One of the reason why I quit Google and moved to Canada is because of Poutine. It is serious!

In 2006, I lived in Montreal to study French at University of Montreal and I discovered one of my favorite food: Poutine. It is a very simple food. In a big bowl, you add French fries, chicken based gravy sauce and some fresh mozzarella cheese on top. That’s the basic Poutine. I love it.

Now, I discovered that there is a restaurant in Montreal that has a very special Poutine. It’s a Poutine with Fois Gras!

I couldn’t resist it and I went there on Thursday. Au Pied de Cochon is a restaurant specialized in Fois Gras and the place is really comfy and invites people to eat seriously.

I went there and I ordered Poutine avec Fois Gras. I also ordered a special beer from the restaurant, I think it was biére de Pied de Cochon Rousse. It was a nice mix of red beer and poutine. The fois gras came in a generous size. It was mid-rare. I expected the fois gras to be more cooked so it would enable the fat from the fois gras to come stronger.

It was a nice experience for a poutine lover. Do you love poutine?

Restaurant Au Pied de Cochon

536, rue Duluth Est, Montréal, QC
H2L 1A9

514-281-1114

www.restaurantaupieddecochon.ca
Open 5PM till 12AM (close on Mondays)
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MaRS CIBC Entrepreneurship Upstart Competition 10K
This event is held in the MaRS Centre in Toronto and will feature a lot of new entrepreneurs showing their latest ideas.

Startup Camp Montreal 6
I think this event will show me how the startup scene is in Montreal. It will be my first exposure to see how the entrepreneurs in Montreal are doing. I will update about the event after.

Skopje, Macedonia
This is the most excited event of all. I will be doing volunteer work in a country that I have very little information and experience about. Differently from all other countries where I have been before, I cannot speak the local language and it is a thrill for me. In my past trips, I always could speak the local language and I normally do not face communication problems. I’m excited for the experience.

Today is a special day for Google’s Doodle team. It had to create and publish three different doodles. Except in Brazil and China, Google is showing the Winter Olympics doodle. In Brazil, Google is showing a Carnaval doodle and in China, it is showing the Chinese new year doodle.

Although not as popular and well known as the summer Olympics, the winter Olympics is being held in the beautiful city of Vancouver. Canadians are very excited for this big event.

I was curious to know that there are some athletes representing Brazil in the winter Olympics. We do not have snow in 99% of the Brazilian territory and the winter is not as harsh as in Canada. It is quite hard to develop a strong winter sport team in Brazil due to the climate. It would be very expensive to maintain artificial winter conditions in such a hot country.

I guess the Brazilian athletes train in Canada.

The Brazilian Carnaval happens once a year and it usually starts on a Friday and it goes until the mid-day of Wednesday. Carnaval dates change according to lunar calendar, which is the same one used for the Chinese new year.

Chinese new year happens according the the lunar calendar. The new year can happen at the end of January or the end of March depending on the lunar cycle.

The Google China website is slightly different from the traditional minimalist look of Google. I think that the minimalist concept is very challenging for the Chinese aesthetic point of view. Take a look at one of the most popular website in China. If you compare Google’s homepage and Sina.com.cn’s website, you can see that Google may give an impression that something is missing in the eyes of a Chinese.

However, nothing beats the cuteness and fluffiness of a typical Japanese website (http://lolipop.jp).

Happy new year (year of tiger), Carnaval and Winter Olympics!

RKP9PJUU7JTD

Kwedit is a strange name for a payment company. This is a startup that offers a new form of payment to social and interactive games that allows people to buy virtual goods. The strange thing is that it allows people to “promise” to pay for a virtual good and the user can pay the promise later with a bar code in a 7eleven store.

Even though this seems to be a great innovation, the idea of printing a bar code and pay it in a retail store is nothing new to date. The strong differentiator of Kwedit is the idea of promising to pay later. I wonder what would happen if everybody promises to pay but none of the actually pays anything. I believe that the CFO of the company would be scare of the increase in the account payable of the balance sheet.

This type of payment for virtual goods reminded me of Habbo Hotel. Habbo is a Finnish company that started its virtual goods operations before the internet boom. It is probably the first company to have a business model based on selling virtual goodies to users. Interesting enough, Habbo targeted in a very narrow market segment. Its targets on teenagers that love to chat in pixel-lated environment.

Habbo and its many forms of payments.

Habbo offers 7eleven payments too. OK, they sell pre-paid cards and Kwedit doesn’t.

In my humble opinion, Sulake could have grown much more if it had focused on the virtual good market as a whole market instead of just that niche teenager segment. It could have created a strategic plan of reaching all types of games and services based on virtual goods. Well, other companies grew upon this model and they are newer than Habbo. C’est tant pis.

CrowdFlower is a company that allows companies to outsource their repetitive tasks such as data verification and filtering. I think initially this can be very useful for internet companies that need to have content verification and data check services. Usually, it is not cheap to hire people to do this kind of job and the error rate is quite high for this type of repetitive task. I think the value proposition is to offer this type of service where companies do not have to hire people and have higher quality of service. It is a promising service.

The company received an additional of $5 million funding as stated from http://bits.blogs.nytimes.com/2010/01/20/crowdflower-raises-five-million-to-boost-crowdsourcing/.

I found out a quality of life index of over 100 countries. Canada is positioned at 11th together with other 8 countries.

Quality of Life Index 2009

Read more here.

The smartphone industry is moving to follow the same path of the personal computer (PC). Both industries have a lot of manufacturers. For example, Dell for computers and Motorola for smartphone. PC and smartphones have operating systems. For PC, the major OS is Windows and for smartphone, there are more than one major operating system. There are iPhone OS, Blackberry and Android (Google). It seems that there is a platform war among the manufacturers and Google. Imagine that a company can implement a system that is used by most of the cellphone manufacturers. This company will be able to control the smartphone industry, just as Microsoft controls the PC industry.

Nexus One Homepage

Google launched its official cellphone with Android operating system today. It is entering the smartphone market by providing a free OS to cellphone and aligning with manufacturer to provide a better user experience through better applications and superior hardware.

Google may reach a dominance in the smartphone market if it can have more manufacturers using its OS. However, manufacturers are not going to rely 100% in one software company. At the same time, most industry players do not have core competency in software development, thus they may rely on Google Android this time.

Meanwhile, iPhone is growing and Blackberry is responding to the new threats in the market. Nokia and other cellphones company are losing ground. It is an interesting time for this fast changing industry.

My 2 cents.

Very very interesting way to see history, politics and graphics.

These guys are great in doing info visual stuff.

http://www.blog.biggerpicture.dk/our-history-visualized/

It is so hard to come up with a nice name for startup or new blog when most of the basic names are all registered. Then, most people come up with strange or too creative names to their website which are hard to search. But imagine that you can search for domain names with prefix and suffix easily and Nomaine can provide that type of domain name search. I will use this tool and some others (Google Insight for Search) for domain name registration.

http://nomaine.com/

Bookhu is a book review website that shows if a book is read more by men or women. It is a food for thought website. It shows if I have more male or female preference. In my searches, most of my books related to entrepreneurship, venture capital and languages are read more by men. However, my books related to culture are read more by women.

The Science of Managing Search Ads

There is an amazing article about Google AdWords from the New York Times.

It illustrates the management of an online campaign in AdWords for a company called Tiny Prints. This company advertisers on Google and gets a substantial part of its revenue and customers from AdWords. The company has stopped advertising for a day, trying to decrease its acquisition cost, but it ended up losing customers and allowing competitors to grow. Its management team decided to advertise again and it started to manage its campaign more closely, balancing the ads spending, competitors’ bids and profits.

