From time-to-time I hear from investors: what if Google decides to build it?

My replies are as follows:

1/ Google is the king of web-based advertising derived from search, and it does so extremely well and profitably. Yet Google is a pretty monolithic animal. While the company is capable of building virtually any technology outside of its core competency and brings a bright sparkle of innovation to Silicon Valley, it is consistently unsuccessful in turning that innovation into great Billion dollar businesses (which reminds me of Oracle, before Chuck Phillips came on board).

2/ Google is not a true marketplace, nor does it seem to understand free-market principles as witnessed by their actions. Google is a premium market for search-based advertising placements and it will continue to drive premium market DNA to the adoption of technology. Nothing wrong with that, unless they portray a more liberal character. So, you’ve got little to fear if a free-market platform is what you are building.

3/ Google does not understand any software category that doesn’t derive its revenue from advertising. While there may be a great future for software (as a service) that no consumer ever pays for directly, today that is not the reality. Desktop software, proprietary enterprise applications, software-as-a-paid-service are examples of what Google is highly inexperienced and generally unsuccessful with.

4/ It would be a great sign if Google decides to build a similar product or service, as it would produce a rhetorical blessing of the proposition and an impromptu acquisition play by its competitors. Isn’t that what you want as an investor.

Google’s relatively young age, massive growth and company DNA are probably the best reasons why it hasn’t succeeded financially in many areas it operates in. But I greatly admire their drive to invest a large part of the difference between their (Wall-street) valuation and real value in new technology development.

Beyond search, Google is in essence a giant research institute with the limited financial successes that come with that model. But Google lays important development groundwork that has and will continue to do us all good. They also provide valuable incubation of new technology ideas a commoditizing VC market rarely picks up on.

My startups have a different charter; turning great technologies into great businesses, now!

Tags: Google, Wall-Street, Innovation, Markets, Marketplace

Let’s look at photography (my hobby), arguably the most important purchasing-driver of computers (after the ability to access the internet) by consumers. Media management (yes, on the desktop) remains more than a Billion dollar market opportunity.

Case in point: new announcements of Adobe Lightroom and Apple Aperture tout enhanced interoperability with third party plugins to manage and edit your photographs. Don’t you feel good about that warm open-source-like karma of interoperability?

I don’t. Both vendors have deployed their next trick to customer imprisonment. And plenty of uninformed customers will fall for it. Here is why you shouldn’t:

1/ There is no need for an additional platform for photo management.
Photo editing capabilites of both applications are mediocre (no layer based editing, no advanced local editing etc.) and their asset management capabilities are little more than a replica of file system capabilities (even photographic attributes such as exposure, aperture and other attributes are maintained by the file-system metadata today). So, except for making nice photo albums and calendars, why else would you slug thousands of photographs in a proprietary asset management format that is less reliable than the underlying file-system and requires seperate backup and archiving strategies to maintain.

2/ Plugins have worked for years on file-system based photographs.
The announcement of the interoperability with plugins is really old news as those third party applications have been working with file-system based photographs for years. This is a platform on top of a platform, designed to milk more money out of customers and locks them into a proprietary technology stack. A prison with the windows open is still a prison.

3/ The operating system needs-to and will evolve faster.
The pace of meaningful innovation of the Personal Computer OS is deplorable. Microsoft has not made the PC operating system significantly smarter over the last ten years and that has opened the window of opportunity for Apple to surpass Microsoft in usability (rather than functionality). The ability to easily create and manage user-generated content such as, Photography and Video, has now become important adoption drivers to the platform, OS-vendors have yet to respond to. Photographic capabilities should be built-in (not priced-on). These days the unique media experience of the platform is the differentiation that sells the computer (since they all do internet quite well).

As a consumer, buying into seperate photography management siloes will cost you significant time and money (as the former CEO of a photo software company, researching the alternatives, I tried). My advice is to wait until an agile vendor steps up and turns media management into a core competency of the computing experience.

In the words of Ray Lane (partner at KPCB and former COO of Oracle) who once said customers are better off skipping some steps of innovation (in his case to skip client-server for three-tier internet architecture), I have just presented you with my reasoning to skip-over Adobe Lightroom and Apple Aperture. Not because I don’t like some of its functionality, but because it is strategically a dead-end street.

