Rested, rejuvenated, and — most important of all — replenished with good ideas, the Startup Tour is getting back on the road, revisiting the companies we saw last summer. That first visit set a baseline, introducing the startup companies, but this trip is our chance to help.
Just like they did on the old Newlywed Game, we’re bringing to each company a gift “chosen especially for you.” This is typically something we sensed was missing on the first visit that — through the power of television — we could help provide on this second trip. Sometimes it will be a customer, a strategic partner, a distributor, an investor, a new head of marketing or CEO for those companies that need one, or even a hero for inspiration. For about a third of the companies we’ll be bringing plain old money.
All startups think they need money and some can actually use it. For many, though, cash alone isn’t the answer, because cash brings complexity and obligation — two things these earliest stage companies often can’t handle. Ready-fire-aim may work in Silicon Valley, but we’re avoiding Silicon Valley, remember? So aiming is what we’re all about.
Sometimes finding what we can do to help is easy. The company can’t get a meeting at WalMart, for example. We can fire-up the cameras and maybe get that meeting in Bentonville, but first we’d argue against it, because working with WalMart kills many companies, especially those with shallow pockets. WalMart shows vendors no mercy and doesn’t care how big or small they are. It may be better to aim our cameras elsewhere.
But finding money, it turns out, is a little harder. At least it was for me.
Every startup needs a break, a lucky accident like sitting next to exactly the right person on an airplane or finding the ideal partner at your son’s Cub Scout meeting. But such accidents happen only to those who actually get on planes and attend Cub Scout meetings. Good fortune rarely knocks on doors.
Nor does capital, it turns out.
I had this idea right from that start that venture capital would play a role in both the Startup Tour and the TV show. Here I had this crowd-sourced deal funnel filtering hundreds of good companies into a couple dozen really exceptional opportunities. Readers did the work of a dozen overpaid VCs finding the best startups. What resident of Sand Hill Road wouldn’t want to hitch a ride on something like that? I envisioned offering my VC friends the chance to tag along, giving sage advice on TV and snapping-up the best investment opportunities in the process. It was going to be a win-win.
Except I couldn’t interest anyone in seriously participating.
“We’ll eventually see all those companies,” my VC friends said to me. “They’ll come to us. ”
No they won’t.
Most of our Startup Tour companies have never even met a VC and wouldn’t know how to arrange a pitch, much less do a good one. That’s the Silicon Valley tradition of startup-as-theater. Startup Tour companies have real products, not just ideas, and they’ve already survived an average of six years. I’m not saying they can’t do an elevator pitch nor that they shouldn’t have to do one. I’m saying the Tour and the show aren’t about pitching, but doing.
My VC friends turned out to be too lazy, I think, to participate in what would have been an amazing opportunity for any of them. That’s their loss. But where was I going to get the money?
Hong Kong, mainly.
Now does it make more sense that I’ve been writing about China?
America is strapped (all except the banks and of course the big corporations sitting on $1.4 trillion in cash). Okay, Americans are strapped, while Asians seems more prosperous and less risk-averse, at least for now. Little Hong Kong has plenty of accredited investors still interested in the American Dream. Ironic, eh?
So with my friend Jong Lee, the guys and gals of Hambrecht & Quist Asia Pacific, and Kingsway, a Hong Kong investment bank, we raised the Startup America Fund specifically to help some of these little Startup Tour companies. H&QAP is a Hong Kong-based private equity firm that is 25 years-old and has $2.8 billion under management, so there is adult supervision, which means no new RV for Bob, dammit.
These aren’t prizes, they are investments. We sat down in Hong Kong and decided as a group to practice old-time venture capital, investing modest amounts in real companies with real products that are ready — or nearly ready — to go. The investments vary from $100K to $5 million, which are amounts beneath the threshold of many Silicon Valley VC firms, and involve a substantial component of sweat equity — the fund’s sweat, not the founder’s. Helping startups to succeed is what this is all about, though making a profit is nice, too.
