22 Qualities of Entrepreneurs Likely to Fail

By Jeff Haden

I'm not an angel investor.

Nor am I likely to be providing venture capital anytime soon. So you would think reading a comprehensive guide to angel investing would be of little interest to me.

In fact, often the best way to approach a situation is from a totally different perspective. Say you want to build a thriving business. You could list everything you think is important in founding, building, and maintaining a startup, and build your company that way.

Or you could focus on what experienced investors look for--not because you want to attract outside capital, but because you want to evaluate the same key qualities an experienced investor looks for when deciding whether a business merits his or her money.

In other words, build a company that has all the qualities a successful angel looks for... and you've probably built a company with real legs.

The same approach can apply to you, the founder.

As David S. Rose, the CEO of Gust and the founder of New York Angels, says in Angel Investing: The Gust Guide to Making Money & Having Fun Investing in Startups:

"The number one thing I look at when making a startup investment is the quality of the entrepreneur. In this, I--and a majority of professional angel investors--follow the old adage: 'Bet the jockey, not the horse.' A great entrepreneur--especially one backed by an outstanding team--can tweak, improve and refocus a business idea as needed, while a mediocre entrepreneur is likely to ruin the promise of a brilliant business concept. If I have to choose between a great business idea and a great entrepreneur, I'll take the entrepreneur every time."

So what about you? Do you have all the qualities a successful angel looks for in an entrepreneur?

There's no need to guess. Although in the book, David describes certain behaviors of great entrepreneurs, he also lists a number of warning signs.

See if any of these apply to you:

  • Perceived lack of integrity
  • Unrealistic assessment of market size
  • Unrealistic assessment of competitive offerings
  • Unrealistic assessment of competitive advantages
  • Unrealistic assessment of execution challenges
  • Unrealistic assessment of execution costs
  • Unrealistic assessment of timing
  • Unrealistic financial projections
  • Unrealistic valuation expectations
  • Unrealistic declarative statements
  • Unrealistic fundamental business idea
  • Lack of execution track record
  • Lack of domain expertise
  • Lack of technical expertise
  • Lack of long-term vision
  • Lack of historical knowledge of the market space
  • Lack of perceived leadership capability
  • Lack of perceived communication skills
  • Lack of necessary operational skills on the management team
  • Lack of perceived ability to grow with the company
  • Lack of perceived willingness to accept advice or mentorship
  • Lack of carefully considered go-to-market strategy

Of course, you might say, "Wait. I don't plan to seek investors. So an inability to communicate effectively with potential investors is a nonissue."  Of course, you'd also be wrong; although communicating with investors may not be important, communicating with everyone else--employees, customers, vendors, etc.--is definitely important. Any entrepreneur who lacks solid communication skills is working at a huge disadvantage.

The same is true for all the other items on David's list of warning signs. If you can't lead, then your employees can't follow. If you can't grow with your business, then your business can't grow. If you can't identify and leverage your real (not imagined) competitive advantages, then you can't compete.

And although you think you may never be an angel investor, you already are, because you've invested in your business.

Viewing entrepreneurship and your business from a different perspective--especially an experienced perspective--is incredibly valuable, because it can help you identify weaknesses you must overcome...and just as important, strengths you can leverage.

The Art of Evangelism

By Guy Kawasaki

A long time ago I was a revolutionary at Apple. My job title was “software evangelist.” My responsibility was to evangelize Macintosh to software developers. Later my title was “chief evangelist,” and my responsibility was to evangelize Macintosh to anyone who wanted to increase productivity and creativity.

The Art of Evangelism

Post Apple, I’ve been many things: author, speaker, entrepreneur, venture capitalist, advisor, and father, but I’ve never used the title “chief evangelist” until today. This is because the title only works if your product can change the world—or at least a significant part of it.

Macintosh changed the world. It democratized computers. Google changed the world. It democratized information. eBay changed the world. It democratized commerce. After  two decades of looking, I found Canva. It can change the world by democratizing design, and that’s why I’m now chief evangelist of Canva.

Company vs Meaning

We’re big believers in “content marketing” at Canva. It means providing information that’s valuable to our readers and customers. We define “valuable” as something that you can make your life better as opposed to increasing our sales or profits. In this spirit, I’d like to explain how to evangelize a product or service.

