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Recent Tech Valuations Worry Startup Entrepreneurs

  
  
  
  
  
  
  

valuation

As valuations soar, tech field starts feeling bubbly

By Laurie Segall, staff reporterDecember 20, 2010: 11:25 AM ET

NEW YORK (CNNMoney.com) -- On any given day at Grey Dog, a small restaurant in downtown New York, you'll find clusters of engineers and entrepreneurs crowded around tiny wooden tables discussing their startups' latest creations.

The high ratio of techies to tables isn't surprising. DogPatch Labs -- an office space that houses more than 10 companies backed by venture capital firm Polaris Ventures -- is right around the corner. One street south, a variety of startups rent desks at TechSpace. A number of Union Square Ventures-backed companies work in the area. And TechStars, a mentoring-and-seed-cash program that just selected finalists for its first crop of New York startups, is right around the corner.

Within a few densely packed urban blocks, dozens of tech startups are cranking out code. And investors want in. Early.

Which has tech veterans a bit nervous.

The murmuring started months ago, with early-stage investors moaning about soaring valuations and venture funds shifting their cash toward Internet upstarts. Then a widely circulated dispatch from New York venture capital doyen Fred Wilson yanked the conversation out into the open.

"I think the competition for 'hot' deals is making people crazy and I am seeing many more unnatural acts from investors happening," he wrote last month in an ominous blog post titled "storm clouds."

Things have intensified since then. Google (GOOGFortune 500) tried -- and failed -- to snap up daily-deals darling Groupon for a rumored $6 billion. Twitter sucked in $200 million more from investors, giving the company a valuation of nearly $4 billion. Kleiner Perkins is raising more than $1 billion for new venture capital funds -- and lured Wall Street's star Internet analyst, Mary Meeker, to Silicon Valley to spot investments for them.

Wilson avoided using the term "bubble," but others aren't shying away. Angel investor and Wine Library TV host Gary Vaynerchuck thinks a "huge bubble" is inflating.

"I'm seeing a lot of companies get $5 million to $15 million valuations now on their first seed rounds that have no anything," he says. "At least they're a little bit more practical than 2000, when people got crazy."

Hot deals "are incredibly competitive, which pushes up valuations," says TechStars director David Tisch.

Two worries. First: Bubbles artificially prop up weaker ventures and disrupt market Darwinism.

"I do worry about companies that shouldn't get funded, getting funded," says Chris Dixon, an active Silicon Valley angel investor whose portfolio includes Skype and Foursquare.

"When you have great talented people all starting their own company, the companies that are trying to hire are getting hurt because they're not able to hire," Tisch says of the brewing talent war. Exhibit A: Google's recent decision to hike its workers' pay by 10% across the board.

Second problem: This kind of thing usually ends in tears. Bubbles burst, and the last time that happened it blew a crater in the U.S. economy and froze tech investing for years.

Which is why those who think things are getting frothy wouldn't mind hearing some pops.

Lawrence Lenihan, managing director of New York-based FirstMark Capital, thinks there will be a few high-profile flameouts.

"My prediction of what will happen is that there could be a meltdown in the New York tech scene," he says. "But it's like a forest fire: It's good, it clears out the dead wood."

Tisch thinks a bust "would help everybody on some level. A realignment of the early stage stuff would be a benefit to quality companies."

But here's the silver lining: Some of the dot-com debacle's lessons stuck.

Most of the billions being plowed into the tech scene's hottest startups right now are coming from venture capitalists and rich angels -- not retail investors sucked along by an IPO tsunami. And those VCs say they're planning carefully for the market's ups and downs.

"We are not pulling back. We are sticking with our investment strategy,"Fred Wilson says.

He thinks his last venture capital firm, Flatiron Partners, made two mistakes during the go-go '90s: It raised too much and spent it too fast. This time around, he's keeping a close eye on maintaining a slow and steady pace, adding six to eight companies a year to Union Square Ventures' portfolio.

Lenihan has a similar approach. His firm, which makes the majority of its investments in New York companies, will keep deploying its cash even if the market fizzles.

"This is not Silicon Alley," he says of the modern New York tech field. "This is not something where it's going to disappear off the map."

The tech industry itself has also changed. Thanks to open-source software and fast-improving tech tools, it's vastly cheaper to launch a Web startup now than it was 10 years ago. And for every Twitter -- a great idea in search of a business model -- there's a Groupon or Zynga: companies that mint money and are already solidly profitable.

As Dixon put it: "The tech sector is probably the brightest sector of the U.S. economy. It's real. It profits."

