ClearCreek publishes a monthly newsletter on trends and events in the capital markets for entrepreneurs and CEOs of private companies. Please use the following link if you wish to receive the email edition of Capital Solutions.

subscribe: Capital Solutions Newsletter

Capital Solutions Newsletter…                                                                                                            download pdf
October, 2010

The change in season accompanies a number of transformational shifts.  In this issue: the increasing division in and around venture capital; the benefits of start-up schools and the anti-MBA; positive lessons from negative results; and five best blogs. My own technological failure means this month's newsletter is far later than usual - apologies.

____________________________

Venture Capital Duality
 
It's a theme as old as Dickens and reflects both a central tenant of biology and the basic economic belief that as an industry matures, it divides.  Fred Wilson sees the venture capital industry increasingly split into two parts:

"The first VC industry is investing in software based businesses. The software VC business has been fundamentally altered by the massive decrease in the cost of building and launching a software based business. I don't think I need to explain why this massive decrease in cost has happened to this audience. We've talked about that ad naseum here and on other tech blogs.

 

The second VC industry is investing in cleantech, biotech and other capital intensive tech businesses that have economic models that have not been fundamentally altered. This VC industry operates largely the same way it has operated for the past twenty or thirty years."

Tweet

____________________________

Lessons from Start-Up School

As the incubator model spreads and both virtual and real communities of start-ups proliferate, entrepreneurs learning from entrepreneurs is becoming more of an every-day event. Several groups are institutionalizing these lessons, and even opening them up to casual observers.  At the recent Y Combinator's Startup School event, it was as if one of the classmates in the front row took some really helpful notes just in case you played hookey. Among the positives: endure like a cockroach; learn from others; too much conviction can be a bad thing; and yes, mistakes are unavoidable and okay.  Among the negatives: avoid music; sales matter; and scale is rarely a solution to real problems.

As for alternatives to start-up school, the most vocal online crowd clearly advocates for the anti-MBA -- and perhaps with some impact since actual MBA applications are down slightly for the first time in years.  For example, see this appeal to a personal MBA as opposed to accepting potentially burdensome debt, forgone earnings, and the rare glimpses of undergraduate fun at most business school programs, while even more dramatic is this harsh critique of hedge fund manager and PayPal co-founder Peter Theil's proposal to pay entrepreneurs $100k to drop out of college. Now, just think what Jeff Spicoli might have earned.
Tweet

____________________________

Failure's Lessons

I've always been a keen believe that the lesson of failure are often more instructive than those of success.  One tends to take personal credit for good outcomes regardless of their origin, and assign bad outcomes to some outside event.  So it's been fascinating -- and invaluable -- to see a number of entrepreneurs and companies come forward with their personal tales of failure in the belief that others can learn from their errors. 

First is a substantive review of the rivalry between Wasabe and Mint.  Similar websites with a focus on personal financial information, the former had almost a year's head-start but eventually shut down while the latter was acquired for $170M. The worst of times and the best of times -- Wasabe's CEO details what happened. Next is a summary of how YCombinator-backed NewsTile hit the dead pool, and the decision to shutter BracaBox. Not all failures are innocent, as noted in a summary of the financial improprities at cMoney, nor are they limited to start-ups, seen in an insightful post of the ongoing struggles at Yahoo.

Many VCs look to see if an entrepreneur has the scars -- and substantial lessons -- from failure, with the belief that the failure itself is less important than what one might have learned. And since the value of failure is not enough to justify its deliberate pursuit, to really wallow in the misery of others, here are the autopsies of 25 failed start-ups.

Tweet

Five Best Blogs

Five of the best blogs I've come across recently: Chris Dixon on the ladies night strategy; Shaival Shah on Sell-Side vs. Buy-Side Business Development; Greg Gretsch on why Venture Capitalist's rarely say "No"; Ron Conway's guide to technology megatrends, and 13 completely ridiculous technology executive titles.

Tweet

____________________________

Capital Solutions is sent irregularly, and generally not more than once each month.  All content and any errors are mine exclusively, while the occasional sharp insight is probably borrowed.  As always, feel free to contact me at the number below if you have any questions, or just to catch up.

 Regards,

 
Alexander Ooms | Managing Partner                      

alex@clearcreekpartners.com

303.731.2960