As you may recall, I have been trying to chase down a polling tool for my side bar for six months now. There are a number of interesting ones out there like Majikwidget (inspired/created by Guy Kawasaki) and WebPollCentral (Barry Moltz turned me onto that). However, TypePad finally saw the light and have integrated Vizu as a default option into their templates. So, the good news is that I can finally lob up polls, but the bad news is now I have to find topics that aren’t lame (sorry about the poor Jockey vs. Horse one but I just needed to get it up and running for testing). This is where you all come in…let me about polls that would be of interest???

      "That’s what Tiggers do best…"
                           — Tigger

Joe Born had a great follow-up email to the Venture Philanthropy post. He wrote:

"…what if we were sold/brought on new managment sometime down the road.  What would my life be like if I was full time on a non-for-profit?  Am I better off staying an entrepreneur and funding someone else’s project?"

VC’s often ask themselves the same question about entrepreneurship. Does it make sense to jump over to the light side and start up a business given all that we have seen and experienced? The answer depends upon the person and their DNA. Some VC’s make a great transition over. Andrew Anker jumped over to join the Six Apart team as have other VC’s over the years.

One of my favorite authors is Joseph Campbell who produced, with Bill Moyers, the Power of Myth series. He was one of the leading worldwide experts on "myths" and how they functioned to instruct and guide society and its people. He often used the phrase "follow your Bliss". By this, he meant to find that thing or things that give you purpose and energy when you get up in the morning. If making a difference in the lives of others gives you energy, find out in what role you are best employed. It could be as evangelist (if you are a good writer or speaker), or fundraising (if you are good at networking) or lobbying/policy (if you are strategically oriented and good at the political game) or operations in the field (if you are good managing people and getting things done). There are a lot of places for people with passion to play a role. Personally, I think it is more of an economic question than anything else. Do you want to forgo the potential economics of a successful company or the salary of being a CEO? Do you want to spend your time in the field with Chinese orphanages or in a tech start-up creating the next Google? Also, how well do you deal with the politics and cultural norms of the non-profit world? How well do you handle slow moving social systems?

I have spent a considerable amount of time in the inner city of Chicago. When my mother passed away over 10 years ago, I took several months off from work to walk around the inner city and think through how we wanted to direct our small, newly formed family foundation. (BTW, I can’t stress enough how important and rewarding it is to spend significant time in the field where services are delivered for your cause of choice. Too few people just write checks.) I concluded that my motor spins too quickly and I grow too impatient over impasses to work effectively in the field. I do not handle non-profit or neighborhood politics as well as others. However, I am a good evangelist and a good networker. I can provide support for the causes I believe in and help those who do work at the field level best. Everyone needs to self-assess. All of this obviously applies to entrepreneurial roles for everyone as well…

Figure out what your type of work your Tigger does best and follow your "bliss".

I came across an interesting new venture blog, Startup Review, written by Nisan Gabbay at Sierra Ventures. I like the format, which is more case study based than traditional postings.  My fellow Feedburner board member/investor and uber-blogger, Brad Feld, gave a nice overview of Nisan’s new blog.

I came across an interesting new venture blog, Startup Review, written by Nisan Gabbay at Sierra Ventures. I like the format, which is more case study based than traditional postings.  My fellow Feedburner board member/investor and uber-blogger, Brad Feld, gave a nice overview of Nisan’s new blog.

"Who’s the U-Boat Commander?
"
             — Service Manager after Tom Cruise
                puts his dads Porsche in Lake
                Michigan (Risky Business)

How do you mess up a business this badly? AOL had 35 million subscribers at its peak. See the NYT’s quote below…it will lose 33% of its subscribers in the next year, which is already down 50% from its peak. It just goes to show how if you can see how the competition is going to eat your lunch, get to the lunch box early yourself and start eating…Technology moves too quickly and Darwin always strikes quickly.

NYT’s today: "The jobs eliminated by the current cutbacks will largely not be
replaced. An AOL spokesman said that the company had not ruled out
further layoffs but that none were in current plans. AOL has said it
expects to lose at least six million of its 17.7 million subscribers in
the next year and more than nine million in total over three years."

