I spent the day yesterday at Northeastern University, serving as a judge for their RISE 2012 program (Research, Innovation and Scholarship Expo).

It was an amazing day

Over 400 poster presentations covering a wide range of disciplines: Physical & Life Sciences, Computer & Information Science, Engineering, Humanities, Arts & Design, Health Sciences, Law, Business and Social Sciences.

My high school hero, Leonardo daVinci, would have been thrilled.

Topics ranged from the esoteric (“High-rate Electrofluidic Directed Assembly of Nanoparticles”)… to the practical (“Adapting the multiplex residential building into different sites in metropolis”)…to the fascinating (“Development before Darwin”).

What began to hit my consciousness about 10% of the way through the session, was the makeup of the students presenting.  Apologies to those many who are ignored, and to those who’s names I’m about to use to make a point.  Here are (somewhat) random examples: Xin Wang, Nada Alqadheeb, Tuyatsetseg Badarch, Osso Vahabzadeh, Shalini Purwar… I then looked through the program.  Out of more than 400 presentations, only a few dozen had what I would think of as familiar “American” names.

I began asking the students where they came from (India, China, Estonia, Romania, Colombia, Russia, Korea, Turkey, Iran, Mongolia… and on and on….) .. an amazing example of America’s openness to diversity.

But then the blinding realization: where were (are) the native-born Americans?  Have they (we) lost interest in higher education?  …or are they merely less committed to excellence… or less willing to attempt the difficult? (and some of these topics were stupendously difficult).  I came across a number that I felt could be the basis for a substantial commerical enterprise… unique intellectual property… fascinating concepts.

THE KILLER?: not only weren’t most born here; most were not citizens; and EVEN WORSE: many (I can’t yet say “most”) were sad to say they would be forced to return to their native country by US immigration policies.

A number of prominent people have already suggested we staple a visa or green card to every diploma… I would have gone further:  We should have padlocked the doors to the Cabot Gymnasium (where the session was held), and INSIST these 400 students stay in the US for at least five years.  The richness of experience, the intellectual intensity, and the role models they serve would enhance who we are as a nation…. and more importantly: the economic stimulus they would create by bringing their ideas to reality… could help transform our lethargic economy and our worsening self-esteem.

Immigration policies that make it difficult for such students to come here… and even more difficult for them to stay… represent the stupidest of stupid policies we have as a country.  We are not “saving jobs” by making them leave… we are committing suicide by lowering our national IQ, and exacerbating the unemployment problem by preventing numerous entrepreneurial initiatives that could result from their presence.

Those 400 students represented to me, not a bunch of “foreigners”… but the embodiment of what America is (or should be) all about.  They are, after all, the 21st century version of the pilgrims…. and we should work hard to make sure their names join the list of “American” names.

Thought for the day: Never attribute to malice that which can be adequately explained by stupidity. - Anon

AMENDMENT 5/5/2012: A few people have commented to me that they thought it unreasonable I suggest we require foreign students to stay post-graduation.  I guess it’s tough to insert emotional intent into the written word.  I meant to say it would be PREFERABLE to insist they stay rather than insist they leave.  Obviously, the optimum scenario would be to ALLOW them to stay…. ENCOURAGE them to stay.  But given the choice of maintaining the current policies OR insisting they stay as a prerequisite to allowing them the education… I’d choose the latter.

Every entrepreneur has heard of the importance of his/her “elevator pitch”… the succinct description of your business you’re supposed to have at the ready when a VC says “so, what’s your business?”.

We do entrepreneurs a disservice by calling it a “pitch”…. This should not be thought of as something separate and distinct…. crafted for the sole purpose of raising money… it should an integral part of one’s business.

As many entrepreneurs have learned, I’m obsessed with having crisp , concise communications.  If you can’t describe the essence of your business simply, how will your prospective customers ever understand what you offer?  How will your team know what they are building?  … and yes, how will investors know whether they are interested?

A recent experience crystalized this point for me:

An entrepreneur approached me… requesting help getting introduced to a venture fund where I’m an LP.

I asked him for a sentence or two I could use as a “hook”. Why should THEY want to talk with him (he had begun the conversation by focussing on why he wanted to meet with them…. I asked him to think about it from their point of view rather than his)

He sent something  …. Rambled with far too much detail without making a point.