1. Make it great.

It’s very hard to evangelize crap. It’s much easier to evangelize great stuff. I learned that the starting point of evangelism is a great product or service. Great stuff embodies five qualities:

  • Deep. This means your product or service has lots of features because you’ve anticipated what people need as they come up the power curve.
  • Intelligent. When people use your product or service, they see that someone smart understood their problem or pain.
  • Complete. A complete product is surrounded with everything you need. For example, great software is not just the downloadable file. It’s also the documentation, support, and string of enhancements.
  • Empowering. A product or service empowers people because it makes them better. Great stuff doesn’t fight you—it becomes one with you.
  • Elegant. This means that your product or service is not just functional, it’s also well-designed so that people could use it easily and quickly.

2. Position it as a “cause.”

A product or service, no matter how great, is a collection of parts or snippets of code. A “cause,” by contrast, changes lives. It’s not enough to make a great product or service—you also need to position it and explain it as a way to improve lives. Steve Jobs didn’t position an iPhone as $188 worth of parts. Evangelists need to seize the moral high ground and transcend the exchange of money for goods and services. 

3. Love the cause.

“Evangelist” isn’t a job title. It’s a way of life. It means that evangelists must love what they evangelize. No matter how great the person, if he doesn’t love the cause, he cannot be a good evangelist for it. If you don’t love it, don’t evangelize it. This has hiring implications too: a good education and relevant work experience are not sufficient. It’s just as important that an evangelist loves the product or service.


Evangelist Isn't a Job Title

4. Localize the pitch.

Don’t describe your product using lofty, flowery terms like “revolutionary,” “paradigm shifting,” and “curve jumping.” Macintosh wasn’t “the third paradigm in personal computing.” It simply (and powerfully) increased the productivity and creativity of one person with one computer. People don’t buy “revolutions.” They buy “aspirins” to fix the pain or “vitamins” to supplement their lives, so localize the pitch and keep it simple.

 

5. Look for agnostics, ignore atheists.

It is very hard to convert someone to a new religion when he worships another god. The hardest person to convert to Macintosh was someone who worshipped MS-DOS. The easiest person was someone who never used a personal computer before. If a person doesn’t “get” your product or service after fifteen minutes, cut your losses and move on.

 

6. Let people test drive the cause.

Evangelists believe that their potential customers are smart. Therefore, they don’t bludgeon them with ads and promotions. Instead they provide ways for people to “test drive” their products and then decide for themselves. Evangelists believe that their products are good—so good that they’re not afraid of enabling people to try before they buy.

7. Learn to give a demo.

“Evangelist who cannot give a great demo” is an oxymoron. If you can’t give a great demo of your product or service, you cannot be an evangelist for it. Demoing should be as second nature, even involuntary, as breathing. This is what made Steve Jobs the world’s greatest evangelist for Apple’s products.

Learn to Give a Demo

 

8. Provide a safe, easy first step.

The path to adopting a cause should have a slippery slope, so remove all the barriers. Examples: 1) revamping an entire IT infrastructure shouldn’t be necessary to try a new computer; chaining yourself to a tree shouldn’t be necessary to join an environmental group; and 3) speaking a foreign language and owning a special keyboard shouldn’t be necessary to register for a website.

9. Ignore titles and pedigrees.

Elitism is the enemy of evangelism. If you want to succeed as an evangelist, ignore people’s titles and pedigrees, accept people as they are, and treat everyone with respect and kindness. My experience is that a secretary, administrative aide, intern, part-timer, or trainee is more likely to embrace new products and services than a CXO or vice-president.

10. Never lie.

Lying is morally and ethically wrong. It also takes more energy because when you lie, it’s necessary to keep track of what you said. If you always tell the truth, then there’s nothing to keep track of. Evangelists evangelize great stuff, so they don’t have to lie about features and benefits, and evangelists know their stuff, so they never have to lie to cover their ignorance.

