Posted From: Joylent Blog

One of the things we are most proud of at Joyent is our history of helping fledging start-ups bootstrap themselves into a successful business.

A critical component of this is giving you the flexibility to “fail fast”. This means you can try a business plani, see if it catches on, adjust and react to market changes, and most
importantly, gain traction and revenues before you ever need to seek funding. With a deal like the free Joyent Facebook Accelerators, we take care of the hosting infrastructure, Facebook provides you with a distribution channel and all you need to bring is the code.

Fred Wilson over at Union Square Ventures has an interesting post entitled Why Early Stage enture Investments Fail which proves the value of this flexibility.

Fred puts it this way:

So
it’s pretty clear to me that most venture backed investments don’t fail
because the business plan was flawed. In my experience at least 2/3 of
all business plans we back are flawed. Most venture backed investments
fail because the venture capital is used to scale the business before
the correct business plan is discovered. That scale/burn ratei becomes
the cancer that kills the business.

And to
prove it, he gives some nice statistics on companies that he has funded. He compares the performance of companies that were nimble enough to transform their business (aka the ones that failed fast) with the businesses that stuck to one plan and did not or could not ever
adjust.

The lessons for this are simple:

• Keep all your costs variable
• Get traction before raising capital.

Using cloud computing as part of your infrastructure is one way to accomplish both of these goals.

Additional reading about failing fast and failing often at Early Stage VC

Seed funding has been challenging to track down, but maybe that's changing. Here's a list of programs designed not only to seed early growth, but provide expertise and inspiration to get you there.

The KTEC PIPELINE is an innovative new program, designed to identify talented and entrepreneurial Kansans, match them with best-in-class training, resources and mentors and encourage them to pursue a career as a technology entrepreneur in Kansas.

Kansas is the only state today that is systematically identifying their top technology talent and connecting them to become future leaders. The KTEC PIPELINE adds to KTEC's comprehensive technology program by ensuring the most important component to any successful economy - cadre
of innovators that will lead the Kansas economy for generations to come

Deadline: Sept 10, 2008 Apply

Get up to $15,000 in seed funding for your new company, plus the chance to pitch to angel investors and venture capitalists at the end of the summer.

Only ten spots. TechStars takes only ten companies each summer. Last year more than 300 companies applied. Getting in is hard, and it means something special.
Seed funding. TechStars fills the startup funding gap by providing just enough capital to get your idea off the ground. Your new company receives up to $15,000 in seed funding.

Advice and Mentoring. TechStars fills the experience gap by bringing together the best and the brightest in one place and surrounding you with incredible proven mentors for the summer. With this much talent in one place you’ll get great advice on
your product and strategy, thereby ensuring the best possible start for your new business.
Connections. TechStars companies get immeasurable benefits that come from introductions and connections to potential partners and customers. At the end of the summer, each company also has the opportunity to pitch during an investor event that
we organize.
A great deal and a great co-founder.
In exchange for the TechStars summer program, seed funding, advice, mentorship, connections, and investor demo day, TechStars receives a 5% equityi stake in your new company. TechStars receives “founders stock” which is just like yours. We want to be thought of as an experienced and well connected co-founder so we have the same risk and reward
system that you do. Learn more.

Deadline: March 31, 2008 Apply here

LaunchBox Digital, an early stage investment firm located in Washington, D.C., is focused on helping entrepreneurs get through those challenging early days by bringing capital, advice, and practical guidance to help early stage businesses succeed. We offer:

• Funding and administrative support to enable founders to focus their energy on developing a great product;
• Mentoring and advice from seasoned technology veterans who have created significant stakeholder value; and
• Access to strategic partners, angels, VCs and the press to take your business to a whole new level

LaunchBox Digital is a place for cutting-edge ideas and cutting-edge talent. It's a way to maximize your chances of success. We've structured LaunchBox Digital so that we win only if you win.

Deadline: March 14, 2008 Apply

• Seed Funding
• Mentors and Advisors who have "been there and done it" before
• Free legal, accounting and administrative help to form your company properly
• Introductions to funding sources (including Angel Investors, Venture Capitalists, private investors and public sources of funding) for your first round of financing

Deadline: March 12, 2008 Apply

Y Combinator does seed funding for startups. Seed funding is the earliest stage of venture funding. It pays your expenses while you're getting started.

Some companies may need no more than seed funding. Others will go through several rounds. There is no right answer; how much funding you need depends on the kind of company you start.

At Y Combinator, our goal is to get you through the first phase. This usually means: get you to the point where you've built something impressive enough to raise money on a larger scale.
Then we introduce you to later stage investors—and in some cases even acquirers.

Deadline: April 2, 2008 Apply

Are you a hacker
who has thought about one day starting a startup? Have you already started it? Then you're invited to a free, one-day startup school this April 19 at Stanford

Deadline: March 23, 2008 Apply

Our 2007 Summer Entrepreneurship @ Highland program was an outstanding success in providing the environment and resources for university-affiliated entrepreneurs to focus on an idea for starting a company. We hosted eight projects and the quality of the participants greatly surpassed our initial expectations (additional details).
In addition, several of the projects are in the process of raising Series A financing rounds as a result of their participationi. You can read more about the program courtesy of Entrepreneur Magazine.