The next evolution of media management will soon eradicate the old one and deliver lasting differentiation to the vendor that owns it and provides a much, much better media experience to the consumer.

I am planning on having something to do with that.

Tags: Platform, Photography, Consumer, OS X, Operating System, Innovation, Integrity, Adobe, Microsoft, Apple

When Facebook decided to integrate new application capabilities that were first available as a third-party application from a marketplace participant, they broke the cardinal rule of marketplace meritocracy. When Getty Images’ staff-photographers allegedly took new pictures similar to previously top-selling pictures from participants they too broke a fundamental marketplace rule. When Amazon.com optimized sales results based on margins requirements they too broke many of the free-market rules as described in “Look, but don’t touch”.

By calling themselves platforms or marketplaces those companies misled their participants and engaged in what I would characterize as false advertising. Not only did the suppliers expect to be treated equally and become successful based on a true meritocracy, buyers expected to get an untainted view of that meritocracy to make informed purchasing decisions.

Technology platforms need to obey to a simple macro-economic marketplace definition:

A marketplace connects unrestricted supply with unrestricted demand through an un-arbitrated and transparent exchange.

Marketplaces thrive because they support free-market principles, and as a result they level the playing field for all participants. No longer are unfair advantages for participants defined by geographic location, subscriptions, volume or other artificial boundaries, but simply by the value and the price of their products.

Here is what platform vendors, to maintain free-market principles and thrive, should stick to:

1/ Don’t employ sales people that sell marketplace content. Sales people give preference to specific content which violates the integrity of the marketplace. Sell the effectiveness of the marketplace mechanism instead.

2/ Don’t market specific content, but market the effectiveness of the exchange. Unfair advantage is an attribute of a premium market not a free-market.

3/ Don’t arbitrate. Anyone should be able to participate, participation fees (that anone in the target group can afford) are okay.

4/ Don’t hide sales results. Transparency of the effectiveness of the marketplace is crucial to invite new entrants on the supply and buy side.

5/ Don’t participate in the marketplace yourself. Clearly seperate yourself from the participants, platform vendors should just build the platform, not the content.

Technology companies that are building platforms should check out our cardinal marketplace rules and investors should measure their platform companies on the compliance to those rules. Investing in a premium market business is fundamentally different from investing in a free-market platform business. Funding requirements and use-of-proceeds differ dramatically.

I’ll make the point again that investors should understand macro-economics impact before they invest.

Marketplaces are not for-free and still support capitalism, but the money will be made by platform owners from a transparent margin on the exchange (and sometimes carefully applied advertising opportunities). Diligent consumer marketplaces achieve winner-takes-all participation levels and massive exchange volumes and revenues. eBay and the Apple AppStore are great examples of more disciplined marketplaces.

Because of the virtually unlimited global reach of the Internet we have an incredible opportunity and obligation to present the world with free-market platforms that treat all participants fairly and with respect.

Let’s stop whining about the authenticity of our presidents, and instead, as the creators of the technology industry show the world how we turn authenticity, embedded in our technology, into a massively sustainable advantage.

Tags: Platform, Amazon, FaceBook, Getty-Images, Photography, Meritocracy, Marketplace, Markets, Premium

With the proliferation of the new iPhone, Mobile Applications as a viable VC investment category is dead.

Companies like Digital Chocolate (founded by software gaming pioneer Trip Hawkins) are now painfully aware of that. Recenty switching gears, it is debatable whether they can compete with the endless supply of a new free-market.

The future of many companies like Aeroprise, still basking in the glory of a proprietary Blackberry environment and tucked away in the enterprise mobile markets, will be severely threatened by standards-based technlogy running on any internet capable device, very soon.

The premium market of mobile applications protected by walled gardens has been changed to a free-market by Apple’s iPhone and the App Store. Macro-economics, discussed in this blog many times before, at work again.

Rather than single minded companies being able to protect their turf with a collection of proprietary applications (usually aimed at businesses), now individuals will start to create applications for other users. By the people, for the people. N/N :the airplane code for Steve Jobs’ Gulfstream. Get it already?

User-generated-content (one of those awkward Silicon Valley attempts of describing content that resides in a free marketplace) has a brand new companion, it is called: applications.

