CapLinked’s News Weekly Wrap Up

Top features in CapLinked’s weekly social media:

What Angel Investors REALLY Want to See 

Some inside tips on how to attract angel investments to your business.

The Time to Start a Company is Now

If you’ve got a business idea here are some points why you should start it now.

                                                                           Crowdfunding Update: FAQ’s for Entrepreneurs

                                                                           Updates on the crowdfunding bill and how it will effect entrepreneurs.

CapLinked is now Better, Faster, and Easier to Use

CapLinked has grown by leaps and bounds since our public launch in February. We recently surpassed $10 billion in deals hosted on the site. While we’ve been growing rapidly these past few months, we’ve also been working to overhaul and improve our online service.We’re excited to unveil a completely redesigned and upgraded version of our site. It’s not just the look and feel that’s changed. We’ve rewritten the entire application to make it easier and faster to network with other professionals, securely manage a capital raise or asset sale, and exchange private updates on our site.

So What’s New?

Here’s what you’ll notice the next time you visit our site:

Social Sign-Ins.
In addition to LinkedIn, you can now connect your Facebook, Twitter, or Google accounts with your CapLinked account to make logging in even easier. To do this, login as you normally would with your password, and then go to your “Edit Account” page to link your social account.

More Ways to Connect.
We’ve improved search and browsing capabilities to make it easier for you to find who you’re looking for. Take advantage of the messaging feature to contact any user on the site.

Radar.
Keep your eye on deals, companies in your portfolio, and your contacts with Radar. It’s your one-stop destination for updates on your deals and companies. Look for it on your homepage after you login.

Status Updates.
You can now post public status updates on your CapLinked profile, and users who have you in their connections will automatically see your status in their Radar. Likewise, you’ll be able to read updates from your contacts.

Easier Document Uploads.
Adding documents to your deal or company just got easier. Now you can drag and drop files to put them in your deal room for prospective investors or into your company room for your stakeholders.

We’re Just Getting Started…

This new edition of CapLinked is only the beginning. By revamping our website, we’ll be able to move faster as we continue to roll out future improvements to our website.

In the months to come, we’ll be rolling out premium accounts with special features to help users network with new leads, syndicate deals, and manage their company updates. We also plan to launch an API to allow third party applications to access CapLinked.

We’ve also cut back on some under-used features. We noticed that charts in the company room feature weren’t being used often, so we removed them from the new site. Removing less popular features enables us to provide better support for popular ones, such as direct messaging to other users, deal rooms, and document storage.

Talk to Us

Our new and improved site was driven in large part by the feedback we’ve received from our users. Take a moment to login to your account so you can check out all the upgrades.

We want to hear what you think. Send us your feedback to support@caplinked.com and let us know if you encounter any problems. We’re here to help you get the most out of CapLinked.

Managing the Capital Raise for an Independent Film with CapLinked

Today we’re speaking with Adam Preskill of Peninsula Entertainment.

What were you raising capital for?
We were raising $100k to fund an independent feature documentary. The film is still untitled at the moment, but it tells the true story of the Quileute Tribe, the Native American Tribe featured in The Twilight Saga, and will be completed this summer.

Who were you approaching for your capital raise?
We initially began by approaching small production companies and independent film investors, but through CapLinked we were able to broaden our search to include investors in a range of different fields.

What types of information did you store in your CapLinked deal room?
We used the deal room to store a film synopsis, a powerpoint presentation to illustrate key plot points from the film, our business plan and our investment documents. We also used the CapLinked company message interface to keep investors updated on our progress during both the fundraising and film post-production processes.

Where did your leads come from, and how persistent did you have to be when you were pursuing them?
Most of our leads were direct referrals from people we had met with to other individuals in their CapLinked circle of contacts. We then tried to set up individual meetings with each contact we met through the system and were fairly successful in scheduling those meetings.

What suggestions do you have for other entrepreneurs raising money?
I would recommend using CapLinked for any independent fundraising effort, because we discovered is that it makes it easy for potential investors you’ve met with to spread the word about your project by forwarding your deal info on to their own contacts. That way anyone you meet with helps you widen your circle of potential contacts, even if they aren’t interested in investing, which is a great bonus, plus you can track who is viewing your pitch and deal info and follow up with them directly.

What’s It Take to Get Venture Capital Funding?

Today we’re speaking with Jim Andelman, general partner of Rincon Venture Partners, an early-stage venture capital fund located in Southern California.

What are the most important factors you take into account when considering an investment? 