11. Remember your friends.

Be nice to people on the way up because you’ll see them again on the way down. One of the most likely people to buy a Macintosh was an Apple II owner. One of the most likely people to buy an iPod was a Macintosh owner. One of the most likely people to buy whatever Apple puts out next is an iPhone owner. And so it goes, so remember your friends.

Be Nice to People on the Way Up

12. Conclusion

People often ask me what the difference is between evangelist and salesperson. Here’s the answer. A salesperson has his or her own best interests at heart: commission, making quota, closing the deal. An evangelist has the other person’s best interests at heart: “Try this because it will help you.” Keep this difference in mind, and you’ll be on the right track.

Wisdoms from the HOW Design Live Conference

I had the opportunity to attend the HOW Design Live Conference in Boston last week and must say that it was beyond anything I had expected. The quality of speakers, workshops and the genuine interactions that happened were unbelievable and it was truly a blessing to be able to attend.

The following are some key highlights from various speakers from the conference. Let these words inspire you to create something amazing and be different!

On finding success over failure:

Stanley Hainsworth said, "The most success I had in my career was when I took on things that I was not asked to do." 

Maria Popova said: "No specific routine guarantees success, just show up, day in and day out to achieve success." 

Christine Mau said: "Playing to not lose is not the same as playing to win. As a designer, play to win." 

On what the role of designers is today:

Malcolm Gladwell said: "Designers introduce balance into the way we see things by providing a new perspective." 

Dan Pink said: "Access to information has been replaced by curating information. Data is cheap; Value is in designing for focus and knowledge." 

Of course: Bob Gill said: "Go to the Dry Cleaners!" in other words get out from behind your computers and experience the products and services you are designing for. The answer is not in your head or your computer screen. 

Certainly the theme of making things was a big one. I do not have an example of this but lots of speakers touched on why you need to turn your inspiration into stuff and be creating frequently. 

On learning:

Dana Tanamachi Williams said: "It is what you learn after you already know it all – that really counts." 

And finally, Seth Godin said: "Design thrives when a human being wants to create work that, at its core, touches another."

Why You Should Always Make The First Offer In A Negotiation

Contrary to the commonly held wisdom, people who make the opening offer in a negotiation have the upper hand.

The advantage is owed to something psychologists call the anchoring principle. It's a cognitive bias where people rely too much on the first piece of information they have.

In a salary negotiation, for example, whoever makes the first offer establishes the range of possible variation from that anchor. If you start high, the hiring manager may adjust the figure down slightly. But that's typically a stronger position than starting low and trying to negotiate up.

"Most people come with the very strong belief they should never make an opening offer," says Northwestern University management professor Leigh Thompson. "Our research and lots of corroborating research shows that's completely backwards. The guy or gal who makes a first offer is better off." 

Marketers use the anchoring principle to trick you into thinking something is cheaper than it actually is. A "discount" tag that still shows the original price on a pair of pants is a prime example, since you tend to focus on the deal you're getting rather than the price you're paying.

In a negotiation, you can use that bias to your advantage. "Whoever makes the first offer essentially drops an anchor on the table," Thompson says. "I might say that your opening offer is ridiculous, but nevertheless, unconsciously, I've been anchored." 

What's more, the opening offer helps orient the other person's perception of the value of what's being negotiated for. An aggressive opening offer makes people consider the positive qualities of an object, since it forces them to decide whether it's worth the cost, says Columbia Business School professor Adam Galinsky. On the other hand, a low opening offer makes people stingily consider what might go wrong, since lower prices are associated with negative qualities. 

"My own research suggests that first offers should be quite aggressive but not absurdly so," Galinsky says. "Many negotiators fear that an aggressive first offer will scare or annoy the other side and perhaps even cause him to walk away in disgust. However, research shows that this fear is typically exaggerated. In fact, most negotiators make first offers that are not aggressive enough." 

To start with a high but not overly aggressive offer, you could just introduce a number--rather than explicitly ask for it. 

Harvard Law School's Program on Negotiation details why:  

"The most effective anchors further reduce risk because, rather than placing firm offers on the table, they merely introduce relevant numbers. A job applicant may state his belief that people with his qualifications tend to be paid between $85,000 and $95,000 annually, or he might mention that a former colleague just received an offer of $92,000. This assertion is not an offer; it’s an anchor that affects the other side’s perceptions of the zone of possible agreement."

