Greylock's move west suggests local venture capital scene lags
Venture firm pulls up stakes. After 44 years in the Boston area, Greylock Partners has chosen Silicon Valley for its new headquarters. The venture capital firm's Waltham office will remain open, but administrative staff will be in Menlo Park, Calif. - and the firm will add new investing partners there. Greylock has helped to launch Bay State companies, including Avid Technology, Millennium Pharmaceuticals, Apollo Computer, and Genetics Institute, a biotech industry pioneer. Bijan Sabet, a partner at Boston-based Spark Capital, blogged about what the move means for Boston's start-up scene.
If I wanted to put a positive spin on the Greylock move, I would just wish them well and enjoy their departure. Less competition for those of us staying.
But the reality is that this was expected for a long time. They have not been active here for years. It's no secret that the younger partners they have recruited over time are on the west coast.
Having said all of that, I am concerned about our local market. [Spark Capital hasn't] been as active specifically in Boston/Cambridge as I would have hoped. And it's not just Spark. Many of my VC colleagues tell me they are looking into NYC and are investing actively on the west coast.
We are seeing big changes in the Boston VC market that are promising, but will take time. Several new firms have launched with new funds and are active. [These include] our firm, Spark Capital, and other firms like Flybridge Capital, General Catalyst, .406 Ventures, and others. And while I miss [the start-up incubator program] Y Combinator for sure, I'm happy that Boston is getting more attention from the outside. Foundry Group is making investments here, as is First Round Capital and others. And TechStars (another incubator program) just launched in Boston.
Massachusetts has roughly only 2.3 percent of our nation's population but receives about 10 percent of VC dollars nationwide. Life sciences, energy, software and Internet technologies will remain quite strong and promising.
We have a lot of opportunity here and plenty of raw materials. But we need to improve and compete at a higher level.
And when I say "we" I mean all of us: VCs, angel investors, successful entrepreneurs, new entrepreneurs, failed entrepreneurs, big companies, small companies, universities and government. We can do better.
Bijansabet.com
Don't try this yoga move. Is your company practicing "inward facing dog"? That's a term invented by HubSpot Inc. cofounder Dharmesh Shah to describe a business that is more focused on what's happening inside its offices than what's going on in the outside world. Here are some of the signs, according to Shah:
1. More than a few days go by, and you haven't talked to a customer other than to provide support or try to sell them something.
2. When people bring up things like "Did you hear about X (a direct competitor) doing Y?" most of the time, you hadn't heard the news and sometimes you didn't even know who X was. Note: I don't advocate being obsessed about your competition - and I particularly don't advise following them (i.e. X did Y, so I have to do Y. . .) But I think there's a lot that can be learned simply by observing your competitors.
3. You haven't located five people in your industry whose blogs you think are worth reading regularly. I don't care what industry you're in, there are bloggers out there writing things you should be reading. Even if you disagree with them. Even if you think your industry is "broken" and you're out to transform it. In fact, especially if you think your industry is broken. Read, read, read.
onstartups.com
Skip the business plan?
Bloggers in the entrepreneurial world have been buzzing about a study that found investors pay little attention to business plans. Researchers at the University of Maryland found that venture capitalists rely on instincts - and information about the potential of the market being targeted by the new company, as well as the people who are running it. Angelo Santinelli, who heads the Sudbury consulting firm Dakin Management LLC, blogged his agreement that fantastic five-year revenue graphs really don't matter much.
I am a big believer that businesses fail for two primary reasons: People dynamics, and markets.
Most investors will admit that they spend a good deal of their due diligence hours assessing the team - its market knowledge, ability to work together, past performance. The remainder of time is spent assessing and validating the market size, growth potential, competitive dynamics, etc. If markets take too long to develop, or if competitive response is not anticipated, guess what: you burn more cash.
Figuring out whether an idea is an opportunity should be where any entrepreneur invests a good deal of time before even approaching an investor. The process of digging for data, speaking with industry experts and creating one's own view of the market and how it will evolve is time well spent. Simply regurgitating an analyst's view of the market is a signal to me that the would-be entrepreneur is intellectually lazy. Building a product or service is only half the battle. Knowing and understanding who will be there to purchase it, at what price and volume, is the other half. This knowledge can only be gained by wading through the data, forming a hypothesis, and testing it on many potential customers and industry experts. Only then can you confidently build an operating plan that more accurately estimates financial need, the amount of time to first sale, pricing, distribution, working capital needs, and believable estimates of cash-flow break-even. Perhaps a reason that many investors ignore business plans is that they sell too hard, are produced in a vacuum with little customer validation, and the numbers reflect dexterity with spreadsheets rather than being driven by estimates backed up by accepted yardsticks and fundamental analysis.
www.dakinmanagement.com/Dakin_Management/Blog/Blog.html
Have you seen an interesting item on a local business blog lately? E-mail kirsner@pobox.com. 
