This is a day of transition for me as I close the TechDrawl office in the ATDC in Atlanta and get ready to move both the business and my home to Austin.  In the early 80’s I was a member of the Committee of Twenty, a group of young Georgia Tech Alumni chaired at the time by John Hayes, which actually spawned the idea for an incubator.  Then GT President Joe Pettit, having come to us from Stanford, was receptive, and the ATDC became a reality.

I have started and housed companies in all iterations of the ATDC from the original O’Keefe basement to 10^th Street and then to 5^th Street when that building first opened.  (Having indoor access to the bathrooms at 5^th was a major architectural improvement, but that’s another story.)  Although there have been a few interruptions over the years as my companies have grown and flown elsewhere, the ATDC has always been a welcoming home for the next venture.  I commend all those who have had a role in building such a strong institution over these decades.

My etching still remains in the lobby, and I’ll be back and forth to Atlanta for business and family reasons, so hopefully I won’t be forgotten.  I did keep my prized Georgia Tech football seat, but I’m afraid my near perfect attendance record over 44 years will be lost.   It’s not all bad having the Longhorns to cheer for, particularly since both my children graduated from U Texas in Austin and long ago gave me an excuse to add some burnt orange to my wardrobe.

Our windowless office for TechDrawl became affectionately know as “the Cave” in recent years.  In addition to our staff, we enjoyed having a number of talented young people hang out with us, particularly during the evolution of TechDrawl as a video blog.  We appreciated their time there, and I hope there was some little bit of wisdom imparted to them. 

My last meeting in the Cave was this morning with Peter Baron and Suzanne Moccia of Carabiner Communications, a loyal TechDrawl sponsor.  That meeting was memorialized by my immediately thereafter removing the conference table to its new home. 

The Daily Beast today has a gallery of America’s 30 funniest cities.  Austin ranks 1st, but Atlanta is 4^th, and both cities have a population in which 26% of people consider themselves funny.  I’m glad to be staying in the top tier of funniest, and maybe that will give me some license to add more humor to TechDrawl.

I would actually have written a more business topical post today, but the relocation process requires interacting with all manner of service providers on both ends, and every touch point now is measured so tightly that there is always a request for a follow-up phone or online survey.  It takes more time to respond to all the surveys than to make the actual transactions.  I had my car serviced for the road trip last week at a GM dealership where I received unbelievably good service.  It was like they had Prozac in the water cooler, and everyone from the porter to the senior managers was drinking from that cooler.  Of course I gave them all 10’s on the follow-up survey, but somehow I miss the old days when you had to fight a bit to get your car fixed.  There was a certain manly satisfaction to that.

Enough rambling for this Thursday.  Thank you for reading TechDrawl, and please continue. 

Today my most interesting conversation was with a young entrepreneur who has conceived an idea with enough novelty and scope to justify funding and pursuing it.  It is always fun to watch a creative mind at work defining a problem, figuring out how to address that problem, and turning a clean sheet of paper into the outline of a startup business.

Our discussion led to a focus on the first customers, the ones who will provide the “traction” that leads to forward funding and real revenue.  Defining that target has everything to do with how much funding is required.  Here are some alternatives we pondered:

• Elephant Hunting – You have a product that could be utilized by a dominant existing player in your targeted industry.  But, in the current open source world where you have very little IP protection, showing it to that player may well result in a “Thank you very much.  We’ll have 50 developers knock this out as soon as you leave the building.”  You must have some special leverage to take this risk: probably the best bet is to be so far along with your product that a buy versus build decision makes sense for the elephant.   And, you get there only if you raise enough money to start with one of these.
• Horde Hunting – Your plan calls for acquiring 100,000 customers right out of the chute to create some critical mass.  You must be very clever using all manner of social media, tech influencers, traditional PR, paid advertising and events to get noticed.  You may try to put some partnerships in place with established marketing channels to help you acquire customers in bulk.  Or you must enlist this celebrity.  You still need pretty big bucks to make this work.
• Partner Hunting – You can identify marketing partners whose interests should be aligned with yours, who can bring you early revenue, and who are not so big as to just walk with your idea.  If you target industry is fragmented enough to allow this approach, this concept is the most capital efficient for you.  You should avoid an industry like this.