So we’re getting that win-win after all from this desparate exercise in me channeling Simon Cowell.
I only wish more American investors and institutions had taken my call.
In spite of the last article, in this one you go to Hong Kong to find VCs to fund American startups !
Take notes and let’s see in 5 years if the VC sponsored companies do any better than the non-VC sponsored ones, ok ?
As a follow up to my last post, here’s an interesting link:
https://www.slate.com/id/2270948/
Professional managers go to startups in India and bring best practices to a group of companies, carefully matched against a group of controls who did not get professional help. The result? A mere 10% improvement, which to me is well within the scope of the Hawthorne effect (similar to the placebo effect, productivity will improve simply because researchers are studying the workers).
10% improvements yielding $200k/yr is pretty lousy. At $200k/yr it would be many, many years to pay for the 5 months of Accenture consulting it took to get the improvements.
Maybe those with capital have read your recent pro-socialist/fascist articles.
Maybe they don’t want to be giving their money to someone who advocates the government confiscation of the assets of the rich.
Maybe your past writings are catching up with you, and, having revealed yourself, people find they don’t want to do business with a socialist.
Are we surprised then that you turn to your brethren, the socialists of Hong Kong, to find your funding? Will you be surprised later when the intellectual property of your most successful socialist-funded company is stolen by the Chinese, who will then slaughter your company in the marketplace? Do you not read the news?
Who will be surprised, except you, that socialism and fascism don’t reward the innovative? On what path are you leading these silly little companies, away from American VCs and into the arms of the waiting socialist crooks?
Don’t blame America, and American VCs, because nobody trusts you.
Try blaming yourself and your ideology.
Whoa there Ayn, Hong Kong is probably the most Libertarian, and the least socialist place on earth . . . either there or Macao.
2. Bob is hardly a socialist.
3. “successful socialist-funded company is stolen by the Chinese, who will then slaughter your company in the marketplace?” I thought you guy were for the Darwinian survival of the fittest (which includes slaughter of the unfit).
4. Bob is a pragmatist, not an ideologue. Can’t say the same for Libertarians though . . .
5. Please don’t hurt me . . . ;-(
francis, I noticed you didn’t quote me fully. I said:
“Will you be surprised later when the intellectual property of your most successful socialist-funded company is stolen by the Chinese, who will then slaughter your company in the marketplace?”
The chinese steal IP. That’s not Darwinian survival of the fittest, that’s outright theft. Read the full sentence, quote it correctly, and get used to the fact that the chinese are thieves. You disgrace yourself by editing the line.
If you don’t think Bob is a socialist, then you haven’t been reading him.
My hope is that these startups do more research than you have. Find out who Bob really is, find out who backs the HK VCs, and discover what happened to the many foolish investors who were lured to the honeypot of HK money. It’s a well-documented trap.
As to your statement, “Please don’t hurt me,” all I can say is, dude, have the strength of your convictions. If you believe something strong enough, then you’re going to get knocked around a bit in the world of ideas. If you think Bob isn’t a socialist, then stand up for him, and back him fully. But remember that I’m going to pull specific quotes from him. Good luck.
Ok.
But I’m not sure the Chinese are thieves as you say . . . because if it’s IP you are talking about, patents and copyrights are monopolies granted in law (ie. by the government) within a specific country. If you have a US patent it doesn’t mean you have a patent in Germany or Canada automatically. How many companies get patents in China, under Chinese law? Does China a cross-patent deal with the US such that each recognizes the other’s patents? I don’t think so. I read a piece a while back that says few US companies bother to get patents in China. So actually there have no legal IP protection there. Remember a patent is just a legally granted monopoly.
Would Ayn Rand have been favor of such government granted legal monopolies? I’m not sure. If you read other articles of Bob, he makes a strong case that the patent system – which has turned into a legal game for squatters who want to make off with riches without building anything – is completely broken.
