Bridge Out

I happened to run into Stephen Fleming last night, and we started talking a bit about early stage incubators.  One of the things that Stephen likes to say is that if the ATDC is an incubator then VentureLab is pre-natal care.  And while it is not a requirement that an ATDC company has a connection to Georgia Tech, VentureLab concepts must be based on IP that comes out of Tech.  Both he and I have come to the conclusion that this is leaving creating a "bridge out" in the ecosystem to create tech companies here in our fair city.  There is no VentureLab for non-GT technology.

This begs the question "what exactly does VentureLab do?"  From their web site:

Georgia Tech VentureLab provides comprehensive assistance to Georgia Tech faculty members, research staff members and graduate students who want to form startup companies to commercialize the technology innovations they have developed.

As a one-stop center for technology commercialization, VentureLab provides a clear pathway from laboratory innovation to the commercial market. VentureLab specialists help transform innovations into early-stage companies by assisting in business plan development, connecting the innovators with experienced entrepreneurs, locating sources of early-stage financing, and preparing the new companies for the business world.  Graduates of the VentureLab program may apply for admission to the Advanced Technology Development Center (ATDC), also a unit of the Enterprise Innovation Institute, or EmTech Bio, an incubator operated by Georgia Tech and Emory University.

VentureLab helps faculty members, research staff members and graduate students answer such questions as:    

• Is there a commercial market for my innovation?
• What should my role be in building a company based on the innovation?
• What are the steps between laboratory discovery and commercial product or service?

In a nutshell, they lead companies through the stages of idea stress testing, building an initial team, naming the company, incorporating the business, drafting a b-plan, getting seed funding, staking out some IP, and perhaps building a prototype.

I have come to the further conclusion, from observation and discussions with Big Thinkrs like Scott Burkett and Wayt King, that there are actually two bridges that need to be constructed. 

Yes, there is a need for a VentureLab for non Georgia Tech deep technology companies.

And as Wayt has publically stated, there is also a need for a Y Combinator, or in my view perhaps an Ignite VP model, that can take advantage of the light capital requirements of early stage web companies.

Time to mix up some concrete and get to building.

Open VC

If any aspiring entrepreneur believes that Southern Capitol Ventures may be a good fit with what they are working on, Jason Caplain has a call out to entrepreneurs to come see him on April 20.

Web 3.0 Part One

I have been interested in the concept of digital lifestyle aggregation (DLA) for some time.

My most recent pain surrounding this had to do with the launch of a web site promoting our condo in Rosemary Beach, Florida. In conjunction with this we also listed the condo on a few of the online rental web sites (boy are they getting a little long in the tooth). Regardless, the Kokomo Kid exclaimed at one point, "you mean every time I make a change on one site, I need to go and replicate it on the others?" "Ummm, yeah" I replied. A microcosm of a larger problem that has yet to be addressed.

Well, Fred Wilson pointed me to an post by Peter Rip. The interesting part is here:

Much of the "easy" innovation seems to have been wrung out of the Web 2.0 wave. Web 2.0 was cheap - thanks to open source, simple - thanks to RSS/REST, and distinctive - thanks to AJAX and Flash. It helped more than a little the Google has continued to entice us all with the abundant profits in Internet advertising.

Now the hard work begins, again. The next wave of innovation isn't going to be as easy. The hard problems in the WWW are no longer usability or ease of everyday content creation. These problems are solved. Digital cameras, SixApart, WordPress, and digital video cameras showed us how ease it could be. Now the hard part is moving from Web-as-Digital-Printing-Press to true Web-as-Platform. To make the Web a platform there has to a level of of content and services interoperability that really doesn't exist today.

The Web today still resembles MS-DOS more than MS-Windows. Every website is an island, an island that knows nothing about any other website. This is no different than the world before the Windows Clipboard. All 640KB of memory was available to whatever application was running. The point of integration was the User. As it is today.

The Kid was incredulous because she is the human integrator. Removing her from this task and enabling web software do the integration is one of the next waves of Internet innovations.

Tired WIRED Promo

So I am eating lunch today reading through the lastet issue of WIRED when I come across this cool little promo.

It requires that you enter your 10 digit subscriber ID number. I am a subscriber. The subscriber ID number is on the plastic cover they put on the magazine. It gets put in the trash the day the same day the magazine arrives. Everytime.

Not too well thought out unless they did not actually want their customers to filfull.

Annoying.

2006 Angel Activity

According to the Center for Venture Research angel funding was up 10% last year nationwide.

It seems like the move to later stage investments in the angel market is a national trend. According to the press release:

“While angels continue to represent the largest source of seed and start-up capital, market conditions and the capital gap in the post seed investing stage are requiring angels to engage in more later-stage investments. New, first sequence, investments represent 63 percent of 2006 angel activity, indicating that some of this post seed investing is in new deals. This restructuring of the angel market has in turn resulted in fewer dollars available for seed investments, thus exacerbating the capital gap for seed and start-up capital in the United States”

The full report in pdf format is available.