The article gives an accurate view of how advertisers live with AdWords. To have success in that platform, you need to have quick decision, money and knowledge to use this powerful tool.

Read more here: The Science of Managing Search Ads

This is a special blog post dedicated to Brazil’s venture capital firms.

Before getting into the list, I want to make it clear that private equity investments are much stronger than venture capital investments. There may be four reasons for a small venture capital market in Brazil:

High interest rate – competition for capital, government bonds are much safer and provide better return, the current real interest rate is over 8%.

Entrepreneur unwilling to exchange equity for capital – the idea of having a 3rd party controlling or on the verge of controlling someone’s company is not very common yet.

Venture capital is unknown – the word venture capital is not a very known word in Portuguese, some people call venture capital as Capital Empreendedor or Capital de Risco in Portuguese. A literal translation of those two words is  entrepreneur capital or risk capital respectively (capital risque in French and riskkapital in Swedish). The meaning of risk is too explicit in those words.

Capital competition from other source of funding – there are big private equity firms and very wealthy individuals that can take the risk of new ventures easily, the capital is highly concentrated.

Sao Paulo - Copan

That is why there are not many venture capital firms that have look and feel of a American or Canadian venture capital firm in Brazil.

Here are some of them:

Monashees Capital + – currently with 7 portfolio presented to the public, Monashees is one of the two firms that fit into the typical venture capital firm (early stage investment, nurturing startups).

Adrenax Capital – this is new for me. It is dedicated to early stage and high-tech investments. This is the second firm that fits into the definition of a typical venture capital firm.

FIR Capital – a hybrid of venture capital and private equity firm, linked to DFJ.

Ideiasnet – This is a hybrid of incubator and venture capital firm.

Rio Bravo - imagine Goldman Sachs + Carlyle + Sequoia in one single firm.

Green Capital – private equity in green tech. Green tech is usually related to agro and ethanol industries in Brazil.

Invest Tech – a fund that invests in technology firms.

DGF Investimentos – it is a venture capital and investment fund firm.

Brazil is such a big country and I am puzzled to see that the venture capital industry is still so small. If the Brazil’s economy continues to rise, maybe there will be market space for more venture capital firms. Also, Brazilian people are known to be very creative and talented. There is no lack of talents for development of new technology and companies.

Lastly, most of the venture and investment firms are located in Sao Paulo. If you are interested in investing in Brazil, this is your city.

If you have any interest to know more about current condition of investing in Brazil, please drop a comment and I will post more things about it.

I am very impressed and glad by the speed that Stribe has replied to my post. A good entrepreneur should be able to react to the current dynamics of how people comment and make opinions about his product. A fast reply like that is a plus. He got me from this positive attitude.

I registered for the beta and I will check it out and compare with other similar tools from the web. I will update my findings in another blog post once I tested them all.

Below is the reply from Kamel, the CEO of Stribe.

———————————————————–

Hello Chim Kan,

Thanks for sharing. it’s very interesting to have your point of view. I am going to try to show you the key differences between Stribe, Facebook Connect and Google Friend Connect :
- Stribe is an embeddable White Social Network. That means the social network can be fully branded with look & feel of the website;
- Stribe is a B to B service. The ownership of data and content generated by the users of the community is the ownership of the “Stribed” website.
- Stribe provides the analytic of the social activity of the community to let the website drives and understand their members online;
-There is no downloading neither technical requirement to stribe a website. Indeed, you just a Javascript code let you embed a Stribe Social Network. All Internet users will be able to see/join/share with your community IN your website without downloading anything.

Finally, the speed of the website is not impacted by the Stribe Social Network because it is loaded only if the end-user want to interact or engage with the community.

What do you think about these explanations? it is helpful to better undersdand our value proposition?
Feel free to contact me to move forward.

Thanks again for sharing.

All the Best,

Kamel
@stribe

——————————————————————————–

It is hard to make money on the Internet. Currently, there are two famous ways to monetize on the Internet: advertising and e-commerce. In the advertising side, we have Google AdWords, Yahoo Marketing or Microsoft Advertising. These companies make money by having big audience that attracts advertisers’ money. For instance, Google gets money when users click ads. In the e-commerce side, we have eBay, Amazon, Newegg, etc. They gain profit from buying low and selling high price. They have strong brands and first-mover advantage. It is almost impossible to create a company to compete against these behemoths.

However, that did not stop entrepreneurs to come up with more startups. A lot of entrepreneurs created other viable ways to make money on the internet. One of the most interesting way is the Make-Your-Own-Stuff Web 2.0 companies. They are characterized by Ajax site structure with big buttons and fonts and crowdsourcing or customization features in their websites. They make money by selling cool things that a lot of people like. Some companies sell t-shirts, mugs or print arts for your iPhone.

I’m going to present four companies that fit in this Make-Your-Own-Stuff Web 2.0 category:

Threadless home page 2009 winter

Threadless is a company that sells crowdsourcing designed t-shirts (from Chicago). Simply, people send their t-shirt designs; other people vote for the best and cool designs; Threadless make t-shirts from those winning designs to the mass. People buy them. [This is a classic successful web 2.0 company that relies on crowdsourcing and social interaction.]

Gelaskins Canada Startup Homepage 2009

Gelaskins is a Canadian company that sells cellphone and other electronic gadget special skin protection with very interesting design. They have a lot of designers that create cool designs for all those cellphone protectors. The protectors are made of a special plastic-rubber easy to remove and glue that not only make your iPhone or Blackberry more beautiful, but also protect your gadget from scratches. [Great potential to grow.]

Scarfmaker an Estonian startup

Scarfmaker.com is a startup from Estonia and it allows users to customize scarf with their own designs. I think the idea is great and it may grow very very fast. Currently, I think the company is backed by Swedish VCs. I will be watching the developing of this company.

Crazy Custom Caps Home page 2009

Crazy Customs Caps is a typical company that offers customized caps. There are many many companies that allow people to create customized caps but not many of them set up a website. Although, the idea of this company may not be original, the business framework of allowing users to customize their products is definitely catching on in the web 2.0 landscape.

All these companies belong to the e-commerce category of money making website, but they are able to compete against big players because they have a special value proposition to customers. Most of them offer unique items created by the crowd or by user’s customization of the product. Interesting niche market.

I was using Hunch this weekend to see how it works. It is a quiz guessing website. You make questions and it gives you its hunch about what the best thing is for you.

I chose the What’s the best profession for me quiz. It started showing me the following questions:

And I’ve got the results here.

Windside – A Different Kind Of Wind Turbine.

Read more: http://www.arcticstartup.com/2009/11/13/windside-a-different-kind-of-wind-turbine/

I’m currently taking the MBA course at Ivey business school here in Canada. I started on August and it is impressive how many things we learned until now. I am very sure that I do not see business, organizations, finance, accounting and career management in the same way as I used to. Even though I’m just here for about 4 months in the course and in Canada, my knowledge about business has improved significantly. For instance, I can provide assessment in the optimal capital structure of a firm, I can read and understand balance sheet in the point of view of managers, investors and shareholders, also I am starting to see how strategy can drive employees and managers behavior and how a leader can drive the direction of a company.

The course lasts for 1 year and its main focus is in general management.

Besides the academic life of an MBA, I’m participating in many different activities. Maybe too much.

I’m one of the four Executive Directors of LEADER Project, a student run not for profit organization aimed to teach entrepreneurship in universities in Eastern Europe countries (Russia, Macedonia, Moldova and Ukraine). I founded with Ali the Innovators club. I’m member of the Finance, Entrepreneurship, Marketing, Wine and Presentation Skills clubs in the MBA side and I’m member of the French, Portuguese and Visual Arts clubs in the University of Western Ontario side.

