We’re In This Together

I have been all geared up for a post noting some of the questions and issues for small businesses that have arisen in the first few months of the Trump administration. I did my best to find both good and bad news – for example, the House version of the One Big Beautiful Bill increases and makes permanent the pass-through entity deduction available for LLC and S-corp owners’ business-related income. To the relief of many, the Corporate Transparency Act finally appears dead, at least for U.S. companies. And the Small Business Administration reports an increase in the number of SBA loan approvals, although this apparent demand for capital could be read as good news (small businesses are investing in growth and expansion), or not-so-good news (that small companies are being forced to borrow just to stay in business).

Of course, small and start-up businesses are also facing a number of new challenges – tariffs, and even the threat of tariffs, are in many cases increasing business expenses, reducing profit margins, and disrupting supply chains. The uncertainty surrounding the administration’s tariff policy make hiring, expansion, inventory management, and other operating decisions tricky. Interest rates remain high and despite the above-noted increase in SBA loan approvals, SBA loan eligibility and requirements have become stricter, and the agency is eliminating a number of programs that facilitate participation in federal contracts by women-owned and minority-owned businesses.

Book Review: Bill Aulet: Disciplined Entrepreneurship: 24 Steps to a Successful Startup

Like many people, I have dreamed about being an entrepreneur and having my own business venture. But when I really think about the concrete steps of starting a business, it is a headache: what kind of products or services do I want to provide? How do I target my potential clients? What are the marketing channels that I should focus on? How do I do the pricing? All those question marks in my head just led to cold feet.

There are indeed a lot of entrepreneurship-related online courses available, but most are either long or focus on a particular aspect of entrepreneurship. If you are, like me, looking for entrepreneurship 101, a comprehensive preview of all kinds of questions you need to think about in different stages of an enterprise, and a roadmap of how to start your own business, Disciplined Entrepreneurship: 24 Steps to A Successful Startup, by Bill Aulet, might be just what you are looking for!

From Linebacker to Food Entrepreneur: Blake’s Seed Based

Regular readers of entreVIEW may be familiar with my enthusiasm for Wisconsin sports. As an alumna of the University of Wisconsin-Madison, it is particularly exciting to see other alumni experiencing professional success — especially when it links sports, entrepreneurship, and my (required) dietary restrictions.

I, along with an estimated 3 million other U.S. adults, am allergic to tree nuts. This can make for awkward social situations (eating alone at weddings because it takes so long to get a nut-free meal) and challenging grocery store selections (if it says it was “processed at a facility that also processes tree nuts,” it’s probably fine, but on the off-chance it’s not, I’m stuck with an entire box of granola bars). So, when I heard the story of a former Wisconsin Badgers football player who had developed a line of allergy-free seed based snack and protein bars, I was intrigued.

Blake Sorensen, a Minnesota native and budding food entrepreneur, was recently featured in a forbes.com article. Between 2007 and 2010, Sorensen was a linebacker for the Wisconsin Badgers. Like me, he has a tree nut allergy. While getting his MBA at Indiana University, Sorensen took a social entrepreneurship class from which a business idea was born: Blake’s Seed Based, a line of snack bars featuring a combination of seeds and fruit free from the major allergens of nuts, dairy, and gluten.

8th Annual MinneBar “Unconference” a Hit

This Saturday I attended the 8th annual MinneBar conference held at the Best Buy Corporate Headquarters in Richfield. With over 80 panels, presentations, and sessions on technology and software scheduled in 50-minute intervals across the span of eight hours, and what was rumored to be over 900 attendees, there’s no doubt the organizers – and attendees – considered the conference an unqualified success. 

Actually, the event is touted as a “Bar Camp,” or an “unconference” – terms I was not familiar with before Saturday. I have to admit, the loose plans for the event (anyone and everyone can sign up to present, and we weren’t given the schedule of sessions until less than a day prior to the start time) was initially a bit off-putting. However, from the moment I walked in, I noticed an energy and excitement that are not typically present at a traditional conference. 

Apparently the idea for the “open space” format of unconferences was first developed in the mid-1980s by a man named Harrison Owen, though some compare the experience to science fiction conventions that have been held since the 1930s. The key characteristics dictate that an agenda is created by the attendees upon arrival rather than prior to the event, and anyone who wants to sponsor a discussion on a topic can set up a time and a space. The open discussion format works best when attendees are highly knowledgeable and experienced in the field around which the conference is centered. The term “unconference” wasn’t first officially used until almost 2000, and was popularized in the context of the BloggerCon convention first held in 2003. The phrase “Bar Camp” is a related term, referencing more specifically open-to-the-public forums centered around technology and the internet. 