If the top three in real estate are location, location and location, the top three for us when investing in web-based startups are team, team and team.  Ideas are important but also plentiful:  ability to execute is what counts most.  After that, we focus on the customer value proposition:  is there a pain point for which customers are eager for relief?  We love clear and objective ROI, and are less interested in nifty technologies looking for a market.  Third is market opportunity and structure: obviously big markets with rising tides help make for fast and sustainable growth.  One place where we’re different from many other VCs is that we look for markets that structurally will support multiple winners.  These days most good ideas get pursued by multiple startups:  we like knowing that a sufficiently talented team can carve out a nice piece of a market for themselves.  And fourth, do the founders share our values?  They need to be excited by a lean approach.  They need to be responsible stewards of the capital that has been entrusted with us, and passed on to them.  They need to be looking for business partners, not just money.

What kinds of things should entrepreneurs be doing when they’re starting their company so they can have a better shot at raising VC funding?

(1) Build a great team; (2) build independent third party validation; (3) don’t wait for funding to GSD (get shit done).

The first is obvious:  in particular, we feel it’s essential for an Internet startup to have strong technical competence onboard at the outset.  Outsourcing can help get you started and can help with extra capacity or a specific skill-based intervention, but the pace at which a startup can iterate is going to define its success, and it’s hard to do so fast enough without in-house tech talent.

The second, independent 3rd-party validation — I know it’s a mouthful — has a hierarchy.  Ideally and at the top of the hierarchy, you have paying customers who will shout from the rooftops how great your offering is.  Next down the hierarchy (and therefore next best) are channel partners, who can serve as the voice of the customer, who can extol the virtues of your plans.  Next down the hierarchy are subject matter experts who have signed on as advisors or investors, and are agreeing to attach their own personal brand to your start-up.

The third — get shit done — is also pretty obvious.  A pet peeve is when founders seem like they’re waiting around until they’re funded to go and make things happen.  At this point in history in the web domain, a sufficiently talented founding team should be able to get something to market before they take institutional funding.  We want to back founders who will make great things happen regardless of the obstacles placed before them.  Don’t put “YEAR 1″ on your financial plan.  Get yourself on a good trajectory and demonstrate how a financing is going to enable you to maintain or improve that trajectory.

What the biggest mistake you see entrepreneurs make?

I guess I’d say the biggest mistake I see boils down to believing that hope is a valid strategy.  We all know that there are many examples where a new consumer web offering “went viral” and achieved massive adoption in a very short timeframe.  What we don’t read about on TechCrunch very often are the multitudes of startups for whom that didn’t happen.  A plan that relies on massive adoption, but that lacks the concrete action items — or more importantly the fundamental elements of your offering — to drive that adoption, likely has a pretty low probability of success.

What trends are you currently seeing in the venture capital industry? 

Bifurcation.  Or maybe trifucation (yup, it’s really a word).  In one segment are the demonstrated successes:  Facebook, Twitter, Zynga, Groupon, LivingSocial, etc.  Certain investors with massive amounts of capital are paying almost any price to get a piece of those that look like they’ve already arrived.  In a second segment are seed- and early-stage start-ups — mostly consumer Web and mostly in the Bay Area and New York — that capture the fancy of an increasing pool of angel investors and small seed funds.  These dangle the “promise” of hyper-scaling and consumer ubiquity.  Finally, you have everything else, and the companies in this segment might be having a tough time getting investors excited.

On the “supply side” (meaning the venture capital funds themselves), we’re seeing a dramatic reduction in the dollars going into typical VC funds.  2010 saw just under $12 billion committed to new venture capital funds.  This represents an 87% reduction from the peak in the year 2000, and is less than half of the haul in 2008.  At the same time, concentration is increasing:  “megafunds” have emerged over the last 18 months, like NEA ($2.2 billion), Bessemer ($1.6 billion), Sequoia ($1.3 billion), JP Morgan ($1.2 billion), and Norwest ($1.2 billion), which means that the percentage decline for “all funds other than the top five” has been even more dramatic.

What is Rincon’s investing philosophy and what makes you different from other VCs?

Rincon is one of the more tightly focused VC firms you’ll meet.  We invest in early-stage Web-based businesses that are: led by “serial founding teams”; enjoy proven, attractive and recurring monetization; and are executing on capital-efficient operating plans.  Mostly on-demand software and online marketing platforms and services.  Our approach is highly founder-oriented:  we seek to back teams who have had success together and are choosing to do it again together in a relevant domain.  These people can be in their roles for a good long time, and we try to maximize our alignment with them over the lifecycle of the Company.  That means getting in early, minimizing financial engineering, and providing modest amounts of capital that these founders can take a long way.  We still go for big wins, but this approach provides a much broader range of exit values that everyone will be very happy with.