Where is that young Francisco who I lust after so? I want to make sweet love to him while Ayn Rand pervertedly watches, rubbing a stack of 100s…
You mean this Francisco? https://www.capitalismmagazine.com/index.php?news=1826
Actually when I was a child my family lived in South America, and I was called Francisco, but no, you can’t have me, nor watch if Ayn and I get together, perv . . .
I can’t believe there’s a ‘Capitalism Magazine’…
“The chinese steal IP. That’s not Darwinian survival of the fittest, that’s outright theft.”
Isn’t theft a valid adaptation for species survival? If you don’t have a government to protect you, and I can steal all your stuff, clearly I’m more fit than you.
You don’t have to look very hard to find a non-human animal that thrives via theft, either from other members of the same species, or from other species.
Take out the notion of human social constructs, and theft is just another way to aid the perpetuation of your kind.
I think ayn rand is referring to survival of the fittest within the laws, customs, and mores of a civilized society. That puts the onus on the people of the civilized world to pass and enforce laws that are in the public interest. For example, neither a 100% tax rate nor a 0% tax rate is in the public interest. Some limited protection if IP is generally regarded as in the public interest by most nations.
Well, not to annoy anyone,but this continent was peopled by 170 million people who had been living here for at least 30,000 years before European contact. Now they are have been done in and we call this place ours. Forget about IP. If you want thievery and murder on a grand scale you don’t have to look very far. Oh but I forget, most people don’t think very deeply on anything, and prefer to see the stile in their neighbors eye, instead of the plank in their own (me included, unless I try very hard).
What I get for not reading to the end of the thread. Sorry for the dupe of your point.
In a Darwinian jungle, theft is a legitimate survival strategy. In the eco-system it’s called scavenging. In the economy it’s called copying, which is only illegal because of excessive government regulation (the broken patent/copyright/trademark system). Or are you a LINO (Libertarian in name only)?
Ironically, the VCs just shrugged.
Good one! I needed a laugh today. Oh wait, you weren’t serious were you?
that’s silly.
think “establishment inertia” instead.
“why, Son, that’s not how it’s done. hell, I did it with 6SN7s back in the 40s.”
“feller, that’s pretty clever for a little guy. when you’ve got a business plan large enough for Businessmen, call back for an appointment.”
“does it work with Windows?”
“what’s your China price?”
“you know, I don’t work with anybody that doesn’t have a (whoosis) PhD on the board.”
“uh, have I seen you before?”
Watch this TED lecture on exchange of ideas and it may change your mind about IP:
https://www.youtube.com/watch?v=OLHh9E5ilZ4
Hi Bob,
When will we see the TV series air?
Bob may have a bit of a liberal bent from time to time, but if you really understood Ayn Rand you’d see that Bob is the one championing the producers, and disdaining the leeches.
As a startup, I would welcome the Hong Kong money, but I would be very wary of giving any significant technical info up.
Bob, I think you came up with an ingenious solution. The Silicon Valley VC Boys have their heads in the clouds (or maybe just up their asses).
Seriously, “Disdaining the leeches”? You mean capitalists?
I think we know what you think.
Although I agree with the points you made in in your first two posts, I don’t interpret Mr. Windows comments as you do. To a communist “leeches” may mean capitalists but to a capitalist it means those on the public dole. Either way we should keep in mind that Bob is talking to legitimate businesses with good ideas and technology who could make good use of additional funding.
I notice that most of the other people here are attempting to play nice and avoid the personal attack. In my experience, those who must use the personal attack usually have little else to offer.
Yes, leaches. Those who make their money trading in the efforts and work of others, while building and producing nothing. Fucking leaches.
“So with my friend Jong Lee,”
is this the H&Q, MTV Japan, Pineridge Resorts, Sugarloaf, Gotcha, Nexon Jong Lee??
how about a crowd sourced VC fund? i bet there are many nerds, like me, who dont have millions to put into risky investments, but do have smaller amounts they would like to invest into a high tech VC fund. if a reliable source (e.g. a current fund manager or broker) had such a fund we could invest in as we would a mutual fund, i bet you’d find a surprising number of investors. maybe there are such funds i’m unaware of.