I was ultimately convinced that there is no better format to use for an entrepreneurial, unconventional crowd (pun intended). MinneBar’s website promoted the feel for this event, stating on their website that no “spectators” were allowed – only participants. The event was free for anyone to attend or make a presentation. And while we were somewhat nervous about who would show up to our law firm presentations on technology agreements and intellectual property basics, the first session, at least, had over 50 attendees, including those sitting on the floor and standing in the doorway. They were even kind enough to laugh at our jokes relating to source code (“Why would we need that if we’re buying a new software system and the vendor will soon be going out of business?”) and Lotus 1-2-3. 

In fact, even the location for the event – the Best Buy corporate headquarters – catered to the entrepreneurial crowd and the unconference vibe. Despite obviously being a fortune 500 company with a 1.4-million-square-foot corporate headquarters, Best Buy is decidedly hip. Having worked there for two years in the mid-2000s, I was reminded upon returning that the company embraces its humble beginnings with a huge memorial wall, and its playful attitude with a large gaming area complete with multiple video game stations, pin ball, and a pool table. And as we’ve all seen in the news in recent weeks, Best Buy’s original founder is returning to the helm of the company, proving that no matter how big you get, an entrepreneurial spirit and founder attitude may be the best thing for a company, even one with annual revenue of close to $50 billion. 

Needless to say, I have no doubt that the “conference” I will be most looking forward to in 2014 won’t be a conference at all. I will definitely be a participant in next year’s MinneBar!

A Post by Karen Wenzel, Guest Blogger

An Upate on Lot18: Too Much of a Good Thing?

Some of you may have read my post about Lot18 back in November, wherein I extolled its virtues and hypothesized as to why the New York startup was so phenomenally successful at raising money from venture capitalists.  Since that post, tech news outlets have reported two rounds of layoffs at the company and the closing of its short-lived UK operations.  Lot18 also stopped offering food and travel products for sale, which it had recently been doing in addition to its primary business of selling wine.

When I was reading about the company to write my previous post, Lot18 reportedly had about 500,000 members; now there are almost 1,000,000, according to online reports!  Things seemed to be going so well!  As it turns out, the wealth of cash the company was able to raise might have also made it easier to lose sight of its core business.  As founder Philip James told Betabeat, “One of the perils of having a lot of money is, it’s easy to launch a lot of things.”  We can all understand how a company flush with cash might be more apt to take risks on premature expansion than one that needs to watch every dollar just to keep the lights on.  

While the decision to wind down the company’s short-lived food and travel businesses is unfortunate for the employees who lost their jobs, it should help Lot18 refocus on building its wine business for long-term sustainability.  Luckily for Lot18, the nature of its business is such that its investment in those complementary businesses probably was “just” those people and maybe a few other ancillary services, marketing expenses, etc.  One can imagine many other types of businesses where expansion into ancillary businesses would require huge capital outlays at the beginning for things like equipment and regulatory approvals, which are not easily recouped.  This reminds us of the important life lessons we can take from Lot18 so far:

1. Drink good wine.
2. Do not expand so quickly into new businesses that doing so jeopardizes the long-term success of your core business.

A Post by Alyssa Hirschfeld, Guest Blogger

Small Reflections on the Big Apple

I was thinking about my recent trip to NYC and all the fodder for a post relating to entrepreneurship. Should I write about the demise of H&H Bagels  (a NY institution started by Hector Toro and Helmer Hernandez on $5,000 of seed capital), which was recently shuttered because Helmer (now the full owner) was indicted for stealing employment-related taxes (a reminder to never use the IRS as a source of capital)? What about Doughnut Plant (started by an entrepreneur using his grandfather’s doughnut recipe and now a highly successful business that sells the best doughnuts I’ve ever eaten for (only in NYC) about $3.00 a pop)?

Ultimately—and not surprisingly for those who know my passions (I did see the usual 6 shows in 4 days)—I decided to forego baked goods with holes in them and comment on the journey of Newsies The Musical to the Great White Way. First, a little background:

·   The original live-action Disney movie musical “Newsies,” which was loosely based on the New York Newsboys Strike of 1899, opened in 1992. It was filmed on a budget of $15 million and earned under $3,000,000 at the box office; it was also widely panned by critics and earned seven Razzie Award nominations.

·   However, after release on VHS and DVD, the movie developed a cult following among teens, many of whom memorized every lyric (check out this YouTube video as an example) and held sleepover parties to watch the film. Amateur theatre companies made Newsies the most requested theatrical version of a Disney property that hadn’t been adapted for the stage.

·   Disney assembled a high caliber creative team, including the original composer and lyricist (Alan Menken and Jack Feldman, respectively) along with book writer Harvey Fierstein, to create the stage version. Their hope was to mount a successful professional production that they could subsequently license for regional and amateur productions. That original version opened in September 2011 to strong critical acclaim and huge response from the film’s fans.

