Risk


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Sorry for the big gap in posts!

As a bunch of you probably know, James Holzhauer is on a streak to set the record for Jeopardy game show wins.  I just read that the show picks back up on May 20th with “live versions” (which are actually taped).   I do not watch Jeopardy at all.   But, the news stories have caught my eye so I have read a few of them.   The other day I came across a print interview that included this question:  Would you describe the traditional way of playing “Jeopardy!” as overly risk-averse?

Holzhauer’s answer: “I would definitely say it’s too risk-averse. The funny thing is, my strategy actually minimizes the risk of me losing a game. There’s times in a football game where a team goes for a big TD pass. If you don’t take a risk like that, you’re not Continue reading “Risk”

More on Independent Board Members


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Happy New Year everyone!  I hope you all have had a great holiday season.  Quick post just following up to my most recent post on independent board members.

a16z has a podcast series, and one of my CVF partners just sent me this podcast from them on independent board members.  Great quick 23 minutes.  Have a listen.

Tidbits of value from the a16z podcast:

  1.  Independent member are able to diffuse hidden agendas among investors.
  2.  Independent members are able to provide feedback to CEO by a trusted non-investor.
  3.  Makes the overall board dynamics way better as the relationship between the VCs and CEOs is just different than the relationship between the independent board members and the CEO.
  4.  The reality is that the VCs have to give up board control too once the independents arrive!
  5.  Entrepreneurs don’t like working for others and CEOs always have to work for Continue reading “More on Independent Board Members”

The Value of Outside/Independent Directors


This post is by Zach Shulman from ithaca VC


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Most startups as they mature get better and better people on their boards of directors.  In this context, “better and better” means people that can really help the company grow from a strategic and operational perspective.  Impartial, independent, outside directors.  They are independent from the founders, independent from the management team and independent from investors.   You can search “independent director” on Wikipedia if you like.  The definition is not a topic of controversy.  The terms “independent” and “outside” are used interchangeably.  And there is a ton of literature (from blog posts to books) about the value that good independent directors can and should bring to a startup.  Here is my take (and trust me, probably nothing I write here is new):

  1. Balance:  independent directors bring balance to a startup board.  Often there is inherent tension between professional investors (VCs) and Continue reading “The Value of Outside/Independent Directors”

DROOM and SOM


This post is by Zach Shulman from ithaca VC


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Entrepreneurship at Cornell (which I run with a great team) just held one of our big annual conferences called Summit.   Summit is in NYC.  The photo gallery and speaker videos will be posted in about 10 days to the Summit site.  We had some fabulous speakers and tried out “real time” audience Q&A with hand held microphones.  That actually worked out very well and the speakers seemed to truly enjoy the unscripted questions.  Summit is held at the Times Center in midtown Manhattan.   The venue auditorium holds 380 and we had over 520 registered.  Just like an airline!

One of my favorite speakers of the day was Barry Beck, the co-founder of Blue Mercury.  His Q&A was hilarious actually and he really opened up on some of his experiences.  Anyway, in his prepared remarks, he commented on the concept of DROOM. Continue reading “DROOM and SOM”

Government Support – Congrats to EkoStinger!


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




I am always very cautious when it comes to government grants and government supported competitions.  Apart from SBIR/STIR grants (which often literally are used to start companies based on university research), my general view is that startups should NOT overly rely on the government for anything.  As a strategy, it is just too risky and unpredictable.  Municipalities are tough customers, for example.  Often slow paying, bureaucratic, etc.  Likewise, state grant funding is sometimes extremely hard to collect or requires that a company spend first and then get reimbursed after the fact.  That can be tough for a startup!

Well, let’s leave those cautions behind!  EkoStinger (one of CVF’s portfolio companies and one on which I have been a board member of for over 5 years) just won NYSERDA’s 76W competition – first place!  One million dollars of non-dilutive funding!  Yes, there Continue reading “Government Support – Congrats to EkoStinger!”

Management Carve Out Plans


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




I have posted a few times on management carve out plans (back in February 2011 and November 2011; wow, time flies!!).

Our portfolio companies routinely adopt carve out plans when the founders/employees equity values are not likely to provide enough incentive to get a company to an exit.  This typically results when the company has raised a lot of money and the preferred stock liquidation preference would absorb an out sized portion of the exit proceeds.  It can also result from straight forward dilution.   Regardless, I am a big fan of carve out plans.  There is just no way to get a good exit without a motivated management team and employee base.

Some great carve out plan materials were recently shared with me so I thought best to “memorialize” them in a blog post.  Law firms often make startup “legal issues” materials available Continue reading “Management Carve Out Plans”

Its all about the relationships…..


