Inaki Berenguer, MBA '09

Jamie Goldstein, from Northbridge Venture Partners: "Talk to as many people as possible"

Jamie Goldstein gave a talk in the 100K Executive Summary Contest Finale in Stata Center (this is the contest we have won with Ubitrack). Jamie Goldstein is a famous entrepreneur and now a partner at North Bridge Partners.

North Bridge Venture Partners has offices in Boston and Silicon Valley, have $2B under management, and has invested in successful startups such as Cognio, Sonus, Sycamore or Arrowpoint. They are also quite present in the MIT entrepreneurial community, as 8 of their current portfolio companies are MIT spin offs, including A123 Systems.

He recommended talking and pitching your startup to as many people as possible. It is always good that other people know about what you are doing. And do not be afraid of other people stealing your idea. If that is the case, then the idea is probably not very good or your team is not the most appropriate to make it happen.

Interestingly, yesterday Noubar Afeyan, managing partner of Flagship Ventures and my professor of New Enterprises, also mentioned that launching a startup is about talking to a lot of people that know other people that finally refer you to the final person that is interested in your idea or gives you the good piece of advice. And along the process, you become a "beggar" :-)

Jamie also mentioned that ~90% of the ventures he invests in do not even have an executive summary or formal business plan.

Below you have a picture that shows how he evaluates Business Ideas.

After the event, he invited us to talk to him about Ubitrack.

Visit to Charles River Ventures

As part of the Mass Tech Trek, I visited with a group of 8 Sloanies the offices of Charles River Ventures, an early stage venture capital firm. Austin Westerling, partner, hosted our visit.

Since its foundation, Charles River Ventures has raised 13 funds totaling $2.2B. Some of the companies they invested in the past include Ciena, Flarion, Cascade, Sonus, Upromise, Netezza or Bigband. Their equity target is 15% to 30%: usually 10% initially and the rest over time.

Austin talked about the VC industry and CRV investment strategies:

• Pre-money valuation averages $7.1M among startups.
• Last year they invested in 10 ventures in the East coast and 10 ventures in the West coast. Rive Technology is among the companies they invested in last year. Its founder, Javier Garcia, has been named 2001 Young Innovator by Technology Review and he is from Alicante, Spain (like me).
• The typical things they look in a startup are (cliche): a) A team of missionaries, not mercenaries; obsessed with customers not competition; sense of urgency, yet patient; people that show success in whatever they do; passionate founders; commitment to technical excellence; understand market; b) large and growing market; clear market need; reasonable financing and clear business model;
• Venture back companies are growing in the NY region, in particular in the media, gaming, advertisement and consumer sectors.
• Charles River Ventures helps startups to acquire customers, partners and recruiting
• In terms of careers in VC, it is better to have an associate position in a tier 1 firm than a VP position in a tier 2, because the brand matters and it is possible to learn from other excellent people.

Charles River Ventures also has an interesting program called Quickstart. They invest up to $500K and only requires the approval of two partners so they could potentially make the decision in the same day.

A recommendation he gave to entrepreneurs "Entrepreneurs usually underestimate both the size of the market and the time to take off. Therefore, control the cash burn rate and you will make a lot of money"

Visit to Plug and Play in Sunnyvale

Saeed Amidi (who was involved in PayPal early days) hosted our visit to Plug and Play, an incubator in the Silicon Valley.

Plug and Play Tech Center is a strategic partner to technology start-up companies in Silicon Valley. Based in Sunnyvale, they are home to over 100 start-ups offering a full range of services from full service office space to strategic advice to direct investments. It seems that they are also well connected to the SV entrepreneurial community, with partnerships with universities (MIT, Stanford, Cornell) and several VCs. Plug and Play can also coinvest in the companies through Amidzad. It seems like a nice place to be in the early days of your startup (full of other young entrepreneurs in startups of less than 5 employees). I also met a guy from Secuware, a Spanish startup that has a small office in this incubator. For more information about Plugh and Play, the NYtimes published an interesting article about Saeed.

Plug and Play is launching a new program to accomodate startups during the summer providing limited capital to cover the founders' summer expenses and initial capital requirements: e.g., ~$200K in exchange of ~5% of the equity. If your startup reaches some milestones, they invest another $2 million one year later in exchange of ~15%. Saeed told me that he would like to have about 3 startups from MIT :-)

Other VCs are launching similar "summer in entrepreneurship" programs, such as LightSpeed Venture Partners  (what they call summer grants) or Highland Capital Partners (with their "Summer Entreprenuership" program). These programs give you some money to cover basic expenses over the summer (e.g., ~$10K per founding member) and in the end of the summer they might invest in your company, similar to what YCombinator or SeedCamp do.