Here’s a model for such a cloud-sourced VC fund.
https://www.kiva.org/
Not crowd sourced but safer: https://www.signonsandiego.com/news/2010/nov/03/andreessens-venture-fund-adds-650-million/
Bill:
I agree, a crowd sourced VC fund would be great. My company is part of the startup tour and fundraising is definitely one of the biggest difficulties for startups right now. I have talked with tons of friends and family (and some outright strangers) who would love to invest in our company but do not qualify as “accredited investors”. I’ve talked to attorneys and experienced investors about this and the response is basically “Sure, take their money if you want, but you’ll never get a VC to follow on afterwards.” Apparently, US law puts the follow-on VCs at too much risk of a legal headache if they invest in private companies who have unaccredited shareholders. Even if the smaller investors create a syndicate to pool their funds, the SEC and the courts regard that as just a ploy to bypass the accredited investor criteria and essentially disregard the syndicate if/when it comes to the courtroom.
Oddly enough, Canada has done exactly what you’re suggesting. They actually sell stocks in their VC funds on the open exchange so that anyone who wants to buy a share can own a piece of the VC fund. The funds then have professional managers who decide which companies to invest in and all of their activity is available in publicly accessible reports so everyone knows where their money went. I’m not an expert on it, but I understand that their system has been very successful so far. It seems a little odd to me that the US – supposedly the innovation capital of the world (at least in terms of patents and innovations per capita) – would be behind anyone else on such a system.
Are you saying a VC fund is prohibited by law from investing in Microsoft because some of the current Microsoft shareholders are not accredited?
No, they’re not prohibited at all. And none of the problems i mentioned apply when it comes to publicly traded companies. But with private companies, non-accredited investors can cause legal problems for the company and VCs. Accredited investors are considered to be safer because they are less likely to be able to claim that the loss of their investment caused them financial ruin.
Bob,
Seems to me you have actually done something to help people. What have all these naysayers done to help people? Reminds me of that old saying, “Money talks and BS walks.” (Or should it be, “BS’ers just talk, but some people actually do something.”)
Mr. Holmes, sometimes you don’t really know your friends until you dig a little deeper.
Wise words.
Holy Crap!! It’s been a while since I read the full list of comments on an article. Hello..people? Blogspot! Very interesting turn of events for Bob and the Startup tour. I’ve never had to deal with VCs, but I think I’d prefer to deal with Bankers with experience. Senior notes coupled with warrants would be better than the vampire percentages you hear about VCs taking.
Watch this TED lecture on exchange of ideas . . . it may change your mind about trade and IP:
https://www.youtube.com/watch?v=OLHh9E5ilZ4
I’m not really sure “ayn rand” actually knows what real socialism is.
It’s become such an overused, misunderstood buzzword in American politics over the past two years, oftentimes used as a method to simply inspire fear.
The more afraid we are, the more money we keep handing over to Halliburton.
Keep in mind that capitalist enterprises have to provide some service in return for their income, unlike government which only has to tax.
I feel your angst. I never had any luck whatsoever with this kind of stuff, either. So happy to find out I’m not by myself!
Excellent article, I discovered your website via Google. I bookmarked your website for furture infomation, thanks.
This makes me a little uneasy. China already owns so much of the U.S. Sure, it’s entirely possible that none of the companies Bob has discovered will amount to anything. But, what is one of them is the next Microsoft or Google?
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I will tell fairly … the first time has come on your site on purpose “clever spam”. 🙂 But to write that that close on a theme it is necessary to read. Has started to read – it was pleasant, Has subscribed and with pleasure I read. Very to be pleasant your site – interesting The maintenance, pleasant design for reading … 🙂
Oh,nice article. Good informations..
Oh,nice article. Good informations..
Oh,nice article. Good informations..
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