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Archive for the ‘Board Of Intellectual Capital’ Category

China’s Hanergy to buy solar startup Miasole in fire sale

Posted in AQT Solar, Board Of Intellectual Capital, boic, Distressed Intellectual Property, Distressed IP, Economy, Gerbsman Partners, Intellectual capital, internet, Investments, tagged , , , , , , , , , , , , on September 30, 2012| Leave a Comment »

Article from GigaOm.

After making a public appeal for investors, MiaSole has found a suitor in Hanergy, a large renewable energy company in China that just bought another solar equipment maker in Germany. The $30M sales prices of MiaSole shows how cheap solar manufacturing assets can be picked up.

Thin Film Solar Underdog MiaSole Looks Ahead to New Plant, Solar Shingles

The search for a financial suitor is coming to an end for solar thin film startup, MiaSole, which has agreed to be bought by China-based Hanergy, according to a shareholder letter.

Hanergy plans to buy MiaSole for a measly $30 million, according to the letter, and also reported by the San Francisco Chronicle. While the Silicon Valley solar company has been mum about how much venture capital it’s raised since its inception in 2001, published reports have put the figure somewhere between $400 million and $500 million by the end of 2011. Earlier this year, the company raised $55 million.

MiaSole was desperate for a white knight to rescue it from oblivion. After years of research and development, the company seemed to have finally nailed its manufacturing process to making solar panels out of copper, indium gallium and selenium (CIGS) that are more efficient than many rivaling CIGS thin film companies. But it was running out of money and needed to expand its production and attract customers. CEO John Carrington joined MiaSole late last year, and he made a public appeal in December for investors and partners who could bring money and sales and marketing expertise.

Hanergy may not be a well-known company in the U.S., but it’s large renewable energy producer in China. We pointed out in this post back in June that Hanergy is a company worth watching not only because of its large hydropower and solar panel production plants in China, but also because of its involvement in installing solar energy equipment. Hanergy won a 3-year deal to install solar panels on Ikea’s stores in China. The company also has built a wind energy generation business within China.

With the purchase of MiaSole, Hanergy is knitting together a global solar thin film empire. Last week, the company completed the purchase of CIGS thin film maker Solibro from Q-Cells in Germany. Hanergy said it would increase Solibro’s production for the European market. With MiaSole’s purchase, Hanergy, of course, will have a CIGS thin film manufacturing base in the U.S.

Solar startups have been picked off one by one cheaply – or filed for bankruptcy – over the past 19 months because the global solar market has been plagued by a glut of solar panels. The fast-falling panel prices – roughly 50 percent in 2011 alone and 30 percent so far this year – have put an enormous pressure on companies to lower their prices. That pressure is particularly difficult to handle for startups, which often have higher manufacturing costs initially when they are scaling up production of their technology. And many of them indeed were trying to raise more money and make that leap to mass production when the financial market crisis hit in late 2008, followed by the oversupply of solar panels starting in 2011.

One of the remaining CIGS thin film company from Silicon Valley, SoloPower, hopes to reverse the trend. The company inaugurated its first large factory in Portland, Ore., last week and plans to start making use of a $197 million federal loan guarantee to expand production.

Read more here.

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The Venture Capital Secret: 3 Out of 4 Start-Ups Fail

Posted in Board Of Intellectual Capital, Entrepreneurship, Gerbsman Partners, Investments, tagged , , , , , , , , , , , , , , , , , , , , , , , , , on September 23, 2012| Leave a Comment »

Article from WSJ Online.

It looks so easy from the outside. An entrepreneur with a hot technology and venture-capital funding becomes a billionaire in his 20s.

But now there is evidence that venture-backed start-ups fail at far higher numbers than the rate the industry usually cites.

About three-quarters of venture-backed firms in the U.S. don’t return investors’ capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School.

The Wall Street Journal reveals its third annual ranking of the top 50 start-ups in the U.S. backed by venture capitalists.

Compare that with the figures that venture capitalists toss around. The common rule of thumb is that of 10 start-ups, only three or four fail completely. Another three or four return the original investment, and one or two produce substantial returns. The National Venture Capital Association estimates that 25% to 30% of venture-backed businesses fail.