Breakfast with Menlo Ventures (Mark Siegel)

During our Silicon Valley Trek we had the opportunity to have breakfast with Mark Siegel, Managing Director of Menlo Ventures and MIT alumni.

Menlo Ventures provides long-term capital and management support to early-stage and emerging-growth companies. They have organized and managed nine venture funds since their inception in 1976. They have ~4 billion under management, and a team with 9 partners. Some companies they have invested in the past include Hotmail, Mobitv, Ironport, Ascend, Clarify, LiveOps, LSI Logic, Telenav, or Infoseek.

Some random ideas he pointed out about entrepreneurship:

• Market vs. Product vs. People: The size of the market is what he looks first. He will invest in a company that is an emerging leading player in an emerging market (disruptive)
• He spends ~40% of his time helping with recruiting issues in his portfolio companies
• Regarding the people, he wants to make sure that startups have the right people, with the right roles, with the right organization and the right compensation
• 1st mover advantage: for him distribution and locking key partners is a barrier for other players and this does not depend on IP
• Half of his investments are related to people they invested in the past (i.e., either serial entrepreneurs or employees in portfolio companies); very unlikely that he invests in an entrepreneur he did not know before
• Some emerging markets he sees: Next data center technologies, virtualization technologies, social technologies merged with gaming, celluar+fixed wireless technology convergence
• There is too much money looking for few good deals
• If your goal is to be acquired, you do not need to raise funding to create a salesforce
• In the past, entrepreneurship was about solving a problem for X. This is not the case in Web 2.0.
• In early stage, they would like to see the possibility of getting a x10 exit within 4-7 years

Telefonica R&D attracts talent to Barcelona

Last week, Nuria Oliver from Telefonica R&D came to MIT to present part of the research work Telefonica is doing in Barcelona. The goal of the talk and the visit was to take other researchers from MIT to the recently created Telefonica R&D center in Barcelona.

It was the first time I met Nuria. I had heard of her back in the 90s when she was cited as 1 of the 40 most influential young persons in Spain by El Pais and also as one of the best students of the decade by a national student newspaper. She later did her PhD here at MIT and then spent 7 years at Microsoft Research in Seattle. Since a couple of months ago, she is back in Spain working as Scientific Director at the new Telefonica R&D center in Barcelona (some news in Spanish).

I am very happy that Telefonica has taken the initiative to do world class research from Spain. During the last years, Telefonica R&D was perceived as a company doing only "D" rather than "R&D". But since a couple of years ago, Telefonica is recruiting some of the best researchers in the world, despite those having offers from places like Google, IBM or Microsoft. For instance, last year, Pablo Rodriguez, who had lead research projects at Microsoft Research and Bell Labs, joined the labs. Pablo was at Cambridge, UK, at the same time I was there, next to my office and collaborating with people in my research lab. Pablo convinced Alberto Lopez to join the lab last October and he is telling me how happy he is about the research environment he has found there. Alberto is one of my best friends and just finished his PhD with Xiaodong Wang, my PhD advisor at Columbia University.

I have also heard that David del Val has accepted a position at Telefonica R&D. In 1996, David started with colleagues from Stanford University VXtreme, a company for video transmission over the Internet. In 1997 the company was acquired by Microsoft and the product later become the integral part of Windows Media.

Alejandro Jaimes (I overlapped with him at Columbia University, NY, during one year) has also recently decided to join the labs. And I am hearing that other international researchers have also decided to move to Barcelona.

Nuria mentioned how surprised she was about the environment that Telefonica has created in Barcelona, with competitive salaries and cutting edge research projects. It seems like a place that is going to attract more talent and create great impact in their research areas.

I hope that the ecosystem of world class researchers highly respected in industry and academia attracts more talent and attention and creates spinoffs and startups in Barcelona.

Deutsche Telekom created a similar initiative in Berlin about 3 years ago. Pablo Vidales, also a good friend, has been in this lab from the beginning. It happens that Pablo was visiting me in Boston last week at the same time Nuria was visiting MIT.