Also, I’m creating a business plan with John, John, Matt and Pema. We think we may have a great opportunity in the online advertising industry (I always worked in Internet monetization, my expertise). Besides, I’m participating in the Canada’s next top ad executive competition with John. I will also participate in some others competition in the beginning of next year.

After all of this, I’m also making some new friends! Friends from China, India, Venture Capital industry, Automobile industry, Canada, Peru, etc.

A lot of things are happening, that’s why I am not updating my blog as much as I used to. The great thing is I’m able to manage and prioritize all my activities. Thanks for my Google experience where I learned how to do things fast.

My next posts will be focus on the monthly Canada’s Venture Capital Firm list (I’m posting on December 3rd). I will add more information for each of the firms. Also, I will resume my posts about the case studies from the Entrepreneurial Finance from the MIT OpenCourseWare. I promised in the beginning of this year that I would go through all the cases from that course at MIT and I think I am much more prepared to discuss the cases in that course.

Here are some of my previous posts about the Entrepreneurial Finance course:

Horizon Communication

Venture Capital Valuation Method

What happens when the schedule slips in startup?

Technical Data Corporation

I will resume from the Horizon Communication case. Probably, I will make a podcast for about it.

Stay tuned!

Internet Speed and Costs Around the World

I wonder what people in each of the high Internet speed market do.

The Back of the Napkin: Solving Problems and Selling Ideas with Pictures

I read this book and it is really great to show a new way of structure problem solving framework.

It provides a a good introduction about the benefits of the visual thinking. Then, it provides a step-by-step walkthrough about how to detect, solve and show problems through the use of our visual faculties.

It first shows us how we can enhance our ability to see critically by looking, seeing, imagining and showing. Then, it provides the SQVID method of analytical thinking. It helps our right-side of the brain to be better connected to the left-side. So, we can draw and think at the same time. Moreover, it provides the [6][6] framework that helps us to problem solving.

The book is very easy to read, but it does not lack anything from its simplicity. It provides a complete framework solution for business issues and it’s a great book for those who wants to see creative ways of problem solving.

I would also recommend this book for those who loves TUFTE. Tufte’s books give guidelines of what is good or not in the information design knowledge. The Back of the Napkin provides the how to create amazing graphics and pictures of our problems.

TiE Young Entrepreneurs

I love this competition. It is one of the firsts business competition towards students from 9-12. This business plan is hosted by Carolinas – The Global Network of Entrepreneurs and the award for the winning team is USD 10K.

It is important to foster this type of competitions to children and teens. They will be able to learn and train their guts about the process of creating a new business.

For more information check it here.

Canada - USA - Niagara Falls

People in the venture capital industry know that the VC industry is not going well in Canada. That is why it is even more important to know the situation in a quatitative point of view.

The SME Financing Data Initiative is a government website that publishes quarterly reports about the venture capital industry in Canada. The summary is that the level of investment and funding is the lowest since 2003.

VC investment and fundraising, Q1 2008 and Q1 2009

There is an increase in the number of investment in the seed stage startups. However, all other stages of deals fell.

VC investment by stage of development, Q1 2008 and Q1

Also, you can see better how the distribution deals in Canada per provinces is.

Number of companies receiving VC by province, Q1 2008 and Q1 2009

I haven’t added all the number, but the impression that I have is that the venture capital activities in Canada is decreasing significantly. You can read the whole report here: http://www.sme-fdi.gc.ca/eic/site/sme_fdi-prf_pme.nsf/eng/h_02156.html

I took the report from the Money Tree Report from PriceWaterHouseCoopers and there is a lot of interesting results.

According to the report, the number of deals remained flat but the value increased slightly compared to Q1. But if we compared to Q2 2008, the value of investment drop 48.6%. In this perspective, Canada is not doing that bad at all.

Number of deals in US

Another interesting fact is that the number of seed stage investment increased as in Canada.

Seed investing increasing

This is actually good news. The more we invest in early stage company, the more growth we can expect in 3 – 5 years. So, those who want to gain fast money should not get into the venture capital industry now. But, it is important to get into this industry now to invest in new companies and expect a good exit in 3-5 years; this is the average needed time for a company to mature for an IPO.

The current situation in the VC industry is not good. But, actually, this is a good opportunity to have a readjustment in the industry, lower the valuations and we may have a better return from the portfolio companies in the next 3 -5 years.

I’ve just read news from Revista Exame, a prestigious Brazilian weekly magazine, which talks about the new generation of entrepreneurs in Brazil. According to it, there are 10 million of Brazilian entrepreneurs and the new generation of entrepreneurs are creating companies because they believe they have the skills and will to do it. Compared to the older generation, a lot of self-described entrepreneurs had to open a company because they were not able to get into the job market.

10 million of entrepreneurs in Brazil

Then I went to the Global Entrepreneurship Monitor website and I downloaded the GEM 2008 report. It is a comprehensive survey about entrepreneurs in 43 countries. It separates these countries in 3 categories: Factor-Driven Economies (economies that depend on natural resources mainly), Efficiency-Driven Economies (economies that rely on the economy of scale or comparative advantage in production) and Innovation-Driven Economies (economies that rely on the invention of new technology).

There are some interesting data.

For instance, it seems that the less developed the country, the stronger entrepreneurial activity in that country.

Early-Stage Entrepreneurial Activity Rates and Per Capita GDP, 2008

Early-Stage Entrepreneurial Activity Rates by Gender, 2008

However, the entrepreneurial activity in Technology sector is stronger in more developed countries such as Canada. Although the GEM report doesn’t explain why this happens, it is intuitive to know that the development of high technology needs a strong education system in the country. That is why that you can see that countries such as Australia, Ireland, Denmark and Canada have the strongest entrepreneurial index in the Technology sector.

Percentage of Early-Stage Entrepreneurial Activity Active in Technology Sector, 2002-2008

The Ex Post Facto blog commented about a report from the Center for Economic and Policy Research August 2009 about the percentage of total computer-related employment in companies with fewer than 100 employees. It is interesting to see United States in the bottom of the graph. You can find that Italy, New Zealand and Austria have more small companies in the computer-related services than the US.

Ex Post Facto - Entrepreneurs in the US

Definitely, this doesn’t mean that United States lag behind in the entrepreneurial activity. It is totally the opposite. United States have the Silicon Valley.

All these data do not account other many particularities for the US entrepreneurs. Even though the US main not be in the top position for any entrepreneurial index, it does have a strong entrepreneurial culture and environment.

In my experience, there are some strong cultural traits that you can only see in the Silicon Valley:

-          Belief that one can get rich by starting up a new Google or Apple.

-          Low opportunity cost for entrepreneurs.

-          An unusually high concentration of venture capitalists per square foot in the region.

-          A lot of stories of very successful entrepreneurs.

-          Great universities and culture for innovation.

-          Local culture that see failure as a good thing instead of a bad thing.

-          Also, a lot of young people want to follow the entrepreneurship path, instead of going for the traditional and stable way of life/ career (medicine, lawyer, corporate life, etc.)

In comparison to Brazil, most university students and young people don’t have the same type of culture or thinking. Maybe, there is a huge difference of opportunity cost in becoming entrepreneurs.

-          Most university student aim to get to work in a big multinational or for the government.

-          Most jobs don’t pay enough for young people to sustain themselves, so most young people live with their parents until late stage of their lives.

-          Families pressure their sons to follow a more stable career path.

