organize kids around the world to give $10 million for Hurricane Katrina/Rita relief. Now CEO of RandomKid (www.randomkid.org), whose mission is to "take the goodness of a child and turn it into the goodness of world", she reports over $10 million going to RandomKid guided projects in 20 countries. Projects are conceived, led and implemented by kids, and include sending crutches and artificial limbs to Haiti, growing plants from seedlings to provide food for the homeless, and sending DVDs to our troops.

Shot of Talia after she pitched Jeff Bezos.

 

Talia is wonderfully self-possessed and articulate--well beyond her years. She has amazing eyes and sports a very hip yet appropriate style. Her Mom, Dana Leman, is here with her at Techonomy and is a consultant to her company, but Talia is a force on her own. Indeed, RandomKid's tag line, is "the power of ANYone." Talia learned she can make a positive difference in the world at a very young age and now she empowers kids around the world to do the same. She's here seeking donors for her 501c(3) non-profit corporation. Kids like Talia and the 10 ISEF winners here at Techonomy have the vision, intelligence and moxie to fix the mess we made. More than any of the big ideas expressed at the Techonomy conference, these kids give me hope.

"Teach your children well..." Graham Nash

I loved sitting with several of the Intel ISEF winners over dinner. These kids are so great. Matt studied malaria and is excited about meeting Bill Gates tomorrow. He doesn't know where he wants to go to college but does know he wants to be a doctor. He really enjoyed David Christian's talk, and found much of the economics discussions "boring." We talked at length about how technology can solve food problems for the world. These smart high schoolers understand the science of my portfolio company, aOvaTech, (eliminates the need for Growth Producing Antibiotics in animal feed using natural, antibodies in hens) better than I do. They are so earnest in wanting to solve the world's problems. "Teach your parents [and your elders] well...."

Loved meeting Quentin Hardy in person. Knew his Forbes work and we FB friended (can't remember who asked who). He's so funny on FB--always look forward to his posts.

John Doerr did a good job of getting the participants to ask questions and raise issues, but the best presentation was Dean Kamen talking about his First (www.usfirst.org) project. His passion and his achievements in mentoring kids are impressive. First's mission:

"To transform our culture by creating a world where science and technology are celebrated and where young people dream of becoming science and technology leaders."

"Pushing the barriers, planting seeds. Playing the mind guerrilla." John Lennon

 

First day of Techonomy WAS a mind guerrilla. Some of my favorite moments:

Eric Schmidt: A problem we'll have to deal with 10+ years out, is teenagers changing their names in order to deny their online past. (aka known as how to defeat Google memory.)

Eric Schmidt: "That's why God invented the off button." Eric says he can stay off the grid for up to 90 min. Big laugh from all who listen while tweeting and texting.

David Christian: The history prof you wished you'd had is talking about Big History. If you take the billions out of it, the universe began 13 years ago, the Earth was formed 5 years ago, human civilization began 3 weeks ago and the first space launch was 1 second ago. Much of the Earth's big history is about bacteria (single celled bacteria).

David Christian: "Creativity, innovation & collective learning is what distinguishes humans from other species."

David Christian: Most psychologists study misery. A small segment studies happiness. Can humans use collective learning and technology to solve our Malthusian crisis and create more happiness?

While David Christian refers to Antonio Gramsci's "pessimism of the intellect vs optimism of the will", Intel's video about their top 10 ISEF winners exhibit optimism on both fronts. All 10 winners are in attendance dressed in white jackets. So inspiring. I love these kids.

One of the bennies of only 10% women participants at the Techonomy conference is there's no restroom line at the break! They also served Dove ice cream bars as a snack. Excellent choice.

Stewart Brand: "This doesn't look like a treehugging crowd." and "New definition of fusion = synthetic solar."

Stewart Brand & Kevin Kelly: "The lucky poor people of the world will get technology when it finally works."