But these applications are no longer mobile applications, they are internet applications - that happen to run on a great mobile internet device. And they will run on many other internet devices, hard-wired or mobile. Think of them as the big brother of widgets, task oriented applications that remove the need to use a browser to benefit from the Internet. They target regular consumers, not internet savvy technologists and they self-configure, based on location and other user preferences.

So the investment model for mobile has changed dramatically and the recently announced $100M iFund (by top investment firm KPCB) and a similar one by BlackBerry - the vehicle of purportedly investing $1M per application vendor - makes no sense at all. Here is why:

1/ User-generated content does not provide a great foundation for large upside - let alone an acquisition or IPO that is priced to produce interesting VC returns.

2/ The value to the VC is in the “winner-takes-all” platform, not the content (albeit that produces great value and choice to the consumer). Apple, with the App Store platform for distributing applications using free-market principles (although still not perfect, check out our marketplace rules) will again walk away with the same benefits it reaped from the iTunes store, direct and halo.

3/ Application development is a very high cost business, especially in a highly competitive marketplace. The gaming industry wrapped in a slower transition from premium to free-market is finding that out too.

4/ Mobile used to be a proprietary, and protectable, path to the internet. No longer. The intelligence of the backend service, accessed through a mobile of hard-wired computing device is where the value is.

So, i suggest to rename the iFund in Software-As- A-Service fund, agnostic to access paradigm.

Nokia and Blackberry (RIM) will have to follow quickly. But they would need to start hiring people that understand macro-economics, not just technologists that create poor copies of Apple’s implementation.

All phones need to have a real operating system inside, and Roger McNamee’s investment in Palm may make sense in that way, but they better step it up quickly. Nokia is off playing with Symbian, Microsoft has its own concotion. All of them pretty much asleep at the macro-economic wheel.

Yet for individuals, on the supply and buy side, all this disruption leads to new opportunities that are derived from a meritocracy. Fantastic applications are being developed and used in massive numbers. The world is indeed flat after all.

Tags: Apple, Nokia, Blackberry, Free-market, Marketplace, Meritocracy, SaaS, Proprietary, Gaming, Funds, Wall-Street, ITunes

Finally the market is talking, and I knew it would have more impact than my blog:


(from VentureBeat)

Years back we suggested the diminishing value of micro-economic innovation (or technology silos) and a stubborn VC club that still operates under old fashioned principles (see “In Search of the Economist VC” written in 2005, “10 Investment lessons learned” and “Invest different” in 2008) as the main reason for this decline.

Alex Haislip on PEHub agrees:
“The VC industry is laboring under a set of outdated assumptions, a structure optimized for conditions no longer applicable and an unwillingness or inability to embrace the tectonic change it is undergoing. The hand wringing about various short term shocks (such as skittish investors) that sunk the second quarter’s IPOs misses any serious discussion of the long-term systemic shifts that many VCs have failed to act on.”

What needs to change is:

1/ VCs need to start investing in businesses rather than technologies
No one outside of Silicon Valley cares about Web2.0, Mashups, UPnP etc unless it proves to deliver a unique experience, deliver substantial competitive advantage or significant cost savings to customers. Indeed, back to fundamentals.

2/ VCs need to embrace different investment models
We need a long-and-short and high-and-low in technology investments, and everything in-between. With a business centric view of the world comes an investment model that is tailored to that business. Every unique company ecosystem has unique financial requirements. History has shown not all businesses benefit from low-ball investments; the majority of seed stage deals go for less than half the price of a regular house in Palo Alto. The superficial categorization of businesses in technology categories is turning new business opportunities into (forced) commodities.

3/ VCs need to change how they find deals
The problem starts at first encounter. The Ivy League kids fresh out of business school that are the first point of contact for most entrepreneurs are just not capable and experienced enough to spot disruptive technologies that have macro-economic impact. A first time pilot right out of school is not allowed to take the helm of a commercial airliner, neither should an MBA graduate be allowed to veto an investment. False negatives are rampant and deflating overall market value. We need unconventonal companies, not more conventional ones.

But the great thing about the demise of the current VC model is the need to create a new one that, in turn, spawns a new more exciting asset class.

