Our associates has reported to us that they have seen various San Francisco and Silicon Valley startups who operate on the fly while not knowing their goal and their priorities. They believed in being flexible and agile to the conditions of the marketplace. The outcome is usually a waste of time and resources. The cause is due to a lack of research and poor strategic assessment of their marketplace.
While believing that their operating process is flawless, these entrepreneurs function in a trial and error mode. Some of them do not even have a tangible business plan. Retrospectively, they are maneuvering from the seat of their pants. ... It sometimes amazes us that they have received venture capital.
“In antiquity, when the Yin dynasty arose, they had I Chih who served in the Hsia. When the Chou arouse, they had Lű Ya [ The T’ai Kung ] in the Yin. Thus enlightened rulers and sagacious generals who are able to get intelligent spies will invariably attain great achievements. This is the essential of the military, what the Three Armies reply on to move.” - AoW 13
Nothing changes then. Nothing changes now. Businesses and ventures who have succeeded in this global economy, are those who have a superb intelligence gathering system, a thorough strategic assessment process and a well-built strategic plan.
Compass Rule: Always assess the big picture before making your next move.
More food for thoughts:
Do you assess the big picture every month?
Are your plans based on your gathered intelligence?
Do you have a well-built business plan?
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Dot-com bust ripples still felt 10 years later
Tom Abate, Chronicle Staff Writer
Sunday, March 7, 2010
With just $20,000 in cash but gobs of gumption, ambition and talent, Ethan Bloch and two partners are turning an idea into a Web-based business.
"I came to San Francisco to build a big company that does important things," said the 24-year-old Baltimore native.
Last year, Bloch co-founded Flowtown.com, which creates personal and professional profiles of people by gathering information from social networks, data it then sells to marketers.
"We're either going to make it big or fail spectacularly," said Bloch, who became fascinated with the region as a teenager growing up during the dot-com era.
"It was definitely inspirational," Bloch said.
Wednesday will be 10 years to the day that a plunge in the Nasdaq index punctured the dot-com bubble and ended the most frantic race to riches since the Gold Rush.
From its March 10, 2000, peak of 5,132.52, this index of tech and biotech stocks fell to a low of 1,114.11 on Oct. 9, 2002. The bust caused a brief recession and had longer-lasting - but not entirely negative - impacts on the region's startup economy.
Today the Nasdaq is muddling along at 2,326.35, where it closed Friday. But despite another recession and a harsh environment for raising money, the region remains an entrepreneurial mecca.
"Silicon Valley is a state of mind," said Oliver Muoto, 41, who co-founded a $94 million Internet startup in 1998 that sold at a huge loss four years later.
"People came out here knowing they would be successful," said Muoto, who now runs Metablocks, a music software company in Menlo Park. "It was a time of excess."
Nationwide data provided by the National Venture Capital Association tell part of the story.
In 1999 and 2000, Wall Street invested in 534 venture-backed initial public offerings.
Those IPOs made huge profits for venture capital firms, which plowed money back into startups. In 2000, at the peak of the bubble, VCs made nearly 8,000 investments valued at $100.5 million.
But in recent years, as Wall Street has shown less appetite for IPOs, VCs have made fewer investments in startups.
In 2008 and 2009, the association said, a total of just 18 venture-backed companies went public. So far in 2010, seven companies have delayed or postponed IPOs, while 11 others that did go public, including Hayward's Anthera Pharmaceuticals, had to cut their share prices first.
Without Wall Street to offer a profitable "exit strategy" for early stage investments, venture funds have been putting less money into startups. In 2009, venture firms nationwide made just under 2,800 deals worth $17.7 million. Silicon Valley continued to get the lion's share of startup cash - 39 percent last year - but there is far less money sloshing around the region than in the past.
"Venture capital is going through a restructuring," said John Taylor, research director for the venture capital group.
Too much money
Geoff Yang, a founding partner of Redpoint Ventures, a venture capital firm in Menlo Park, said the dot-com era proved that bigger was not better when it came to funding startups.
"The venture capital industry can only absorb a certain number of dollars," Yang said, before too much money starts chasing the finite number of ideas with the home run potential that VCs expect.
Veteran entrepreneurs look back on the dot-com era as an aberration.
Steve Perlman, 48, who worked at Apple in the late 1980s and helped start many companies including WebTV Networks Inc., which Microsoft Corp. acquired in 1997 for $503 million, said the tech sector was always eccentric.
"I remember when I first went to Atari in 1982 there was a guy designing an Indiana Jones game who liked to crack a leather whip in the halls," said Perlman, who is developing a Web-based game-playing site, OnLive.com.
But many dot-com entrepreneurs lacked the personal commitment and fiscal discipline necessary for success, he said.
"During the WebTV startup, there was a point when we were almost flat out of cash and I had to mortgage my house," Perlman said. "I came very close to losing everything."
The dot-com era's stock-option millionaires created an expectation of quick riches, said Elizabeth Charnock, chief executive of Cataphora, a private firm in Redwood City that does sophisticated information sifting for law firms and investigative agencies.
Charnock, 43, who came to Silicon Valley in 1989, worked for some large companies before getting into a dot-com startup that blew up so disastrously that, when she started Cataphora in 2002, she avoided venture capital or angel financing.
"It's either revenue or it does not exist," said Charnock, who employs about 70 people and bills in excess of $10 million.
"One of the damaging things the bubble did is that everybody is still thinking that is what they should be able to achieve," she said, "to work like dogs for two years and make millions when it takes a lot longer to build a business."
But perhaps today's young entrepreneurs have learned some lessons from the dot-com excess, and from the necessity of adapting to the near drought in venture capital.
Lessons of failure
Bloch said last week he attended a standing-room-only event called FailChat, an offshoot of FailCon, a conference held last year in San Francisco. The idea is to get entrepreneurs to share the many lessons taught by failure - such as how important it is to create products, generate sales and earn profit.
"We were founded in January of last year and we turned a small profit in December," Bloch said proudly.
E-mail Tom Abate at tabate@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/03/07/BUK71CB0PV.DTL
This article appeared on page D - 1 of the San Francisco Chronicle