I’m sure you can add other angles to this.  You may have something that you can in fact sell to just a few people at a time to get a reasonable start and proof of concept, but things are moving so quickly in the Internet world that anything other than starting with a Boom may leave you as a spectator to someone else’s success.

This is somewhat related, but one of my favorite recollections of my years working with Rupert Murdoch’s News Corp was making deal calls with the EVP responsible for our activities.   We were developing technology for the travel industry in the 80’s (1980’s that is), and this EVP would tell me this:  “Ben, I’m going to propose A to American Airlines; they’re going to object mightily and come back with B, I’m going to tell them why that idea won’t work so they’ll have to agree with C, and they will.”  You know what, he was always right.  He was the elephant, and he had the leverage to make things happen exactly according to his plans.

I recently had an occasion to speak with a young man whose first job out of college is on the sales front lines in a fast growing technology company.  I was hearing about the many organizational issues that face him, including unclear job responsibilities, evolving pay plans, and “who’s on first” type confusion.  My first thought was that Peachtree Software must have looked that way to many of my employees when I was learning the ropes as a young CEO.  For the most part they were kind enough not to make fun of the situation, at least until my going away party when we sold!

Now we are seeing some of the heavily funded Consumer Internet companies grow at such breakneck speed that I have to admire the ability of their management teams to keep so many smart employees on the same page.  CEO Mark Pincus of Zynga in particular impressed me at a recent conference, with something like 0-1200 employees in 4 years, half of them technologists.  That’s no easy accomplishment.

Now I’m seeing many fundraising presentations that also include a pitch for hiring developers.  And, we’re all pretty familiar with the war for talent that seems to have emerged in the Valley.  I’m sure some of the more established companies would like to see the establishment of a “no-flee” zone to the option-laden startups.  (Sorry couldn’t help that.)

I had occasion today to discuss this with my friend Peter Rosen of HR Strategies & Solutions.  He had some interesting words of wisdom on the art and science of motivating and retaining key employees.  Much of this is documented on his web site, but I thought I’d share a few words of wisdom from our conversation.  If you’ve reached the stage of about 10 employees and are on the way up, pay attention.  Here’s a list in no particular order:

• Employees stay around when feel valued and jump when they don't.  It’s important to help them realize their importance to the company.
• “Re-recruit” every day.  Always treat employees like you are welcoming them anew into the fold and make the glad to be on the team.  (I’m not sure Bobby Knight ascribed to this view, but big-time coaching is different.)
• The high rate of unemployment makes people more scared and litigious than in normal times.  Peter is seeing defensive claims being filed by people fearing that they are about to be fired for poor performance.  They defend themselves by going on offense first with some manufactured claim of mistreatment.
• There is an art to terminations to avoid repercussions.  It’s important to show that the departing employee is still a valued person, even if the particular circumstances didn’t work out.  
• You might want to re-read Mr. Rosen’s article “Five Tips for Growing a Thriving Company, originally published on TechDrawl.  Those tips all matter when it comes to retaining your best talent.

Those of us in the technology business are always dealing with true talent.  Many otherwise very smart people can never be great developers; there’s a gift that must be present somewhere in the DNA.  While every business is in its essence a people business, these issues are particularly deserving of management attention where genuine talent is a rare commodity.

The mobile world seems now to offer significant opportunities for the entrepreneur who is a “systems engineer.”  With hundreds of thousands of apps for iOS and Android, it is increasingly more difficult to conjure up a standalone app, get noticed, and get rated highly enough to be found by consumers.   It seems that everyone who has a smart phone has an idea for an app.  And, I’m seeing those ideas daily.

Two news items today caught my attention, both having to do with mobile payments.  The WSJ reported on a deal where Google is teaming up with MasterCard and Citigroup to create with your Android phone an electronic wallet where you literally pay with a wave at a special reader.  Separately, TechCrunch discussed American Express’ announcement of its digital payments platform called Serve, also available on mobile phones.  The massive shift toward mobile as the platform of choice for the Consumer Internet is being closely followed by the ability to conduct P2P and business transactions.  There’s nothing like tying a consumer’s enthusiasm of the moment with an easy ability to spend money. 