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Howard Morgan (co-founder of First Round Capital and currently chairman of B Capital) spoke at Cornell this past Wednesday.  Howard received his PhD from Cornell in operations research in 1968 (I was 3 years old!).  He has a wonderful experience set (see this Cornell article).

I have seen Howard speak a bunch of times, and I enjoyed this recent one the best.  He gave some really interesting data driven insights on VC and startups, like that timing is the #1 factor in startup company success, with team being the #2 factor.  So…..the element of luck is huge as timing is often a factor of luck.  I have seen many companies that have almost failed, then struggled to survive for a few years and then hit it out of the park as the market ultimately caught up to the company’s product offering. Continue reading “Its all about the relationships…..”

Small Investors


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




It is highly typical for a startup to have small investors on its cap table.  Founders often raise money from friends and family and other angels.  That is all well and good….and 100% normal.  Without friends and family and angels there would not be many companies for VCs to look at!

The treatment of the friends, family and angels (FFA) as the startup matures and raises larger rounds of financing over time is interesting.  And sometimes founders want to protect the financial interests of FFAs.  This is completely understandable but not always possible.  Here is a quick guide.

  1.  If FFAs only invest at the beginning and do not make any follow on investments as the company raises more $$ then the only real way FFAs make money when the company is ultimately sold is if the company keeps raising future rounds at higher Continue reading “Small Investors”

Top Schools for Female Entrepreneurs


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Hope you are staying warm!

CollegeMagazine just ranked Cornell #10 in group of “top schools for female entrepreneurs.”  See https://www.collegemagazine.com/top-10-schools-female-entrepreneurs/.

What is most interesting is that Cornell is the only Ivy in the group….and that the group does not include Stanford or Berkeley….and that 3 of the schools in the list are very small colleges (Babson #1, Mt. Holyoke #6 and Smith #2).

I am not sure of the criteria for the ranking, but like the result non-the-less.

Enjoy your weekend.

Startup Resource Book


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Happy Thanksgiving!!  Or as I like to say “GobbleGobble!!”.

A friend of mine just sent me this “all in one” resource published by the NYSE called “The Entrepreneur’s Roadmap – From Concept to IPO”.    I first saw that it was 321 pages and thought to myself that it would be indigestible to most entrepreneurs.  But then I saw how it is was organized and who wrote the various sections.  Very digestible!

So here is it.  Great reading and resource for any entrepreneur.

 

Dilution and Investors and Tension


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




I am going to try to address a complex problem in a concise way.

Here is the big problem with investors – they dilute the founders’ ownership in the company.  Is this actually a big problem?  Well, that answer depends on your point of view.

Let’s cover some basics:

  1.  It is impossible to issue stock to investors without existing shareholders (founders, employees and prior investors) being diluted.
  2.  It is impossible to do a stock for stock business combination without existing shareholders being diluted.  But now the diluted shareholders own a smaller piece of a larger pie hopefully.
  3.  If you have issues with dilution then raising outside investment will give you heartburn every time.  That is not a good situation to endure.

Given the basics, here is one key subjective data point that I always like to keep in mind:  what exit value is going to make

Continue reading “Dilution and Investors and Tension”

VC Backed Alumni Ranking


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Each year Pitchbook runs an analysis of which universities/colleges have the most VC backed alumni.  In theory, this should be a measure of the entrepreneurship heft of the given school.  Here is their just published report.  Highlights:

  1. Methodology:  Pitchbook tracked founders of companies that received a first round of venture funding between January 1, 2006 and August 18, 2017.  Large data base.
  2. Page 4:  Cornell ranks 6th for undergraduate programs for the number of VC backed entrepreneurs.
  3. Page 7:  Cornell ranks 6th for dollar volume of VC dollars raised.
  4. Page 9:  Cornell ranks 5th for female founders.
  5. Page 10:  Cornell ranks 14th for MBA programs.
  6. Page 11:  Cornell ranks 3rd for undergraduate founder unicorns (companies with over $1 billion in valuation)

Good reading.  Enjoy!

Upstate NY’s Strongest Economy


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




A Buffalo-based business publication just published an article called “Which parts of Upstate New York have the strongest economies? (And which are trailing the pack?)”.  Here is a PDF of the article:  Upstate NY Strongest Economies.

I am obviously delighted with Ithaca’s ranking and proud to be part of this great and growing ecosystem.  Things are hustling and bustling here and startups are leading the way!

Woohoo!