Mr. Ghosh chalks up the discrepancy in part to a dearth of in-depth research into failures. “We’re just getting more light on the entrepreneurial process,” he says.

His findings are based on data from more than 2,000 companies that received venture funding, generally at least $1 million, from 2004 through 2010. He also combed the portfolios of VC firms and talked to people at start-ups, he says. The results were similar when he examined data for companies funded from 2000 to 2010, he says.

Venture capitalists “bury their dead very quietly,” Mr. Ghosh says. “They emphasize the successes but they don’t talk about the failures at all.”

There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh’s research.

Failure often is harder on entrepreneurs who lose money that they’ve borrowed on credit cards or from friends and relatives than it is on those who raised venture capital.

“When you’ve bootstrapped a business where you’re not drawing a salary and depleting whatever savings you have, that’s one of the very difficult things to do,” says Toby Stuart, a professor at the Haas School of Business at the University of California, Berkeley.

Venture capitalists make high-risk investments and expect some of them to fail, and entrepreneurs who raise venture capital often draw salaries, he says.

Consider Daniel Dreymann, a founder of Goodmail Systems Inc., a service for minimizing spam. Mr. Dreymann moved his family from Israel in 2004 after co-founding Goodmail in Mountain View, Calif., the previous year. The company raised $45 million in venture capital from firms including DCM, Emergence Capital Partners and Bessemer Venture Partners, and built partnerships with AOL Inc.,  Comcast Corp.,  and Verizon Communications Inc.  At its peak, in 2010, Goodmail had roughly 40 employees.

But the company began to struggle after its relationship with Yahoo Inc. fell apart early that year, Mr. Dreymann says. A Yahoo spokeswoman declined to comment.

In early 2011 an acquisition by a Fortune 500 company fell apart. Soon after, Mr. Dreymann turned over his Goodmail keys to a corporate liquidator.

All Goodmail investors incurred “substantial losses,” Mr. Dreymann says. He helped the liquidator return whatever he could to Goodmail’s investors, he says. “Those people believed in me and supported me.”

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Daniel Dreymann’s antispam service Goodmail failed, despite getting $45 million in venture capital.

How well a failed entrepreneur has managed his company, and how well he worked with his previous investors, makes a difference in his ability to persuade U.S. venture capitalists to back his future start-ups, says Charles Holloway, director of Stanford University’s Center for Entrepreneurial Studies.

David Cowan of Bessemer Venture Partners has stuck with Mr. Dreymann. The 20-year venture capitalist is an “angel” investor in Mr. Dreymann’s new start-up, Mowingo Inc., which makes a mobile app that rewards shoppers for creating a personal shopping mall and following their favorite stores.

“People are embarrassed to talk about their failures, but the truth is that if you don’t have a lot of failures, then you’re just not doing it right, because that means that you’re not investing in risky ventures,” Mr. Cowan says. “I believe failure is an option for entrepreneurs and if you don’t believe that, then you can bang your head against the wall trying to make it work.”

Overall, nonventure-backed companies fail more often than venture-backed companies in the first four years of existence, typically because they don’t have the capital to keep going if the business model doesn’t work, Harvard’s Mr. Ghosh says. Venture-backed companies tend to fail following their fourth years—after investors stop injecting more capital, he says.

Of all companies, about 60% of start-ups survive to age three and roughly 35% survive to age 10, according to separate studies by the U.S. Bureau of Labor Statistics and the Ewing Marion Kauffman Foundation, a nonprofit that promotes U.S. entrepreneurship. Both studies counted only incorporated companies with employees. And companies that didn’t survive might have closed their doors for reasons other than failure, for example, getting acquired or the founders moving on to new projects. Languishing businesses were counted as survivors.

Of the 6,613 U.S.-based companies initially funded by venture capital between 2006 and 2011, 84% now are closely held and operating independently, 11% were acquired or made initial public offerings of stock and 4% went out of business, according to Dow Jones VentureSource. Less than 1% are currently in IPO registration.