The next time you enter a negotiation, don't play coy. Put your offer on the table first.


By Drake Baer

VCs Catch Wave To Silicon Beach

Silicon Valley dives into local investment boom.

Rounding Into Shape Co-founders Zach James and Rich Raddon at Zefrs office in Venice in a January 2013 photo
Rounding Into Shape: Co-founders Zach James and Rich Raddon at Zefr’s office in Venice in a January 2013 photo. Photo by Ringo Chiu.

By OMAR SHAMOUT Monday, May 19, 2014

When online consumer rewards site Swagbucks last week took its first outside investment, a $60 million infusion from Palo Alto’s Technology Crossover Ventures, it was the latest indication that L.A.’s booming tech industry is coming of age.

Not only has the amount of money pouring into local tech firms surpassed sums raised at the same point last year, Silicon Beach is getting far more attention from the top tier of Silicon Valley’s venture capital community.

L.A. information tech companies have raised more than $620 million in roughly 50 deals thus far this year, according to data collected by SoCalTech.com. That’s 78 percent more than the amount raised at the same point last year. And it’s more than any other comparable period since Silicon Beach was more or less established in 2009.

Exits are healthier, too.

Sixteen local tech companies have been acquired or gone public this year, reaping more than $1.7 billion. That number could spike much more if Apple Inc.’s rumored $3.2 billion purchase of Santa Monica’s Beats Electronics goes through. The deal flow does not include some private transaction for which terms were not disclosed.

The activity, particularly the influx of cash from Menlo Park, signals a change from a few years ago, when top Silicon Valley venture capitalists pigeonholed L.A.’s tech founders as entrepreneurs who didn’t think big enough, said Dan Chen, managing director at Siemer & Associates in Santa Monica, a boutique merchant bank serving the tech community.

Venture firms in Silicon Valley expect companies they invest in to make billion-dollar exits, Chen said, and their interest in investing in the L.A. market reflects a growing confidence that their goals can be achieved here.

The momentum started last year, when Silicon Beach companies Snapchat, JustFab, Honest Co. and OpenX had funding rounds led by Bay Area VCs. It has continued this year as anonymous messaging app Whisper and enterprise messaging app developer TigerText raised $30 million and $21 million, respectively, mostly from Silicon Valley investors. In addition, Zefr, co-founded by Zach James and Richard Raddon in 2009, netted $30 million in a February Series D round from four Bay Area firms: Institutional Venture Partners, US Venture Partners, First Round Capital and Shasta Ventures. A London firm, Richmond Park Partners, also joined.

Proving ground

The activity is a reflection of the increasing credibility and viability of businesses being built in the region, said Rod Werner, managing director of City National Bank’s tech and venture capital banking group in Palo Alto.

“You’re definitely seeing the top firms come in,” Werner said. “People who were skeptical of that market in the past are saying, ‘Let me look a little closer.’ ”

Those bets are being confirmed, in part, by the size and number of exits that have been seen this year.

By this time last year, just six companies had been sold, with DreamWorks Animation’s $117 million purchase of another multichannel network, L.A.’s AwesomenessTV, the only one in which terms were disclosed.

Nearly three times as many deals have been struck this year, with Walt Disney Co.’s March purchase of Maker Studios leading the pack. The Culver City YouTube multichannel network could bring in $950 million from the deal if all benchmarks are met.

SoCalTech.com editor Benjamin Kuo said the region should be encouraged by recent trends.

“I think the number and size of the exits speaks very positively to Southern California’s ability to continue to produce very valuable startup companies,” Kuo said in an email.

Werner noted that tech companies with revenue models built around content are garnering particular interest, owing to L.A.’s deep-rooted knowledge base in all things entertainment.

These businesses, such as multichannel networks, or MCNs, offer large media companies access to a whole new consumer base.

And buyers are certainly not in it for the YouTube ad dollars.

“If they can drive more unique users to their site,” Werner said of the studios’ desire to move eyeballs away from YouTube, “then they can generate revenue from them.”