I asked that he re-write it…. and try to get to the essence of the message in a sentence or two.

He called me a week later asking what response I had gotten from the VC to his revised message.

I apologized, explaining that I didn’t quite remember his earlier request.  He was a bit insulted… reminding me that we had spoken… and he had sent me two different descriptions of his business… and certainly I should remember the conversations.  Again apologizing for my poor memory, I asked him to summarize what he had sent in the email. 

His response: “I’m in the car, I don’t have the email with me”

I was blown away!.. If HE didn’t remember what he said about his own business, how could he expect me or anyone else to do so?

The lesson?  A “pitch” is not some artificat…. a well done “pitch” is evidence you know where you are going, and why.. and it is impactful enough to be readily remembered by others.

Thought for the day:   You do not really understand something unless you can explain it to your grandmother. — Albert Einstein

An article in today’s Boston Globe by Scott Kirsner entitled “Can Massachusetts Produce the Next Google?” sends a great message.  We are not building big companies, not because we can’t, but because we’re not trying.  We’re all thinking too much about short-term financial gain.  We need more role models where “success” is not a quick flip to make a quick buck, but rather building something with legacy potential….

His article prompted me to dust off an article I had written last year for Mass High Tech, entitled “Build Big Companies, not Big Exits”.  Scott and I are beating the same drum (and hopefully entrepreneurs will listen, and alter their aspirations slightly).  

Here’s the full text of my earlier article:

In recent years, there has been a lot of talk about how vibrant the environment for technology startups is in Silicon Valley compared to Boston. We hear how “they” have a much more active venture/angel infrastructure and how “they” build great companies, while our startups sell out in their infancy.

People in the high-tech community lament that Boston used to be THE center of high technology success — Digital, Data General, Wang and others of a bygone era are frequently mentioned wistfully — but in the last 20 years we have stopped growing major companies… while “home run” successes like Microsoft, Cisco, Google, Amazon, eBay and the like have been limited to the West Coast. In fact, we do have EMC, Analog Devices, Staples, Akamai, Biogen, Boston Scientific and emerging successes like Constant Contact, A123, LogMeIn, ACME Packet, EnerNoc, ZipCar, iRobot and others. We have lots of companies to be proud of, but apparently not as many world-renowned companies as Silicon Valley has created.

While much of the Silicon Valley/128 comparison is factually correct (there are more venture capital dollars in Silicon Valley; there are more deals; there have been more IPOs, etc.), the tone of the discussion makes it sound like Boston/128 has failed. I call it the “Rodney Dangerfield” effect: The Massachusetts technology community just doesn’t get any respect anymore.

I’ve been an angel investor for a number of years, and I have heard lots of commentary and seen many shifts in strategy and mindset in the venture capital and angel communities. It is time for another shift. I have a simple solution to the dearth of “home run” successes in Boston. I propose that we eliminate the question “What is your exit strategy?” from all investor interrogations of startups. Instead, let’s concentrate on how one builds a successful business.

I’m not sure where the emphasis on exit strategies from the get-go began. It was probably an MBA course that said all business plans must explain how investors will achieve liquidity, or perhaps it was from a period when venture capital funds had a heavy mix of 8-year-old illiquid companies. Somewhere along the line, describing your exit strategy before your company really got started became a must. But think about it: How many successful exit strategies are there?  Go public or sell the company. Are there others? 

Here’s the problem. If we aim for an exit from the start, we’re likely to get what we aim for: an exit, often through a sale to another company, perhaps one from the West Coast. On the other hand, if we aim to build great companies, we’re more likely to build the kind of company that does the acquiring.  

The metaphor of “exits” is an apt one.  If we’re thinking about exits when driving on a highway, then we slow down each time we approach one, asking “Is this the right one?” However, if we’re driving across the country focused on a goal of, say, seeing the Grand Canyon, we fly by the exits along the way, eager to reach our larger goal.  If we hear reports that the road to the Grand Canyon has developed a lot of potholes, we can turn off along the way. But let’s not have our goal be to turn off along the way.

Like all metaphors, this one is not to be taken too literally. There often are companies not designed to go all the way to the Grand Canyon, but if we plan on only driving a few exits, we’ll end up designing a lousy car, one that’s not reliable, not designed to go long distances, and one not capable of high performance.