I also just received my Square device, which plugs into my Android or iPad and enables me to swipe credit cards.  This is truly a novel invention and comes with discount rates that are merchant friendly.  My only concern about it is that it is so tiny it almost needs a lanyard to keep from being misplaced.  At the very least, keep it away from small children who might swallow it.  Square has the advantage of letting someone collect from your favorite credit or debit card in any location, with no special appliance required on the buyer’s end.

We are probably some time away from real compatibility across mobile platforms, credit card brands, and, in particular, the myriad of POS systems in use.  And we have some work to do to make phone payments as easy as a simple card swipe.  But, in this case “some time” may be measured in months and quarters more so than years.  There is tremendous inertia in the entrenched interchanges and transaction processing systems, but that is being met head on by the creativity of our entrepreneurial technologists and their venture backers. 

Back to my beginning point, the mobile ideas I am seeing now that have the most appeal are the ones that take into account the full system viewpoint of an app, from the initial reason it is used and how it fits into a market or distribution environment all they way through to the consummation of actual business and the reporting and data collection that results.  Couponing, advertising and promotion combined with a seamless way to pay can make for a powerful business model.  Having a cool system that is tailored for a specific market where all aspects of business development prowess, including complementary channels, can be effective seems more promising than just “slapping an app” into the store. 

Stay tuned for very specific examples on this theme as some of the stealth projects that have come my way begin to unfold.

After yesterday's excitement over the $41M pre-launch investment in Color Labs and my post on that subject, I was sent this morning the following link to a blog posting by a NYC-based company called Profitability.  It's entitled "A Tale of Two Financings" and is a very candid story of one company's year-long journey toward a obtaining its desired capital.  It's so compelling, I'm going to be lazy today and just serve up this link for your enlightenment.  While the big deals in the Consumer Internet space enjoy the hype, here's a more down-to-earth view more from the creator of a decidedly less sexy business intelligence tool for QuickBooks.

The WSJ reports today on a $41M capital raise for Color Labs, a mobile/social startup pre-launch.  It's a Valley deal with proven entrepreneurs and blue chip investors.  The notion that demonstrated "traction" is a prerequisite for a high-value capital raise is out the window with this deal.  

We see stories like this and get the impression that it's just raining money in California for Consumer Internet startups.  But we don't get the full story on each deal and have no way of knowing how much effort went into this raise.  I doubt that firms like Sequoia in this case handed out $41M strictly on a napkin.  The founders must surely have put enormous energy into their product design and business strategy, and you can bet there were lots of fits and starts along the way.  There was also likely plenty of time spent on the fundraising process itself.  Even if the deal was so hot that it resulted in a bidding war, you have to think this was the founders' total focus for some period of time.  And, all this had to be accomplished in an environment of so many other Valley startups that any competitive grid probably changed hourly.

The point of this post is that for anyone, with the possible exception of a few card-carrying members of the Valley elite, raising capital is never easy.  There may be some quick angel money, like we saw on stage at Launch, but that's just the beginning of the marathon.  If things go well for your venture, there may be very large rounds ahead, and by that time you'll have a lot of hard data on product acceptance, a history to explain, probably some founder turnover, and a few other surprises.  Due diligence will be much more diligent at that stage.  If things don't go so well but you have a plausible restart or recovery strategy, expect even more scrutiny.

Raising capital is work, and who has to do this work?  The senior management team is always going to be on point.  They are the ones on whom the bet is being placed and who must get to know potential investors, and they are certainly the ones who can be most convincing about the company's prospects.  Lawyers, advisors, and investment bankers can certainly be instrumental in the mechanics of the process, in making the right introductions, and in putting the company's pitch in the best possible light.  These parties can dramatically improve your odds of success, but you can never expect to do a clean hand-off with a "go find me some money" task.