After the Maker deal, rumors were swirling that rival multichannel network Fullscreen, which received $30 million in Series A funding last year from Chernin Group and Comcast Ventures, among others, is also on the market and looking for a Maker-size payday. Recent reports have named Time Warner, Yahoo and Relativity Media as suitors for the Culver City company.

Also in March, West Hollywood’s Machinima raised $18 million from a group of investors including Warner Bros. Entertainment and Google. Not to be outdone, Culver City’s Collective Digital Studio raised an eight-figure round from German media conglomerate ProSiebenSat.1, reportedly in exchange for 20 percent of the company.

Chen said this spate of deals has also had a ripple effect on smaller YouTube networks that produce content for a narrower audience base.

“Newer emerging MCNs focused on niche content verticals have all seen an increase in investor interest and activity” over the past few months, he said.

Though it garners a lot of local attention, entertainment tech isn’t the only sector generating buzz and attracting investment.

Swagbucks Chief Executive Chuck Davis said the company’s funding round, the first in its six-year history, signals investor confidence in L.A.’s growing e-commerce sector, as well as the larger tech market.

“We see this as a great year for L.A. tech investment, and the round we’ve just taken from TCV is a great step in that growth,” said Davis, who previously served as chief executive at Fandango and Shopzilla, both located in Los Angeles. “It’s exciting to see how this market is maturing rapidly and attracting more investor interest from all areas.”

Note of caution

If anything’s putting a damper on the enthusiasm, it is concern that the market for tech IPOs might be pulling back.

After peaking above $20 a share in the weeks after its $450 million IPO, Playa Vista’s Rubicon Project has settled in below its offering price of $17.50.

Werner said inflated valuations coupled with the rocky performance of tech stocks over the past few weeks is causing companies to hold off on public offerings.

“We are seeing companies rethink their IPO exits this year,” he said, noting the recent decision of Los Altos cloud storage firm Box to delay its IPO as evidence of a trend that stretches to Southern California.

Among those in the wings is Santa Monica auto shopping website TrueCar Inc., which registered its $125 million initial public offering with the Securities and Exchange Commission in April. It has not indicated any delay in its plan.

Chen explained that many tech companies are opting to stay private much longer than in the past.

“When they go public the frank reality is that a lot of the value creation in the business has already been done” during investment rounds, he said.

Another recent phenomenon is a decision by traditional asset management firms such as Fidelity, T. Rowe Price and BlackRock to invest in tech startups – Pinterest, Box and Dropbox are examples – before they go public, though he noted such investments represent a tiny fraction of the assets they manage.

New York hedge fund Coatue Management, which typically invests in public equity markets, was an investor in Snapchat’s Series C financing round in December, which valued the company at $2 billion, according to New York research firm CB Insights.

“The last time I saw this kind of activity happen was back in 2007,” Chen said. “It indicates to me that IPO investors are having to secure a position in interesting eventual IPOs early by investing in these companies while still private, and they may be doing this to seek a higher overall return from the investment beyond what the IPO alone could generate for them.”

Because late-stage companies are garnering such high valuations, Werner said many venture firms are starting to get in early before they’re priced out of the market. For that reason, seed funding probably won’t dry up anytime soon.

“We’re seeing a lot of investors come in earlier now,” he said. “The health of the community is the startups.”


-- 

Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink

3 Competitors Every Entrepreneur Needs to Beat

By Jay Samit

Too many entrepreneurs view their competition with a Coke versus Pepsi mindset. Competition is rarely as simple as slightly differentiated products. Beating the other guy isn’t what makes a great company or what makes it profitable. Instagram, Swiffer and Nest had to compete with consumer habits and perceptions. 

Breakout products face competition from the formidable inertia powering the status quo. Success therefore comes from taking on the three real competitors every innovator must beat: the way it was done, the way it should be done, and the best way to get it done.

As great as you believe your new product or company is, the world got along just fine without you. The greatest competition every startup faces is convincing consumers that there is a better solution to the problems that vex them. Inefficiency and habit are your first real competitors. Microsoft’s Steve Ballmer laughed at the iPhone because he couldn’t envision people using a mobile device differently. People shared large files before Dropbox. Dropbox just made it so much easier that new users were not only willing to change their habits; they encouraged others to share files the same way. To beat the way it was done, your solution needs to be an improvement over the past. 