As a longtime angel investor, I’m not insensitive to the need for liquidity.  I just think that focusing too much on liquidity too early on can sell our startups short. Let’s try this for a few years. Maybe we’ll find we stop wistfully talking about the good old days, and start talking about all the great, world-class companies that are growing in Massachusetts — once again. 

Thought for the day:  A rock pile ceases to be a rock pile the moment a single man contemplates it, bearing within him the image of a cathedral. - Antoine de Saint-Exupery

I am quite fond of getting to the essence of things… often by “dumbing down” to a simple phrase or metaphor, to make a concept easily understood and communicated.

When I saw the blog by Martin Zwilling @startupPro about the new book Nail It then Scale It: The Entrepreneur’s Guide to Creating and Managing Breakthrough Innovation it resonated with me, because it’s been a message I’ve tried to give to entrepreneurs for years, but in a less elegant manner.

I haven’t read the book…. but in my simplistic way, I’ve latched on to the conept implied by the title.  These guys have distilled nicely the essence of bootstrapping, capital efficiency, voice of the customer, and a bunch of other important concepts in one….. and all in five words.

Figure out a business model that works on as few dollars as possible… THEN raise a bunch of money to scale it.  If you raise a bunch of money first, you’ll spend it all on “nailing it”, and won’t have any left to “scale it”.

Thought for the day:  Good judgment comes from experience, and experience comes from bad judgment. —  Will Rogers

There have been a number of indications the last 9 months that things are getting frothy in certain aspects of the startup world.  Some crazy valuations… angels chasing deals and writing checks w/o ever meeting, or in some cases w/o even speaking with the founding team.

I personally have seen some deals in the $100M and $200M valuation range… deals where there has been some traction… some revenue…. but investors seem to be chasing the hot ones without letting valuation get in the way….Although full disclosure: in one of those deals, I do think the valuation will be justified in a few years.

Another more notable indicator arrived in my inbox today…..a raw startup, whose plan shows growth from $0 revenue to $1.4 BILLION in revenue in four years …. with over $250 Million in profit in year four (that’s not Gross Profit… that’s not EBITDA… that’s NET profit over $250 million in year four)…. and more interesting…. cumulative losses before they become profitable are only $700K.

While there is some chance I’ll be kicking myself for not diving in (I probably would have passed on Twitter, YouTube, Facebook, Groupon and a few more winners), but I have begun doing something I haven’t done in a while… passing on deals just because of what I perceive as inflated expectations…. including price.

Entrepreneurs are letting the recent Groupon/Dropbox success affect their expectations…. and in many cases investors are doing the same.

This is one old fart who (hopefully) won’t get sucked in.

(by the way, I DID get sucked in in 1999… about six months too late…so I hope the whole movie isn’t a re-run… only the trailer….)

Thought for the day: People don’t ask for facts in making up their minds. They would rather have one good, soul-satisfying emotion than a dozen facts. -- Robert Keith Leavitt

A few years ago, while driving to Maine for a long weekend, I received a call from a woman looking to raise money for her early stage venture. She said she offered a line of luxury cat furniture. “Excuse me?”, I asked. “Luxury cat furniture” she repeated.. going on to explain that hers was not ordinary cat furniture, but furniture designed with fashion, style, and comfort in mind. This struck me as so ridiculous that I started to giggle..forcing me to mute my cellphone while she explained her competitive advantages and unique market positioning. I had to pull to the side of the road to regain my composure. As nicely and professionally as I could, all the while biting my lip to keep from laughing, I explained that it was not a market I understood, and I preferred to avoid consumer products as being too alien to my background to take the risk…. and wished her well.

A few weeks later I ran into a friend of mine who used to own a regional chain of pet supply stores, and described for him my humorous encounter with the “cat furniture lady”. He went on to explain with enthusiasm how cat furniture was the single highest margin product category he had in his years of retailing pet supplies, and how it represented the most passionate, loyal segment of his customer base.

Boy, didn’t I feel like an idiot (a not-infrequent feeling :-). Lesson learned? - at least ASK an expert his/her opinion before jumping to conclusions. Having said this, I am NOT suggesting automatically relying on the “expert”, since I have other examples where supposed experts have expressed disdain about a company that was ultimately successful. The larger lesson: get input from experts, let their knowledge temper your judgment, but don’t blindly follow their advice.

