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A decade after the dot-com boom introduced us to the idea of entering our credit card numbers into our Web browsers, the world of purchasing and customer interaction has gone online.  Most of us purchase most of what we buy over an Internet connection.  Some websites do a really excellent job of making it simple, intuitive, friendly and straightforward. They've cracked the code on making ordering fun, and the experience of friendly, flexible sites can be very rewarding.  But when things go wrong the contrast is maddening.

A recent example:

A few years ago I purchased my first portable, automobile purposed GPS unit.  I'd used the technology as a pilot, but really had little interest in it for the purposes of navigating my car.  I realized that my lack of interest applied to installed units, since most of my driving was local. But that changed when the units became small and easily portable, and thus became useful for travel.  I was pleased with my particular Garmin product.

I'd updated the unit online in the past, and recently began receiving alerts that it was once again time to do so.  I linked it to my laptop, logged in, verified my personal account and unit serial number, selected the lifetime map upgrade option and triggered the download. Knowing that my unit was registered and identifiable by serial number, and that the download I'd selected was specific to that unit, it never occurred to me that I would experience what followed.  

After a download lengthy enough for a cup of coffee, I followed the prompts to the next step, which was the upload to my GPS unit.  About 2/3 of the duration, as indicated by the progress bar, the upload was canceled; I was informed that my unit had insufficient memory for the upgrade.  So sorry!  No suggestions, explanations, or alternatives.  And no prompt to enable me to cancel the order.  

I abandoned the convenience of my online transaction and dialed customer service , only to learn that,  yes - I had ordered the software. And that--no - they would not refund the upgrade I couldn't use.  The "free prize inside," as Seth Godin might call it, was a transfer to sales to purchase the required memory card.  I If I'd looked closely at the system requirements page beforehand (the representative actually used the words "fine print"), I would have foreseen and avoided the problem.   Conclusion - I have been happy with my use of the Garmin product.  It's almost 3 years old, however, and, given the improvements that have been made with newer units and displays, I will be ready for an upgrade soon.  In the meantime I have no desire to spend much on an older unit.

Of course I'm picking on Garmin as an example that entrepreneurs today have to decide carefully which mechanism they would rather support and repair: the widget or the relationship.    A credit offered in the spirit of keeping my business over the long haul seems smart.   In light of my experience, what would motivate me to  consider their product line?  

Technology is a good thing; common sense is too. BTW - I did succeed in obtaining the refund.  I hate to think of matching the amount of the refund to the value of the time I spent on the phone. If my story is demonstrative of anything, it's that no matter the demographic, the market segment, no matter the medium through which we conduct our business, the experience economy is upon us.  Consumers consider more than the quality of the product and its feature set, especially since the Internet has introduced everyone to the concept that good things can be free.  Capitalizing on the intangibles is the tricky task of today's entrepreneur.  

Perhaps this is why companies such as Zappos.com are so vocal about choosing to focus first on customer service, transparency, and empowering the people who are in front of the customer--either physically or virtually--to do what they think makes good sense.  The next time I'm shopping for a GPS unit, I'll plan on using my good sense, too--and my memory.  

I recently attended a 2010 Outlook for the Investment Banking and Venture Capital industries, an event hosted by Polsinelli Shughart PC . In addition to thanking Polsinelli Shughart, I'd like to acknowledge two excellent speakers featured at the event: Wayne Nielsen of W.G. Nielsen & Co. and Stephanie McCoy, most recently a venture capitalist at Meritage Funds.

Stephanie, speaking from a venture capitalist's perspective, addressed the liquidity crisis; Wayne, who made some remarkably accurate predictions last year for 2009, made 2009/2010 economic observations that contrasted the carnage of 2008 with some encouraging trends from 2009. Both speakers highlighted the lows, but followed with some signs of promise.

What everyone wants to know is: How do we work our way out of last year's economic abyss, and when do we see a light at the end of the tunnel? What is the impact that the absence of capital markets will make on the types of innovative, early stage businesses that characterize our Colorado business community, especially in the emerging business sector of renewable energy and other sectors that are at the heart of our economic health?

Here are some notes from both presentations and key takeaways from the event. Any editorial commentary is my own!

A Venture Capitalist's Perspective

• Institutional investors all but disappeared in 2008 and through much of 2009, leading to the precipitous decline in funding to the VC industry.

