Wednesday, February 29, 2012

How to Break into VC

Here are a few great articles for others who are interested in trying to start on a career path toward venture capital:

A lot of the same points seem to come up over and over again in articles, such as the ones above including:
-          Build a strong network early on in order to potentially introduce VCs to new entrepreneurs and generate deal flow
-          Work for a startup – the learning experience can be extremely helpful to understand the challenges that entrepreneurs face and learn more about the fundraising options available to them
-          Really focus on a specific area that you can learn to become an expert on and develop an opinion on it that you can share during interviews

Saturday, February 25, 2012

Recruit More Female Board Members

One of the VCs that I really respect, Aileen Lee, a partner at Kleiner Perkins, had tweeted/wrote about why more companies should recruit female board members – if you haven’t read the full article yet, you can find it here.

One of her main points is corporate boards need the female perspective because women are the majority of customers for several companies and often control family’s spending decisions.

The one statistic that most people might not realize, but isn’t all that surprising once you think about it, is that company’s who are more diversified based on gender have 36% better stock price growth and 46% better return on equity. Therefore, there seems to be a real difference in financial performance as well when companies are open to diverse perspectives.

Thursday, February 23, 2012

Growth in Chicago Startup Scene

Here’s a great infographic that shows the dramatic increase in the Chicago startup scene over the last two years. I moved to Chicago in July 2011 and I could see the dramatic momentum and growth that was building up in this community. Before I moved here, Technori Pitches hadn’t started yet – and now they sell out the full 500 seat Chase Auditorium. Healthbox, the second healthcare-focused startup accelerator, was just launching and I had the opportunity to attend the first few events. Other new developments in the startup community include 1871, the startup co-working space, and the FireStarter Fund, the newest angel investing group in Chicago. It’s clear that the rest of the country is also realizing the growth in startups here in Chicago, since Brad Feld, founder of Foundry Group and TechStars, recently mentioned it in his blog as well. It's a very exciting time to live in Chicago and watch this community continue to grow!

Sunday, February 12, 2012

What makes a great angel investor?

There was a great blog post that recently listed the five key traits of angel investors. Here is a summary of the characteristics mentioned in the post:
1. Relevant experience and knowledge in the industry of the startup
2. Large network with relevant connections
3. Willingness to learn as much as you are willing to teach
4. Ability to provide time and empathy during tough times
5. Long-range thinking

I would argue that these are important skills that are relevant for just about any profession and they are also skills that I'm always continuing to build on. The first two traits come with additional experience in the field and take longer to develop, but the last three traits are ones that people can start on right away. The fourth trait is probably one that females have an inherent advantage, since empathy is often a trait that comes more easily to women (and one can argue that aggressiveness and risk-taking come more easily to men, which are other skills that can be helpful to investors).

Another great female angel network that I came across is the Women's Capital Connection.  The network was launched three years ago with 32 investors, who commited to investing in women-led ventures. The group started out in Kansas City and has invested over $1mm in five female-led ventures. They've also expanded to nine other similar groups and locations across the U.S. These amazing women of WCC are helping shape the future of angel investing, while sharpening their own financial and investment skills, mentoring other females, creating wealth and jobs for local communities and investing in women's futures and ideas. That's a very inspiring goal for us to strive for! 

Thursday, February 9, 2012

Entrepreneur’s Clinics

I recently discovered a new organization called Startup Trebuchet, which is a great resource for entrepreneurs, since it provides mentoring and legal assistance to startups at little to no costs.  They recently started a series of discussions and classes called Entrepreneur’s Clinics, which typically take place in River North on Saturdays from 11am to 1pm. These are open sessions which are meant to be more of a discussion format and are limited to 10 or 20 participants. This past weekend, the topics were entity formation, establishing co-founder agreements and protecting intellectual property. I had a chance to sit in on the first part of the discussion and it provided a great review of some of the key considerations entrepreneurs need to take into account when starting a new business venture.

The main highlights of the discussion revolved around the fact the VC firms will require your startup to be a C corporation incorporated in Delaware, so if you know you will want to tap into VC funding within a two year period you should form your startup as a C corporation, but if you are planning to bootstrap the company and don’t think you will need outside funding, then many people might choose to form as an LLC for the tax benefits. Just be prepared that if you choose to form an LLC, VCs will ask you to convert the entity when you are getting prepared for fundraising rounds.

Another important consideration for VCs is the relationship between the founders of the startup. They will try to gain a good understanding of how stable the relationship is between the founders and often VCs will shy away from single founder entities because in the event that there is a distraction or illness in their life, the whole venture may stumble. That’s why when you are initially getting started with your business, it’s very important to have open discussions about who is contributing what to the venture and you may want to have exit mechanisms in place in case there is a disagreement between founders.