Accelerate or Not Accelerate….That is the Question


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Personally, I am a fan of accelerator programs.  There is a healthy debate on this topic, but I think that being intensely pushed by good mentors for 3 months or so can only improve the chances of success!

This morning I came across an interesting accelerator ranking.  A group of professors (from strong programs) created something called the Seed Accelerator Rankings Project. The lead is Yael Hochberg, who used to be at Cornell and is now at Rice.  Definitely research and stats oriented and produced.  You might enjoy taking a look, particularly as the presentation is very nonacademic!

I read about the project in Term Sheet, which is a great daily on VC.  You can subscribe here.

How to Start a Startup at Cornell


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Cornell MBA student Mike Annunziata recently published a great article on starting a company at Cornell from the perspective of a student.  Mike has in fact started a company called Natural Cuts https://www.natural-cuts.com/, and no, it is not a hair cutting salon!

Mike hits the steps (getting started, course work, getting involved with entrepreneurship, taking ideas to market, and getting funded) and identifies which Cornell resources might be useful.

Here is Mike’s full article.

Hope you have a great weekend.

The Importance of Boards


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




I have written quite a few posts on the topic of Boards of Directors.  Just put in “board of directors” into the search bar.  As a quick review, it is the Board of Directors or “Board” that literally by law makes all critical decisions for the company.  The Board has to vote on issuing stock, approving the annual budget, setting the company’s strategy, changing the company’s by-laws and certificate of incorporation, selling the company, merging with another company, hiring officers like the CEO, shutting the company down, etc.  The list goes on and on.  Good corporate governance is critical at startups and other companies alike!

The importance of the Board is why institutional investors (like VCs) often get a seat on the Board after an investment.  The Board discusses and agrees on strategy.  Discussion is critical.  But don’t be fooled, there is an element of control as investors want a

Continue reading “The Importance of Boards”

Answering the question “What do I need to know about investing in a startup?”


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




Once in a while I get the question “What do I need to know about investing in a startup?”   The context is typically where Friend A has asked Friend B to invest in Friend A’s startup business.  Then Friend B asks me the question.  This happens multiple times a year.

It is a fair question.  And one that is hard to answer definitively.  But, here are some basic things that I would recommend to Friend B to start with:

  1.  How much is Friend A looking to raise in total?  Let’s pretend the target raise is $750,000.
  2.  Is there a minimum amount needed to “close” the round of financing.  This is a critical question.  If Friend B wants to invest $25,000, then there better be some larger minimum amount going into to the company at the first closing.  If Friend A took $25,000 from Friend B and nothing else,

    Continue reading “Answering the question “What do I need to know about investing in a startup?””

State of Startups 2016


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




First Round Capital just released its State of Startups 2016.  It is chock full of interesting stuff!  No need for me to recap it here.  Just view it for yourself.  Here is the link.  Thanks!

PS:  2 prominent team members at First Round Capital are Cornellians (Bill Trenchard and Howard Morgan)!

Make a Donation to UVC


This post is by Zach Shulman from ithaca VC


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Warning:  this is a non-profit fund raising email!

I am on the board of Upstate Venture Connect (UVC).   UVC is a non-profit focused on helping build the upstate NY startup community.  Among other things, UVC (i) connects people via events and newsletters, (ii) helps groups create seed/angel funds, which then invest in NYS companies, and (iii) maintains an ecosystem map and calendar.

As you plan your year end giving, please consider UVC.  It is worth the support.  All donations are fully tax deductible.

I have set up a simple way to give via GiveGab (yes, GiveGab is a CVF portfolio company).  Here is the link.   Thanks in advance!

Upstate Venture CEO Survey


This post is by Zach Shulman from ithaca VC


Click here to view on the original site: Original Post




I am on the board of a non-profit called Upstate Venture Connect.  Nasir Ali, a good friend of mine, heads the organization.  Here is a guest post from Nasir sharing summary findings from a recently completely survey of upstate NY CEOs.  Enjoy!

Seeds of Growth are All Around Us

This year’s Global Entrepreneurship Week follows an election season where economic anxiety weighed heavily on American voters.  Nearly a decade of research from the Kauffman Foundation and other sources has confirmed that young, high-growth businesses create almost all the net new jobs. While Upstate NY leaders were busy trying to save (or attract) industrial era giants, a new generation of world-beating founders grew up in our midst, then left to launch companies like Android, airbnb, Priceline, Nvidia, etc. in more startup friendly communities.

As the head of Upstate Venture Connect (uvc.org), I am committed to building Upstate NY’s startup ecosystem. I meet incredibly talented and ambitious founders

Continue reading “Upstate Venture CEO Survey”