How to Making Money

How is Elop going to address this by
using Windows OS? He has to do more than just charge more, he has
to produce better product at competitive prices, which keep getting
lower. Elop will have to license the Widows OS, which is an
expense, one that he would bear to nowhere near the same extent if
he used Android. I feel he mistakenly looks at this as Google
commoditizing the Android platform, in lieu of the more reasonable
perspective of Google commoditizing the entire portable computer
space.

Well, the answer has arrived. Microsoft is buying Xx% of Nokia for paying Nokia over $1 billion to product Windows Phone 7 hardware.
Nearly all of this money is undoubtedly going into R&D and
marketing. Nokia and Microsoft (their new defacto owners) invariably see
Google as the pre-eminent trheat and are pulling out all of the stops
to nullify said threat. This also answers the question of how Elop, the
Nokia CEO will be able to deal with the reduced margins of having to
buy OS licenses while competing with vendors who get Android for free –
Microsoft is not only footing the bill, but investing in the business
as well. You see, the drop in Nokia’s share price is highly unwarranted
and their is visible synergy in this deal. Nokia gets to remove the
costs of OS R&D from its line times, sunk costs that have apparently
had negative incremental returns as they have had their asses handed to
them by Apple and most definitely Google – who knocked them off of
their number one market share perch in just over a year.

Microsoft gets the economic benefits of an existing hardware platform
that happens to have the number one marketshare metric in the world,
and gets it for just over a billion dollars. This is a win-win
situation. The question is,  will it win againt Google. Both companies
will still fail if they don’t execute on Google-time, who has compressed
development cycle years into months – literally!

From the Bloomberg article linked above:

Shrinking Margins (yeah, you’ve hear thist from me often enough)

Espoo, Finland-based Nokia needs to cut
costs to keep operating margins from narrowing further, after they
shrank to 4.9 percent last year from 19 percent a decade earlier. For
2011 and 2012, Nokia may cut its budget for research and development in
devices and services by about a third from last year’s spending of about
3 billion euros, said Sami Sarkamies, a Helsinki-based analyst with
Nordea Bank.

Microsoft spokeswoman Melissa Havel
declined to comment on the specifics of the agreement. Laurie Armstrong,
a spokeswoman for Nokia, said the final contract hasn’t been signed and
the company will share further details when they are complete.

Nokia’s royalty payments will help
Redmond, Washington- based Microsoft make a profit on the accord even
after the payments to Nokia, one person said. Some of the payment to
Nokia would be made before the company starts selling the phones,
meaning Microsoft bears some upfront cost in the partnership.

…

Microsoft shareholders want the company
to salvage its mobile-software business while also reining in costs. The
company doesn’t break out results for its mobile-software unit, and
instead groups them with the profitable Xbox video-game business, making it difficult to evaluate the financial performance of phone software.

Chief Executive Officer Steve Ballmer
has come under pressure from investors and his own board to improve
sales of mobile software after the company lost market share to Google
and Apple. Microsoft stock has declined 7.8 percent so far this year.

The agreement for the more than
billion-dollar payment was part of a campaign by Microsoft to keep Nokia
from choosing Google’s Android operating system, one of the people
said. Nokia also opted for Microsoft because Windows Phone software,
which is newer than Android and has a smaller number of handsets for
sale, gives Nokia a better chance to stand out, one of the people said.

The agreement also has Microsoft paying Nokia for the right to use its patent portfolio, one of the people said.

As part of the deal, Microsoft will use
Nokia’s Navteq mapping products for functions such as geolocation
services and selling local advertising and coupons tied to a user’s
position. If successful, that also could generate additional revenue for
Nokia, which will share in the sales. The two companies will also
divide revenue from services like search and advertising, Microsoft
President Andy Lees said last month.

I’ve been warning my subscribers about margin compression in this
space, and its about to get much uglier – to the extreme benefit of
consumers of personal and enterprise tech. Previous (and prescient)
posts from last year on this topic…

• Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
• After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
• As
  I Warned in June, DO NOT DISCOUNT Microsoft in This Mobile Computing
  War! Their Marketing Campaign is PURE GENIUS! and it Appears as if
  the Phone Ain’t Bad Either
• Apple on the Margin
• How
  Google is Looking to Cut Apple’s Margin and How the
  Sell Side of Wall Street Will Enable This Without
  Sheeple Investor’s Having a Clue

Monetizing the Mobile Computing Race

We have a pretty firm idea of who is in the pole position as of now,
but that position is both risky and volatile, not to mention medium to
long term in nature – see Navigating BoomBustBlog Subscription Material To Find The Google Valuation Drilldown.

