On February 13 I headed to Denver for the Rockies Venture Club at the Marriott City Center. I caught up with Susan Thevenet and Mark Weakley of law firm Holme Roberts & Owen and we shared a drink at the bar before heading down to dinner. Susan and I discovered we were both military brats (Army for her, Navy for me) so we reminisced about officers' clubs, frequent moves, and the spit-and- polish lifestyle.
Approximately two hundred and forty people were already seated by the time we got to the event. I spotted Kristen Johnston, director of corporate and media communications for GETGO, Brad Spirrison, managing editor of eMileHigh, Drew Bolin, deputy director of domestic and international business development in Colorado's Office of Economic Development & International Trade, and Erika Brown, founder/principal of NetGoddess. Among those sitting at my table were David Van Bussum, director of strategic accounts at Nortel Networks, Lee Sterling, VP-general counsel at Alin Q, George Sexton, CEO/president of MH Software, and Tony Parker, senior producer/marketing manager of Bandwidth Communications. I spent most of dinner talking to Allan Roth, who runs a consulting firm specializing in financial strategy. We compared notes about Colorado Springs. He moved there from Aspen earlier this year and I lived there most of the 1980s. The Springs now has its own version of Rockies Venture, Peak Venture Group.
The three entrepreneurs making five minute pitches were David Howard, president/CEO of 1Vision Software, Eli Williams, CTO of DigitalCCTV.com, and Gene Jackson, president of Power Energy Fuels. I learned about data storage, electronic surveillance, and alcohol-based fuels generated from manure, wood, and garbage.
The featured speaker was Steve Leatherman, president of private equity firm Quest International Management and chairman of the advisory board for the Bard Center of Entrepreneurship Development at the University of Colorado-Denver. (He's also been president of Hanifen, Imhoff Investments.) Quest has invested in a variety of deals, about 50% of them tech-based. Partners have to co-invest in every deal.
Among the insights he shared were:
*Entrepreneurship involves (1) bold goals which stretch beyond what is believed possible, (2) a high degree of opportunity, and (3) substantial financial risk and reward.
*Good ideas are only 5 -10% of the equation. The ability to execute is more important. VCs look for entrepreneurs who are passionate, which means differentiating between kooks and visionaries.
Valuation is not that important. A business plan is nothing more than a screening tool, but it is more persuasive than an in-person pitch. At the same time, VCs don't trust what you say and will check out everything for themselves. Assume they will find out what you don't want them to find out.
*If a VC spends 20 hours reviewing your company, he feels he's invested a million dollars of his time. Eighty percent of the VCs who go this far will follow up with money.
*We're in for a hard landing. There is an overcapacity of IT. Venture capital investment is down 80-90%.
The next day I attended a lunch at the Mediterranean on Pearl Street in Boulder, hosted by the Council of Growing Companies. The restaurant was packed, as always. CGC is a national organization for peer-to-peer exchanges among CEOs. Greg Fine, director of chapter relations and development, was in from CGC's headquarters in McLean, Virginia. During our meal Patricia Glora, VP of operations for Tango Technologies, Bob Williams, president of Aviation Everything, and Dick Sirbu, chairman/CEO of Sirbu Enterprises and former president of AmeriTrade Clearing and OnMoney Financial Services Corporation, had high praise for the usefulness of CGC's monthly CEO roundtables. We talked about the value in bringing together old economy and new economy corporate execs now that economic conditions are forcing many dot-coms to look beyond their own sector for contacts and advice.
This week I also had a chance to talk to Richard Smith, CTO of the Privacy Foundation, based in Denver and started by Peter Barton, former president of Liberty Media. Richard lives in Boston, telecommutes, and comes into Colorado every month or two. I asked him to tell me more about what he does. "I've been involved with privacy issues for about two years. I was in the computer software business for about 25 years and had my own company. When it was sold, I had some time to investigate security and privacy on the Internet. I made lots of discoveries about the products out there and the privacy problems with them. The press picked up on what I found and then I joined the Privacy Foundation last summer."
"I take apart products, see how they work and impact on privacy, and then publicize what I find. Our main goal is to educate people on how the computerized systems such as the Internet, cell phones, and digital cable TV are different from what we had to deal with before. They communicate information about us. To some degree they act as surveillance devices. It has become extremely inexpensive to accumulate data. This enables companies to watch online behavior, record it, and then use it to market in the off-line world. Since the Internet is having trouble making money, I think there will be a push to use that data to sell us stuff through telemarketers and junk mail. The online banner ad networks like DoubleClick and Engage are in the monitoring business and they are going to try to profile people. Intuitively we think profiling works, but there has been no demonstration so far that is does. It's not been proven that this has any value in predicting buying patterns."
I asked him if he had a message he wanted to get out. "I think the industry has made a mistake in not being more forthcoming about data collection and what they are doing with it. The more they do, the more groups like us can monitor them. They can be watched, just as consumers can be watched."