• Institutional commitments to venture firms were $5B year-to-date in 2009; down from $23B in 2008 and $40B in 2007. (The number was $80B in 2000).
• The number of venture investments followed suit, both in number of investments and in the size of the investments.
• Early stage companies were hardest hit. $2.4B went to 536 companies in 2009 (YTD); down from $6B invested among 2550 firms in 2008, and $7B to 2852 companies in 2007.
• Exit strategies became a memory of the past. The IPO market ground to a halt- especially for small cap firms. And as Wayne predicted, M&A activity in 2009 has declined more than 40% from 2008 and more than 80% from 2007.

The result: Companies retrenched and venture firms marshaled their remaining capital.

And there are some seemingly favorable indicators of an improvement in the venture industry, as seen in a survey of the top 100 institutional investors.

• Despite a virtual stoppage of venture sector investments, over 90% of surveyed firms indicated their intent to continue to invest in venture capital firms.
• More than 30% indicated that the level of their investment as a percentage of their allocation would increase.
• Only 6% indicated their intention to reduce their percentage exposure to venture capital investments.
• Private equity funds currently have approximately $400B in investment capital available, while commercial banks and lending institutions have approximately $1.2B in cash assets.

What's not so clear is: How much remaining capital have VC firms retained that is not likely to be limited to follow-on investments?

An Investment Banker's Perspective

There is no question that the picture here is complex. Without a healthy investment banking industry, the parties affected by the events above are absolutely affected by the lack of access to capital along the way. They are critically affected by the inability to achieve liquidity events through public markets or M&A transactions. We hear much in the press--repeatedly--about economic sectors: Retail sales and consumer confidence, low housing starts, mortgage foreclosures, the federal debt, and the implications of the bailout.

Despite Warren Buffett's admonishment, "Anyone who thinks the market knows the value of anything needs to do more homework," some indications of favorable trends include:

• The DOW, Nasdaq Composite, and the S&P 500. They're all up between 60% and 70% since March of 2009.
• Low price/earnings ratios and skyrocketing worker productivity. Decade-long highs indicate a likelihood that business profits will improve.
• Increasing U.S. manufacturing activity throughout 2009.

Physics warns us, however, that for every force there is an equal and opposite force. Many of these indicators mirror the relationship between high productivity and high unemployment, etc.

The IPO market seems to be returning.

• Q3 2009 saw an IPO volume of 20 deals producing $5.8B of equity investment.
• As of October there were 34 registrants in the IPO pipeline, up from 28 registrants seeking $7.6B on June 30, 2009.
• Only 12 companies went public in the first half of 2009; 8 were US-based.

What does this mean for Colorado and its sustainable startups?

The venture capital landscape in Colorado is experiencing some uncertainty with a number of firms in fundraising mode. Our venture investment reality is that 80-90% of venture capital comes from out of state. At the same time there's another development occurring. We are experiencing an explosive emergence of the cleantech/renewable energy sector which saw 76 Colorado companies apply to make presentations at this year's 22^nd annual NREL Industry Growth Forum. About the same number of applications came from California, and is almost double the number of Colorado-based applications from the previous year. However, while the general impression seems to be that regional firms are having difficulty raising money, the reality is a bit more mixed in my mind as evidenced by (if my facts are correct) a number of firms that have in fact raised money within the past few years: Foundry Group, Altira Group, Infield Capital, Access Venture Partners, Boulder Ventures and Meritage Funds. And there are other smaller funds emerging on the landscape. Demonstrative of a transition, Altira Group is, and has been, entirely focused on energy technology. Infield capital was formed to focus their investments on cleantech-related vehicle powertrain technologies, and Access Venture Partners has become active in the cleantech space.

During a follow on visit with Stephanie, we discussed the regional VC landscape. She agrees that, while the cleantech sector is an area of great opportunity, it's relatively immature; it struggles with uncertainties around government policies and subsidies, and developing convincing business models. We both were reminded of Colorado's cable industry during the 1970s--how it developed a critical mass here, despite regulatory challenges, and was supported by some of Colorado's most prominent venture capitalists, visionaries, and leaders.

We know that venture capital flows to great new ideas in the hands of seasoned entrepreneurs. Perhaps we're going to see a similar evolution in the cleantech space, and the influx of established energy companies will attract capital and new management talent. Do we have the necessary ingredients? I invite your views.