·   Disney decided to transfer to production to the Nederlander Theatre on Broadway for a limited three-month run in early 2012, which was extended for another two months and, finally, to an open-ended run.

·   Although the show didn’t win the Tony Award for Best Musical on Sunday (that distinction went to Once, which I also really enjoyed when I saw it off Broadway last fall), it’s tough to find a ticket for the Broadway production.

What could be more entrepreneurial than a show about enterprising newspaper boys banding together to take on big corporate honchos? After-all, many well-known entrepreneurs (including Warren Buffett and Walt Disney) got their starts delivering papers.

There may be another lesson here about taking measured steps. Most people wouldn’t guess that Disney (the same Company that brought the gigantic spectacle of “The Lion King” to Broadway—it’s still running after almost 15 years and has grossed more than any Broadway show in history!) would have set its sights so low with “Newsies.” By setting appropriate expectations and decreasing the stakes—mounting the show (which could have flopped) on Broadway would undoubtedly have cost millions more than mounting it first at the Paper Mill Playhouse—Disney found a way to build the right show for the right audience. The payoff will likely come with a long-running Broadway production and successful foreign and touring productions to follow.

Often I see entrepreneurs who set their sights on the BHAG without focusing on the small opportunities right in front of them. While it’s important to have big aspirations, particularly when you want to use other people’s money to reach them, sometimes it’s OK to think small.

Reports on Venture Capital Investments for 2011 Show Mixed Results

While there has been a lot of concern recently about the level of investment (and expected investment) in early-stage companies, some recent data suggest that the climate isn’t as bad as we thought, although there continues to be a lot of room for improvement.

According to a MoneyTree Report (which is prepared by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters), approximately $28.4 billion of venture capital investments were made nationally in 3,673 deals last year. This represented a 22% increase in terms of dollars, and a 4% increase in the number of deals, compared with 2010. Investments were up in all stages of company development, except for seed stage investments, which were down 48% compared with 2010. Locally, venture capital investments in Minnesota-based companies were up to almost $265 million in 2011, which is about a 78% increase over the nearly $149 million invested in 2010.

I won’t bore you with all the details in the report, which you can read for yourself. But I did find a couple of things especially interesting.

First, investments were up in almost all industry categories, particularly for software, Internet-based, biotechnology, medical device, and clean technology companies. I was not surprised by the software and Internet-based company results, as—at least locally (see more below)—this area seems very active. I suspect it has something to do with the lower capital needs of those companies, and the quicker path to exit based on fewer regulatory hurdles. I was surprised, however, to see that investments were also up in several other industries, especially the medical device and biotechnology industries. Personally, I’m aware of several companies in those areas that have had difficulty raising capital. Apparently, while raising capital remains a challenge for those companies, well-valued deals are still getting done.

Second, I wasn’t surprised that investments in seed stage deals were down, although the 48% decrease seemed high. Based on my own experience, seed stage companies are still finding it difficult to attract investment right now, although the right types of deals (with the right valuations) seem to be getting done. I think the difficulty is in part based on the fact that venture capital investors don’t seem to invest in seed stage deals anymore, so there are fewer investors (angels) willing to look at these companies. Instead, venture capital investors tend to invest almost exclusively in more experienced companies, those whose path to exit is shorter. Indeed, the MoneyTree Report shows that later stage investments were up 37% last year. One thing that is helping this trend locally, at least, is the Minnesota Angel Tax Credit. For 2011, all $15.9 million of tax credits available for allocation was subscribed. For 2012, Minnesota will have $12 million of credits available. I wouldn’t be surprised if that too was fully subscribed well before the end of this year.

While local deals were up in 2011, one real bright spot was investments in tech deals. According to this TECHdotMN article, more than twice as much money was invested in Minnesota tech deals in 2011 as was the case for 2010. The report defines tech to include IT, web, mobile, SaaS, and hardware companies. 2012 is also off to a good start for local tech deals, based on the recent announcement of a $52.5 million investment in Code 42 Software, Inc. 

We hope the economy will continue its recovery from the meltdown in 2008/2009, and more early-stage companies will get funded in 2012.

Thinking About Selling in 2012? Be Prepared to Show Buyer Why your Business is Worth What You’re Asking

For many of our entrepreneurial clients, the sale of the business he or she founded is the most obvious exit strategy when the entrepreneur no longer wants or is able to continue actively running the business and the entrepreneur’s children have not inherited his or her “entrepreneurial spirit.”

