DLA Piper Breakfast—State of Venture Capital & Angel Investing

Paul Hurdlow of DLA Piper held a breakfast forum this morning at the Four Seasons hotel. I sat on the panel with Rudy Garza of G51, Wes Cole of Gefinor Ventures, and Steve Fredrick of Grotech Capital based on the East Coast.

One of the topics of discussion is how do angels protect themselves from dilution that comes with subsequent rounds of investment. The short answer is to seek deals that don’t need so much capital and entrepreneurs that don’t have “IPO” as stars in their eyes. Back in the roaring ‘90s entrepreneurs would come with their “funding plan”. Seed stage money today, Series A in six months, Series B in another six months, etc. For angels that kind of thinking is a non-starter. I remember some of the companies in the ‘90s spent more time with the investors rather than their customers. I always thought there was something wrong with that picture.

Another topic was the general slow down in venture capital. John Hurley showed the latest stats from VentureOne which highlighted a slow down in funds invested. I highlighted the increase in angel investing and attributed a portion of this shift to the reduced cost of starting up businesses. What took $5M to start a business in 1997, now takes only $500K in 2007, in some cases. Of course, semiconductor and life science deals still need large amounts of capital to pay for basic research, software and consumer product companies are much cheaper to launch today due to outsourcing, offshoring, and better productivity tools (email, web, etc).

The Angel Capital Association released a survey run in the first half of this year. Over 50% of the angel groups saw Dealflow rise significantly. The average membership number grew 22% (from 42 to 51). Anecdotally, I’ve seen angel activity increase substantially from 2006 to 2007. I attended the ACA summit in 2006 in which there were150 attendees. The summit this year doubled to over 300 attendees. Across the board, Dealflow was up as well as membership.

The DLA Piper events are great fun. Paul paid me one of the greatest compliments. He said he reads my blog.

Best regards,
Hall T.

Wireless Seed Stage Forum—Using Wireless technology to Enable Startups

The ATI and CTAN held a Wireless Seed Stage Forum today at the UT Club. It was the first time I’ve been to the UT club, and I must say it was a nice venue. We had 16 wireless entrepreneurs from across the country including California, Chicago, Huntsville, Pennsylvania in addition to Texas-based companies.

The most inventive presentation goes to Agilemesh which makes mesh-based surveillance equipment targeted at military and law enforcement units. Instead of the standard 15 slide presentation, the entrepreneur built a wireless system for us demonstrating the ease of setup and use. I could have used a little more information about their business plan as I now know how to setup their system, but I have no idea how they make money, what their business model is, or who is their competition.

A common theme throughout the day was traditional businesses seeking an outlet on the mobile phone but not quite knowing how to make money out of it. Entrepreneurs showed off solutions. One example of this is Advanced Mobile Solutions which pushes newspaper content to the mobile phone.

Zibadoo won the greatest interest from CTAN members. Zibadoo generated point of sale coupons for mobile phone users who request information about a particular service/product. During the presentation the entrepreneur gave the audience a code to text message and in return the user received a coupon for a free pizza.

RFMicron another Austin-based company, makes RFID tags that work in any geography and on in surface. By using a signal processing algorithm they are able to tune the RF frequency to the range mandated by each region of the world and also correct for the surface on which the tag is placed – whether it be metal, insulation or liquid. This is useful since RFID tags operate differently based on the material to which they are attached.

Syner Ip combined VOIP and WiMAX to provide telephone service to Hispanics living in the US.

Benesec is a 4 month old startup from California that performs mutual authentication for credit card purchases to prevent fraud.

HEMS technology makes wireless network devices for homeowners who want to monitor and control their electricity consumption in the home.
Q-track used an interesting technology called Near Field Electromagnetic Range to perform real-time tracking of a subject or device.

Yuvee showed off an advanced user interface on the PC that could download to the mobile device a new definition of the keys. One could turn a key into a speed dial for a particular website such as CNN, to get that content on the mobile phone. The interface was quite slick as it look like a virtual phone keypad that hovered over the tablet PC screen. By pressing on the touch-sensitive screen, the entrepreneur was able to adjust what the keys on the phone would do. It was like having a virtual mobile phone that you could reprogram by just touching the keys (and in some cases entering web-link information).

The event generated buzz among the investors in the room. Now let’s see if it generates some checks.

Best regards,
Hall T.