Tags: Investment, Eco-systems, VC

Photography is a fantastic craft to which now, with the introduction of digital photography, many more people have access. Great photography relies on an ecosystem of factors (technical: shutter-speed, exposure, aperture, depth of field, ISO etc. and non-technical) to turn a simple scene into a compelling vision. Just like in business.

The similarities between photography and business are remarkable:

1/ The Art of Seeing
Great photography starts with an ability to see in the same way great innovation starts with an ability to imagine. Spotting a scene and finding extraordinary simplicity in detail is what lays the foundation for a great photograph and business. More so than the ability to master the camera, time is of the essence. Shoot it - now - with whatever camera, as that scene may never come back. So do the great opportunities in business. Carpe diem.

2/ Establish Focus
Every photograph needs a clear focal point, just like a business. One, and not more than one. But focus is not always obvious and in the middle of the viewfinder. Focus in photography and business is achieved through experience of knowing what that focus yields. In business that defines how you are percieved by your customers. As a photographer, you determine where the focus is and set the right angle. As a CEO you establish the focus and direction.

3/ Set a Composition
Composition determines what you see beyond the focal point. Other objects in the viewfinder compete for attention with your focal point, but a great composition takes your eye on a journey to the focal point and strengthens its attraction. Lines, shapes, curves and contrast establish focal point supremacy. In the same way competition in business strengthens (not weakens) the unique appeal of your business.

4/ Evaluate Exposure
Exposure determines how much light you let in. Too much or too little light washes out great detail. Too much or too little exposure undervalues or overvalues the company, either one turns off customers. Use exposure to enhance great value, not to displace it. Use public relations and marketing wisely. So, locate the real business value before you expose it. Exposures can usually be fixed afterwards.

5/ Measure Depth-of-Field
Depth-of-field establishes what is in the foreground and what is not. What is important and what is less important. In business, razorsharp focus is required to establish a solid bottom-line. But a business without “depth-of-field” is a one trick pony. A great bokeh (a photography term for the background pattern established by an f-stop) determines its longevity and - ultimately - sustainability.

6/ Know Technology
Technology is becoming more relevant in photography and similar is the impact in the business world. Technology determines how the end product can be shared and organically find its massive appeal. Now, through the internet, great photographs and great businesses will find a new audience that was previously unreachable. New, more free, markets are opened up and new opportunities arise.

For me personally, photography is a way to relax, but in actuality it is an extension of what I do in business every day. I am always looking for unique moments in time, taking great pictures and building great businesses, that perhaps - others don’t see.

Tags: Photography, Markets, Free-market, Eco-systems, CEO, Marketing, Experience

Is the question that was posed to me recently. My short answer is: macro-economics.

1/ Apple technology is proprietary, all the way
Apple is creating a premium computing platform, rather than an open and commoditized one. Premium markets precede open markets and dish up much higher profit margins. Proprietary environments also allows Apple to control the differentiated customer experience.

2/ Apple is focused on lifestyle computing
Apple is focused on creating solutions to support our lifestyle - a massive addressable market - that consists of music, photography, video etc., rather than esoteric office software for people with lots of technology expertise.

3/ Apple is building an ecosystem
Apple is focused on supporting a differentiated ecosystem, rather than building competitive technology silos. The sum of all lifestyle components interacting with each other make it unique. The iPod remains competitive because of the iTunes store that is accessible through a (Mac) computer and vice versa. Their capabilities are tied to each other.

4/ Apple is building an unique customer experience
The experience of purchasing, innovative design, great product quality, and unique (in-store) customer support provides the evidence of a company that wants to please you.

There are many other differences, some of which also lie in a fundamentally different product development strategy. But top-level differentiation drives micro-economics.

Other companies face an uphil battle if they don’t compete with Apple at the macro level first.

Tags: Apple, Margin, Mac, Eco-systems, Proprietary, Software, Platform

The key to understanding customers is to observe them, rather than to listen to them. As in most life scenarios, what people do and what they say are quite different. And your product strategy better be focused on real purchasing behavior rather than yet another opinion - stated as a fact.

For that reason, the way large technology companies implement usability studies is useless, as these studies attempt to formulate an opinion from people who should be buying - but have not - and use the wrong method to derive their intent, verbal rather than behavioral. Unbridled wishes, promises and demands from prospects are worthless. Yet priceless is the behavior and satisfaction of buyers.