Nik Rokop just forwarded on a cool link…http://www.goodsearch.com/. The site allows charities to sign-up and as members use the Good Search engine (powered by Yahoo), the charity gets money. Kinda like uPromise meets affiliate marketing. Most charities seem to be raising small amounts here (hard to change consumers behavior like what they search with), but a pretty cool, well-intentioned idea. Anyone seeing any other types of creative Web 2.0 charity concepts?

Wow. If you want to see a big difference between the buyout and VC world, check out this article in PE Week: Return of the Corporate Raider. It never ceases to amaze me how often the buyout shops will charge egregious fees for services that are standard, free value-add in the venture world.

Return of the Corporate Raiders

Burger King is supposed to represent the best of what private equity has to offer. Unfortunately, it also represents the worst…

My father-in-law started in the brokerage trading business in the mid-1960’s. He showed me an industry tombstone advertisement page from 1969 that had over 50 regional and local brokerage firms, along with a handful of the growing national players (like Merrill Lynch). Today, nearly all of them are either dead or acquired and it is dominated by the majors. There are boutiques, a couple of regionals (Blair, Baird, etc) but it is dominated by the large players. The venture business is heading in a similar direction it looks like.

Scale is becoming increasingly important (domain expertise, visability, branding, etc) just as it was in the brokerage business. The challenge is that venture does not scale well. It is impossible, as we all showed in 2000, to do early stage venture from an $800m fund. However, LP’s are not interested in backing unproven groups. Groups with history are, again, getting big funds raised. So, I’m not certain how this trend continues to play out since the forces are pushing to larger organizations, but larger organizations ($800-$1B) groups have trouble successfully deploying money early stage and getting solid returns. So, they are likely going to:

— go later stage and compete with the hedge funds and existing later stage players. This will drive pricing up (as is happening in buyouts) which will hurt returns.
— go international and chase the China dollar
— put 50+ investments into a fund and take a portfolio approach.

In short, this is a mess (for both start-ups…too many competitors and for VC’s) and why we have pulled back to a regional early stage focus while leveraging the 34 offices worldwide in our network for scale. Below is the recent press release from Venture Economics reporting on the YTD fundraising in venture:

"Venture capital fund-raising activity in the second quarter of 2006 is further proof that fewer and bigger war chests are being amassed by investors.

According to new data compiled by VentureOne, a research unit of Dow Jones & Co., the number of funds closed during the quarter fell dramatically from the year-earlier period, to 23 from 37, but the amount raised remained steady, with $8.2 billion in the latest quarter versus $8.3 million in the period last year.

In addition, barring a second half flurry of small fund closings, 2006 as a whole is shaping up as the year that funds under $100 million were all but forgotten. In the first half of this year, only 28% of the funds closed have been less than $100 million. If that trend continues throughout the year, 2006 would have the smallest portion of double-digit funds raised since 1992, the earliest period tracked by VentureOne.

The percentage of sub-$100 million funds raised has been falling steadily on an annual basis for the past four years, the data shows, from some 71% in 2002, to 63% the following year, 52% in 2004 and 44% in 2005. The median fund size this year sits at a high $170 million.

The largest fund that closed in the second quarter is Oak Investment Partners’ Fund XII, which happens to be the largest venture capital fund ever raised at $2.56 billion. And as limited partners clamor to get into brand-name funds, the trend of bigger-is-better shows no sign of slowing down. The third quarter kicked off with New Enterprise Associates raising its giant $2.5 billion twelfth fund. DCM, a Silicon Valley early-stage venture capital firm founded in 1996, closed its largest fund to date, the $500 million DCM V, last Thursday."

"So you say you want a revolution…"
      — The Beatles

In previous posts, I have discussed how entrepreneurs are making a difference in philanthropy. This approach is very similar to how venture capitalists approach early-stage investments. I also want to point out that you don’t have to be Bill Gates to get involved. Everyone from the MBA to the Java programmer to the CEO can have an impact. It has a number of components:

1) People, People, People: if you have a day job, it is unlikely that you will be running the cause, just like VC’s enable but don’t run businesses. Successful companies and non-profits are willed into existence, usually by the vision, charisma and passion of the founder. Insight, connections, resilience/tenacity ability to execute and vision drive success. Before you invest your money or time, make certain you are backing the right person/people. More importantly, once you have found someone, your job is to enable and facilitate their vision without getting in their shorts. Find out what resources they need and what challenges they face. Define what success is upfront (milestones), help as you can and step back. Do your homework on the issue and space so you can knowledgably interact with management. Too many funders have little understanding of the battlefield and force the Executive Directors to spend a lot of management time managing their board, giving presentations and running down blind alleys. In other words, once they have given their money, these funders actually suck value out of the organization.