The hardest competitor to take head on is the way it should be done. Many startups run out of cash striving to create the perfect product. You and your team spend months covering your white board with every conceivable feature and functionality your product should possess. Your vision of perfection will send your companies crashing on shores long before you have a large enough user base to keep the enterprise afloat. 

When it comes to coding: don’t get it right, get it written. The good is no longer the enemy of the great when we live in an ever changing world were new products and technologies are released daily. Get your product into users’ hands as quickly as possible and incorporate the crowd’s feedback to iterate. Your customers will provide the data you need to chart the best course for your company and bury any competitor that goes it alone.

Every product you have ever loved was a compromise from the ideal vision of its creators to the realities of shipping on time, on budget, and on price point. Anyone who has ever manufactured a physical product that had to be on the shelves for Christmas shopping knows how painful these choices can be. Every entrepreneur builds their business with limited resources, but competes with unlimited passion. Sometimes innovators just need to build something that solves one universal problem perfectly. 

Snapchat didn’t have millions in the bank when it started. Snapchat solved the problem of teens finding unwanted photos publically posted on social media. Now the company has the usage patterns and data of 700 million photos and videos per day and I am sure the founder is still working to add more features and functionality from his white board.The hardest competitor to take head on is the way it should be done. Many startups run out of cash striving to create the perfect product. You and your team spend months covering your white board with every conceivable feature and functionality your product should possess. 

Your vision of perfection will send your companies crashing on shores long before you have a large enough user base to keep the enterprise afloat. When it comes to coding: don’t get it right, get it written. The good is no longer the enemy of the great when we live in an ever changing world were new products and technologies are released daily. Get your product into users’ hands as quickly as possible and incorporate the crowd’s feedback to iterate. Your customers will provide the data you need to chart the best course for your company and bury any competitor that goes it alone.

Don’t focus on the other businesses in your market. At the end of the day, your toughest competitor will always be the face you see in the mirror every day.

Congrats to our El Segundo neighbors - Swagbucks locks in $60 million in its 1st external raise!

I had the privilege of seeing Chuck and Josef present at Oasis Summit earlier this spring. They certainly had some exciting news just around the corner... Congrats to this great Los Angeles company and inspiring team!

El Segundo-based coupon site Swagbucks secures $60 million in venture capital

By Jordan England-Nelson, Long Beach Press-Telegram

POSTED: 05/13/14, 5:55 AM PDT |

A South Bay tech company has raised $60 million in its first round of external funding from Technology Crossover Ventures, a late-stage venture capital firm that has backed such heavy hitters as Facebook, Netflix and Spotify.

Swagbucks.com, whose parent company Prodege LLC is headquartered in El Segundo, offers gift cards to Wal-Mart, Nordstrom, Amazon.com and about 300 other e-commerce companies in exchange for interacting on its site. Users earn points — or “swag bucks” — when they shop, search the Web, play games or take quizzes. The company then uses the data collected to run targeted ads and drive traffic to its affiliates.

“Rewards are not just an aside, they become an emotional part of the experience,” Swagbucks President Josef Gorowitz said by phone Monday. “The consumer is constantly collecting points and having fun doing so as well.”

Swagbucks, which bills itself as the “leading rewards discovery community” and top provider of free gift cards, announced its new funding today in a press release.

The company also announced that Prodege Executive Chairman Chuck Davis will become Swagbucks’ new CEO, a role previously held by Gorowitz.

Davis’ resume includes running the discount shopping site Shopzilla and, more recently, the online movie ticket site Fandango. Davis also is a partner at Technology Crossover Ventures.

The announcement of Swagbucks’ venture funding comes amid what seems to be a boon in the online rewards and coupon sector. RetailMeNot Inc. had its initial public offering in 2013. Pre-IPO shares of Coupons.com Inc. jumped 90 percent after it went public in March. And Ebates Shopping.com Inc. is reportedly planning its IPO for later this year.

However, the real value of these rewards sites, which purportedly create value by driving traffic to affiliate partners, may be overblown.

