39% of IT Managers think Excel is Rogue IT

BluePrism, one of our investees has just conducted a survey into "Rogue IT". It was a surprise to me on first inspection that "complex Excel spreadsheets were Rogue"! On reflection, I guess that's understandable, you can build a great deal of mission-critical stuff in Excel, even without doing Macros/VB (I know we do!).

b.tween presentation on VC post web2.0

'nuff said:

CEOs never stop fundraising

A former CEO of one of our portfolio companies complained to me recently that "we spent 60% of our time in the company marking time whilst we raised more funds", and he expressed great enthusiasm to raise a large round and then spend all his time on the business next time round. Certainly the founders at Me.dium will be glad that they've got $15m in the bank, but back in the real world I'd suggest that a CEO of an early stage company is always raising new money. My view is that the right time to put together the business plan for the next round is the Monday morning after you closed the last lot! Recently we've suffered a couple of follow-on rounds taking more than 12 months to complete- so to have a little headroom you need to plan a long way ahead.

Boat Race Analogy

I really like this story, but can't find the correct attribution. The oldest blog post I can find is at just-auto.com is here:Canoe race analogy. But it's too good not to share...

A Japanese company (Toyota) and an American company (General Motors) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race. On the big day, the Japanese team won by a mile. The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action. Their conclusion was the Japanese team had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing. So American management hired a consulting company and paid them a large amount of money for a second opinion. They advised that too many people were steering the boat, while not enough people were rowing. To prevent another loss to the Japanese, the Americans' rowing team's management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager. They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the "Rowing Team Quality First Program," with meetings, dinners and free pens for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The next year the Japanese won by two miles. Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year's racing team was outsourced to India!!!!

Inaugural Opencoffee Leeds

Open coffee Leeds was buzzing today- about 20 people I think. Starbucks had kindly provided a "meeting room", which turned out to be a small formal meeting room with board table and chairs- about right for 6 people- but not very "opencoffee". Very interesting conversations with a few startups, technology folk and entrepreneurs. I'll be doing my best to go again to this one- well done to Imran Ali for organising it!

Beware the "Investor No-brainer CV"

I really like Marc Andreessen's recent post: How to hire the best people you've ever worked with- it should be essential reading for everyone involved in startups.
In particular Marc's comment: "beware in particular people who have been at highly successful companies", rings very true:
Our portfolio companies are always looking to raise new cash, and in the UK in particular, management with a track-record is a key attraction for much of this follow-on money. So we can be very tempted by someone who has a CV which shouts "prior blue-chip success" and helps drive a positive fundraising round.
But, we've learnt in practice that such candidates must be approached with caution:

• No-brainer CV's usually involve larger companies- and in some of these the main attribute for success can be the person's ability to manage "work politics"- something we'd hope to avoid in our tiny investee companies
• Attribution of success can be very unreliable- the number of people who claim responsibility for successes, strangely, seems to be somewhat larger than those who'll admit to the mistakes!
• Serendipity matters! It's dangerous to assume that someone who was lucky once will, NECESSARILY be lucky in the startup.

This doesn't even stratch the differences in terms of culture or working practices which may be rather alien to the first-time corporate drop-out!
Our biggest (avoidable!) hiring mistakes have been when we've been tempted to bring in management who had "no-brainer" CV's to help raise follow-on funding, but where we harboured doubts ourselves.

FAQ- how to value a web 2.0 company

I answered a question recently from a linkedin connection, to see if it sparks any debate I thought I'd repeat it here:
How should Web 2.0 companies value their businesses when looking for investment?
For what it's worth my answer was...

This is really crude but really meant to be a framework for you to do your own numbers... Take an exit that has happened that looks in the same ballpark as where you'd realistically hope to end up..... e.g. Feedburner sold for (I believe around) $100m Assume you'll need at least one more round of finance that currently planned (that's just the way it usually seems to work out!) and that the next round VC's will therefore demand 40% now to have 25% of the final exit- i.e. $25m from the proceeds. The next round VC's need a 10x markup in that scenario, so that sort-of works. i.e. they might give you $2.5m for that 40% Therefore your company is maybe worth $3-4m. I'd suggest that If you take this model and then factor some differences for your own deal you'll not be a million miles out! Bear in mind strange things can happen when there has been a massive exit but there are zillions of competing early-stage companies ;-) Best of luck with the round! Ed

Any views?