Regardless of the hassle of going through such a process, I think it’s quite amazing that this deal went through. As I was actively involved in the back and forth negotiations, I have to say that this was not an easy deal. There were times when my friend actually stopped the negotiating process, knowing that if he agrees to whatever is proposed will not allow him to feel comfortable about the situation. Just goes to show you never to give up. It’s true that my friend approached quite a few VC’s until he finally hooked up with the investor (a significant angel investor none the less), but the result was that a team was created that now really has a chance of making it big.

There were times when I advised my friend to go seek new funding opportunities and leave this angel be. There was one time when I got so mad at him for lagging the process and excepting things I would never accept, and I am sorry for that meeting. He insisted that he believes in this match-up, hardships and all.

This investor, who shall go nameless, already has in his pocket one major success, being the former CEO of one of Israel’s leading companies, decided not only to fund the new venture, but also to be an active part of the decision making process. I wouldn’t say that he will be the company’s CEO, but he will definitely not sit on the sidelines and wait for his money to grow.

This is what I like. Investors who are not afraid to dive into the water together with the entrepreneur are very hard to come by. While most entrepreneurs think they know it all, and that if someone only gives them some cash they can conquer the world, the best entrepreneurs are the ones who know what they are good at – mostly it’s a vision or some kind of technical ability. Not everyone with a potentially good idea is necessarily the next Steve Jobs.

Congratulations, dear friend (I know you are reading this) – I was wrong, you were right. Here’s to you brother :-)

Doron

If you don’t know TED Talks (http://www.ted.com), you simply MUST register to their podcasts. Here is an abstract from their website explaining exactly what it is:

“TED stands for Technology, Entertainment, Design. It started out (in 1984) as a conference bringing together people from those three worlds. Since then its scope has become ever broader.”

Every week you get to hear the most riveting ideas that are about to change the world, presented by the most brilliant minds in the world. If you only watch one podcast a week, this is the one.

Last week, Tim Berners-Lee, the guy who invented the Web (Yes, he literaly invented the Web), gave an amazing lecture on the future of the next web. I took the liberty of embedding the video here so that everyone can enjoy it. Take the time and see it.

I found it absolutely amazing. What did you think? Drop me a line at doron@dhconsulting.info and let me know…

Ever since Sequoia capital introduced their now infamous “doom & gloom” presentation to their portfolio companies last October, the start-up world had been in turmoil. Enterprises are laying employees off like there is no tomorrow (e.g. Comverse, Orbotech etc.), start-up’s are running around snake bitten looking for an investment & the media is having a field day, generating ratings from unemployed people with nothing better to do other than reading the news.

Over the past few months I participated in different events focused on showcasing entrepreneurs to potential investors. Last week I participated in an event that was especially interesting. It was set up by the financial services company Brooks-Keret together with the Israeli chamber of commerce (here’s a link to some press coverage of the event). The goal behind the event was entrepreneur / investors speed dating. In a nutshell, each company had 15 minutes to showcase their idea, hoping that an investor would request a follow up meeting and learn more about the venture. That’s all. No due-diligence, no macro-economics state the market declarations, no promises. Just make an interesting presentation so that you get a follow up meeting.

It was during this event that I got the chance to have coffee and biscuits with some of the investors, some of them angels and some are VC executives. I was surprised to see the difference in the manner by which they evaluate companies.

VC’s are constantly looking for an exit strategy. They have an obligation to maximize their ROI in the shortest period of time. That is exactly the reason why they concentrate on the short run, instead of considering a business as just being a viable one. Angels, on the other hand, tend to look at businesses as a long-lasting money machine, and not just a pile of shares that might be worth something to someone one day. The main reason behind this is the fact that most angles are actually business persons that achieved success, and therefore know the nooks and crannies of creating something out of nothing.

If you take away the usual bladibidibla about how the recession is good for investors because they can now get better deals (more equity) for a cheaper price (as is often talked about in the media), you can actually make some sense out of it all. Market rules had changed.

In the aftermath of the global economic meltdown, almost everyone I talked to was telling entrepreneurs that they have to focus on making money. Since October, a “screw your vision” mentality had taken over the funding process. Investors kept saying to entrepreneurs that it’s time to leave the dreams aside and focus on cash flow. Cash is king. In a way, I agree.

The first problem that arises from this “screw your vision” mentality is that technological advancements and breakthrough concepts are being neglected. Good ideas don’t necessarily have a solid business model in mind when trying to change the world. I’m not saying that businesses don’t have to make money, of course they do. I’m just saying that sometimes the business comes after the idea, not the idea after the business. Take a look at Google as an example.

The second problem is that VC’s, being the major funding channel for start-up companies, are not necessarily looking for breakthrough ideas and technologies right now. They want to see a solid business model, preferably with some sales as topping, before even thinking about proceeding.

If that be the case, are VC’s lying when saying that they are always open to new ideas and are still investing? Well, in a way, yes. VC’s are not open to new ideas. They are open to new business opportunities. Good ideas are left for angel investors and dreamers.

After a long break in the activities of the validation panel, we are all set to help you out again.

If you have a venture and believe that the assistance of the panelists might help, feel free to send me an E-mail describing your venture. I promise a follow up.

For all of you who don’t know what the validation panel is, I’ll give you the short version:

A panel of industry experts that gather together in order to assist young ventures in different fields. In a nutshell, the entrepreneur showcases the idea in front of the panel, followed by an intense Q&A session. The entire meeting lasts about an hour, after which the entrepreneur receives a document that holds the opinions and recommendations of the panelists, each in his own field of expertise. If you’d like to know the members of the panel are, check it out in previous posts.

Showcasing before the panel costs you nothing. The outcome (document) also costs you nothing. This is completely pro-bono work offered by the panelists, simply to assist.