Thought for the day:   Everybody is ignorant, only on different subjects. — Will Rogers

How do you know you have a dependable team?  When you no longer feel the need (nor even have the inclination) to “check up” on each other.  I view dependability the way a trapeze artist views (and needs) a dependable partner.  When he/she leaps off the trapeze bar and throws her arms back, she KNOWS someone will be there to catch her, without having to look over her shoulder first.  Business teams should have that same characteristic…. you just KNOW your fellow team member will fill his/her part of the assignment.

I have also used a slightly different metaphor to make a similar point: there are some people, who, if on January 1 say they’ll meet you at 8:00 AM on March 14th, you just know they’ll be there… without need to reconfirm… and there are others who say “I’ll meet you at 2:00 PM today”, and you half expect them to cancel/not show up/or be late.

Regardless of the metaphor you prefer, if your team does not share the trust and mutual respect implied by these examples, then you should have a frank conversation among yourselves and change the team.

Thought for the day:  Trust is the foundation of all good relationships. — Brian Koslow

I sometimes come up with metaphors that pop to mind in the moment, but don’t become part of my conscious memory. (as you age, you, too, will experience this trait :-). I recently had an entrepreneur tell me how in the six months following his successful fundraising, he frequently recalled my story of the nurseryman selling trees, and how instrumental the metaphor was in getting him over the “hump” of valuation. I didn’t remember the conversation, but he said it had served as an important reminder that led to a successful closing. The story?

Earlier in the year he had been having a difficult time raising money. I explained that one of the factors might have been that he was overpricing the deal (no, that’s not always the reason for not reaching closure, but I knew what they were asking, and sort of “knew” it would not be where the VC’s would end up). His retort: “but we’ve made SO much progress in the last six months… we’re clearly worth more than we were asking when we started raising money”.. to which I explained: You’re just like the man who owns a nursery.. and has a rare tree for sale for $500. He goes the whole year without selling it, but the following year says “it’s taller now… so it’s worth $600”… and sure enough, five years later he has the same tree in stock at an asking price of $1,500.. never having sold it. Clearly, while the tree was “worth more” each year, it was never worth what he was asking. Don’t be offended if the market doesn’t agree with your personal assessment…either wait until the market smartens up… or change how you are positioning the company…. or broaden the scope of your efforts…. or accept the reality that if you want money TODAY, you need to accept what the market is willing to pay TODAY. Don’t let emotions get in the way of assessing reality.

Thought for the day: It’s better to change your opinion on the basis of information than to change your information on the basis of opinion — Dr. Mardy Grothe

We used to have a dog… Gretchen…… a wildly enthusiastic puppy with boundless energy and enthusiasm.  Each night, we’d tie her to our wood-burning stove in the kitchen (she wasn’t house trained, and we wanted to minimize the “damage” her eager roaming might cause).  Each morning when I came down to the kitchen, she would come bounding toward me, until brought up short by the leash.  It took only a few days for Gretchen to learn that she could only move about five feet from the wood burning stove.  On subsequent mornings, she would jump out of her bed, and sit about 4.5 feet from the stove….. just the amount allowed by her leash.  As Gretchen became house trained, we stopped tying her to the stove…. but kept her bed next to the stove.  Every morning for the next ten years, Gretchen never jumped past her 4.5 foot “fence”…even though she was free to do so.  She knew her limits…. or at least what she THOUGHT were her limits.

I’ve used that story many times to encourage employees to not be bound by historical limits….and have used it with CEO”s to make sure their own early policies and management style didn’t send signals to their employees that there was a leash restricting their potential.

A friend of mine, Clint Battersby, passed away last week.

He was young… at least by my standards (53)… having fought a losing battle with cancer.  We had talked occasionally since his diagnosis… and got together once when he was physically up for it… He had an amazingly philosophical attitude towards his situation.. Always talking about “making the best of it”.. and always talking about life’s priorities - his wife Maria, his kids Alexandra and Andrew, and how his faith was helping him deal with things.

During my last conversation… a few weeks ago, his tone changed.  When I asked how he was doing, his only comment was “life sucks”.

Something for us all to keep in mind when we are feeling stressed.  Whenever we think “life sucks”…. compare it with Clint’s life this last year… and life looks pretty wonderful.. or at least something we should all appreciate more.

Thought for the day:  Not life, but good life, is to be chiefly valued. — Socrates