-          There are not a lot of successful entrepreneurs stories to tell, or those who are successful have some kind of special background that most Brazilian don’t have (rich family support, family have money to send children abroad, etc.)

-          Universities in Brazil are followers or they don’t have great innovation in high growth industry such as internet.

-          Venture capital industry in Brazil is still in its infancy (Private Equity is much stronger in Brazil, GP Investimentos is the top firm in Brazil)

As you can see, these “soft” attributes cannot be accounted in any of the researches you have on the market. I believe they can make a significant difference in determine if a country or region will have its own Silicon Valley.

There is a news from the CNET that tells that Smartphones and low-cost handsets will keep dominating the wireless market. The post tells that despite the fact of economic downturn, demand for smartphone remained high and this category grew 27% compared to the same quarter a year ago. Also, smartphones have been the fastest growing segment of the mobile industry. Moreover, the prices for smartphones have been decreasing steadily in the last 5 years.

In my experience, smartphones were quite expensive. For instance, Palm Treo 700p was launched on 2005 and its price was around $650.00 with a two year contract. Now, you can get an iPhone with 8G with two year contract for about $99.00. I am not even counting the fact that we can do more things in the current generation of phones and we have more services than in the past.

Palm Treo 700p with two year contract around $650.00

From Gartner report from 2008, Market Share: Smartphones, Worldwide, 4Q08 and 2008, the Global sales of smartphones in 2008 reached 139.3 million devices, up 14% compared to 2007 . The smartphone market is definitely growing. It is expected that with the economic rebound, people will upgrade their mobile phones and they may buy more smartphone if the service costs and the phone become cheaper.

Looking at the Table 4, Worldwide: Smartphone Sales to End Users by Operating System, 2008 from Gartner, we can see that in spite of the 13.9 growth for the overall smartphone market, Research in Motion and Mac OS X grew really well with 96.7% and 245.7% respectively.

Smartphone market landscape 2007 - 2008

This type of growth is similar to what happened with the PC industry during the 80s and 90s.

As you can read these excerpts:

Chip makers post record results bolstered by booming PC sales

HOME COMPUTERS, 1994

PC Sales Over Holidays Rose 33% From '93 Level, 1994

Strong Gains For U.S. PC's, 1995

As you can see 1994 and beyond were the years when the PC industry had the greatest growth in history. The growth relied on the consumer market. While B2B has always been the initial driver of the PC industry, the B2C market was essential for the popularization of the personal computers.

Also, late in the 1997, the PC manufacturers started to sell PC in the sub-$1,000 category. This happened at the same time with the first big internet growth (Yahoo!, Amazon.com, etc.) and the high adoption of internet. In the following graph from ITU, the internet user’s rate grew 70% (the blue line from 97 and 98).

Internet users per 100 inhabitants 1997-2007

Also, the sales of PC grew immensely with the introduction of PC that cost less than $1,000.

Sub-$1,000 PC sales soar

As you can see from 25-Years PC Anniversary Statistics , the number of units of PC sold jumped from 5.7 million in 1981-1985 to 1,540 million in 2001-2006. That is a 27 times growth!

25-Year PC Anniversary Statistics

25-Year PC Anniversary Statistics Chart

Although, we do not have the power to see the future, there are some patterns from the PC industry that shows us that the smartphone industry will also have a spectacular growth. Definitely, there are differences, such as the number of operating systems and platform and also the fact that in the wireless industry, the manufactures and the carriers have a big say in the definition of the market, but undoubtedly, smartphone will growth.

And if the smartphone market grows as big as the PC industry, there will be a lot business opportunities and innovation.

Folha de Sao Paulo - Prestigious newspaper in Brazil

It is nostalgic to see some of my texts written for Folha de Sao Paulo in 2003, a prestigious newspaper in Brazil.

I worked for a couple of time and I wrote technology news, such as new wireless and mobile services, reviews about new notebooks, digital camera and printers and big technology expositions, for the newspaper. It was a great experience to work in one of the most respected and trusted newspaper in Brazil. Also, I was a huge fan of the newspaper, so knowing how the company works was great.

This experience laid a solid base of my PR and media sensibility.

Here are some of the news I wrote at that time (Portuguese only):

Serviço Download é novidade da Telesp Celular na Telexpo 2003
Câmera digital tira fotos e passa vídeos na rede
Câmera faz auto-retratos faz auto-retratos
Primeira impressão: Rede pode falhar ao enviar fotos

I hope I will be able to write news in some Canadian newspaper some day. Obviously, it will be about technology.

Thanks Googlers!

Last Friday (July 17th) was my last at Google as a AdWords Product Specialist in Brazil. It was a fun, growing, interesting, deep, challenging and awesome experience.

As a Google fan, I was lucky enough to work in the product development, engineering, marketing, project management, education, training and sales sides of this great company. I was able to see the wholeness of how this behemoth company works and the more I knew the company, the more I admired Google.

Besides that, I admired Googlers the most. Googlers are extremely smart, intelligent and nice to work with. They do have a really high standards about any kind of work. That environment challenged me to do my best and to grow even more.

It was sad my last day, but I believe I will see my coworkers from Google someday again.

Now, I’m focus on my MBA in Canada.

Some of my Google experience left on the Internet:

Novos Recursos do Google Analytics (in Portuguese only)
Google University – AdWords Além da Busca? – SMX Sao Paulo
Google Developer Days 2007

Evan Williams

I became aware of Evan Williams from Founders at Work: Stories of Startups’ Early Days. He had a great and very interesting story about how he founded Blogger and all the hardship he had with it. I think one of the most interesting point is the disagreement he had with the other founders and employees from Pyra Labs. Given the Internet burst, it was really hard to sustain Blogger at that time. The whole team, except Evan, left the company and he worked to have the company running alone for a couple of months.

From the book, you can see that he could sustain Blogger for a while by himself. This happened because there were some paid services from Blogger. Also, in the very beginning of the service, he had asked the users to donate money to buy more servers and other thing.

Of course, all of this became history when Google acquired Pyra Labs. Read more about this here: http://searchenginewatch.com/2165221

Not only, he could cash in his project, but he could develop Blogger in a very different way within Google.

However, he didn’t stay long. After 1 year and 8 months, he left the company by his own decision and he was planning to start another company. You can read his blog post about his decision to leave Google.

Instead of founding a very different company in a different industry, he founded a micro-blogging site that everyone knows now! Twitter.

It looks there is a pattern in the way how he works. He founds a communication platform company, the company gets huge buzz and he sells it to other company. Interesting indeed.

Koenigsegg's car with Saab logo

I’ve been following many news related to the GM’s sale of Saab to Koenigsegg and I’m very curious about the outcome of this situation.

I searched Google to see if there was any news of small companies buying big companies and I couldn’t find any results to that, instead I found many news of big companies buying smaller firms.  Then, I made some changes in my query and I still didn’t get any results of small companies buying a bigger one. However, I’m sure that there are a bunch of history of small companies buying big troubled ones or at least their brands.

Two examples:

• Infogrames buying Atari, read more at Wikipedia.
• Rackable Systems buying Silicon Graphics, read more at Wikipedia.

As in this little research, most companies bought the troubling ones because of the brand. It is quite hard to see a small company buying a larger one because usually, small companies do not have capital to buy any company at all.

That is why it is fascinating to see the merger of Koenigsegg and Saab. Koenisgsegg sold only 20 cars around $1.2 million each last year. Meanwhile, Saab sold over 5o,000 cars units during the same period. Koenisgsegg is receiving many many support to acquire Saab. First, it has $600m loan from the European Investment Bank guaranteed by the Swedish government, and a dowry from GM in the form of platforms, powertrains and about $500m in cash and other assets.

