OC startup guide

This is a guide I put together last year on the OC startup scene.  Activity has definitely picked up in the meetup and co-working scene which is great so I”ll be doing an update soon.  Let me know if you have any additions/corrections.

My trip to Boulder, CO

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I’d been wanting to take a trip to Boulder for a couple of years but never found the time before. This changed when I met Brad Feld in LA in December ’12 and was struck by his genuine interest to help “everyone”!! So when I took him up on his offer  to help do intros for me that’s when the big surprise came. First he immediately accepted and sent emails to a good group of pretty influential people in the Boulder startup community.

The next nice surprise was when everyone on the list happily setup appointments with me and even recommended others I should meet. I have never seen this level of genuine interest in helping others, and considering these are all extremely busy people it makes it even more important.

So I made the trip, found a room using airBnB (first experience was positive) and spent 2 days in Boulder in January. Even though the weather was a shock to my thin SoCal blood the energy in the city was so hot I felt warmer inside than in my normal days in OC. THis is not a slam on OC but it’s just amazing to see so many people close together, working on similar projects. The downtown Mall is an awesome place to hang out around or even find job at hot startups. Great coffee and fantastic restaurants and even local live music by the Harp Guy that caught me off guard.

The meetings
Although some of the meetings had to be re-planned for future the majority of them were help on time and as planked and were packed with fantastic feedback and offers of help and support. Top of the list is of course meeting Brad in his office at the Foundry Group and Luke Beatty at TechStars. Tim from SendGrid is also an amazing person – I recommend touching base with him for events in OC as SendGrid has a local office and is interested in helping the community here. (and hiring)

So, if you can take a couple of days from your busy schedule and make the trip I “highly” recommend it. Brad is walking the talk from his Startup Communities book and Startup Revolution project and will actually put you in touch with people that might change your life.

And if you’re interested to help an OPEN and FREE entrepreneurial community in OC hit me up and I’ll share my vision with you.

Startup lessons from Humpty Dumpty!

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I watched the movie “Puss in booths” today for second time.  I needed a break from work and a funny movie is always on top of my list for this.

Other that the amazing production of the movie and performance of Antonio Banderas this time I started seeing similarities of Humpty’s life with of startup founders.  As we search for our own “Magic Beans” we go thru many of the same ups and downs.  The idea of believing in something that does not even exist in anyone’s minds and convincing other people to believe in the same dream and go thru one of the most difficult experiences (and rewarding) is what drives us.  These are the traits I identified:

Vision and Dream: Having a clear vision helps enormously in driving to success. Humpty had the exact image of the 3 beans imprinted on his mind and never forgot what he was looking for.

Dedication and Passion:  As he tried different things and each one failed he never gave up on his dream and this passion came thru clear and loud any time he opened his mouth.

Flexibility on the path:  at the same time he was willing to try different paths to fulfill his vision, and got pretty creative in the process.  Not to condone the illegal side but stressing the fact he was fully open and willing to learn and do what was needed to get to his dream.

Planning: as we embark on the road to creating something out of nothing remember the value of planning.  Humpty show us this with his little book prepared and worked over years of obsessing about his dream and living it in every moment of every day.  The important point here is not a business plan per se but the concept of planning.  At the same time too much planning can get to the analysis paralysis state is also detrimental to startups.

Chance of a lifetime:  How we interact and optimize on once-in-a-lifetime opportunities is a very important factor in making it.  I’ve had many opportunities come my way when I was not ready.  In hindsight they always look like lost potentials but if I personally was not “available” for it was it a real opportunity? The planning and preparation along with the obsession about the vision (not the path) has helped me be more available personally when opportunities have surfaced.

First draft of the Orange County startup community guide

I’ve put together the first draft of the guide to Orange County startup community as a starting point to document and help people  navigate their way around.  There is obviously a ton more that needs to be added but I need people to help, and lead the next steps in the development of this document – and build a vibrant community here.

Hope you’ll join and become a part of this – we’ll all benefit together.

Building a Vibrant Startup Community in Orange County

I recently had the pleasure to meet Brad Feld in Los Angeles and read his new book Startup Communities which provides an excellent roadmap for building startup communities from the ground up.  The book is based on his experience as one of the leaders of the Boulder startup community so it’s not hypothetical, which is important for me.  If you have not read the book I highly recommend it, there is a lot of useful info for startup founder, even if you don’t have time to get involved in the community in a leadership role.

Some of the key takeaways were:

- The Boulder Thesis; the four key requirements of building successful startup communities (main requirement: must be lead by entrepreneurs)
– The role of leaders and feeders,
– Mentor-driven networks versus hierarchical structures,
– The “give before you get” motto.

At the same time two startup community guides were published by Sam Teller (Los Angeles) and David Cohen (Boulder) which provide the next step in helping a community come together and grow.

Being that I’ve lived in OC for the past 12 years and intend to continue (to the extent in my control) I’d like to be a part of a vibrant tech startup community in Orange county.  For those that know me I have tried in the past with limited time and resources to get something going in the Aliso Viejo area but being new to the process I was not successful.  However, the thought never left me:  Why do I have to drive to LA and San Diego or Fly to the Bay Area to get the basic support and feedback startup founders need?  Every one these communities is awesome and I love any chance I get to go there but considering the time and cost of travel it not practical on an ongoing basis.  So it was perfect timing when I found out about Brad’s book and I’m now back at it.