So in downtown in New York, techies will keep checking in at Grey Dog, where Tisch stopped in for breaks while culling through the stack of applications for TechStars NYC. The finalists -- who got the good news last week -- include ventures targeting fields ranging from data migration to social e-commerce to fashion.

Maybe one of them will be the next Google

Check out this article at http://money.cnn.com/2010/12/20/technology/tech_startups_bubble/index.htm?hpt=T2

Global Entrepreneurial Leadership by Robert Hisrich, Ph.D.

  
  
  
  
  
  
  

In today’s fluctuating economy, the notions of entrepreneurship, entrepreneurial leadership and entrepreneurial decision-making is receiving increased attention by citizens, academics, managers and politicians on a global basis. The current global financial crisis has put added pressure on creating new ideas and bringing these to the market resulting in financial fruition, economic development and employment. Being an entrepreneur and creating value by establishing a new organization in both the profit and non-profit sectors in business as well as the arts impacts both economic and social conditions. This creation process takes more time and effort than one can imagine and is by no means easy, with a high failure rate reaching over 70 percent in certain countries.Global Entrepreneurship

Since entrepreneurs are found in all professions—education, medicine, research, law, architecture, arts, engineering, social work and distribution—the definition of entrepreneurship in my book Entrepreneurship, 8th edition (McGraw-Hill/Irwin, 2010) is relevant: “Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.”

Global entrepreneurial leaders create visionary scenarios that assemble and mobilize participants who become committed by the vision to discovery and creation of sustainable value. They have a wide variety of attributes including being a visionary, having a passion for their idea, being a risk-taker, having perseverance, building a team, recognizing opportunities and needs, solving problems, and giving back. Let us look at a few examples.

Leonardo Da Vinci

 In addition to his many other titles, Leonardo Da Vinci should be labeled as one of the great global entrepreneurial leaders of all time. It is in fact the breadth and depth of his work, his wide-ranging skills and his lasting impact on both the arts and society that reflect the strength of his entrepreneurial vision. Leonardo created many new and different pieces of art, devices, and ways of thinking that were ahead of their time. 

Edward Teach (Blackbeard the Pirate)

From 1716-1718, Blackbeard the Pirate ruled the seas and was also an entrepreneurial leader who flourished in his trade. The pirates who joined Blackbeard’s command often came from the lowest classes of society or were former members of the British Navy, who found the conditions and treatment they received better than life on farms or plantations. All booty taken by the pirates would be divided evenly among the crew, one part each, save the captain’s two.

Peter the Great

Peter I (Peter the Great) ruled Russia from 1682 until his death in 1725, bringing about major modernization to his country.  His global entrepreneurial vision and leadership gave Russia a new position of power as the country was transformed into a western empire; educators, military personnel and businessmen were invited to Russia; the army was modernized; a strong navy was developed; and arts and education flourished.

John Rockefeller

John Rockefeller was an extraordinary American entrepreneur and philanthropist. Through hard work, determination and a strong competitive nature, he became the world’s first billionaire. Rockefeller chose to change his entrepreneurial pursuits away from making money towards giving it away. From his equity position in Standard Oil, a company he co-founded, he felt the need to disperse his wealth to those less fortunate and formed the Rockefeller Foundation; this started the rise of American social philanthropy.

Madam CJ Walker

Entrepreneurs often find opportunities and success in spite of great odds and obstacles. Madam CJ Walker was one such person who identified a gap in the market—hair care products for black women. CJ Walker became the first self-made female black millionaire in the United States. At one point, she employed over 3,000 women and had a wide range of hair and skin care products.

Muhammad Yunus

Muhammad Yunus is an example of a selfless global entrepreneurial leader. After seeing the impact of his first micro-loan and the way in which he was repaid, Yunus began to envision a model that could work anywhere. He found that the poor would often quickly repay their loans with few problems. By the early 1980s, Yunus had expanded to other developing countries and in 1983 formed The Grameen Bank, the institutional home of his micro lending practices both of which were recognized with a Nobel Peace Prize in 2006.

Bill Gates

Microsoft founder Bill Gates’ entrepreneurial skills are varied. His company revolutionized the computer industry, ushered in the internet age, and had a deep and profound impact on the daily lives of people around the world. Because of this persistence and risk taking, he shaped the evolution of the information age making Bill Gates the world’s richest man in 1995. In 2000, the Bill and Melinda Gates Foundation was founded with the goal of alleviating many of the problems that are afflicting the world’s poorest people and has grown into one of the premier philanthropic organizations in the world.