Then, Saab’s Creditors agreed to write down 75% of their debt!

This merger looks more like this: GM and the Swedish Government “hired” Koenisgsegg to clean up or infuse a new life into the company.

I would love to see how successful this ‘marriage’ will be. Some cars enthusiasts’ sites say that it would be great to have Koenigsegg technology and hype infused into the Saab products. I wonder what Koenigsegg is thinking about this. Maybe, it would be great for them to have a platform where they can mass produce their extremely cool cars to the world.

However, there are many risks for this strategies. How could Koenigsegg adapt its designs into the production line of Saab and how the small Koenigsegg’s team can hope to manage the bigger and fatter Saab management and company’s structure?

I wish them luck!

News related to Saab and Koenigsegg sale:

Unstable Storm – Economist.com
Saab’s Creditors Agree to Sharply Write Down Debt
Koenigsegg buys Saab: The automotive gods may smile upon us once again
Google News: Saab & Koenigsegg
512-HP Koenigsegg Quant Solar-Electric 4-Seater To Enter Production
Geneva 2009: NLV Quant by Koenigsegg

A new study by the Ewing Marion Kauffman Foundation, Right-Sizing the U.S. Venture Capital Industry, states that venture capital industry’s return is under performing because of the current size of the industry. It says that by reducing the it, this industry may increase its return.

The logic is that the VC firms won’t have that much money to make high valuations in startups, so the return will be higher naturally.

Kauffman says The US VC industry must shrink

This report is in tune with what I am reading from The Money of Invention, How Venture Capital Creates New Wealth: Paul A. Gompers, Josh Lerner. Josh Lerner’s book states clearly that if the supply of money from limited partner is high, while the demand of investment from startups is the same, the consequence is lower return.

This is incredible.

You can read more about the Kauffman’s paper here: http://www.kauffman.org/newsroom/venture-capital-industry-must-shrink-to-be-an-economic-force-kauffman-foundation-study-finds.aspx

Wow, this is increadible. 

Facebook is receiving $ 200 million for 1.96%!
 To calculate the post valuation, we just need to do this:

X = post-valuation
X = 200 million / 0.0196 = 10 204 million = $ 10 billion roughly.

Amazing how this company is able to draw more investment. 

Read more news about this event here:

Russian firm invests $200 mln in Facebook
What Is Facebook Actually Worth?
Why Facebook needs DST in Russia

In any negotiation, it is important to establish these four points:

- Maximum point

- Fair price

- Minimum point

- Walkaway point

For example, when someone is negotiating salary, it is important to established these four point.

Let me illustrate this:

A venture capital associate at Vulcan may have salary varying from:

Vulcan Analyst Salary

http://www.glassdoor.com/Salaries/Vulcan-Analyst-Salaries-E3037_D_KO7,14.htm

So, the candidate for salary negotiation might have these:

- Maximum point:  $ 125k
- Fair price: $ 98k
- Minimum point $ 70k
- Walkaway point $ 65k (just for illustration, it could be the minimum wage if the person is desperate)

In this example, I’m not considering the experience level. Obviously, the more experience you have, the more leverage you have to ask for higher salary.

Once with these number, it is easier to justify why the person should get a higher salary. Also, you will have a better picture of what you should ask for yourself.

Best alternative to a negotiated agreement or BATNA is a term that describes the alternative options that someone has in negotiation. When the parties do not reach agreement in the original proposals, each party will try to reach a “second best” mode.

For any negotiatior, BATNA is one of the essential step for preparing a negotiation. Also, it is important to know what BATNA is for the other party. This information can be used to smooth out the differences in any negotiation.

Following BATNA, it is also important to answer these two questions:

- Why am I negotiating?

- Why are they negotiating?

DreamingWith BRICs: The Path to 2050

BRIC is an acronym which means the fast growing developing economies of Brazil, Russia, India and China.

The BRIC concept was developed by Goldman Sachs’ Dreaming with BRICs: The Path to 2050 article.

The article states that if these countries follow some of the recommended conditions for growth such as macro stability, institutions, openness and education, the BRIC countries will be better prepared to achieve economic hegemony in 2050.

The article says that in 2050, Brazil, Russia, India and China will become a larger force in the world economy. Goldman Sachs used the latest demographic projections, model of capital accumulation and productivity growth to map GDP growth for each of these countries. Some of the highlights:

- The BRICs economies together could be larger than the G6 in US dollar terms
- About two-thirds of the increase in US dollar GDP from the BRICs should come from higher real growth
-The key assumption underlying our projections is that the BRICs maintain policies and develop institutions that are supportive of growth
- Higher growth may lead to higher returns and increased demand for capital
- Rising incomes may also see these economies move through the ‘sweet spot’ of growth for different kinds of products, as local spending patterns change

Read more at: http://www2.goldmansachs.com/ideas/brics/book/99-dreaming.pdf

Startups and Venture Capitalists Beware

I found an interesting post from Matt Eventoff (http://www.matteventoff.com) about how entrepreneurs should be careful of how to communicate to venture capitalists. 

He tell us that entrepreneurs should get a central message and practice the presentation. 

Basically, a lot of entrepreneurs do not get to the point of presentation. Usually, people present the potential of their products or how cool they are but they miss the main mission or objective of the presentation. In the case of an entrepreneur, he should pass the message getting funding, for example.

I personally agree the practice part. I usually practice 2 to 4 times my presentations about saying out loud to an imaginary crowd. I practice my voice, non-verbal clues and eye contact. The results are pretty good by the feedback I receive from Googlers.

Read Matt’s post about his communication tips here: http://www.matteventoff.com/venture-capital.html

There is a very interesting article about this question: http://bits.blogs.nytimes.com/2009/05/14/do-web-entrepreneurs-still-need-venture-capitalists/

It basically says that given the lower cost to create web companies, the current venture capital model may not be attractive enough for those web entrepreneurs. It gives some examples such as the iPhone Apps developers that do not need a huge  amount of money to create their products. 

However, it ends the article saying that is why some venture capital firms are changing its strategy by creating special funds for this type of development or some VCs creates smaller fundings specially designed for these web entrepreneurs.

I believe it is a must read for web VCs and entrepreneurs.

Leslieville is home to an array of cafes and antiques stores.

Toronto is a very international and diverse city. It is one of the biggest city in Canada with 2.5 million of people (Greater Toronto has 5.6 million). 

I went there three times in my life and I have to say that it has its own big city charm with its Eaton Center and the Queen West District. Compared to other Canadian cities, it has a metropolitan vibe with its traffic and people rushing to schools, work and entertainment. 

It has a strong theater, music, painting and modern art scene. 

You should read the New York Times ‘36 Hours in Toronto‘ and follow its recommendation of how to visit this pretty city.  Also, visit my Google Maps that I created based on the article.

This is a rough view of the venture capital investment stages. These stages are for guidance only. In the real world, there is no standard in the classification of the investment stage. Sometimes, you can read number of rounds of investment. Other times, people will use the classification as stated below.

Angels investors

Angels investors are wealthy individuals who can invest in ranges from $50,000 to $1 million or more. They also provide expertise, experience and networking. They may perform the same roles as a venture capitalist.

News related to Angels investments

Getting Your Due
Angel investors commit less, but stay active in 2008
Houston tech startup wants to be all about you
Hoosier startups a bright spot in venture capital market

Seed stage

It is also a concept stage financing. The VC invests to allow the entrepreneur to spend on marketing research, patent application, incorporation, formation of the senior team and the company. Most VCs do not invest startups at this stage.