A more risk averse strategy is to go long on the component vendors
who supply those battling for pole position. Last week we released the
document Long candidate #1 – Hardware: The Mobile Computing Wars
to subscribers that outlined who our number one pick was after an
initial scan. This is not necessarily the absolute final say on the
matter since we have yet to perform a full forensic analysis, but the
company does look good in comparison to over 120 peers. Non-subscribers
should reference The Potential Equity Investments Most Likely To Prosper From the Google/Apple/Microsoft Mobile Computing Battle.

I am releasing the draft of the full shortlist of prospective long
candidates as of now (17 pages, 5 companies) to subscribers. Please be
aware that is a draft document and work in progress, but it is quite
informative nonetheless.  See Mobile Computing Vendor Long List Note WIP. Those who wish to subscribe should click here.

Click here to read up on all of Reggie Middleton’s Mobile Computing War opinion, analysis, and research.

Editor’s Note: This is a guest post by Mark Suster, a 2x entrepreneur who has gone to the Dark Side of VC. He started his first company in 1999 and was headquartered in London, leaving in 2005 and selling to a publicly traded French services company. He founded his second company in Palo Alto in 2005 and sold this company to Salesforce.com, becoming VP of Product Management. He joined GRP Partners in 2007 as a General Partner focusing on early-stage technology companies. Read more about Suster at Bothsidesofthetable and on Twitter at @msuster.

Lately I have seen a number of deals announced on TechCrunch in which five or more different VCs were participating in the deal.

This always makes me chuckle because in my first company we had five investors in our first round and we picked up five more before we finally sold the company. In my second company I had only five investors.

While there is no right or wrong answer, having seen the extremes I’d like to offer you a framework for considering the right answer for yourselves.

The Perils of Many

I understand the appeal of having many VC firms on your cap table. You may feel as I did in 1999 that the more smart people around the table the more intros you’ll have, the more sage advice you’ll receive and the more impressive you’ll seem to outsiders. Plus, if you need more money it’s far less for each to dip into their respective pockets to fund you.

While all of this is true, it’s also true that nothing so perfect ever comes without a cost. Here’s the problem:

Let’s say you have five VCs (plus angels but let’s ignore that for now) and each one owns 5% so you took 25% dilution to get the round done. By definition each of those VCs (unless they are a micro VC – and one who doesn’t mind 5% ownership) will view you as a sort of “option” where they might get to fund the next round if you do well. Either that or there is something other than a financial motivator involved – NO VC is looking to build a business off of 5% ownership in startups. You simply can’t drive good returns that way.

So why else would they invest if not as an option to re-up in the next round? Maybe they wanted the branding associated with a hot company, maybe they wanted to work with the other investors around the table or maybe they thought it was a cheap way to get educated on your market – it’s always easier to learn an industry when you’re on the inside.

These are all dumb reason to invest – of course. But it happens.

So let’s consider a bad (but likely) scenario where either you don’t hit your targets, the market sours or competition is kicking your butt making it hard to fund raise. Most companies hit a bump in the road at some point. None of those five investors is sufficiently motivated to help you in tough times.

Firstly, they haven’t really signaled that it’s “their deal” in the way that leading a deal does. They can plausibly tell others, “yeah, we were a really small shareholder there – we had nothing really to do with the problems.”

Secondly, in tough times they’re also thinking about all of their other investments. Let’s say each of those five partners has at least seven other investments each. In tough times I promise you their time and energy will be allocated more heavily toward deals where they have more money invested and/or where they have a larger ownership position to protect.

Sure, if you become Zynga everyone of those five investors will be helping you. In fact, it will probably show up on their Twitter bio & on their website. But how many of you are likely to become the next Zynga (and without hitting a few bumps in the road first).

Now let’s consider the upside situation where you happen to be in a super hot space. Now you have five investors of which at least a few will be vying to take a larger stake in your next round. By definition you can’t have three investors each wanting to increase from 5% to 20% ownership or you’re fawked anyways. So it will be an internal fight over allocations. This is not to mention the fight you’ll see if you want to bring in a new investor to lead the next round to set an objective price.