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Facebook Lets Businesses Plug In CRM Email Addresses To Target Customers With Hyper-Relevant Ads

Posted in Board Of Intellectual Capital, boic, Branding, Digital Marketing, FaceBook, Gerbsman Partners, Market research, Social Networks, Strategy, Technology, tagged , , , , , , , , , , , on September 21, 2012| Leave a Comment »

Article from TechCrunch.

No one got just how powerful it was that Facebook recently said it would allow ad targeting to lists of email addresses. Today at the Dreamforce conference it became clear, as Facebook ad chief David Fischer formally launched “Custom Audience” ads and how they tie into CRM. I’m convinced they’re going to be hugely profitable for advertisers and Facebook.

Why? A hotel company like Starwood has email addresses of its customers and could target “Come stay at the luxurious St. Regis” to high-end customers who’ve stayed there before, while targeting “Find cheap hotels nearby” to those who’ve stayed at its low-budget brands. That means more sales and more loyalty for advertisers, and more revenue for Facebook.

On August 30, Facebook told press that Custom Audiences was coming, but now it’s live with eight ads providers. Custom Audience ads let businesses submit a text or CSV file of privacy-protected hashed email addresses, phone numbers, or Facebook User IDs and have Facebook target those people with a specific ad. Businesses can also layer on additional ad targeting parameters, such as age or interests to reach a specific demographic within a customer segment.

Salesforce who brought in Fischer for its Dreamforce conference is uniquely suited to take advantage of custom audience ads because it owns both its massively popular eponymous customer relationship management system, but also a Facebook ads buying system Brighter Option that it got with its acquisition of Buddy Media this summer.

I’ve attained from Facebook a list of the seven other vendors working with custom audience ads, but none have their own CRM. They are AdParlor, Alchemy Social, GraphEffect, Kenshoo, Nanigans, Social Moov, and Optimal.

Custom audience targeted ads will be much more relevant than ads just targeted to a business fan’s or some biographical demographic. They can reach people who a business is sure purchased its products before, or that haven’t thanks to exclusionary targeting. Yes, businesses could just email these existing customers for free. However,  Facebook can help them hone in on certain demographic segments of their customers by overlaying additional targeting parameters, and reach them vividly through the news feed instead of their dry inbox.

Here are a few more examples of industries that could use custom audience ads:

  • A car company with email addresses of its customers could target “buy a new SUV” ads to people who bought an SUV 5+ years ago, while targeting “Find nearby charging stations” to those who recently bought an electric vehicle.
  • A bank company could target different ads to customers with savings of $5,000 versus customers with $5 million.
  • A Facebook game developer could plug in the user IDs of its gamers, targeting ads for its newest war-strategy games to those who played its old strategy game, while targeting ads for its latest shopping game to users who played its fashion game.
  • A B2B vendor could submit a file of the phone numbers of its biggest clients and target ads for a premium service to them to increase revenue, while targeting its newest clients with ads for discounts to increase loyalty.
  • Instead of targeting general ads to all its Facebook fans encouraging return visits, Amazon could advertise specific products to segments of its customers who’ve bought similar things.

Precise targeting of segments of existing customers like this could produce huge return on investment for advertisers and command high ad rates for Facebook. CRM-equipped companies might spend more when they know who they’re reaching, and that could help Facebook please Wall Street with higher revenues. In fact, it’s such a smart idea to plug CRM into ads that I bet we’ll see more advertising platforms integrate like this soon.

Read more here.

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Consumer, Internet Startups Increasingly Targeted for VC Backing

Posted in Board Of Intellectual Capital, boic, Business models, Economy, Entrepreneurship, Intellectual capital, Investments, tagged , , , , , , , , , , on September 7, 2012| Leave a Comment »

Article from PE Hub.

Venture dollars have shifted to early rounds from late-stage deals over the past several years. It is a shift that proved fastest in quick changing industry segments, such as the consumer Internet, and slowest in segments like semiconductor, which are less dynamic.