While a few of those entrepreneurs have been through a sale transaction before with other businesses they owned or when employed in other capacities before becoming an entrepreneur, for most of them a sale of the business he or she founded is a once-in-a-lifetime event. Having never participated in an M&A transaction before, it is hard to know what to expect or what is “normal.” 

One way we help entrepreneurs evaluate what is “normal” in their negotiations is by reviewing the results of various published studies, including the Mergers & Acquisitions Committee of the American Bar Association Business Law Section’s Private Target Mergers & Acquisitions Deal Points Study. The most recent iteration of this study was released in December 2011 and analyzes the frequency of certain material legal terms in 100 acquisitions of private companies completed in 2010. Of the transactions reviewed by this committee in 2011, almost half involved entrepreneurial sellers, so we know these results are relevant to what our entrepreneurial clients can expect in sales of their businesses.

I thought it would be interesting to compare the results of the 2011 study with those of the 2007 study, which analyzed acquisitions of private companies completed in 2006, well before most of us knew that we would soon be facing an economic crisis. 

When comparing the results, I expected that certain deal terms reflecting heightened buyer apprehension would be more common in the 2011 study than the 2007 study. Specifically, I expected that buyers would be demanding more post-closing remedies against sellers in the event of breaches of purchase agreements by the sellers. Certainly, it has felt to me that buyers have been more conservative than they used to be and less willing to take the risks that are inherent in any acquisition. What I found was that some of the most highly-negotiated indemnification provisions were almost the same in the two studies, but that there was a substantial increase in the use of certain provisions that arguably bear a more direct relationship to the bottom line.

Buyers in the 2011 study certainly seemed to be more concerned about overpaying for the target company than they were in the 2007 study. Post-closing working capital adjustments (usually requiring a target company to have some minimum amount of working capital delivered to the buyer at closing) were included in 68% of the transactions in the 2007 study and 82% of the transactions in the 2011 study. Additionally, the use of earnouts (additional purchase price to be paid to the seller upon the business achieving certain performance goals after the closing) to bridge a valuation gap between what buyers were willing to pay and sellers were willing to accept for their businesses increased from 19% of transactions in the 2007 study to 38% of transactions in the 2011 study.

By contrast, the primary contractual provisions that provide remedies to the buyer after closing were almost unchanged between the 2007 study and the 2011 study. There was no significant change in the period of time after closing during which a buyer was entitled to assert indemnification claims against the seller for breaches of the seller’s representations and warranties. In both the 2007 and 2011 studies, the most common survival period was 18 months, followed by 12 months and then 24 months (each appearing with similar frequency in both studies).   

Similarly, there was no significant change in (a) the amount of the purchase price held in escrow or held back by the buyer for some period after closing, (b) the percentage of transactions for which the escrow or holdback was the buyer’s exclusive remedy after closing, or (c) the cap amount for the seller’s general indemnification obligations as a percentage of transaction value. In both studies, more than half of the transactions had an escrow or holdback amount in the range of 7-15% of the transaction value and just over half of the transactions had the escrow or holdback as the buyer’s exclusive remedy. In the 2011 study there were actually a higher percentage of transactions in the lowest category of cap amounts, but overall the cap values were similarly distributed in both studies.

These few data points are, of course, just a small sample of the results of these studies, but they serve as a good reminder of something attorneys are prone to forget: the dollars and cents of a transaction matter most. Legal points and risk management are important, certainly, but favorable indemnification terms alone don’t make a financially unsound transaction suddenly attractive. My advice to entrepreneurs looking to sell their businesses is this: be prepared to show your buyer why your business is worth the price you are asking—whether it’s based on current financials or future potential. If you’ve done that, negotiating the legal and risk allocation points is likely to lead to similar results in any economic environment.

A Post by Alyssa Hirschfeld, Guest Blogger

Local Entrepreneurs Jump into Shark Tank!

Minneapolis entrepreneurs, Sue Kruskopf and Nancy Bush, co-founders of My Wonderful Life, LLC, have jumped into the Shark Tank! You can watch it on January 20 at 7:00PM Central Time on ABC. That’s the season premiere of Shark Tank, which some have referred to as “…clearly the best business show on television.” [Marv Domon, Business and Finance Examiner, April 8, 2011.] 

If you have ever wondered what it is like to ask a seasoned investor to put real money into your small business, you must tune in to this show. How does the investor make the decision? What questions are asked? What does it take to raise funds from independent, sophisticated investors? Then, how should you use the funds to grow your business? Check it out. 

After January 20, check back to this blog site to trade feedback on whether Sue and Nancy were successful. I spoke with Sue and all she would tell me is that the experience so far has been truly exciting and she recommends it to all entrepreneurs. One more thing…Sue, Nancy, and MyWonderfulLife.com are clients of Gray Plant Mooty and we will be rooting for them on January 20.