The role of global entrepreneurial leaders throughout history indicates the diversity in backgrounds, mindsets and goals that spawn entrepreneurial actions, decisions and leadership. From public sector to private, for-profit to non-profit, in science, arts, religion, medicine, politics and business, and across industries, the variety of forms that entrepreneurial leadership takes is clear.

For the contemporary entrepreneur who actually starts his or her own business, the experience is filled with enthusiasm, frustration, anxiety and hard work. There is a high failure rate due to poor sales, intense competition, lack of capital, or lack of managerial ability. The financial, social and emotional risks are high, as are the rewards.  As history has shown, the individual’s reward can easily set the stage for an accelerated impact on the larger community, region, country, or even the world.

 

Robert D. Hisrich, Ph.D. is the Garvin Chair of Entrepreneurship and Director of the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management.  He is the author of numerous publications and books including the textbook, Entrepreneurship; the most widely used text on the subject, published in nine languages.  A self-described serial entrepreneur, Dr. Hisrich has established and sold numerous companies.

Entrepreneurs Unite during Global Entrepreneurship Week!

  
  
  
  
  
  
  

EntrepreneurGlobal Entrepreneurship Week: November 15th-21st

This week is Global Entrepreneurship Week. Nearly 100 countries participate in GEW every November, and each year there are more than 40,000 events that occur around the world with over 10 million participants. 

The United States is second (UK is first) on the list of countries participating with 414 scheduled events and 37,665 people participating.  

What featured events are happening during the Week?

There are a number of featured events that demonstrate the global scope and scale of the initiative. Some of these featured events include:

  • Global Cleantech Open Ideas Competition 22 countries

  • Speednetwork the Globe 50 countries

  • Startup Weekend 15 cities around the world

  • Global Student Entrepreneur Awards 8 countries

  • Creativity World Forum 12 Districts of Creativity 12 countries

  • EO 24 38 countries

  • Your Big Year England

  • La Fête de l’Entrepreneur France

  • YBI Global Forum Mexico

  • The Hunger Project Sweden

Global Entrepreneurship Week has several great sponsors:

Source: http://www.unleashingideas.org/

Check out the list of ASU's Global Entrepreneurship Week events (some are open to the public)

ASU GEW events

Turbo 140: Example Of A Great Thunderbird Business Startup Idea

  
  
  
  
  
  
  

Turbo 140 Wins Thunderbird Business Plan CompetitionAll Jonathan Hegranes needed was a launching pad for his business idea. The Thunderbird MBA student had spent more than 200 hours developing a concept, writing a business plan and recruiting a team to support him. His opportunity came when the Thunderbird Entrepreneurship Network announced the Thunderbird Global Business Plan Competition, with cash startup awards for the winner’s business.

Hegranes’ idea was Turbo 140, a micro-job marketplace that will match people offering small jobs, or “gigs,” with people willing to do the tasks for negotiated fees. What will set the site apart is that all gigs, such as taking down Christmas lights, painting a fence or moving a fridge, will have to be posted in 140 characters or less.
“If Craigslist and Ebay had a super baby, it would be Turbo140,” Hegranes said. “You can outsource your to-do list in140 characters or less.” The name references the abbreviated nature of a 140-character Twitter post combined with a fast, efficient work request. Once a gig is posted, other users can bid their price to take the gig. Job posters and bidders will be able to sort and categorize gig types by region and job type. In addition, they will be able to allow their gig requests to be posted to their Facebook and Twitter accounts.

“This competition was the perfect forum to flesh out our ideas,” Hegranes said. “To go through the business process step-by- step, and to get the idea in front of profes- sionals.” Hegranes has worked with a team of two other individuals since January to build a business model and design a user-friendly, scalable site which is scheduled to launch in May.

“There are a lot of potential users, including businesses and individuals, especially students, who would take advantage of this kind of service,” he said. “We are going to do a big push on the university front beginning this August and hopefully spread beyond the Southwest soon after.”

Hegranes made it through several rounds of competition and business plan projec- tions before being chosen to be in the top five. He, along with the other four teams, had 10 minutes to present their plan before taking 15 minutes of intense questions from the six judges, who were professionals from a variety of backgrounds in Phoenix. “It was good to have some brutal feedback,” Hegranes said. “Brutal, but constructive.”
“Opportunities like this at Thunderbird can help develop ideas, they can help incubate them and fund them,” he said. The culture at Thunderbird is becoming more entrepre- neurial, and a lot of the students are already enterprising and creative. This is a great platform to move the school forward.”

Turbo140 is live and people can sign up to be part of the private beta at www.turbo140.com.

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