By the time you are ready to approach VCs, they will expect all your founders to be full-time employees so that they know you and your team are dedicating most of your time and energy to the venture. They may also look to supplement the talent of your founding team by suggesting additional people you will need to hire in order for them to consider investing in your startup (i.e. a technical co-founder or developers). It will be very important for the VCs to understand the ownership and control over the source code for your startup, so if one of the founders leave they want to make sure that the business won’t crumble.  

VCs will also look to set up a vesting structure for the founders in the term sheet of their investment. The reason the VCs will make you vest is so that they can tie you back to the company and make sure you continue to be dedicated to it. They will also want to check all your employment contracts and make sure you have vesting in place for your employees as well as “work for hire” clauses (the employer owns whatever the employee develops), non-disclosure and non-competes.
Keep a look out for the next Entrepreneur Clinic!

Monday, February 6, 2012

1871 Tour

The startup that I’m currently working with just applied for the new 1871 co-working space and on Saturday I had the opportunity to go on the Hard Hat Tour of the space. While it is still under construction and is expected to be completed sometime in Spring, it was great to help visualize the vision the CEC team has for the new space and for Chicago’s startup scene.

Some of the highlights of the new 1871 space will include reserved desks, conference rooms, classrooms, a coffee shop, shared working space, and additional space for startup accelerators to rotate through, and reserved rooms for universities and VC firms. They currently have 50,000 square feet in the Merchandise Mart with the option to expand another 50,000-75,000 square feet on the same floor, so if there is a ton of demand and if all goes well, they will choose to open up the additional space.

I think the biggest appeal to becoming a member of 1871 is to be connected with the tech community that they are creating. Not only are the spaces/membership options cheaper than the current options, but included in the membership will be several classes on coding and valuation as well as access to guest speakers and mentors. Everyone who is invited to become a member of 1871 is also expected to give back to the community in some way, whether it is teaching a class or mentoring other startups, so it will be a great way for the whole startup community to collaborate on the new ventures that are being established in Chicago.

Sunday, February 5, 2012

Technori Pitch – January 2012

Last Tuesday night I attended the January 2012 Technori pitch event where five new startups were pitching their companies and ideas to an auditorium packed with entrepreneurs, investors and tech enthusiasts. These pitch events are great networking opportunities to meet other people who share the same passion for entrepreneurship and new ventures. The five startups at last week’s event were:, Phaxio, Moosejaw, Leap Year Project, and Georama. The two startups that really caught my attention were and Leap Year Project. helps people find out the fair cost of legal work and they currently have a database of over 25,000 attorneys that list their fees. The unique aspect of the website is the ability to predict the price of any legal service in any location and the website also develops charts for you to see the distribution of attorney fees for your specific service and location. It seems to be a pretty well-funded startup, since they are ramping up with new hires and currently have over 20 million viewers a month, mostly through partnerships they have with other organizations and websites. There seem to be similar startups for the healthcare space in order to review different health services and procedures as well as doctors, but claims to be the major player in the legal industry. Although I’ve never had the need for any legal services and hopefully won’t need to use the website to find any attorneys in the near future, it seems like a very valuable service for customers who might be overwhelmed with finding a local lawyer at a reasonable cost.

The other unique idea this month was a new non-profit organization called Leap Year Project. The goal of the organization is to convince individuals to take a risk this year in order to change their life, their community or the world for the better and share their experiences with the rest of the Leap Year Project community in order to inspire others to do the same. I think taking on this goal would be very rewarding for any individual, but my only suggestion is that it really shouldn’t be limited to just this year. This should be a goal that people should always have in their lives even if it is with smaller projects to help improve their lives and help the people around them. I still think it’s a great idea and I’ll be sure to read and follow the founder’s own Leap Year Project over the next few months.

Saturday, February 4, 2012

New Angel Fund in Chicago

Just last week a new angel fund, FireStarter Fund, was launched in Chicago with members that include some of the big names in the Chicago tech scene including Excelerate Labs' Troy Henikoff, New World Ventures' J.B. Pritzker and CEC's Kevin Willer. There are more than 40 angel investors who have joined the group and each member will be contributing $100,000 or $200,000 to the fund, which will provide a good chunk of new seed stage funding for Chicago's startup scene.

The fund is structured a bit differently than the other major Chicago angel funds (Hyde Park Angels, Cornerstone Angels, and Heartland Angels) in that the majority of the members do not need to vote to fund the startup. In fact, as few as six members can say yes in order for the fund to invest a small amount in a new company. Each member also has the option to co-invest in the companies that pitch to the fund, so in the event that a member finds a startup they think is very promising they can invest more than the $200,000 they initially put into the fund. In the first four years of the fund (in total it will be a 10 year fund), the group expects to make 15 to 20 investments at $150,000 to $350,000 per investment, which is smaller investment amount than some of the other angel groups.

This new structure is especially appealing to startups, since many angel funds tend to be very bureaucratic and need majority vote in order to approve new investments. If everything goes well with this new angel fund, older angel groups may consider changing some of the rules they currently have in place to allow for this added flexibility.