The Definitive entreVIEW Top 10 List of “Must-Have” iPad Apps for Entrepreneurs (at least for this week)

Sometime after Thanksgiving of each year, the annual cascade of “Top 10” lists for the year begins, tempting the “list junkies” (author included if not foremost in that category). This year, I‘ve been trolling through various “lists,” but few have compelled me to go out and actually purchase something. Therefore, I am offering my Definitive entreVIEW “Top 10” List of Must-Have iPad Apps that an entrepreneur just can’t live without (at least until something better comes along).

Why an app top 10 list? Consider the following: since sometime in 2011, the percentage of people utilizing apps outnumbered web use on the basis of hours spent by users. Also, Apple’s app store now has more than a half-million apps, with the total number of downloads jumping from 10 billion to 15 billion between January and July of 2011. Also, from all those apps, six rose to the top—all of which are games. Earlier this month the Android Market announced that its estimated 350,000 apps had accumulated at total of 10 billion downloads  since it opened in 2008.

Like most lists and awards of renown, there needs to be some basic rules. Mine are as follows:   

Criterion 1: These apps are all available for the iPad (preferably iPad2). Some may be available for Droid users, but the focus is for tablet use.

Criterion 2: Except for certain honorable mentions at the end, non-productivity apps (including games) ARE NOT ALLOWED. Therefore, no Angry Birds references other than a link that suggests that Angry Birds may be the single largest contributor to loss of productivity in the workplace. Sorry, Pixelmator (named Apple’s MacApp of the year 2011) and other photo apps need not apply here (unless they instill innovation, organization, or productivity…).

Drum roll please…in no particular order:

Wunderlist: Possibly the best free organization and productivity app on the market. It pulls all Apple-based products into a cloud-based single app that can be synchronized across all of the “task-driven” software on your iPad. If it keeps you on time for just one pitch, it’s done its job. Plus, it’s FREE. Entrepreneurs (like everyone else) love free.

Skype: Whether you’re a traveler or sedentary, married or single, with or without kids, the solution to connectivity by voice and video option is solved forever. Updated only recently for the iPad, the improved camera in the iPad2 does a pretty good job of solving the videoconference juggernaut that travel and quality for business purposes may have posed. Also, it’s FREE.

Googlemaps: Have you ever run out the door only to be midway to a meeting and asked yourself (probably audibly—you know who you are), “Where the bleep am I going?” Googlemaps has—no kidding—very likely saved my life at least once. If you’re trying to find that meeting place for a potential investor and the directions on your calendar invite aren’t getting you there, the analogy just may apply. Streetview via Google may be the greatest invasion of privacy in the last decade, but it sure helps in a pinch. Even better, it’s a “Built-In App” with the iPad thanks to a sweet licensing deal between Google and Apple. Sorry, other tablets don’t have it “built in.” It’s FREE (as are the updates).

LinkedIn: If you like the rest of the world having unfettered access to your closest contacts, referral sources, and clients, this is the app for you. Why spend years building a great personal network when you can just give it away? However, if you ever have that nagging feeling that you “know something” about someone you had just met, but you didn’t know the “what/when/who/how/wheres” for that person (six degrees of separation to Kevin Bacon)—no more. You can simply hop on the LinkedIn App and find out who is a friend of your recent introduction. Buyer beware, people don’t “unfriend” on LinkedIn like Facebook users and there may be more of a matrix of connectivity to someone than you think. As of the date of this blog post, I haven’t seen or used an updated app for the iPad, so it’s functionally smaller (or granier at enlarged size) than it should be, but it’s fast and privacy knows no bounds. It’s FREE.

Dragon Dictation: I know what you’re thinking: “Who dictates anymore?” Surprisingly, many of you do and more will every day because it doesn’t require someone else to figure out what you said into a grainy microphone. If you have the new iPhone 4s, Siri proves the resurgence of voice-activated commands (even Santa Claus uses Siri). However, according to customer feedback, Siri does not recognize southern accents and certain “English” dialects. For those suffering the obvious bias against a southern accent by Apple or for those who haven’t made the upgrade, Dragon is a must-have. If you’re wanting to use it for regular dictation or drafting documents, emails, or texts, this application takes multi-tasking to a whole new level; even Siri doesn’t have the full range of capacity that Dragon does for creating documents. It’s FREE.

QuickOffice: Have you ever found a typo in your PowerPoint before a meeting and you don’t have time to flip open the laptop? QuickOffice Pro, one of iTunes’s top grossing apps ($4.99), is ideal for saving, editing, and editing presentations, Word documents, Excel Spreadsheets, and even open those elusive Adobe files (pdfs). (Do you want to know the real reason why Apple doesn't like pdf)? It’s like taking every file with you, with the ability to edit on the fly.