“One of the biggest problems in e-commerce is attribution,” said Brooke Partelow, co-founder of Bounce Exchange, a conversion rate optimization company that tracks website-user engagement. “They may be taking credit and getting paid a commission for a sale that the site was going to have anyway.”

Reward platform sites like Swagbucks say they drive new customers to vendor sites, but those customers may have planned to buy from those vendors regardless. A person might search for a Hugo Boss suit on Google, find the one they want at Nordstrom.com, and then search for a coupon code.

“Vendors have a very hard time determining who gets credit for helping them sell more,” Partelow said.

Swagbucks’ $60 million deal is a coup for the tech scene in Southern California, where large scale venture capital is harder to come by than in Silicon Valley.

There’s been a lot of investment in Silicon Beach companies in West L.A. recently, but the funding tends to hover between $500,000 and $2 million, according to Matt Crowley, president of the Los Angeles Venture Association.

“When you reach out to VCs, you run into a really hard ceiling,” Crowley said. “Anytime someone raises that much money, it’s darn impressive.”

Venture capital firms invested $9.5 billion in the United States during the first quarter of 2014, according to the PricewaterhouseCoopers Money Tree Survey. About half of that was spent in Silicon Valley. Only 5.5 percent, or $520 million, was spent in the Los Angeles-Orange County area.

According to an interactive map on socaltech.com, a news site that keeps tabs on the industry, there are about 650 technology companies in Silicon Beach, the area stretches along the coast from Santa Monica south to Playa del Rey and east to Playa Vista. There are about 300 tech-related firms in the South Bay, according to the map.


_________

Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink

The M&A train continues to roll through the LA tech scene

Intuit acquires Lettuce Apps for $30 million, plans to integrate the product with Quickbooks online

Michael Carney_PandoDaily

BY MICHAEL CARNEY 
ON MAY 8, 2014

Lettuce_LettuceOffices_388

The M&A train continues to roll through the LA tech scene, this time turning an eye to the burgeoning SaaS ecosystem. Pando has learned that Intuit has acquired design-focused SMB order management platform Lettuce Apps. The all-cash deal came in at $30 million, according to sources close to the transaction, with additional stock-based retention bonuses paid to the startup’s employees. The deal will likely be announced later today.

This is the second such LA-based small business tool that Intuit has snatched up, following the company’s sub-$50 million acquisition of DocStoc in December. Collectively, these deals paint a picture of a company looking to become the go-to resource for small businesses that don’t have large IT departments, software budgets, or consulting firms on retainer.

Lettuce will be integrated into Intuit’s own SaaS-based Quickbooks online, offering small business customers another reason to transition from the company’s legacy desktop software offering to its future-minded cloud platform. For Intuit, that means recurring revenue, rather than a one-time purchase and long upgrade cycles.

The three-year-old startup wasn’t looking for an exit, Lettuce founder and CEO Raad Mobrem tells me. Rather, with over 30 percent month-over-month growth since late last year, the company was in the process of raising a Series B round of funding. Intuit, who was already a partner based on the companies’ Intuit App Center relationship, expressed interest in investing. The terms, and the integration opportunities apparently proved too attractive for either company to pass up, and this investment turned into an acquisition. Mobrem, however, declined to confirm the transaction terms.

Make no mistake about it, startup ecosystems and elite venture funds are not built on $30 million exits, but for a company that had raised just $3.3 million – from investors including Crosscut Ventures, Baroda Ventures, Double M Partners, 500 Startups, Zelkova Ventures, Telegraph Hill Capital, and Launchpad LA – this marks a healthy return for all involved.

Just as importantly for Mobrem, the product he spent almost half a decade building will live on, and his team will stick together, working out of the company’s same airy beachfront Venice beach office.

And with happy investors and a win under his belt, it’s a good bet we’ll see Mobrem back at the starting line in a few years. There are far worse outcomes.


-- 

Melissa Welch

Director of Client Development

Growthink

melissa.welch@growthink.com

(310) 846-5015


Follow me on Twitter: http://twitter.com/MelissaAWelch

Join my network on LinkedIn: http://www.linkedin.com/in/melissaawelch

Become a Growthink Fan on Facebook: http://www.facebook.com/growthink