We typically get lumped into the “Super-Angel / Micro-VC” category, though we differ in that we invest at a much more moderate pace (perhaps 4-6 new investments/year) and play a more active and supportive role.  We typically participate on the Board, and we strive to be the first call when a founder has a question or is wrestling with an issue.   Finally, our small team combines solid, longstanding experience in VC and technology finance with impeccable operating credentials.  I started in VC in ’99, and have been in technology finance for 15 years.  My partner John Greathouse has played executive leadership roles at three startups, garnering two sales for over $140mm each, and two IPOs.  Most notable was probably Expertcity (now Citrix Online), where John led Sales, Marketing, BD and finance.  IDC currently considers Citrix Online to be one of the world’s five largest SaaS businesses.  Finally, while we consider investments nationwide, our proactive efforts are quite focused on the Southern California market.  We see tremendous entrepreneurial activity, with few strong “indigenous” capital sources.  We believe that both startups and their investors benefit greatly from proximity.  It’s hard to achieve the level of intimacy we shoot for when you’re dialing in for board meetings.

Top 5 Reasons Entrepreneurs Fail

Are You Mark Zuckerberg, Colonel Sanders, or John DeLorean?

Nobody likes to talk about failure. It’s not fun or sexy. We live in a culture that worships success, no matter how you get there, and is disgusted by and afraid of failure, no matter what the reason. This is especially true of entrepreneurs. We live in age that believes in overnight success. The mythology of Mark Zuckerberg starting a business at nineteen, immediately succeeding, and becoming a billionaire by age twenty-five is now considered a template for millions of young aspiring entrepreneurs.

Of course it is a cruel myth for anyone to believe that kind of success can be replicated. People would actually have a greater chance of winning the lottery. Most entrepreneurs fail. Sometimes they fail many times before they ultimately succeed. Only a few entrepreneurs have ever become billionaires before the age of forty, and so far only one person in history has achieved what Zuckerberg did at such an early age. That puts the odds at hundreds of billions to one. If anybody likes those odds, we have to play poker together some time.

Here are a few more real life entrepreneurial stories. Colonel Sanders didn’t start Kentucky Fried Chicken until he was sixty-two years old. If you don’t believe that, check Wikipedia. Many entrepreneurs never succeed even if they try over and over for an entire lifetime. Do you remember Jon DeLorean? His car company was sort of like the Tesla of thirty years ago. He was arrested for selling cocaine. Why? So he could raise money to save his dying company. Even the enormously successful Elon Musk had run out of cash before Tesla went public. Rupert Murdoch was out of cash in 1990. He survived because Marvin Davis loaned him money. Stories of extremely delayed success, nearly losing it all, or outright failure are not what people want to hear, but they’re important. As much fun as it is, nothing is learned from easy success. Failure and near failure is how people learn.

All of this begs to the question everybody running a business or thinking about starting a business wants to understand: Why do some entrepreneurs succeed while most of them fail? Here are a few key reasons.

1)     Excessive optimism – Entrepreneurs have to be optimistic to succeed. However, too much optimism is also one of the most common reasons they fail. Entrepreneurs need to remember that only the paranoid survive. As much as you need to believe in your own success, at the same time you must never forget all the things that can go wrong and plan accordingly.

2)     Inflexibility – Entrepreneurs need to be stubborn. They are often surrounded with people, even their loved ones, who tell them to give up and go get a job rather than trying to build something. Nevertheless, the inability or refusal to change and pivot kills many entrepreneurs.

3)     Lack of creativity – A good entrepreneur learns from and often copies what others are doing if it’s working. As long as you aren’t stealing anything, that’s just good business. However, if you have none of your own ideas and are simply a copycat of what others are doing, you aren’t creating any value. Your business has nothing about it that is special, and your customers and others in the market will know it. A commodity business with no unique value proposition is much more likely to fail.

4)     Greed – A good entrepreneur should be greedy and not just for money. Entrepreneurs should have a big appetite for risk, glory, fame, misery, power, and fortune among other things.  However, many entrepreneurs allow their greed to get the better of them. They allow it to blind their judgment and make bad decisions that destroy their businesses or themselves personally. The best entrepreneurs know how to balance their greed with discipline, prudence, and humility.

5)     Bad luck – Yes, a successful entrepreneur must be lucky. This is just a basic fact even as it may be offensive to many people who think that you have to make your own luck and everything that happens people deserve. As nice as that is to believe for some people, it isn’t true. Luck is usually the single most important factor that distinguishes the most successful entrepreneurs from those who just do ok and survive. It is extremely rare for an entrepreneur to achieve great success without luck, and there is no way for anyone to control that variable. This is why many successful entrepreneurs are superstitious.

Why become an entrepreneur when success is so uncertain? The most important reasons to become an entrepreneur aren’t success, money, fame, power, or glory. The entrepreneurial life is about being your own boss, doing what you love, and creating value. Hopefully if you create enough value, the money, fame, and glory will follow. Regardless, nobody can take away from you the enjoyment you derive from what you do. If you’re just in the game for the hope of hitting it big, you shouldn’t be in the game.