Of course raising money takes your eye off running the actual business.  It's important to time your capital raise not only for maximum valuation but also for minimum detriment to the core mission.  If you need, say, $2M, it's probably far better to seek that all at once than to try a couple of tranches in hopes of giving up less of the company.  You'll finish one sprint tired and winded only to be immediately again in the starting blocks.  Meanwhile, you team will be spread pretty thin trying to accomplish the business plan.  And, your investor candidates will take more comfort in a round that buys enough runway for some major goal to be achieved, whether it's product milestones, customer counts, revenue, or even cash flow.  Then is the time when you can go back to the capital markets with enough leverage to drive up the valuation.  You can play more offense than defense.

I'd be curious what is Color Labs fundraising strategy from here.  Did they raise in one swoop all they will need to overpower their chosen market, or is there a much bigger round planned for the future?  It will be interesting to see how this plays out, and to see how this much money affects the plans of others jumping into the mobile/social space.

Lewis Echlin, pictured here standing next to the 2012 Ford Fiesta, is a group marketing manager at Ford Motor Company and is in Atlanta for the Auto Show.  Yours truly was invited to the media cocktail party last night, so I went.  After the intensity of SXSWi, I thought a little automotive diversion might be interesting.

Getting press credentials can be pretty cool, for something like the Masters.  But, there’s only so much influence a tech industry blog can bring to the table.  I certainly am not the target customer for the Fiesta, but many of you will recall Paul Stamatiou’s participation in the Fiesta movement in 2009 and his extensive blogging on that experience.  Ford continues to look for young agents and to exploit social media to drive sales of this 40-mpg vehicle. 

My particular interest at this event was dashboard technology.  You may be familiar with Centrafuse, an ATDC company, which is providing the tools for a collection of functions to converge in one U/X in your vehicle.  They have developed OEM and retail products and provided the tools for a community of custom app developers.  They’re the “agnostic” choice versus what the manufacturers may choose to provide. Their products are Microsoft or Linux based.

With the avalanche of iPads and iPhones, I wonder if we can get to the point where most of your dashboard functionality is built into you personal iOS device and can be transported from vehicle to vehicle.  Instead of being limited to OEM solutions like Ford Sync or Chevy MyLink, what if you could just connect your own setup via Bluetooth in the next car of any make that you rent from Hertz?  You’d have your music, presets, map preferences, email, data, and whatever other features you are comfortable with.  The only other things you’d need to feel right at home would be some discarded fast-food wrappers and dog hair from your own vehicle.

It was interesting discussing all this with Mr. Echlin.  His vision is a voice-driven world – one where current speech-to-text systems are improved to the point of being able to respond accurately to your commands.  He’s thinking real hands-free interaction with your car.  There are whole sites devoted to hilarious misinterpretations by applications like Google Voice (which I use and like but does provide regular humor during the day), so I don’t think we are quite there yet.  I had a Lincoln Mark VIII sometime in the 90’s that was an early Ford experiment in this respect.  It had a voice activated phone built in, and it was amazing how many calls it would initiate when I was conversing with a passenger and said something that sounded to it like a command.  It was part of its charm, actually.

The big question seems to be whether the major automotive manufacturers will choose to open their products to technology developers and to platforms like Centrafuse or whether they’ll want to maintain control of their primary dashboard components and keep those profits for themselves.  You may have paid $4K for a navigation system if you bought a high-line German car in the last few years, and now your phone is probably your preferred solution for this purpose.  Big money is at stake as this plays out over the next few years.

No test rides this time, but maybe I can work my way up the credentials food chain and get some track time for the next product promotion. 

Let me say up front that this post is directed to my more traditionally minded followers, who may be highly successful in their fields but have yet to embrace some of the most engaging new tools on the Internet.  It’s a bit of a primer, but it does mention Charlie Sheen – WINNING!

The term “social graph” is becoming an increasingly common part of our lexicon.  It refers to all of your online relationships, as opposed to your real world relationships that are manifested in sites like Facebook.  It’s a reference to the many connections that you establish through sites ranging from Twitter to LinkedIn to Quora.

Now sites like Klout can provide one measure of the extent of your social graph.  Check out Charlie Sheen and his Klout score of 94 (on a scale of 100).  As the site says, it’s hard to get more influential than that.  Of course no such scale is making a judgment call on whether this is good influence or bad; it is more in this case about celebrity.   You can look up my score of 44 and learn that I am definitely not a celebrity but have a focused, highly engaged audience.  I found that rather heartwarming.  Look up yours and see what you think.