Graduate Entrepreneurs Association (GEA) - Annual Fall Retreat

I thought I'd take a break from a series of things that I've written about -- the myths and realities of entrepreneurship and education -- to report on another fantastic event, our annual GEA Retreat, which I attended last Friday.  The purpose of this annual fall event is to welcome new MBA students to the program and to our business community; to give them a taste of the entrepreneurial Kool-Aid that defines Boulder.

This event, organized by the GEA, and sponsored by the Deming Center, has been a tradition for several years.  This year it was held at Chautauqua.  In most past years it has been held at a venue far up in the mountains - great introduction to Colorado for our out-of-state and international students - but logistically challenging.

 (The distance and high altitude nature of past locations also contributed to it being called a "retreat"- despite my constant observation that to use the words "retreat" and "entrepreneurship" in the same sentence is an oxymoron.) 

We had close to 100 attendees this year - mostly 1st year MBA students, a number of 2nd year MBA students, as a number of faculty members, and about 20 participating speakers and panelists as well. Click here to see the list:
GEA Retreat 2009 - Speaker List.pdf

Special thanks to the participants who served on panels entitled "Young Entrepreneurs," "Finance," and "Awesome Entrepreneurs."  (I thought they were all awesome.)  Great stories, lots of lessons learned, and truly inspiring.  I walked away with several new insights and several more stories for the telling.

But no take-away was more compelling, once again, then the willingness of Boulder's entrepreneurs to give their time to provide help and perspective for our students that are interested in taking advantage. Tim Falls noted well the unique openness and approachability of the Boulder entrepreneurial community.

Thanks to Tim and to Jay Wilson who organized this year's event and to all of the panelists and participants who made it such a successful day.
 

Ashoka

As enjoyable as the GEA Retreat proved to be,  I was sorry to miss another milestone event on campus.

The University of Colorado (CU) has been named a "Changemaker Campus" by Ashoka, the largest association of leading social entrepreneurs in the world. The partnership brings together students, faculty, and staff from across campus to transform the university into a hub for social change.

The Initiative kicked off with a weekend retreat, featuring visits by Lynn Price, Ashoka Fellow and Founder, Camp to Belong,  Chris Pelley and the Ashoka U team. Thanks to Lennon Flowers and Erin Krampetz for organizing the three-day event.

Stay tuned - more to come on the topic of social entrepreneurship.
 

During one of my first entrepreneurial experiences - as part of the management team of an early stage software company - a group of us was sitting around late one night at the end of a challenging day.  One of the guys observed that everyone in the room had left a much larger company to join our relatively small one for similar reasons - to escape the policy and procedures, the layers of management, and with a personal desire to have a bigger, direct impact on a business. And yet we had just spent the better part of a couple of days attempting to draw from those prior experiences in order to implement many of those same processes into our new business!  We all realized that it had become necessary to bring some order to what had become a pretty chaotic situation. 

I frequently encounter misperceptions, or myths as I call them, about entrepreneurship and entrepreneurial environments.  Among them that entrepreneurship is narrowly defined, that it's about only small companies, and that in education it is somehow a lesser business skill than the traditional disciplines of business - finance, accounting, management and strategy.  I call one of these myths the "Big Bang Theory" - that it's all about finding the big idea and that the idea alone will create the success.   That oversimplified perspective ignores the hard work and tenacity that are required for entrepreneurial success.   I've also experienced a corollary to that view during a discussion with a Leeds MBA student.  The student expressed his amazement at the creative entrepreneurial energy that he'd observed since joining our program at the Leeds Business School.  But he was about to disqualify himself from pursuing an entrepreneurial career because he felt that he lacked "the big idea."   These misperceptions can cast a negative view on the perceived value of an entrepreneurship education and how a curriculum that emphasizes entrepreneurship can have broadly applied value.

I recently had a conversation with a group of Leeds MBA students about these topics - about the fundamental importance, value and applicability of entrepreneurial skills.  The process of building an entrepreneurial company --startup or emerging growth-- requires the application of all business skills in what I would describe as the most difficult management environment - one that is undercapitalized, rapidly changing, unpredictable and often seemingly chaotic.  To succeed in such environments, entrepreneurial businesses must have the best talent - the best financial skills, the best marketing skills, and the best strategic selling skills.  These companies can't afford to compromise because they have so little margin of error.  The key is that the members of an entrepreneurial team not only have those specific skills but that they can apply them in such a challenging environment.

At the end of the day, entrepreneurship is still about basic business and management fundamentals - just applied in a demanding, challenging, innovative and highly rewarding environment.  That's a great combination to strive for in any business career.