Funding value range around: US$ 100K to US$ 4 million (internet companies receive the least amount and the medical/green tech/energy companies receive the most)

News related to Seed investments

Burnaby startup finds inspiration in the sun
Automation Alley Invests $350K In Two Firms

Startup or Early Stage

In this stage, the entrepreneur already incorporated the business, but it has not yet started the commercial operation. Usually, it has the prototype or the final product developed.

Funding value range around: US$ 500K to US$ 5 million

News related to Startup investments 

Providence DNA research company receives $4 millioin
Tech new engine of Central Canada
Monica Healthcare, neonatal care startup, gets $1.6M
Investing dropoff hurting biotechs
Capital Factory Invests in Five Startups for 2009 Fund; Early Stage Technology Incubator in Austin, Texas AlsoRecognizes 5 Additional Finalist Startups
Prize CapitalTM Announces Due Diligence Phase for $10 Million Algae Fuel Prize 

First Stage or Round/Series 1/A or Formative Stage

Most startups in this stage already commercialize their products and have less than 3 years of existence. There is already a management team. Some companies have reached the breakeven point.

Funding value range around: over US$ 1 million (depending on the industry, the value can change drastically, the focus is on the company’s organization and the commercial stage)

News related to Series A investments 

Weekly Investor Round Up
Burnaby startup finds inspiration in the sun
AXIGEN Announces 2 Million EUR Investment
WebEx Founder Backs Chint Solar, Contributes to $50M Round
Energy Storage Rumors: Deeya Raises a Round; Bloom Piles Up Customers
Photovoltaic cell co B-Solar raises $3 million

Second stage or Round/Series 2/B

The startups at this stage already have a clear business model and they are already making some money. It has the management team and some employees. Usually, companies at this stage need capital to advance quickly the marketing and commercial efforts.

Funding value range around: over US$ 5 million (depending on the industry, the value can change drastically, the focus is on the company’s organization and the commercial stage)

News related to Series  B investments 

Auditsolutions is now Lavante, closes $5M in series B financing
May 2009 BUSINESS BRIEFS 
Microsoft: Restart or Logoff?
Turning Out The Lights: Ugobe, Maker Of Robotic Dinosaur
10-K/A: VANDA PHARMACEUTICALS INC

Third stage or Round/Series 3/C

If the company reaches this stage, it has a strong sales and customer base. Sometimes, it also has mid-level managers. The fund is used to increase more marketing, working capital, product development and expansion.

News related to Series  C investments 

Australia snares Silicon Valley wireless start-up

Mezzanine or Bridge or Expansion or Later stage

At this point, the company is going to IPO. The money is used to clean the balance sheet, remove debt and buy out any problematic investors or founders.

Initial Public Offering (IPO)

This is the checkpoint that all venture capitalists want to reach. The company’s shares are totally liquid. It means that they can sell the equity / shares they bought from the founders in the early stages of the company.

Shrinking Canada VC market

The Canada’s Venture Capital & Private Equity Association released a report yesterday (May 12th) that the venture capital market continues to fall in the first quarter of 2009, continuing the shrinking trend from 2008.

In the Canadian landscape, only $ 275 million was invested, down from 25% from the $367 million from the first quarter of 2008. Also, the number of deals shrink from 136 to 102 (Q1 09′/Q1 08′) and the average value per deal is $2.7 million.

The US venture capital market raised $US 4.3 billion in Q1 2009, however Canada’s market only raised $ 149 million.

This is a great signal that something should change in the Canadian venture capital market. 

Read the CVCA’s report here: http://www.cvca.ca/files/News/CVCA_Q1_2009_VC_Release_FINAL.pdf

This is a very good and concise presentation about venture capital, the three phrases of venture capital investing, SBICSs and SSBICs (types of small business programs), state government initiatives, key challenges and best practices.

VC Management Challenges and Best Practices

Download the presentation here: http://ocw.mit.edu/NR/rdonlyres/E8256F94-7B44-4E02-8511-7366DE6B20CA/0/class16_vc.pdf

Origins of the Colors

This is the post for all the current material about Venture Capital Method!

Venture Capital Method: Valuation Considering Schedule Slip in the Startup

Venture Capital Method: Valuation Considering Multiple Rounds of Investments

Venture Capital Method: Valuation Considering Granting Stock Options to Management Team

Intro to Finance & Valuation PPT

The Early Stage Valuations by Venture Capital Method

Solution: Leonardo needs return of 30% instead of 50%

To start this post, I recommend you to read my last post:

http://www.chimkan.com/2009/05/05/venture-capital-method-valuation-considering-granting-stock-options-to-management-team/

Now, imagine that at the start of year 3, John project that his startup will not meet the financial targets, but not until the end of 8 year. What share should Ada seek today? And what the equity stake will round 2 investors seek?

So, it means that the financial schedule will slip for 3 years.

Observation 1: Ada will be able to change her investment because she already has done it. (She invested $ 10M for 45.3% of the company).

Observation 2: Now that Ada’s investment lasts 8 years instead of 5 years, what is her Internal Rate of Return*?
*IRR: http://en.wikipedia.org/wiki/Internal_rate_of_return
We can say that IRR is the opposite calculation of the Rate of Return.

First, you have to lay out the investment in years:

Year 1: -$5M (how much she needed to pay)
Year 2: 0 (No money given to her from the company)
Year 3: 0 (No money given to her from the company)
Year 4: 0 (No money given to her from the company)
Year 5: 0 (No money given to her from the company)
Year 6: 0 (No money given to her from the company)
Year 7: 0 (No money given to her from the company)
Year 8: +$53.56M (She should receives 42.18% of the total value of the company $127M)

You can use this formula in Excel >>> =IRR([ARRAY OF THE CASH FLOW])

Ada’s IRR is 23% instead of 50%.

The new investors will want:

$ 4Mx(1.3)^5=$14.85M

It means they will want:

$14.85M/$127M =  11.69% of the equity. The $127M is the value of the company in 7 years discounted the management shares, look the previous posts for more information.

To calculate the number of shares:

Let’s pick up the total shares from John’s and Ada’s:

1,823,636

Let’s calculate how many shares they have to issue to the new investors:

X/(1,823,636+X) = 11.69%

X = 0.1169X + 159750

X = 241,403 new shares

The price is given as this:

P/S = $ 4M/241,403 new shares = $16.56/share

The new investors should pay $16.56/share for 241,403 new shares of the company.

PCCW website

The PCCW case is good to analyse its valuation over the years and make a quick comparison to other telecoms’ valuation. However, even if the minority shareholders won the decision to block a privitization of the company by the major shareholders, it is hard to see that the share price of such company will increase.

During the Internet Boom, PCCW’s share was valued at HKD $ 129.25 (FEB 25th 2000). Today, the share is value at 3.33 (APR 27 2009).  The current value is 2.56% of the highest value PCCW ever got.

A lot of people who invested in PCCW during that time are losing significant amount of money now. 

Moreover, a lot of investors do not understand why the company shares declined during all these years, if the company is still doing well and making profits. The lack of transperancy of why the value decline over the years and maybe a lack of good PR made all these PCCW buy-out case unavoidable. 

In Hong Kong, a lot of investors are angry because some of them are losing their life savings with this situation.

But, come on, we are almost in 2010 and I would never invest in a company that is still using a Netscape Favicon in its corporate website! 

PCCW with Netscape Innovation

It is expected that a telecom company innovates over the years. Maybe that is one of the reason why the company’s share value didn’t increase over the years. Also, as you can see from the chart, PCCW’s share never recover from the Internet Burst in 2001. The AOL + Time Warner stocks behave the same.