Klout uses your Twitter and Facebook actions not to reward sheer volume, but to measure the quality of your online influence.   Will this type of scoring become something that becomes part of your resume in the future?  Perhaps, especially if you’re in an Internet related business.  It does get at a point I’ve always made that it’s not the people you know but the people who know you that matter most in your life. 

I still hear many business people speak with disdain about Twitter.  Certainly not all Tweets are meaningful, but we’re getting to the point that having a Twitter handle and a Facebook log-in are just about as necessary as having a Drivers License.  More and more sites require one of these to sign in, as we do at TechDrawl for comments. 

Does this mean that you have to waste valuable time on services that don’t necessarily catch your fancy?  I think it depends on where you are in your career and professional development.  I can personally attest to tangible opportunities having come my way from LinkedIn and from Twitter.  If you are “on the way up” in the technology business as an entrepreneur or a service provider, you probably need to devote some attention to building your personal brand via these tools. 

I personally check Twitter fairly regularly.  Part of the reason is that I follow a group of PGA Tour players who Tweet regularly and genuinely.  @bubbawatson and @stewartcink are among the best.  I also have my regular A-list with whom I correspond, and I watch a broader feed to keep up with the industry, national events, and other sports.   Because of the brevity of its messages, Twitter is easy to use on your smart phone when you have a break in the action.

I also look at my Facebook page at least daily.  When I have some time for mental sharpening, my favorite site is Quora. This Q&A site covers many interesting topics and is a work in progress from Facebook alums; it has a spirit of competition where answers get voted up or down, and they are moderated.  Some answers are like white papers; brevity is not the winning formula here if you want to move up the ladder on Quora.  It is relatively SF and Valley centric and deals primarily with tech topics among people in that area, many of whom seem to know each other in real life.

Stackoverflow is the Q@A site for coders.  I’m not qualified for that, but I gather that it has become a resume builder for people in that field.  You get to prove (or disprove) your expertise if you jump into the middle of that discussion.

Namesake is more of a conversational site as opposed to a strict Q&A format.  It’s by invitation only now, and I’m just getting a handle on that.  I’ll be seen there more often.

And then there’s the daily ritual of posting to TechDrawl, which I find enjoyable and hope you find to be worthwhile.  Blogs now seem rather old-school in a way, but they still can be very effective tools.  Many carry considerably influence in their chosen topic areas and become daily must-reads for their subscribers.  If you’ve read this far, Thanks!

The rate of change in the technology business is well known.  It seems like the second derivative is always positive whether with respect to the technology itself or to new entrepreneurial ideas.  At recent events I’ve heard some high-velocity Bay Area angel and super angel investors talk about the number of deals they are doing monthly.   Such measurements taken annually are more appropriate in most other sections of the country.

What does this mean for deals to qualify?  For starters, I think this skews toward the very young set that are products of the YCombinator type factories and come out of the door with relatively standardized pedigrees.  Many of those guys aren’t even shaving yet (yes I know some are women), and, pardon the pun, even their deals haven’t had time to grow any “hair.”  One can deploy a lot of smaller investments in convertible notes over a wide range of deals if they are all pretty homogenous and have no history.

Where does that leave the deals that have been around for a while, have been through a few pivots, a few leadership changes, and other transpositions over time?  I’m not sure.  One then gets into having to evaluate the circumstances on a case-by-case basis, and that takes some effort.  It the founders are older than 25, they have careers that need to be examined.  They also likely have family obligations to fulfill, and, while they may be well worth the extra cost, they are not able to return to the college dorm standard of living. 

I personally think this is a segment of the new deal market that offers extraordinary opportunity for investors who will devote their time to taking a bit closer look.  Fixed valuations as opposed to purely convertible notes may be the better way to go in some of these cases.  Some have said recently that experience is less valued than the ability to adapt, but I think there is a middle ground to be explored.  All businesses that scale eventually evolve to people issues as the primary driver.  And, in that case, there is no substitute for experience.