Notability: I am a proud convert from Notes Plus and Penultimate and I swear that the handwriting software actually improves my handwriting. Yes, many of us can text and type very fast, but an overwhelming majority of us are still dependent on the paper pad and pen. Add a Bamboo stylus by Wacom, and you have the best note-taking/illustration device on the market today. Introduced in November, it already is in the top 10 grossing apps in the App Store. Possibly the best $0.99 that you’ll spend before the New Year.

SAI-Business Insider: My favorite newsfeeds aren’t all reduced to apps yet, although I am patiently waiting. Of course, I like the Entrepreneur Magazine app because it’s a guilty pleasure like People magazine (we all wonder what it’s like to be one of the “beautiful people” in the entrepreneur world) and the WSJ app (because, after all, you do live on planet Earth, right?). Elegant, with the same look and feel as the newspaper without that grimy ink residue on your fingers afterwards, the WSJ app actually makes me want to read the real newspaper as well. However, for news by subject, one of the best, with a focus on entrepreneurs, is SAI. Get the free app, get the updates, read it daily. For those who need a distraction in their news, SAI has that, too. The powerful part of SAI is the tech news, podcasts, and input from all corners of the U.S. about relevant news for entrepreneurs and business. Also, it’s a bit unorthodox and politically incorrect, which keeps your senses tuned. It’s FREE.

Citrix Receiver: Can you say, “greatest thing since sliced bread?” If your company is big enough to have an IT department but is not yet “on the cloud,” this is it. Even so, if you’re on the cloud, getting access to the company server and your own desktop is an absolute must. Granted, rumors of bugs in the system swirl, but this robust offering of a full desktop makes other apps stand at attention—it could possibly be the greatest tool for workspace mobility. The small screen for the iPad may not be the best for that work during a layover at SFO airport, but if you’re a road warrior, pick up the $39 Apple Digital HDMI adaptor and use any HD screen you want when you get to your destination. Plus, if you need to show some spreadsheets on the fly, you can never use the excuse that “I forgot them at the office.” Also FREE.

WebEx: Another Cisco product, and this one tops this list for expense. Bite the bullet and write it off as an expense. For those investor pitches where you want to have a captive audience, while not having people “flip ahead” in your presentation materials, this enterprise solution with iPad app connectivity is a must-have for presentations, either in person or remotely. While not cheap, the utility is remarkable and provides for state-of-the-art presentations with spreadsheets and charts. It will make your head swirl when you can scroll through the participant’s simultaneous video and the software recognizes who is talking and brings his or her image to the front of the screen. Try the free demo and see how WebEx will hold the market until Microsoft can turn Skype into a more robust competitor for multiple users and presentations. The app (but not the host software) is FREE.

Honorable mentions

docScan HD: Be honest, how often do those important lunch and travel receipts, not to mention business cards, end up in the washer and dryer? You need to keep those receipts and copies of “stuff” somewhere and the IRS has some stringent rules on verifying expenses for deducting business expenses. Someone will develop a better app, but for the meantime, docScan HD has a mean scan app that utilizes the standard equipment on the iPad and allows for easy handling of those small pieces of paper. Save a tree, download the app. It’s FREE.

Cut the Rope (chillingo): Physics meets massive time vacuum. (Okay…it’s a game, I admit it, but it’s not technically on the list.) This game is addictive, but in a good way. If you like problem solving with a nod to Isaac Newton, this one is pretty cool. That being said, if Isaac Newton had had this game, we might have ended up with just two laws of gravity.  Its $0.99—practically free.

Doom Counter: You just can’t go wrong with a Mayan calendar apocalypse clock that not only provides a countdown of the amount of time remaining before the end of days, but also provides updates on solar flares and seismic activity. Put this app right between your Wunderlist organizer and your e-trade app and see how your daily habits change. This app actually has a useful calendar and provides feeds. Okay, maybe it’s not exactly productivity driven, but everyone needs a little motivation, right?

This list should remain current at least until the second week of January; by then Apple and Droid should have another 1,000 new apps vying for a spot on next year’s 2012 top 10 list. Have a favorite of your own that didn’t make my list? Feel free to suggest it.

Featured Comic: Friends, Family, & Fools 12/20/11

Venture Capital and Angel Investing

The Book: Venture Capital and Angel Investing, edited by Andrew M. Lane and Nicole P. Mifflin (Nova Science Publishers, Inc., 2011).

Why You Should Care: A relatively short and highly readable study of the structure of venture capital and the characteristics and behavior of angel investors.