Time Warner and AOL stocks

This is an interesting case for Private Equity. PCCW has a virtual monopoly in the Hong Kong’s market. Technically, it should have a better stock price because it is not an internet company but a telecom giant. A similar company would be Telefonica.

Telefonica Stock Price

In case of Telefonica, the company (even with all the splits and etc.) increased its value from 2002 to 2007. It is, somehow, expected that other telecom companies do the same (check AT&T). But after a little bit of more research, most of other telecom companies in the world follow the same pattern PCCW has. Most of them had a great valuation from the internet boom and after the burst, the stock price never recovered (Deutsch Telecom, France Telecom, Verizon, etc.) I suspect that this indicates a lack of technological innovation. 

Anyway, the minoriy shareholders are not happy with the current stock valuation and they still hope that the share value increase in the future.

I made a screenshot from PCCW’s website about the PCCW case, when the HK government reverted the decision of allowing PCCW major shareholders to privatize the company.

Maximizing Share Holder Value

It is kind of strange the idea of maximizing value for all shareholders by buying them out (or inviting them to be out of the company).

Based on this, it is hard to believe that the PCCW value will have chances to increase. Instead, shareholders should have quitted the investment after the internet burst, limiting the losses. However, most people have the “sink cost” behavior. They think they should continue in the investment because they lose a little bit before and they hope they will have the chance to recoup the loss later. But in most of the time, it is better to lose a little bit than almost everything at hand. 

Original Text from The Economist:

The PCCW buy-out in court

The PCCW case - Split decision

Some pension funds and university endowments, which have been major sources of venture capital, have scaled back VC investments in the wake of market downturns. The $129 billion California State Teachers’ Retirement System (CalSTRS), the second-largest pension fund in the US, reduced its allocation for venture capital from 1.3 percent to 0.5 percent of its total portfolio in February 2009, according to Forbes. Reduced participation from institutions will hamper some VCs’ efforts to raise funds.

More news about this

Venture Capital Investment Sinks

State venture capital drops 70% in quarter

*** Venture investments fall 61 percent in 1st qtr

Fewer Venture Capital Funds Are Raising Money

The lessons of adversity

How to attract venture capital funding

Saturday News Briefs

O’Brien: Venture capital needs transparency, not regulations

President Obama’s budget proposal, announced in February 2009, aims to raise taxes on carried interest, which could cause taxes on venture capital profits to more than double.

The proposal calls for taxing carried interest as ordinary income, which could result in a significantly higher rate than the current capital gains tax rate of 15 percent, according to Dow Jones News Service. Proponents of the change argue that VCs should pay the same tax rate on their income as wage-earning workers; opponents argue that higher rates would discourage innovation and entrepreneurship.

More news about this

Say yes to liberty, no to left-wing agenda

GrowthWorks Capital Ltd.: Retail Venture Capital Funds Get Boost …

It is quite impressive the amount of bad news from Venture capital industry. And at the same time, it is expected that this industry may suffer from the economic downturn. 

As many of you can recall, the dot-com burst impacted the venture capital industry much more than the current situation. After the burst, the VC industry grew back again and it was very healthy as before 2008.

Based on this, I think the VC industry will have a nice come back after we solve this economic recession mess.

The article I want to talk about is this Venture Capital and Startups Feel More Pain, Study Says from Business Week.

It talks about the “down rounds”, “multiple liquidation” and “play-to-play” concepts.

I will talk about more about these three concepts separately in this blog. Search for these keywords!

I was searching for more news about venture capital industry and I found out this bad news from Boston.com.

Venture capital sector makes adjustments

Highlights from this news:

- Last year, our industry raised about $28 billion in new investment capital, but VC industry will raise around $8 billion and $12 billion, nationally

- The shrinkage of Boston’s venture capital sector will be tough for the venture capitalists (It was expected anyway, it is losing pace against Silicon Valley and other places)

- The upshot is that venture capital firms will be managing smaller funds, and some firms will go out of business.

- Fewer firms and smaller funds will obviously mean fewer jobs for venture capitalists and the staffers who support them.

Some shootings in the British Game industry

In the Economist.com’s article “Play up, play up“, it shows the hardship the British game industry is suffering with lack of business and political support, meanwhile, it shows the growing strength of this industry in countries like Canada. In Canada, this industry receives foreign developers enjoy a five-year income-tax holiday, and firms get R&D allowances as well as subsidies for salaries. 

I searched a little bit the internet and I found out that Canada game industry is indeed very big (just behind Japan and United States).

14,000 people are now directly employed

247 Canadian video-game companies

Video-game sales at $2.09-billion, a 23% increase over 2007

Video games are predicted to account for 57% of all home entertainment sales in 2009

Electronic Arts Canadian offices showed more than 38 openings for high-paying positions

Some famous videos games developed in Canada:

Assassin’s Creed

Need for Speed: Underground 2

FIFA 09

Grand Theft Auto: Mission packs

A complete list of all video games create in Canada is here: http://en.wikipedia.org/wiki/Category:Video_games_developed_in_Canada

I remember that cities like Montreal and Vancouver are hubs in Canada for Game creation.

Also, I was thinking seriously of getting into this industry before landing a job in the biggest search engine on Earth.

David Seah is a functional designer creating very interesting calendar such as the Compact Calendar 2009. It allows you to make a big picture plan of what the most important days are and what you have to do on those days.

Official Compact Calendar Page

Check it out and create your on calendar now: http://davidseah.com/page/compact-calendar

Check out the complete report about VC industry in the US here:

https://www.pwcmoneytree.com/MTPublic/ns/moneytree/filesource/exhibits/National_MoneyTree_full_year_Q4_2008_Final.pdf

Some important highlights:

- Venture Capital firms invested only $ 3 billion in 549 young companies in the first quarter

- Investment was down 47% from Q4 2008

-  Investment was down 61% from Q1 2008

- Internet companies raised $ 556 million, down 31%

- But VC firms raised $ 4.3 billion in Q1, just not investing that much.

Read more in the New York Times’ site: http://www.nytimes.com/2009/04/18/business/economy/18venture.html?hpw

Brooklin - Sao Paulo - Brazil

Brooklin is one of the high-tech hub in Brazil. Many companies such as Microsoft, Terra and many other software and Internet companies are located here.

A long time ago, this place used to be a slum with basically nothing in the place. But the government and private companies invested a lot in this place and now it is a tech hub.

CNN’s has a nice article about this neighborhood. Read more about this place here: http://edition.cnn.com/2009/TECH/04/08/digitalbiz.berrini/index.html

Have fun with your friends!

If you want to read the whole Accel And Facebook case about valuation, please check the posts in this sequence.

A VC firm makes money – Accel and Facebook case – Part 1

A VC firm makes money – Accel and Facebook case – Part 2

A VC firm makes money – Accel and Facebook case – Part 3

A VC firm makes money – Accel and Facebook case – Part 4 (Final)

Have fun!

Yesterday, I baked some cookies. I followed this recipe:1/2 cup (113 grams) unsalted butter, room temperature
1/2 cup (110 grams) light brown sugar
1/4 cup (50 grams) white granulated sugar
1 large egg
1 teaspoon pure vanilla extract
1 cup (140 grams) all purpose flour
1/4 cup (30 grams) Dutch-processed cocoa powder
1/2 teaspoon baking powder
1/8 teaspoon salt
1 1/2 cups (260 grams) white chocolate chips or chunks

For more instructions, visit: http://www.joyofbaking.com/ChocolateCookies.html

The result: 

Chim's Chocolate Cookies

I made a lot of them. And I’m giving some to my coworkers!