So, without the customer telling you what to do, how do you improve your chances of success:

1/ Focus on greenfield adoption
Many so-called markets have no real market leaders owning more than 30% market share. Technology adoption is still in its infancy and plenty of room exists to tap into greenfield markets. Even in a fast growing market like the mobile phone industry where Apple is resetting the rules of engagement, a large demographic still does not use a mobile phone. So, the trick is to come up with a new strategy for the ever changing greenfield, rather than stealing market share by building a better mouse trap.

2/ Define the macro-economic impact of your technology
Consumer technology should yield immediate personal benefit and become an indisposable asset to the daily tasks we perform. It should save considerable more time than it takes to learn. The iPhone is a portable lifestyle device, rather than just a better version of the old category mobile phone. Redefine the rules from the top.

3/ Build a unique customer experience
Style, performance and capability are important consumer product characteristics and so is the purchasing and support experience. Satisfactory life-cycle support of the product is crucial to secure brand loyalty. Ever noticed how almost half of the Apple Store is dedicated to improving customer experience?

4/ Remove the technology language from the equation
Adoption by a greenfield market demands the development of a user-experience, marketing messages, and support experience that is void of technology language and solely talks about usage benefit - rather than how it is achieved technologically. Notice how the marketing of the iPhone is fundamentally different from the Nokia N95 (same price range), full of references to technology protocols (like UPnP) a greenfield market should not have to know about.

The success of technology innovation is increasingly related to how well companies serve steady customer behavior. That behavior has extensively been studied by so many non-technology companies ahead of us.

That’s why I spend so much time listening to the wisdom of CEOs like A.G. Lafley (CEO of Procter & Gamble), Mickey Drexler (CEO of J. Crew, former CEO of GAP, Apple BoD), Jack Welch (former CEO GE) and many other consumer CEOs who put themselves constantly in the shoes of the customer and define what they would like the purchasing experience to be.

It is not hard to detect the patterns of success, but as a CEO you would need to be committed to keep looking at your company from the outside in (rather than from the inside out), and experience the company from a customer perspective.

Get ahead of change and tune in to Charlie Rose on NPR (KQED in the Bay Area) for some great lessons from the masters.

Tags: Entrepreneurs, Innovation, Consumer, Markets, Apple, IPhone, Nokia, Experience

Nothing is sweeter than success, real success, hard earned success. That is what my grandfather achieved when he helped create the company (van Melle) that still makes the Mentos candy today and, in the early 1900s turned it into a worldwide company and brand. Every day, I strive to live up to his achievements. Not just to make a buck, but to fundamentally challenge the establishment and contribute to improving the world we live in. Albeit my sweet spot is technology.

Building a business is all about people; entrepreneurs and investors working hard together towards achieving the common goal. Too many times do I see or hear from investors how entrepreneurs finagle their way into the money pot, with damaging consequences.

While I do not consider myself in the league of Donald Trump in terms of inspirational speaking, I do want to emphasize how important the evaluation of personal skills are to support a great company. I learned some valuable lessons from my grandfather early on - not by asking him many questions (I was too young to do so intelligently) - but by watching him operate. My grandfather did not have access to the funds we have at our disposal in Silicon Valley, but the rules of success have not changed.

1/ Have an opinion.
Unless you are ill informed, having an opinion and expressing it is vital. Vital to you personally - in achieving what you want, and vital to the company you work for - to provide the best quality of service. If you can't see the flaws around you (and in yourself from time to time), you won't be able to detect or imagine true innovation.

2/ Have guts.
The world is full of artificial rules to keep us all in check. Throw them out from time to time, just to see what happens. I run a stoplight litmus test with most entrepreneurs, to demonstrate how tucked-in we still are. And you'll be amazed.

3/ Have integrity.
The goal of creating a lasting personal brand should outweigh the short-term obsession of making money. "Nice" people don't make great impressions, what they stand for does. I bet you'll make more money sticking to your personal brand, then you ever will chasing dollars.

4/ Be transparent.
Transparency is the fair assessment of capabilities, good and bad, combined with the ability to expose them. The companies we create together inherit our good and bad, yet no one will suffer if they are exposed properly. Quite the opposite, transparency builds fairness and trust.