Until now, I have not seen a study with an industry-by-industry breakdown of the trend. The work came from Preqin and offers some useful detail. For instance, just 13% of “consumer discretionary” deals over the last four years were late stage transactions and just 15% of Internet fundings, the study found.

Meanwhile, 45% of semiconductor and electronics deals in the four years from 2009 to 2012 were late stage. And a third of transactions in cleantech and health care were, according to the study.

Since the Great Recession of 2008 and 2009, venture capitalists have shifted substantial dollars to the early stage. In 2007, 40% of invested capital went to late stage deals. Nineteen percent found its way to the early stage, according data from the MoneyTree Report. By 2011, early stage spending was 30% of the total and late stage had fallen to just under 34%. The breakdown for the first half of 2012 is almost identical to last year.

According to Preqin, another segment with strong early stage interest is business services, where just 17% of deals were late stage. Preqin draws the dividing line between early and late at the Series C funding, lumping expansion financing into its later stage tally.

Among the latest of the late fundings during the period were the G and H rounds. Several took place. In 2010, Onconova Therapeutics raised a $15 million Series H and the same year saw Zipcar put another $21 million in its war chest with a Series G financing from Meritech Capital Partners and Pinnacle Ventures.

SolarCity this year roped in $81 million in a Series G round with investors including Silver Lake and Valor Equity Partners.
Read more here.

 

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Multinationals Stake a Claim in Venture Capital

Posted in Board Of Intellectual Capital, Business models, Economy, Entrepreneurship, Investments, tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , on September 4, 2012| Leave a Comment »

Article from NYTimes.

MENLO PARK, Calif. — New York, London and Hong Kong are common addresses for blue-chip multinationals. Now Silicon Valley is, too.

From downtown San Francisco to Palo Alto, companies like American Express and Ford are opening offices and investing millions of dollars in local start-ups. This year, American Express opened a venture capital office in Facebook’s old headquarters in downtown Palo Alto. Less than three miles away, General Motors’ research lab houses full-time investment professionals, recent transplants from Detroit.

“American Express is a 162-year-old company, and this is a moment of transformation,” said Harshul Sanghi, a managing partner at American Express Ventures, the venture capital arm of the financial company. “We’re here to be a part of the fabric of innovation.”

The companies are raising their profiles in Silicon Valley at a shaky time for the broader venture capital industry. While top players like Andreessen Horowitz and Accel Partners have grown bigger, most venture capital firms are struggling with anemic returns.

The market for start-ups has also dimmed, in the wake of the sharp stock declines of Facebook, Zynga and Groupon, the once high-flying threesome that was supposed to lead the next Internet boom.

But unlike traditional venture capitalists, multinationals are less interested in profits. They are here to buy innovation — or at least get a peek at the next wave of emerging technologies.

In August, Starbucks invested $25 million in Square, the mobile payments company based in San Francisco, which will be used in the coffee chain’s stores. This year, Citi Ventures, a unit of Citigroup, invested in Plastic Jungle, an online exchange for gift cards, and Jumio, an online credit card scanner.

Banco Bilbao Vizcaya Argentaria, the large Spanish banking group, opened an office in San Francisco last year. The team, which has about $100 million to fund local start-ups, is looking for consumer applications that will help the bank create new businesses and better understand its customers.

“We are in one of the most regulated and risk-averse industries in the world, so innovation doesn’t come naturally to us,” said Jay Reinemann, the head of the BBVA office. “We want to avoid the video-rental model. We want to evolve alongside our consumers.”

The companies are hoping to tap into the entrepreneurial mind-set. Multinationals, with their huge payrolls and sprawling operations, are not as nimble as the younger upstarts. While they are rich in resources, big companies tend to be more gun-shy and usually require more time to bring a product to market.

“Companies cannot innovate as fast as start-ups; increasingly they realize they have to look outside,” said Gerald Brady, a managing director at Silicon Valley Bank, who previously led the early-stage venture arm of Siemens. “We think it’s happening a lot more than people recognize or acknowledge.”

Of the 750 corporate venture units, roughly 200 were established in the last two years, according to Global Corporate Venturing, a publication that tracks the market. In the last year, corporations participated in more than $20 billion of start-up investments.