2) Sweat Equity: Your time is more important than your money. As with a VC, if you just bring money, it is helpful, but suboptimal. You have connections, experiences and resources. Once you have found an organization to support, find out what road blocks or short falls (beyond just money) that it needs. Spend time to learn more about the issue. Study other historical approaches, efforts and organizations that are involved. What worked & what didn’t. Visit and see in the field how services are provided. This is like coming up to speed on a new deal. You are only as helpful to the organization as you are knowledgable. No armchair quarterbacks. Lastly, find a cause or problem that you have a personal passion around. Like a start-up, this is a marathon, not a sprint. The impediments and challenges are much worse than in the tech world. Passion will help you manage burn out and set backs.

3) Milestones & Measurement: "I don’t know where I’m going, but I’m making great time." Too often in philanthropy, there is no sense of what success means. Often the goals are admirable but too lofty…feed the poor, improve education, etc. Don’t spend your time or money unless it is clear what you are trying to achieve. The Food Depository is great with this…how many families & meals served. Resources are scarce. This sector is dramatically under-funded (and always will be). Like a start-up, you need to be capital efficient. Know what you get versus what you give. A boot-strapping entrepreneur doesn’t just throw money blindly at a marketing campaign and neither should a cash starved non-profit.

4) Patience: the other side of #5 below. These issues have been around forever and will continue to be around. As with a start-up, it takes years and many different approaches to reach your goal. Failure should be expected. Learn from it, adapt and push forward. Set expectations and time frames accordingly.

5) Experiment: one of the key success traits of a start up is that it fails quickly and iterates. Burn as little capital as possible going down a dead-end. Pilot, measure, fail/succeed and iterate. Try new approaches and models. Irving Harris, one of the great Early Childhood philanthropy pioneers, used to seed pilots to address Early Childhood issues. He would measure them and if successful, would migrate it over to a full blown, state/federally funded program. The non-profit world holds onto its failed efforts way to long and there is a significant not-invented-here issue.

6) Small bites: these problems are massive. They can vacuum up enormous amounts of capital in the blink of an eye. Start with an effort whose scale is appropriate for the time and money that you have. Make the difference in a single person’s life, learn and then scale. Mother Theresa started by feeding a handful of people on the streets and scaled from there. Effective start-ups pilot with an initial customer or two, learn what works and applies that learning to the next pilot. You need to know what you are trying to achieve and how to measure success. Tutoring a student, mentoring a graduate, helping a person find a job, adopting a family, adopting a class room are all examples. This means anyone, regardless of income or status can make an impact. Again, it is your time that is key.

Like ants making an ant hill, each one only carries a few grains each time, but as a group, they make a significant impact. This is the case with philanthropy. Everyone can make moderate impacts on a modest scale, but it will all add up.

On Monday, I will post my detailed breakdown of the new Venture Philanthropy model. However, one of the key elements is the importance of focusing your initial efforts very focused, small scale initiatives. Make the difference in a single (or couple of) person’s life and scale from there.

Anthony Kennedy, Assoc Justice of the Supreme Court, sent a letter into the New York Times. In it, he wrote:
“Think of the people around the world, and particularly in Africa, who have no clean water. Women in Africa — and the job falls to women– must spend six, eight hours a day just in trying to bring clean water to their children.
Eight billion hours a year of human effort are spent just in bringing water. And when I heard that statistic, sitting like you are in an audience, I thought, ‘Well, he must have said 8 million.’ Then I thought, ‘Maybe it’s 80 million.” It’s eight billion hours a year of wasted effort because the water is often contaminated when it gets there. This isn’t roclet science. You can fix this.”

As you may recall, my wife, kids and I paid for a well in a village in Ghana. It is a small amount (couple of thousand), but impacts an entire village. It allows girls, currently carrying water, to go to school which reduces both the number of kids and age of motherhood for them.

Think small, focus and go from there!