5/ Find your passion.
You will not see me go-green anytime soon, even though there is a lot of money to be made there. My passion is technology, specifically consumer technology and has been since I was twelve years old. I was lucky in that way, but it hasn't been easy, extricating myself from common beliefs. Explore your own true passion (not that of someone else), and don't rest until you've found it.

Many times is the path to success cut short, not by the market, but by the entrepreneurs themselves. As a CEO I have left companies where major shareholders lack or infringe on those fundamental principles, and I killed investments for similar reasons.

The real sweet taste of success is being true to yourself. So, next time you knock on your investors' doors, pay a little more attention to yourself - rather than the business plan.

(In memory of my hero and grandfather Simon de Smit, I miss him in more ways than one)

Tags: Investment, Integrity, Transparency

From my previous blog post it should be clear that life of the Venture Capitalist (VC) isn't that easy. And if you run the numbers from the presentation attached to that blog, you'll find that the economics of VC (cumulative) don't work out. As many others before me (like Josh Kopelman, Managing Director of First Round Capital) have pointed out, statistically almost every VC firm would need to yield an exit in the range of Facebook and MySpace valuations to produce satisfactory returns to their Limited Partners. That story has been covered by VentureBeat and others, so I will not digress.

But in my view, something much more fundamental is wrong with VC:



1/ The majority of VCs currently operate as a premium market with traditional rules, not unlike Hollywood - ready for a makeover. Those rules include investing in trends, previously successful entrepreneurs, analyst consensus, commoditized application development etc, all of which are guarded by MBA associates with very limited real world experience. But we know better; the best investments made by the top producing VCs come from The Long Tail of opportunities. Facebook, MySpace, Google - non of those came from the precedents described above. 95% of VCs that don't produce a killer return, need to fundamentally change their model to get access to real innovation.

2/ The majority of VCs invest in technology silos, domains or segments. That's why a large corporation like Apple ran circles around the VC community in owning the music (and now video) distribution business. No investor in the Valley today invests in the synthesis of consumer, desktop and server capabilities in one offering. We are introduced to a new definition of innovation that comes from the synthesis of existing proprietary or open architectures across the segments that collectively form a unique business proposition, rather than the depth in every technology segment. So, a macro-economic view of the world would not hurt either (see: In search of the Economist VC)

3/ Many investors are cheap. They believe allocating as little money as possible is a prudent business practice. Pre-technology companies (even those with seasoned professionals) are often given a little bit of money to test the waters. What that really communicates is that the investor does not believe the investment will truly achieve world domination. Now, I am the last person to squander funds, but every investment has its own unique investment profile. Moreover, do we really need to prove to the investors that we can build technology? I don't think so, creating a market is where the investment risks are. So, if you are not ready to pony up as an investor, you should not play. Too many companies get killed by investors that suffocate companies with inexperienced business leadership, lack of vision, pushing products with marketing dollars that are not ready for prime-time or uneven distribution of the company ecosystem.

4/ Investors are hard to approach and sometimes plain rude. Considering their business model that is not a real surprise. Many investors are not entrepreneurs themselves and frankly, have the vision of a lemming. As a result they take considerable amounts of time to sift through false positives and false negatives, or simply brush the entrepreneur off when time runs out. But the best deals come from tapping into the Long Tail of the innovation market, reaching out pro-actively into unchartered territory, with experienced business people.

Investors need to reinvent themselves ahead of markets and technology, not in the least because the majority of VC returns are below the water mark.

The role of an experienced Venture Partner with a strong vision, who understands macro and micro-economic impact of technology is more crucial than ever in finding those unique opportunities. (Shameless plug: come get one here.)

Tags: Apple, VC, Investment, Private Equity, Premium, Eco-systems, Google, FaceBook, Long Tail, Hollywood

As an entrepreneur, getting to know your Venture Capitalist is important, especially because their life is not as cushy as you may think.

Just imagine the onslaught of business plans they get, and how much time it takes to find that rewarding investment. Eliminating the false positives and false negatives takes time, lots of it. We personally reviewed about 40 companies over the last 7 months, yielding 3 companies that have huge potential for our investors but they need work. Hard, fun work. But life of the VC doesn't end there. Knowing the goals of your VC (in terms of fund composition and exit requirements) will make you better understand why a VC firm behaves the way it does. Its fund needs to end up in the top quartile, with or without you.