Brian Arthur, Santa Fe Institute: "If you're not confused, you don't understand anything," culled from a film about the Irish revolution.

Brian Arthur: The physical economy has a mirror or underground digital economy: a self configuring neural layer like a jellyfish's. "This neural layer of the digital economy is a second form of intelligence and the biggest change in economic history."

Jim Breyer:  Where will the next $trillion companies be in 2020? The US economy is not improving. While Google and Apple may be able to reinvent themselves, more market value/higher market caps will be created in China, India, Brazil and Russia. By 2020, Accel will only have 10% of its partners in Palo Alto.

Back at the lobby bar with Kirby and Noemi (Spanish for Naomi and not to be confused with bad French for no friends), for a relaxing Malbec after my Vulcan mind meld. Noemi tells me she uses Chivas Regal as a cologne--it's very popular at Superbowl and other football parties. I suggest that if she wants to meet men who own racehorses rather than just watch football, she should dab on a bit of Knob Creek. Hilarity ensues. Kirby giving Noemi a hug below after he smells her Chivas Regal cologne.

 

Back to the salt mines, oh I mean a delightful cocktail party and another superb meal with Dean Kamen providing the fireside chat.

"Under my umbrella, ella, ella, ay, ay, ay.." Rihanna

With the swiftest of reflexes, Brook Byers, grabbed our lunch table umbrella and rescued us when a mountain wind threatened to dump it unceremoniously upon us. The table behind us was not so lucky. Faster than a speeding bullet, Brook! Otherwise, the Techonomy patio lunch buffet was delightful. I believe Tracy Des Jardins is the executive chef so the food rocked. So did the conversation. I loved learning what SJ Camarata is doing at ESRI (and he knows TrafficCast well, one of my portfolio companies), along with Jacquie Jones of Kaplan University (they're doing an online course in Entrepreneurship jointly with the Kaufman Foundation), and Howard High of Fluidigm who has an amazing biochip of potential use to a couple of my companies. Steven Sprague of WAVE is the quintessential techie, still passionate about the PC platform and making lots of money from it, with a fascinating vision for a secure, set-top box. He shares my concerns about the dangers of bioengineered foods on diversity and ecosystem balance. I felt like a complete dork for asking Kevin Johnson what he does at Juniper Networks (CEO!), but he was gracious and charming, and genuinely interested in learning about tech transfer at Midwest universities. He's an excellent listener, no wonder he did so well at Microsoft.

All this before the conference even starts! As the French say, ça promet!--but these were no Umbrellas of Cherbourg....

 

Can technology fix the global economy?

I often dread the many conferences I must attend, but not this time. I've really been looking forward to the Techonomy conference and 3 days of intensive talks from brilliant minds and hanging out with a fabulous group a participants. www.technonomy.com. Hollywood style sign on the hotel as you arrive telegraphs all the thought and careful planning that have gone into putting together this mini Tech Davos near Lake Tahoe.

The Ritz Carlton Highlands is a lovely, hotel and the service has been excellent. It was a tough choice whether to go fishing on the Truckee early this am or get a facial and massage, but the latter won out and I am relaxed and ready for a Vulcan mind meld. 

Here's the back of the sign and the hotel's roof garden as viewed from the lobby bar. Kirby, the bartender, makes a mean Hendricks martini with cucumber. No doubt I'll have another one tonight as I blog the days learnings. 

 

"Know when to walk away and know when to run." Small bets at the casino, big bets on small companies.

After a lovely glass of 2006 Trentadue Old Patch and the spicy seafood trio app at dusk at the Lone Eagle, I headed off for a bit of gambling at the Hyatt casino in Incline Village. I lost $100 at the roulette table in about half an hour. I moseyed over to Wheel of Fortune because I love the chant and won $20, which I cashed in for a coupon. OK, now ready to play craps. The first table was a bust, and I lost $80 in short order. The second table had a great roller, and I won $240 during his half hour roll. I cashed this in and tried one last visit to Wheel of Fortune using my $20 coupon. I won $232 and cashed this coupon in, walking out of the casino nearly $300 ahead.