My colleague Frank Vargas recently wrote about his experiences working with entrepreneurs in Silicon Valley during the early boom years. Some years before that, while Frank was a mere undergraduate at Harvard as yet untested by the rigors of Boalt Hall, I was already at Stanford Law School, smack dab in the middle of the Valley.

From time to time, my jogging route would take me down Page Mill Road in Palo Alto past Hewlett-Packard. All I knew about the company was that it made calculators, the kind that I had happily abandoned in my freshman year of college after fulfilling my calculus requirement (never to look back). I was blissfully unaware of any revolution taking place at the time. With interest rates in the high teens in the early 1980s, I have heard that some of my more entrepreneurial classmates would borrow for tuition at low subsidized rates, and invest in T-bills, earning themselves a nice spread from which to purchase the odd pitcher of beer at Zott’s (now known as the Alpine Inn in Portola Valley).

It only goes to show you that timing is key (something I’ve alluded to before). By the time things really were churning in Palo Alto, Sunnyvale, Mountain View, and San Jose (around the time that Frank was just starting to work in the Valley), I was sitting some 5,000 or so miles away in the decidedly not high tech United Kingdom. Sad to say, but things were not very rosy there in the early 1980s, what with the Iron Lady presiding over privatization of industry during the depths of recession. But, hey, my dollars sure went a long way, with the dollar and pound approaching parity shortly before I arrived on the shores of that scepter'd isle.

I returned to a United States in the early stages of a high tech revolution. Apple was just beginning to market the McIntosh, and Silicon Valley was now the place to be, not just for innovators, but for venture capitalists. It was around that time that I first became familiar with the concept of “angel investors”—those who provided the money to keep a dream alive until it made the radar monitored by venture capitalists.

Venture capitalists are fairly easy to identify, but hooking up with an angel investor has always seemed to be a fortuitous—if not providential—experience. The question for entrepreneurs was, and remains, who are these people, and how do we get in front of them?

Venture Capital and Angel Investing is a slim volume that provides some help on the first question, and perhaps indirectly on the second as well. The section dealing with angel investors provides all sorts of interesting nuggets of information, all drawn from studies conducted between 2001 and 2006 (and thus likely out of date for today’s economy—but  maybe the best information we have at this time).

For example, it surprised me to learn that “most angel investors are unaccredited investors, but accredited investors provide the majority of dollars invested.” Frankly, I would have thought almost all angel investors would be accredited. Between 2001 and 2003, up to 629,000 people provided an estimated $23 billion per year. (Remember, that’s not venture capital—that’s money from angels.) It is a very high risk game, and those looking for a quick return should not play. “Between 0.17 and 0.2 percent of the companies financed by angels go public, and between 0.8 and 1.3 percent are acquired.”

My assessment? This is a very good read for those interested in “more accurate estimates than were previously available of the market and demand for angel capital, the companies that receive angel capital, and angel deals.”

Silicon Valley: Hollywood for Entrepreneurs

I was a second year law student at the University of California at Berkeley Law School when I first heard about Palo Alto, California. The school had announced that a guy named Larry Sonsini was going to teach securities law the second semester. The famous securities law professor who taught it previously was semi-retired and had decided to retire early, so the school had asked Mr. Sonsini to teach spring semester. 

Larry did a great job of teaching us securities law but he also convinced a couple of us to spend the summer with his (then) small 25 person law firm in Palo Alto. He described it as a growing area for small companies where we would get the chance to both provide legal advice and mentor entrepreneurs. So that summer of 1984, eight of us descended on Palo Alto Square and received an incredibly realistic view of what recently had been labeled Silicon Valley. 

I ended up joining the firm full time upon graduation and immediately was thrown to the lions. My first week, I was the “second chair” lawyer on a number of public offerings, mergers, and venture capital financings. I also did day-to-day work for several small private and public companies. I ended up meeting and working with a number of now famous people like Steve Jobs, TJ Rogers, Vinod Khosla, and Larry Ellison, but I also spent a great deal of time advising entrepreneurs on strategy and becoming their trusted adviser.

Fast forward to today and Silicon Valley is like Hollywood for entrepreneurs. It has its superstars like the late Steve Jobs, Larry Ellison, Mark Zuckerberg, etc., but also its fallen stars. It has its melodrama and career challenging stories, like Jerry Yang fighting to save Yahoo or the continuing saga at HP. It has its money moguls like John Doer, Vinod Khosla, and Promod Haque. But the most interesting thing is that there are thousands of wannabes who have come to Silicon Valley to become a star. They work in companies just biding their time until they launch the “next big thing.” They are not just engineers but marketing and financial people. People work extremely hard and the cafes, restaurants, and coffee shops are full of people talking deals and proposals. There are also thousands of lawyers now in Silicon Valley all trying to get clients, but very few offering advice like we did in the early days. One venture capitalist told me “there are a lot of lawyers but few real entrepreneurial lawyers.”