What Is A Technology Startup?

While the ATDC web site plainly states that we do not generally accept consulting-oriented business models and prefers companies that offer products that are not easy to replicate and defensible, we sure do get a good number of inquires from these types of companies.

Now don't get me wrong, there are lots of good small businesses that are consulting companies, but they are not technology startups the way we look at them. To be a technology startup a company has to be in a product business. With the advent of SaaS and Internet services I use the world product very loosely. By product I do not mean a physical thing. it does need to be a concept that can be sold thing to many people as opposed to custom work. It needs scalability from both a technical and business perspective. To borrow an analogy from Paul Graham, to be a technology startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at a bar.

Startup Lounge Podcast

When you have a little time mosey on over to the Startup Lounge and listen to my conversation with Scott Burkett and Michael Blake. Or better yet go to iTunes and subscribe to the series.

It runs just over an hour so give yourself some time or some mundane task to do while you listen to us prattle on.

Scott and Michael do a great job at keeping things interesting. They have some bigger plans for the show that they shared with me offline but I will not steal their thunder.

ATDC Funding Factoids

Prepping for the Startup Lounge this morning had me going through some funding figures to come up with the following factoids.

In the past 10 years ATDC companies have raised just over $1 billion in venture capital.

Since 2000 ATDC companies have either raised or been acquired to the tune of $1.7 billion. For the last five years the number is just over $800 million.

In 2006 ATDC companies raised $149 million in Venture Capital. Our companies were included in 10 of Georgia's top 25 venture deals of 2006.

Pretty impressive if I must say so myself. How do we help our companies bring home the VC bacon? Let me count the ways.

1. ATDC Company Showcase. A trade show of sorts for our member companies. The next one is May 10. Once registration is live I will provide a link. The theme this year is celebrating the $1 billion that our companies have raised over the years.

2. Capital Readiness Program. An intensive series of workshops designed to get a company ready to go on the road.

3. Roadshow Review. A dry run session of the investor pitch to ATDC Venture Catalysts and EIRs. Friendly fire to get ready for combat.

4. Georgia Tech Innovation Experience. In conjunction with Ion we had about 20 investors and 20 companies participate in a speed pitching experience that was enjoyed by all.

Start Me Up

Next week I am going to visit Scott and Blake at the StartupLounge to record a podcast about what is happening at the ATDC.

They have this nifty little feature that allows you to ask a question that listeners want to hear. You have to register (openness guys, openness) but if you ever wanted to know anything about me or the ATDC now is the time to ask.

Capital Climate Crisis

I am sitting at the Ritz Carlton Reynolds Plantation surrounded by venture capitalist types at the AeA Venture Forum. A semi-rich target environment for entrepreneurs seeking capital.

Tom Noonan, whom I last saw in Beaver Creek sipping a beer après ski, started the morning with the history of ISS. Very candid conversation about the most difficult days there when they switched to a SaaS model. Based on the murmurings of the lack of early stage VCs in Atlanta these days it is interesting to note that he could not raise his Series A here in 1996.

All this financial mojo has me thinking a bit more about Rich DeMillo’s deforestation comments at the Georgia Technology Summit. Justin Rubner piled on all the writings in the blogosphere on with a lead article (paywall) nine days later. But there is something about the whole blame the Atlanta VC meme that just does not feel right to me. They are not evil tree cuttings fools.

So I started some conversations with my VC friends. And this is what I learned.

Rich’s comment is considered a gross overstatement. Early stage money is in short supply, but it is still available. In 2006 seventeen early stage deals that raised $61 million were completed. Granted that is only 17% of the total raised, but it is there. However the early-stage money shorter supply is raising the deal quality bar. Individuals with a material track record from a previous venture can raise early stage funding. Vitrue and Damballa are evidence of this. If you don’t have the track record you best max out 32 credit cards like Noonan did.

I have come to the conclusion that it is another factor identified by Diamond that contributes to the weakening and collapse of present societies, as the real culprit. And that would be human-caused climate change.

The climate change is the dot com bubble and bust. From a venture capital ecosystem perspective, Atlanta has yet to recover. The funds previously available for angel investing or VC funds have fled to other vehicles that are viewed by rather conservative South as safer. As evidence, in 2006 Georgia companies raised $353 million in venture capital. In Q4 of 2006 $4 billion, yes billion, was invested in Atlanta real estate.

As a result of this flight the Atlanta VC population has died out. Only two firms, Noro Moseley and HIG invested more than $10 million last year. And with NMP V getting close to the end of its life they are somewhat limited in their ability to do early stage deals.

Regardless, climate change is a slow process. The elements to support early-stage investing are present in Atlanta. Don’t just blame the VCs. The causes are larger then that. The solution is more wins that attracts investment back into the tech sector. And VCs are part of that solution.