Deadline: TBD

UPDATE: Found a Few more.

Startup Weekend is a intense 54 hour event bringing together brilliant tech minds developers, designers, marketers, ect.) together to create a company from concept to launch! You can read more about what the event is here.

Next Events;

• Boulder II (March 21-23)
• Portland (May 23-25)
• Ann Arbor (June 20-22)

More of a competition, but notable! $50K in cash and $50K in Amazon Web Services, a potential investment offer from Amazon and participating VC's.

PARC's deep scientific competencies and extensive portfolio of business/ technical knowledge add value not otherwise available to nascent businesses. Unlike typical entrepreneur-in-residence programs — which bring in industry experts to develop and help finance specific, pre-defined commercial opportunities — the Startup@PARC Program will help selected entrepreneurs:

• focus planning and crystallize opportunities;
• accelerate time-to-market;
• enhance competencies;
• provide facilities resources, office-lab space, or operational support; and
• create unique, competitive advantages that leverage our track record in applying scientific insight to real-world opportunities.

startFEST+DEMO

startFEST+DEMO is a social gathering with the aim to create relationships among growth-oriented entrepreneurs, innovative companies, and members from the investment community. This first event will introduce the Kansas City business community tostartPATH, a virtual incubatori and social network helping entrepreneurs transform concepts into successful companies. In addition, 10 companies will be demonstrating their technology during this event. Fine beers from Boulevard will be provided, encouraging lively social interaction among attendees.

March 6, 2007 (6-9pm)

Boulevard Brewing Company
2501 Southwest Boulevard
Kansas City, MO 64108

Silicon Valley is undoubtedly the center of the startup world. The numbers can be staggering, with 75% of VCi returns coming from a 10 mile radius around Stanford. A good portion of the remaining VC returns come from the area around MIT. The rest of the country trails far far behind.

Stanford and MIT are certainly a large factor in this success, but it isn't the whole story.

Success From Failure

Counter intuitive as it may seem, acceptance of failure seems to be one of the larger contributors to this success. Most startups fail, 60-90% depending on who you ask, and this applies even in Silicon Vally. The community in Silicon Valley not only accepts this, they embrace it. Failing shows that you tried, as long as you worked hard, were quick on your feet, and honest, you could try again, possibly working with the same investors.

Examples in Failure

Failures can be small incremental concept and business plani failures, or they can be catastrophic crashes with investors, founders, and employees being pounded.

Concept Failure: Confinity was initially started to transfer money from Palm Pilot to Palm Pilot to pay for meals! What a ridiculous idea, it only worked on Palm Pilots it was solving a problem that no one really had. They got $3 Million in VC funds to exploit this market. Not much exists from the original idea, which focused around encryption on mobile devices, but they realized their mistake and reshaped into a industry killer.

Result: PayPal!

Total Failure: GovWorks.com WAS an attempt to make transactions with local government (tickets, drivers licenses, property tax)easy. Great idea, but the team had problems, the technology didn't work, and competitors moved faster. They failed completely and a
movie, Startup.com, details their fateful journey.

Result: GovWorks.com failed, but the founders moved on to create a string of successful new ventures including his own VC group. Read more here

Fear

While many places, especially in the Mid-West, are very cautious about starting up, joining with, and investing in untested entrepreneurs and ideas, it has not equaled a better return. This fear of failure causes paralysis, where no one is willing to do anything until fully tested, approved, and little risk remains.

This is a kickoff to a series on why startups fail, why communities need to support this, and how this understanding of failure can result in a stronger community and more success.

Check back in 2 weeks to read the next piece.

6. Don’t bootstrap and then raise VC. The VC will stress how much he admires your guts and determination (while secretly thinking “phew, glad I don’t have to do that”) but the current revenues won’t impact the valuationi nearly as much as you think. You either get valued on
your revenues or your plan, but the mix is hard. Bootstrap and then sell. With your own capital and that track record you are in the game.

7. Don’t trade equityi for services. It's really just a VC round in disguise and the better vendors won’t do it (they don’t need to), so you get weak vendors who drop you when they get a cash deal. With some smaller, entrepreneurial services vendors, it's good to do cash plus an equity “kicker” as motivation - to get the best people. Whether this is onshore or offshore does not make any difference.

This seems really enticing at first, but you can give away lots of equity in little chunks. It also makes a huge mess and investors will balk at all of the random equity participants.

10. Learn how to juggle credit card offers. As long as you really do have revenue and just a working capital cash flow gap (between getting paid and payments you have to make) this is quite viable. You can keep getting those 0% intro offers and then swap around. It takes a bit of organization and effort, but it's the best free money out there. Then a few years later you can get a bank line of credit.