Big business has played the role of venture capitalist before, with limited success. During the waning days of the dot-com boom, financial, media and telecommunications companies sank billions of dollars into start-ups.

The collapse was devastating. Although some managed to make money, far more burned through their cash. In 2002, Accenture, the consulting firm, scrapped its venture capital unit after taking more than $200 million in write-downs. The previous year, Wells Fargo reported $1.6 billion in losses on its venture capital investments. Dell, the computer maker, closed its venture arm in 2004 and sold its portfolio to an investment firm. (It resurrected the unit last year).

Companies say they are taking a different approach this time. Rather than making big bets across the Internet sector, investments are smaller and more selective.

“We invest with the idea that we’re a potential customer for a company,” Jon Lauckner, G.M.’s chief technology officer said. “We’re not looking to make several $5 million investments and make $10 million on each. That would be nice, but it’s not important.”

As they try to find the right start-ups, some are forging tight bonds with local firms. BBVA, for example, is an investor in 500 Startups, a venture firm that specializes in early-stage start-ups and is run by Dave McClure, a former PayPal executive.

Unilever and PepsiCo are limited partners in Physic Ventures, a venture capital firm designed to help corporate investors build commercial partnerships with portfolio companies. Both Unilever and PepsiCo have installed full-time employees in Physic’s downtown San Francisco offices.

American Express has stacked its investment team with technology veterans. Mr. Sanghi, the head of the office, has spent roughly three decades in Silicon Valley and formerly led Motorola Mobility’s venture arm. Through its network of relationships, the office has met with roughly 300 start-ups in the last six months.

The connections have started to pay off. Vinod Khosla, the head of Khosla Ventures and a co-founder of Sun Microsystems, introduced the American Express team to the executives at Ness Computing, a mobile start-up. In August, American Express partnered with Singtel, the Singapore wireless company, to invest $15 million in Ness.

Mr. Sanghi says Ness is a logical investment and a potential partner. The start-up’s application connects users to local businesses through customized search results.

“It’s trying to bring consumers and merchants together in meaningful ways,” he said. “And we’re always trying to find new ways to build value for our merchant and consumer network.”

For start-ups, a big corporate benefactor can bring resources and an established platform to promote and distribute products. Envia Systems, an electric car battery maker, picked General Motors to lead its last financing round because it wanted to have a close relationship with a major automaker, its “absolute end customer,” said Atul Kapadia, Envia’s chief executive.

Although the company received higher offers from other potential corporate investors, Envia wanted G.M.’s advice on how to build the battery so that one day it could be a standard in the company’s electric cars. After the investment, G.M. offered the start-up access to its experts and facilities in Detroit, which Envia is using.

“You want to listen to your end customer because they will help you figure out what specifications you need to get into the final product,” said Mr. Kapadia.

A marriage with corporate investors can be complicated. Besides G.M., Asahi Kasei and Asahi Glass, the Japanese auto-part makers, are also investors in Envia. They both build rival battery products for Japanese car companies.

Mr. Kapadia, who prizes their insights into Japan’s market, says his company is careful about what intellectual property information it shares with its investors. At board meetings, confidential data about Envia’s customers is discussed only at the end, so that conflicted corporate investors can easily excuse themselves.

“In our marriage, there has not been a single ethics concern, because all the expectations were hashed out in the beginning,” Mr. Kapadia said. “But I can see how this could be a land mine.”

For the big corporations, start-up investing is fraught with the same risk as traditional venture investing. Their bets might be modest, but blowups can be embarrassing and can rankle shareholders, who may see venture investing as a distraction from the core business.

OnLive, an online gaming service, offers a recent reminder.

The company was once a darling of corporate investors, with financing from the likes of Time Warner, AutoDesk, HTC and AT&T. At one point, it was valued north of $1 billion.

Despite its early promise, the start-up crashed in August, taking many in Silicon Valley by surprise. The company laid off its employees, announced a reorganization and in the process slashed the value of the shares to zero.

“It can be painful when a deal goes sour,” James Mawson, the founder of Global Corporate Venturing, said.

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