Operating on both sides of the isle and getting to know the investors I work with better, I attended the AAMA-AAAIM session in San Francisco called "Fund Management As A Business" (presentation in pdf used with permission from AAMA), moderated by the skilled and jovial Robert Grady, Managing Director of The Carlyle Group with a fantastic group of fund managers (Hamilton Lane, SFERS) and a surprisingly honest VC (Altos Ventures). I wish everyone in the investment community was as transparent as this group so we can remove some of the stigma around VC.

Here are three reasons why VCs don't have it that easy:

1/ Many more VCs need to compete aggressively on a relative steady amount of fundable deals, hovering around 4,000 equity investments in venture backed companies per year. The number of VC firms has grown from 399 in 1990 with $31B under management, to 798 firms in 2006 driving $236B into the US venture marketplace.

2/ Joe Schoendorf (Partner at Accel Partners and board-member of World Economic Forum) confirms that less than 5% of the VCs deliver the goods that sustains technology as an investible asset class. That means 95% of the investors are probably stressed out. So don't take a lack of response or a no from a VC too personal. VCs deal with complicated and sometimes long drawn investment strategies (it took Altos Ventures 3 years to land their last fund). Investment allocations may be another reason why you don't always get a quick response for your technology venture.

3/ VCs are working hard. The exits of about 400 M&A plus IPO transactions per year account for less than 10% of total venture investments made. And in order to get a successful exit, VCs review more than 20 times (and that's a conservative assessment) the amount of business plans before they invest in one. So, south of 0.5% is where their - and your - statistical probability of producing a successful exit lies.

The same criteria that apply to the return of the collective technology investments made by a VC with a fund, applies to their Limited Partners (LPs) trying to find great collective VC returns for their Investors (Pension Funds, Insurance Companies, Endowments/Foundations etc). The VC is sandwiched smack in the middle between the entrepreneur and LPs breathing down their neck. Their only "luxury" is time: 5 years of investing and 5 years of harvesting.

As an entrepreneur you can't worry too much about the statistics, if you did you wouldn't be an entrepreneur. But that the amount of deals is slightly on the rise again, perhaps indirectly spurred by massive influx from sovereign funds, means access to money - to live out your dream is improving slightly.

But be prepared to talk to more VCs and saddle up for an extensive roadshow. Fact remains: the cost of doing business to entrepreneurs and investors has increased dramatically.

Tags: Investment, Innovation, VC, Funds

I just came back from a trip to Europe and let me tell you: Belgian chocolate, raw herring from Holland and ficelle from France - nothing is more authentic and delicious.

But few of these travel well or find a large deserving audience in the United States. Much like technology.

The state of the technology industry and the accompanying investment ecosystem in the US are quite a bit more developed than in Europe, 15 years at least.

In the US, roughly $30B per year is poured into early stage companies by some 300 investors in my backyard in Palo Alto, not including Private Equity deals. In contrast, only a handful European early stage VCs exist and the majority of all european investments are late stage investments done by Private Equity firms.

In Europe, early stage VC valuations hover around $1M, compared to $4-7M in the US. As a result desperate european entrepreneurs often default to Angels that show some flexibility, but those investors are often very inexperienced with the technology sector and early stage investing or the combination. They made their money somewhere else. Because of the young history of technology success in Europe, very few european investors (either VC or Angel) have actually had the personal experience of building an early stage technology company from scratch.

To sum it up, european investors (with a few exceptions) take large early equity stakes, provide limited relevant business insight and push those companies to early profitability (even at 250K euro investment levels). Selling a product or a service too hastily, before it is ready to enter a global marketplace delivers NO validation of the business, good or bad. But it is a sure way to slow down its innovation and differentiation.

So, underdeveloped access to quality early stage money makes life of entrepreneurs in Europe quite difficult.

But, let's assume you passed the bar on all the above and your company is on its way to the United States. No one can stop you in the pursuit of the great early exit opportunities only Silicon Valley can offer.

So here are some things to be aware of:

1/ A cherry, picked by an