Meeting with Atlas Venture

In January, a group of 10 Sloanies visited the Boston headquarters of Atlas Venture. Eric Hjerpe, a partner in the technology sector and MIT Sloan alumni, was our host. Peter Shannon from Atlas Venture also had breakfast with us.

Atlas Venture has an early stage focus. Since 1980 they have invested $2.5B. Since 1990 they have made ~350 investments, with ~70 IPOs and ~110 exits via M&A. Currently they have ~100 active portfolio companies.

Some things Eric pointed out:

• Early stage has a location bias (i.e., invest locally). VCs do not want to invest in a place which takes one day to arrive. Moreover, in early stage there are many board meetings.
• To an investor, how you raise money reflects how you run your business. Therefore, put effort in the business plan and execute well
• A typical investment would be ~$5M at a ~%5M pre-money valuation (i.e., ~50% equity)
• The entrepreneurs should be as close as possible to the target market
• Trends: He thinks the following markets are growing (and Atlas in interested in them): video, virtual reality (environments or goods), everything local, consumer oriended products that are easy to get product validation and consumer feedback without waiting 2 years to develop the product

A big difference between now and the 90s is that:

• In the 90s you used to have 3 rounds: round A to build a product, round B to build a sales force and round C to scale.
• Now, after round A, you already throw your beta product to the market.

We asked about the differences between serial and first time entrepreneurs. He thinks that the term sheets are similar but the time to raise funding is longer. First time entrepreneurs need more time to prove themselves and build a team.

Eric is really involved with the MIT entrepreneurial ecosystem (judge and sponsor of the 100K, etc.) and him and Peter nicely said that we could contact them to have a coffee and ask for advice about any business idea or business plan that we have in mind.

Segolene Royal at MIT

On Tuesday I attended the talk of Segolene Royal, last year's Socialist Party candidate for the French presidency. During this week, she has been making a series of appearances at Harvard and MIT, who were jointly sponsoring her visit.

Segolene is as elegant and beautiful as I saw her on TV :-)

The topic of the talk was "Reforming French Higher Education". She read a prepared talk in English (a little bit cliche) and then she responded to questions in French, with an MIT French professor translating to English. She was able to understand questions in English and she regreted that she could not speak better English. Some things she pointed out to improve higher education in France:

• French universities do not rank high in worldwide university rankings.  In particular she mentioned the Shanghai world ranking. Some improvements she proposed:
  a) to grant more decision power to universities.
  b) to increase global mobility (not only European mobility as the Erasmus program). She thinks that France is not open enough and there are various visa issues. She felt that the mixture of cultures, backgrounds and nationalities in the US educational system offer wonderful opportunities
• Free access to universities is a way for poor peole to rise in socitye, and therefore, higher education should continue being free.
• Grande Ecoles vs. Universities: The current educational system creates an elite only based on a single point in life (preparatory classes). After that point, careers diverge: Peole that make it into the Grande Ecole belong to the elite (she called these people the "aristocrats") and do not have an incentive to work hard any more. On the other hand, people that do not enter will never make it, no matter how hard they work. Although Segolene criticized the system, she did not give a clear alternative.

As a negative comment about the event, I would like to say that it was not well organized: There was no moderator, a better room should have been chosen (or at least, erase the board behind Segolene), and a real translator should have been chosen. The translator added her comments while translating and in a couple of occasions she disagreed with Segolene! the tranlator should have understood that she was not why we were there.

Find below two pictures I took from the event and look at the board behind her... so MIT!

"China Lab": I am visiting China in March!

I have been selected to participate in the China Lab program! As part of the program, I will travel to China in March, working in an entrepreneurial Chinese company and teaming up with students from Chinese Business schools.

“China Lab” is a new program that partners MIT Sloan MBAs, Chinese business students, and small entrepreneurs in China to strengthen the firms while providing us with actual experience not available in a classroom."China Lab” is sending the first group of 24 Sloan MBAs to China in March. In China, we will connect with business students at the four Chinese universities affiliated with the MIT-China program. Working in combined teams, we will divide into separate groups, each spending a week working with a small, young Chinese company. The host companies are local, entrepreneurial firms and NGOs. We will study a critical issue: market entry, commercialization, internationalization, financing, etc.

I will go to the area of Kunming, the city of Eternal spring (Yunnan province in SouthWest China), and later I will spend some time in Beijing with the rest of the group. It is going to be great to be there some months before the Olympics! The nice thing is that the program pays for the trip and lodging.