While I make much larger bets on early stage companies than I would ever place at a casino, I follow some of the same principles and patterns. I place small bets at the outset until I am comfortable. I invest in entrepreneurs I believe in who are building businesses I understand. It's definitely a numbers game, which is why I'm looking to invest in 100 companies. Only a handful, or two if I'm good AND lucky, will be very successful and generate high returns. Sometimes I have to push myself a bit to get back on the horse when a company is failing, to either help the entrepreneur reinvent the company, or if I really believe in her, back her in a new venture.  Conversely, if I believe deeply in the business but the founders can't deliver, then we bring in new leadership (with the founders' help and assistance) or, if I have to, shut it down and back a competitive venture.

Casinos are fun entertainment from time to time. Backing "big companies starting small", as Kay Koplovitz, founder of Springboard Enterprises, calls early stage companies, is my day job and my passion.

 

Rocky Racoon, stepped into the room, only to find Lauren's pistol

OK this is funny. In between launching my blog and firing a warning shot from my .25 automatic pistol at a raccoon getting too attached to my property, I found this hilarious post about Dave McClure @ www.seanpercival.com

http://www.seanpercival.com/blog/2010/08/02/dave-mcclure-by-the-numbers-infographic/

"Who, if I cried out, would hear me among the angels?" Ranier Maria Rilke

As I compose my first post, I wonder, does the world really need another blog about early stage investing? There are lots of good ones already from Jeff Clavier, Brad Feld, Bill Gurley, Dave McClure, Fred Wilson and many other men. Not too many by women, in part because there still aren't that many women angels or VCs. 

Despite controlling 50% of our nation's wealth, women do less than 10% of early stage investing. I'm on a mission to change that. If just 20% of women's wealth, currently sitting on the sidelines, was allocated to early stage investing, it would be game-changing. There'd be a lot more capital available to bridge the "Valley of Death," and there'd be a wider access net to women-led startups, most of whom have a harder time raising capital by virtue of not being or knowing "good ol' boys." And as women investors gain experience and confidence in early stage investing, there'd be a lot more professional angels like me and a lot more women on company boards. And perhaps no need for my blog. But right now, it's a voice that needs to be heard.

I co-founded the Phenomenelle Angels Fund to serve a hugely underserved market: women-led tech startups in the Midwest. I also like fishing in productive waters other boats haven't found yet! There are so many favorable drivers for our fund: The Midwest has great research universities, a highly educated work force with an enviable work ethic and little sense of entitlement, a huge lack of local capital--even the best deals have little competition so valuations are reasonable--and the Midwest offers a much lower cost of doing business than the coasts. The other big trends Phenomenelle tap include the fact that an increasing number of women are graduating with science and business degrees, 3 out of 4 new businesses are started by women, women-led companies generally have a lower failure rate and are more capital efficient, and over the past 15 years, companies with women on the Board and/or on the C-level team have had better post-IPO performance.

I often wonder why more firms don't focus on these hugely underserved markets. Unfortunately, there are very few angel groups or VCs that focus on women-led firms and even fewer located in the Midwest. We at Phenomenelle consider our geographic niche and focus on women a major competitive advantage--both in generating deal flow and in differentiating ourselves for capital raising. When we interviewed various women entrepreneurs about the need for a fund focused on women, we got a unanimous YES. In fact they told us that they preferred to have women investors. All of our fund's LPs are successful women entrepreneurs or business execs or are organizations with a lead woman investor. We have significantly more deal flow than we can handle. Means we'll need to raise a bigger fund next time round!

I also invest personally and through my early stage advisory company, SCIO Corp. I'm in 30 companies so far, with of a goal of 100 early stage investments. This blog will share my perspectives, learnings and the occasional rant. I hope to start some good conversations.