As a lawyer in Silicon Valley, I realized then and I realize now that I really enjoy and I can really play an integral role in the aspirations of these individuals (maybe not like a director or producer, but as a trusted agent or adviser, certainly more than just a “best boy” or “key grip”). When I’m asked about the allure of Silicon Valley and what makes so many companies out here succeed, I mention the number and quality of people in the entrepreneurial community, the access to so much capital, and the willingness of people to risk everything to fulfill a dream. I also add it is those in the background away from the glory sitting up at nights with the entrepreneur or CEO trying to figure out how to make payroll this month, convince someone to invest money, or fend off the competitive threats.

The other day I was sitting at Starbucks in Mountain View (nobody can actually afford to live in Palo Alto anymore) and I met a young man who had come from Nigeria to the United States to follow his dream. More than that, he told me he dreamed of becoming the next “Mark Zuckerberg or Bill Gates.” He asked if I would help him reach his dream. I just smiled and said “sure…”

A Post by Frank Vargas, Guest Blogger

Why VCs Are Attracted To Online Wine Retailer Lot18

I was happy to receive an email this week from Lot18, my favorite online wine marketplace, announcing that the company had raised an additional $30 million in Series C venture capital financing led by Accel Partners.

For those who aren’t familiar with it, Lot18 runs “flash” short-term (sometimes lasting only a couple of hours) sales on premium wine and wine-related products, and recently added travel, food and wine experiences, and gourmet foods to its offerings. Since I’m a big fan of the site from the consumer perspective, the news of investors wanting to put their money at risk to grow this business was good news to me. Lot18.com has only been around since last November and has reportedly raised a total of nearly $50 million in investments, has 500,000 members, and did $1 million of sales in one month earlier this year.

With new flash sale sites popping up all over the place in a number of categories (clothing, accessories, food, wine, travel), this category already seems saturated with a lot of sites that will eventually be faced with an inventory scarcity or less price advantages as the economy recovers and wineries (and other sellers of products and services) no longer need to liquidate inventory at below-retail prices.

With this in mind, I looked at this most recent substantial investment as an opportunity for me to research the short history of Lot18 to examine some of the factors that might make this an attractive investment for the VCs. When I really started looking, I realized this company is getting a lot of attention from bloggers, as well as VCs, and I think these are some of the reasons why:

(1) Founders with a Track Record.

Co-founder of Lot18, Philip James, was previously the founding CEO of snooth.com, a wine-focused web site with over 805,000 members that offers extensive wine reviews, online price comparisons between wine merchants, and many other wine-related products and services. Kevin Fortuna, Lot18’s other founder, was formerly the CEO of Quigo, an advertising technology company that was sold to AOL Time Warner for $360 million in 2007. Combined, those two look to possess a very relevant set of skills and experience for this type of venture, and they are a good reminder that, when looking for investment in a yet-unproven company, proven people are very compelling. 

(2) Gradual Loosening of Regulations in a High Value Industry

Gomberg, Fredrikson & Associates, a wine industry consulting firm, reported earlier this year that the United States has just eclipsed France as the largest wine-consuming nation, and that the retail value of United States wine sales in 2010 topped $30 billion. This was a luxury industry that actually grew in the United States even during a recession, which, for a non-investing expert like me, seems like as good a place to put money to work as any.  Further brightening the future for online wine sales, states are continuing to loosen their regulations regarding interstate shipments of wine. Most recently, Maryland passed legislation allowing residents to have wine shipped directly from wineries to their homes. As these shipping regulations continue to change, investors can see an obvious path towards future growth without having to be too imaginative. As we often tell our clients who are looking for outside investment, a simpler story about the path to success is usually a better story.

(3) Differentiation from Competitors

Despite flash sales being a fairly young category of sales vehicle, there already seems to be more flash sale sites than even I can keep track of (and let’s face it, I love wine). In the wine category alone, Wines ‘Til Sold Out, wineaccess, wine.woot, and Gilt Taste are obvious competitors. I admittedly know more about Lot18 than I do about any of these competitors, but from a purely consumer perspective, I prefer Lot18 because of the excellent customer service I have received there and because it offers what appears to be a small and carefully chosen selection. Thus, the appeal of Lot18 specifically lies well beyond just discounts on the wine, which means I am likely to continue shopping there even if the discounts dwindle as the economy recovers in future years. When there are reasons a company should succeed in a bad economy as well as a good economy, any time seems like the right time to invest.

A Post by Alyssa Hirschfeld, Guest Blogger