We should have a case study of this soon, Joe and Judy Roetheli of S&M NuTec bootstrapped of of the back of rotating credit cards for a long time, but it paid off with $150MM in revenues and a very healthy sales to MARS foods. Disclaimer: They do not recommend the credit card game out of hand, and it certainly seems like a way to max out your blood pressure.

Seed funding is hard to find, but maybe most effective in vetting new ideas.

Charles River Ventures has a program that looks interesting, but CRV is a venture firm and may have different objectives than a seed fund from angels. Y Combinator has a great program that is mostly a intense incubation boot camp, and a small shot in the arm financially ($20K). I think that we need more of this activity, especially with web driven technologies where sub $500k investment can go along way, and maybe be all that is needed.

Here's a great article from VentureBeat

When seed funding is better than Series A

By Carl Showalter 10.9.07

It’s surprising how often I meet with first-time entrepreneurs who tell me they need $5 million.

Not many companies need that amount in their first round of funding. Much of the time, what they need at the earliest stage is enough money to prove the concept and mitigate some initial risk. Often, what they require is seed funding, more on the order of
$250,000 or $500,000.

So why do entrepreneurs think they need so much money right out of the gate? Some seem to be attempting to finance their way to profitability, but more often than not they think they
need to ask for several million to get the attention of VCs. It’s become a bit of an urban legend: VCs won’t take an entrepreneur seriously if they ask for less than $5 million. That tall tale belongs in the archives with the one about how alligators live in the sewer system.

An entrepreneur’s risk spans three areas: team,technology and market. They can determine how much funding they need by asking themselves one question: Can a small amount of money
dramatically reduce one or more of these risks in six months?

Read the rest @ VentureBeat

From:
Soaring on Ridgelift :
Online musings of a techno VC

StartPath has been up for a couple months and is very much a BETA. We are taking our own medicine and following through with Guy Kawasaki's 3rd point in the Art of Bootstrapping, Ship it, then Test it.

This is a prefunding stab to test the basic concept and some of the technology options. We have done this with NO investment or serious cash outlays, previous web design or web app experience. It's been a learning experience, but has prepped us to take on this hefty challenge.

The upside is that there are tons of improvements being made over the next few months and you can help hone the output. Sign up and select the "Beta" group if you're interested in helping shape the next steps.

From: Startup Journey

Not sure how "vesting" applies in the Indian context, but Andrew Fife's recommendations - based on the experience of having to close down his start-up - makes a lots of sense to me.

Equityi is used to attract capital and is a major part of employee compensation packages. Thus, it is very important that startups are as efficient with their equity distribution as they are with their capital. Stocked owned by anyone who isn’t contributing to the companies success represents dead weight, which means there is less in the pot to attract new investors and team members.

No matter how close of friends, how much you trust each other or how good your intentions are money comes between people and everyone over estimates their own contributions. Furthermore, founders become highly emotional about their companies. Thus, the process of negotiating taking back stock from founders is not rational and inherently very difficult. However, vesting schedules reduce the difficult negotiation to simply and mechanically exercising the companies pre-agreed right to repurchase stock at the price it was issued. I foolishly let myself fall into the “it won’t happen to me” trap but no startup gets it right on the first
try and theses hiccups often lead to changes in the team. Believing that any startup won’t have to deal with stock vesting issues is totally unrealistic.

Typical startup vesting schedules last 36-48 months and include a 12 month cliff. The cliff represents the period of time which the person must work for the company in order to leave with any ownership and the vesting schedule represents what percentage of stock the company can buy back at the time of departure. For example on a 48 month vesting schedule with a 12 month cliff, if an employee is offered 1000 shares but leaves in the first 12 months they
don’t keep any equity. However, if they leave after 26 months they get to keep 26/48 of the equity promised or 542 or the 1000 shares. Key team members leaving will always be difficult but using a vesting schedule can make one acrimonious aspect of their departure much easier.

The second key lesson is that boards are most effective when they have 3 or 5 voting members and include at least one objective outsider to break any deadlocks. Early-stage startups are probably better suited with 3 directors than 5 so that the entrepreneur(s) can focus on building their company without getting bogged down managing their boards. My experience suggests that 3 is a good number even for bootstrapped companies that haven’t yet raised capital. Upon raising capital the investor will likely want a board seat so one of the board members needs to be ready to resign.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital
activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

Kansas City should be on this map! Let's do something about it. We have to foster a risk taking attitude amongst entrepreneurs and investors alike.

StartPath
will be hosting events, discussions, and other activities to boost tech development, so jump on board and make waves.

p.s. Garmin is on the list, but check this out, they are headquartered in the Cayman Islands, thank SarbOx and the U.S. having the 2nd highest corporate tax rate in the world.

Employees: 4,751
Headquarters: Cayman Islands!
Sector(s): Electronics
Why it's hot:
Garmin unveiled new products to do everything from comparing gas station prices to tracking lost puppies. It cornered 60 percent of the U.S. GPS market in 2006.