So once again, if you have an interesting idea, feel free to drop me a line.

Doron

D.

It’s not every day that you can watch history in the making. A crisis the likes of this one doesn’t come often and one that has a global affect is even more interesting.

The United States had economic downfalls in the past. Beginning with the great depression of 1929, America realized that simply waiting around for things to fall back in place (Adam Smith’s invisible hand) is not a good idea. The government needs to take measures that will stop the downward spiral, and it needs to be done swiftly.

Ever wonder what the crisis is all about? Let me shed some light on the topic:

First of all, what the hell is sub-prime? The answer is very simple. It is the practice of loaning money to people who do not qualify for market interest rates. In essence, it’s giving money to people who can’t pay back.

The US housing bubble started bursting towards the end of 2005. For a few years before, banks were more lenient on funding mortgages, as well as providing loan incentives (e.g. easy initial payments). As housing prices went up, the public began to assume more long term debt, believing that they will eventually refinance under better terms.

Now comes the fall: interest rates began to rise and housing prices began to drop, making it much harder to refinance. Once the initial incentives given to the public were over, it was simply impossible to pay. That’s when defaults and foreclosures began take place. For demonstration purposes, during 2007 1.3 million properties were subject to foreclosure.

Greed, my friends, is the root of all evil. The crisis that emerged from the sub-prime fiasco teaches us all a valuable lesson. Nothing lasts forever.

All in all, I believe that the concept behind the actions of the American government is a good one. Helping the market stabilize by pouring in money might sound like a terrible idea, especially to those sitting at home thinking that “the rich get richer”. The fact of the matter is that what was done essentially killed capitalism and introduced a new paradigm in economics. It’s every man for himself; only with a government backed insurance policy in case you fuck up.

America will not fall without a fight.

I will be hosting the next validation panel soon, and start-ups who wish to apply should E-mail me at doron@dhconsulting.info with their Executive Summary.

D.

Unfortunately, since many of the panelists are spending September abroad (either at events such as the TC50 or simply on business), I am forced to move the next panel towards the end of the month.

Come back for additional news…

Doron

I had first met Cameron through a mutual friend, Roi Carthy, who thought we should hook up, both being veterans of the online advertising industry. A few months and countless emails as well as meetings later, I am proud to call Cameron a friend. Not only is he a good friend, he is also a brilliant analyst with a deep understanding of how things work in the online world, on top of being extremely business savvy with an amazing insight into emerging markets. I hope you enjoy ;-)

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Recently both Google and Yahoo made steps to allow users to opt-out of personalized ad severing provided of cookies. As of a few days ago, Google implemented a procedure effectively allowing users to opt-out their from extended content network including affecting AdWords, Google Syndication as well as DoubleClick.  Yahoo is following suit with full opt-out implementation at the end of August.

This bold step by the two biggest names in search are not in response from market factors - but rather a hearing held by the Senate Commerce Committee. In short the hearing questions 1) the ability of large companies to be responsible for data they collect on behalf of their users and 2) the arbitrage between a user’s understanding and of what is being shared about them against actual data collection and interaction.

Do we really care? In the last 15+ years we’ve grown accustom to sharing highly personal information about ourselves over the internet.  Privacy has always been a significant issue since the first days of connecting online via BBS, prodigy’s internet service (remember them?!) and the like.  Granted, privacy highly valued in the minds of every American - which might explain why similar inquires haven’t been made to scale in other Western countries.  However, since those “early” days so much has happened:

• We subconsciously trust companies at an “evaluation” level. We’ve traded real personal information in return for free web-based internet accounts, social networks, shopping portals and many other services that make our lives easy, fun and exciting.
• That trust is tested in real time. The internet has made Adam Smith economics without the big “G” for government a real thing.  When an internet based business tests the limits of what it will do with its user information - the inherent nature of the internet both allows us to learn about it, and enables us to to act on it.  Case in point the 2006 AOL data scandal.  By in far in Western countries, such exploitations of a nurtured relationships haven’t happened on a doomsday level scale.
• Network effect of sharing information.  With more than 70% of American homes connecting online we’ve come to a near subconscious understanding that sharing information about oneself isn’t that bad given the fact that everyone else does it too.   This effect is highly scaled in all dimensions of American society - as well as other Western countries.

The real issues at hand should be protecting - not distracting people.

Seriously. With google and yahoo handling zillions of searches every day, that fact that non-identifiable information regarding our internet browsing behavior in exchange for convenient search and targeted ads hasn’t actually harmed anyone. I agree that unsolicited advertising via spam and other annoying less than scrupulous tactics are evil; and the government holds a much needed place in consumer protection.  However, targeted ad-serving enabled by cookies truly makes the experience of search more effective for the user (anyone) and ROI effective for a provider (google).

The implementation of cookies have made advertising more like marketing. Imagine a situation where the communication between a user and advetiser is completely market driven, placed with unparalleled targeting and actively searched by a targeted user base.  Yes this freaks out offline advertisers :).  If the model wasn’t appreciated  - the market would move in mass to other search providers without government based initiation.

I have to say. Working side by side with such industry experts is a true joy. Every time the validation panel gets together, ideas fly and the energy level in the room soars.

2 weeks ago the validation panel got together again (for the 2^nd time) to take a look at three start-up companies, each one in a different field of operation. From the first moment you could fee the energies flying around in the room. The presentations were very professional and the Q&A sessions were intense. No wonder that I had received thank you letters from the companies who participated in the event. The outcome, the personal opinions of each and every member of the panel, is priceless.

I will be hosting the 3^rd panel soon enough. If you have a start-up in need of help, feel free to drop me a line to doron@dhconsulting.info.