Being a regular attendee at what I call "venture séances," I'm often asked for my opinions of various venues and formats.

Far and away the best I have seen in recent months was Jason Calacanis' Launch in San Francisco.  He focused the presenters on showing actual products more so than slides, assembled a storied group of jurists to critique each deal, and facilitated the investing of real dollars essentially on stage.  ("RTD" now means "Real Time Dollars."). The only downside to the entrepreneurs was that he kept them in a quiet period prior to the event so that all deals would be fresh.  A few weeks of delay and uncertainty can be painful, especially for companies that didn't quite make the final cut.

Different events serve different purposes.  My critiques here are not necessarily distinguishing good from bad, just an effort to properly position each format.

To me the ideal format is one where the entrepreneur has enough time, at least 15 minutes, to give a fulsome presentation and then is asked questions by either jurists or a very knowledgeable audience.  I want to hear enough to really understand the concept, see how it fits into its market, and to get some feel for the team.  Even in Atlanta I've seen firm dollar commitments made in this format.  

Martin Tilson has run since the early 90's the Communications Group, which follows this pattern and draws about 25 people monthly, including angels, VC's and corporate types, together representing much of the money in the Deep South.  The attendees have the opportunity to get "liquored up" and to enjoy fine dining and a discussion of the deals after the presenters have departed. I enjoy the camaraderie, and Martin and his screening committee work hard to find deals that match the investing interests of the group.  Under Mike Eckert's leadership the ATA is stepping up its game similarly, but there by definition the capacity and deal sizes are much smaller.  The biggest knock on this structure is that it only takes one person who has had a bad experience in a particular area to poison the thoughts of the entire group.  Beware of that risk.

Sanjay Parekh's Startup Riot is at the opposite extreme.  Three minutes and four slides deliver an all-day smorgasbord of opportunities to a crowd of entrepreneurs, observers, and some investors.  Follow-up is facilitated by table-top displays.  The best this format can do is pique someone's interest and show a large number of companies competing for scarce investor dollars.  It has a bit of a bazaar feel, with a great community spirit.

Startup Lounge also brings together a large mixture of companies and a group of investors, all thrown together in an unstructured cocktail party setting, and, for reasons unknown, always on a rainy day.  A true bazaar, the trick for someone looking for money is to get noticed and make a very quick pitch over the din.  Also a great community event, it has to be viewed as a place to get discovered but not to get much farther on the spot.

SEVC is somewhere in the middle of all this.  Entrepreneurs deliver canned slide shows of about 10 minutes duration and are then "around" for further discussion.   With no judge and jury format, and with mainly later stage companies that are already well shopped, frankly it's a pretty dry event.  It is well attended by investors from around the region who are mainly there to check up on each other and see how some of their existing deals are showing. One VC actually told me that any company relying on this method to seek funding had probably struck out in its direct efforts.  The event is well organized with complementary content and plentiful sponsors, and it obviously is providing value.  Venture Atlanta in the Fall is the annual bookend to SEVC and has a similar style.

Microsoft's BizSpark Accelerator at SXSWi had yet another twist. Presenters had only 2 minutes on day one followed by 10 minutes of questions.  Those who made the cut went to a 5/10 format on day two.  Frankly, as you know if you read my posts from Austin, the first day didn't work well.  Two minutes was too little; the 3 judges were on the front row facing the stage, and the audience was an afterthought.  The second day was much better with the colorful Mark Suster on stage both to introduce and question before the ball was tossed to the front row judges.  The crop of candidate companies was really strong, and certainly the finalists were quite good.  This was not a pure pitch session, per se, but there were many investors in attendance.  

So what is the net of all this?  Presenting at any sort of séance must be only part of your fundraising strategy, and you shouldn't bet too much on it.  Séances tilt more toward the investors than the entrepreneurs.  Nothing beats a warm personal introduction to the right angel or the right partner at a VC firm.  There are so many deals and so many investors in SF and the Valley that a "discovery" event there may have better odds than elsewhere.  But, even at Launch, lots of the judges seemed to have already interacted with many of the supposed virgin companies.  It's a tightly knit group of highly interconnected entrepreneurs and investors in that area, and they're not easily surprised.