I do know there is a more active community in North Oc (Irvine and North) than South OC and Orange County is such a large area we need to have activities in many places to get everyone involved.  You can see a view of what’s happening in OC on this map.

The Startup Weekend movement has also been active here (unfortunately I have not had a chance to attend yet) but that is definitely the most high profile, startup friendly event.

As I get started back on this topic I have to remind myself again about what is needed:

1. Be all inclusive:  everyone that is interested is welcome! regardless of experience, age, gender, funding, etc.

2. Partner NOT compete:  When creating new events check with other event organizers in the community to make sure you’re not on the same night and time as much as possible.  If we make Orange County software successful we’ll all benefit.

I’m currently working with other Orange County tech startup people in putting together a guide to our community and hoping anyone that cares about and loves living in Orange County will help with input.  The first draft should be out soon and I’d love to hear from you and hopefully we can work on this together!

Orange County software startup funding options

Looking at the driving factors for building a thriving software startup ecosystem funding options rank high on the list.  An active investor community is the basis for all the other startup centers in the US including Silicon Valley, NYC, Boston, Los Angeles, Boulder and Seattle.

This is a list of the most active OC investors in software area:

1. Tech Coast Angels – the only active Angel group in Orange County.

TCA has been present in Orange county for decades and is probably the most well known sources of equity financing for new companies in Orange County.

2. Palomar Ventures

3. Miramar Ventures

4. K5 accelerator

5. Angellist: Angel List has become an indispensable tool for funding in general and from an initial look it seems like there are active OC-based investors that only play here.

We’ll be providing more in-depth details on these and other companies, if you know of any active software investors in the OC that is not here please let us know. (qualification:  by active we mean having invested in software startups in Orange County in the past year)

Kauffman’s list of top US accelerators

Recently the Kauffman Fellows (associated with the Kauffman Foundation) released a list of the top US accelerators (aka Incubators).  This is the first year this list has been developed and therefore still very much a WIP.

http://techcocktail.com/top-15-us-startup-accelerators-ranked-2011-05

There are positives and negatives from doing these ranked lists:

POSITIVES:

- Helps entrepreneurs find out the top quality programs quickly,

- Helps provide some common measurement guidelines in the operation and effectiveness of the programs,

NEGATIVES:

- Many good programs do not get listed on the list thereby limiting the options for startups,

- The list and the producers take a life of themselves distracting from the work at hand: helping build great new companies.

Overall the list is a good starting point but definitely not an end-all for startups.  Many of the top programs may actually not be good fits for many startups so the due diligence of company founders should go beyond this list.

How do the Founders fair in Angel & VC-backed companies

Interesting article in TechCrunch http://tcrn.ch/cYXT6l about Ron Conway, the famous Silicon Valley angel investor’s discussion on the success rate of investor backed companies.

Some of the stats he used (apply to his own fund SV Angel):

- He expected about one-third of companies fail, one-third get investors their money back, and one-third bring a 2x to Google-x return,

- Actual numbers showed failure rate in recent years — since 2002 — was about 40 percent,

- This leaves 60% of investments that bring either a break even or nice return to the VCs.  Of this number only 20-30% would return a 2x or more return, meaning 70-80% are basically losers.

Some good points in the comments:

- 90% of founders of venture backed companies end up getting “nothing”.

- Founder success is the true measure of a success — not whether an Angel can recoup losses.

-  90% of founders get $0-$200K from of their options (which given their lower salaries during the startup’s life is effectively negative).

- Most of the money from an M&A/IPO goes to the VC’s. The liquidation preferences take most of the value. Sometimes you’ll see the management get some type of carveout, but there’s rarely anything for the original founders (if they’re no longer in the company) or regular employees.

I believe the value of founders in the equation is lower than it could be.  2nd time founders usually have a much higher ratio of success (2/3) – partly because many of the first time losers never start another company.

So short of starting a company, having it funded and exit with a 2X plus return what are founders to do?

Educate ourselves – learn as much as possible before getting funding and fully understand and question the term sheet details; maximize your chances of success by taking a few important correct steps upfront.

Startup success stats

In 2009, the estimated 29.6 million small businesses in the United States:

  • Employed just over half of the country’s private sector workforce
  • Hired 40 percent of high tech workers, such as scientists, engineers and computer workers
  • Included 52 percent home-based businesses and two percent franchises
  • Represented 97.3 percent of all the exporters of goods
  • Represent 99.7 percent of all employer firms
  • Generated a majority of the innovations that come from United States companies

Source: U.S. Small Business Administration Office of Advocacy, September 2009

Building a new business is a great dream that comes with high risks and potentially high rewards.  Unfortunately a large number of new businesses do not see a positive outcome.

  • In 2008 there were 627,200 new businesses, 595,600 business closures and 43,546 bankruptcies.

And,

  • Seven out of 10 new employer firms survive at least two years, and about half survive five years.
  • Findings do not differ greatly across industry sectors.

Do success rates really need to be this low?  How effective are educational and government programs? What is missing from this picture?

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