But I also got another result. It is too expansive to make my own cookies. If I sum the ingredients price (I spent around US$ 20) and my work, each cookie costs around US$ 0,55! In the grocery store a pack of chocolate cookies costs US$2.50 with almost 20 cookies. I think it’s better to buy it from a bakery.

Sometimes, I use this same kind of rationale to think when it’s worth to do a thing by myself or ask somebody to do it for me.

Imagine the following hypothetical situation.

I have a great idea for an Internet consumer product: a website that chooses the best cookie recipe based on your personality.

After thinking a lot, I figured out that it would take me 100 hours of work to get the platform done (I already added the hours I would have to learn programming and stuff). Imagine that my hourly pay is around US$ 8 (California’s lowest hourly pay). So, the website would cost me around US$ 800. CERTAINLY, in California, the cost of creating such a thing would cost thousands of dollar if I hired someone. In this hypothetical case, I would build the website by myself.

This exercise illustrates very well when you have to buy a service or product  from someone or you should do it by yourself. In the case of cookies, it would be better to buy it from the grocery store. In the case of website, it is better to build it by myself.

Some newspaper and some people believe that more people are looking for entrepreneurship to solve their unemployment or lay off issues, however it is not what is happening if we check Google’s Insight For Search tool.

The tool allows us to see the search behaviour on the internet.

If more people are searching for X, X graph will grow. Interpretation in general is simple in that tool.

I’m going to use the tool to see if people are searching more for entrepreneurship or something else because of unemployment.

A lot of people are searching for unemployment and not MBA or GMAT

Chim’s comment: you can see that there was a surge on the search of “unemployment” query. It is easy to understand why people are searching for unemployment if companies are laying off. But, as you can see, there was no increase search in GMAT or MBA! Their searches are flat as usual.

If we add entrepreneur or venture capital, unemployment is still a big search anyway.

Chim’s comment: People are neither caring for MBA, GMAT, Entrepreneurship nor Venture Capital. You will see at the end of this post what matters to most people regarding about unemployment.

When school starts or after people had their vacation, everyone looks to open their own business until xmas, when they forget.

Chim’s comment: I highlighted the seasonality grow of searches like entrepreneurship or entrepreneurs (actually, people search more for entrepreneur (sans ‘s’). Also, nobody wants to talk about venture capital or entrepreneurs during xmas.

Nobody cares about VC or Entrepreneurs but unemployment

Chim’s comment: Again, people are neither caring for Entrepreneurship nor Venture Capital. What really matter is:

Unemployment Benefits!

People wants to look for unemployment benefits, then once they realize what they are entitled for, they want to go to the unemployment office. Isn’t it great? Nobody looks for entrepreneurship or MBA to solve their job loss issue!

It is quite unbelievable that Identity Theft can happen to someone, but it is pretty much a very common thing that is happening these days.

I discovered that I was the latest victim of this insidious act.

Someone somewhere started a buy spree with my credit card in Brazil. I discovered it today and I asked the credit card company to block my credit card and cancel some of the unauthorized use of my credit card.

The worst thing is that I don’t use this often credit card for online purchase so it might be copied from some doubtful real world business place or my personal data might have been copied from a legitimate but minimum secured e-commerce site!

Anyway, changed all passwords from all accounts and I’m watching closely all my accounts for suspicious activities.

I personally don’t see this as a problem, but actually this is a great opportunity for a startup idea! Imagine a service that could protect you or if you really have your most intimate personal data wondering on the internet, a service that can handle all the paper work of “cleaning” your name.

As you can see, people who had their identities stole have to make a lot of procedures as given from the US Gov site about Identity Theft. There are 4 huge steps to follow (they are as big as applying for MBA school). For those who live in Brazil, we cannot do anything but just watch hackers and fraudster using our name until they get exhausted and move to a new target.

Differently than the US, Brazil does not have a strong culture of preserving privacy, so most people have their Brazilian social security numbers, home addresses, phone numbers and etc running free on the internet. Even during a chat with stranger, it is quite common to ask questions that would be considered inappropriate in the Western world’s standard.

Anyway, let’s move on to more interesting posts about venture capital, entrepreneurship and other internet topics! Wish me luck on this hassle!

15 Billion - Facebook and Microsoft Case

Many of you remember that Microsoft paid $ 240 million for 1.6 percent of Facebook . That was a huge amount of money for a company that is not generating THAT much money for the valuation.

Sometimes, a company invest in a startup for strategic reasons.

Anyway, let’s use the Venture Capital Method to see what is the post-money valuation (don’t remember what’s post-money valuation? read my past article about it again.)

Information that we have:

- Microsoft paid $ 240 million for 1.6%

The math is very simple to calculate the post-money valuation: 1.6%(TOTAL) = $ 240 M then, TOTAL = $240M/0.016

We have a whooping $ 15 000 million or $15 billion post-money valuation! 

When a reporter says that the company was valued at $15 B, he was saying the post-money valuation.

In this case, we didn’t need to know the number of shares held by the existing shareholders because we know the percentage Microsoft got from this transaction which was 1.6%. However, we do not know the real number of shares.

I found another website that has more information about the percentage each of the shareholders has of Facebook.

“That’s obvious too with the $240 million cash investment (with more to come from other greedmonger private investors, of course, in another round now being arranged by Facebook) that bought Microsoft exactly 1.6% of Facebook.

That puts Microsoft behind Greylock Partners’ and Meritech Capital Partners’ 1.7%, Founders Fund’s 5% and Accel Partners’ 11%–Accel partner and Facebook board member Jim Breyer also has a personal 1% stake, now valued at $150 million–and Zuckerberg’s 20% (not the 30% that has been widely reported), which is now worth $3 billion.”

Organizing the information:

- Greylock Partners’ and Meritech Capital Partners’ 1.7%

- Founders Fund’s 5%

- Accel Partners’ 11% (Chim’s comment: pay attention to this, in the next posts I will show you why this number decrease from 15% to 11%, but they got a lot of money!)

- Accel partner and Facebook board member Jim Breyer also has a personal 1%

- Zuckerberg’s 20%

If the information is correct, then each of their pre-money valuation would be:

- Greylock Partners’ and Meritech Capital Partners’ 1.7% (of $ 15B) = $ 255M

- Founders Fund’s 5% = $ 750M

- Accel Partners’ 11% = $1.65B (Chim’s comment: again pay attention on this. They invested $XXXX amount and they ‘got’ this billion here, more info in the next posts.)

- Accel partner and Facebook board member Jim Breyer also has a personal 1% = $ 150M

- Zuckerberg’s 20% = $ 3B

Let me check for one thing: $240M + $255M + $750M + $1.65B + $150M + $3B = $ 6 billion.

Where or who is holding the remaining 9 billion? Who knows.

In the next post, I will share some findings about how VC makes money with concrete information.

Flip your words

This is a fun tool that flips and invert the words that you type.

Take this example:

I love venture capital and entrepreneurship. I also love Google too.

Using this tool, I get:

˙ooʇ ǝlƃooƃ ǝʌol oslɐ ı ˙dıɥsɹnǝuǝɹdǝɹʇuǝ puɐ lɐʇıdɐɔ ǝɹnʇuǝʌ ǝʌol ı

It was a success in my facebook.

Check out for this tool at http://www.revfad.com/flip.html

This is one of the most impressive findings from this year. Yesterday night, I discovered this song “Dark is the Night” from A-Ha, the Norwegian pop band from the 80s. I remember that 19 years ago, when I immigrated to Brazil, I used to listen a lot of this song but I didn’t know who sang that. Now, I do.

A-Ha, the Norwegian Pop Band from the 80s