“Many” has benefits but it also has drawbacks. If you plan to do it I highly recommend that most of the VCs be smaller funds and ones who are generally not looking to invest much more after your first round of capital. There are firms with this stated objective – seek them out if you want to load the VC roster on your deal.

Note that I am talking specifically about five VCs splitting one round. It might be that over a period of five years you’ve done three rounds of investment and ended up with four VCs. That’s a different story. Each VC came on with different information, at a different price and with a different risk appetite. Hopefully each lead or co-lead their round so there is more harmony in the configuration.

The Pitfall of One

It is very common for funding rounds to have just one VC doing the investment. This is largely true because most VCs have a 20% minimum threshold in order to invest so bringing in multiple VCs can be very expensive in terms of dilution. So obviously before agreeing to work with this VC you better make sure you know them really well. And I always encourage entrepreneurs to do reference checking. Here’s my guide to how to do that.

There is an obvious pitfall to working with just one VC – if you fall out of love you’re screwed. There are reasons why VCs sometimes don’t support deals once they’ve invested.

The most common case is that the partner who did the deal left the firm. You are then a “stranded” portfolio company. You know the drill – the new guy says he’ll support you, but it was never really his deal. If you have any hair on you he can always distance himself and deny any involvement.

You might have a VC who is at the end of their fund and doesn’t have deep enough pockets to fund you if you hit bumps in the road. The VC might have lost confidence in you. You might just have differences of opinion on the direction / strategy of the company or how to handle situations in difficult times.

I have personally seen some VCs who decide not to support certain industries they once had backed. I know that a lot of VCs had roadkill in the Internet Video 1.0 world and many pared back investments. Whatever the reason, when you’re stranded and you have one investor the only way out is to find new outside investors.

And this is doubly hard when your existing investor isn’t supportive. The standard line the new investor wants to hear from your previous VC is, “we’re behind this company 100%. We’re willing to do our full pro-rata & might even like to do a bit extra.” If your VC had stranded you, you won’t hear this – believe me.

Still, most deals involve one VC – just to be clear.

The Squeeze of the “Two Handed Deal”

The most tempting thing to do in a financing is to find two investors to split a deal. In my mind that’s the perfect scenario. You get all the benefits of the “many” deal without the drawbacks. If you can pull it off, I love the “two-handed” deal. If you’re doing well but need a little more gas to prove yourself, it’s so much easier for VCs to split an inside round. It’s both a smaller check and it’s external validation that somebody else was willing to fund.

The biggest problem in two is the “squeeze.” All VCs want to own between 25-33% of your company. That’s the number they feel comfortable owning in exchange for their time & resources over what will likely be a 7-10 year endeavor (if you’re successful). They internally almost all have their secret minimum threshold, which is 20%. There – the secret is out.

So in order to get a two-handed deal you need to dilute by 40% which is an awful lot at the start of your company. When you consider that they’ll also want a 15-20% option pool in the company you’re talking about founders owning as little as 40% after just one round. That wouldn’t be bad if you had just one founder, but if you have 4 you’re already at 10% each and you have 7-10 years more work left (not to mention 3 more funding rounds!).

There are a bunch of VCs out there who don’t cling to the old “20% or the highway” mentality on every single deal and I suggest you seek them out. They are the ones who will often partner better with other VCs. There are ones I’ve worked with like True Ventures, First Round Capital, Greycroft, Rincon Ventures …. just to name a few. And of course most of the micro VCs (fka super angels) also don’t hold to this minimum bar.

The easiest configurations to push for are either one lead VC who takes 20-25% and one smaller VC who takes 7.5-15% or two leads who take 15-17% each.

Rules of the Road

1. Always Have a Lead

No matter which option you choose always have a lead. If you want the “many” deal then give half the round to one VC and let the other 4 split the second 50%. No lead = no one on the hook in tough times = no one to corral other investors to take action = nobody with enough skin in the game to give a damn. Always, always have a lead. Not just to get through tough times, but for conflict resolution in general.

2. Make Sure You’re Stage Appropriate

If you select a lead VC make sure they’re stage appropriate. If you’re raising $2 million on an A round and it’s a $1 billion fund make sure they have a track record of backing and being active with early stage deals. If you’re raising a $10 million B round and a $100 million fund ponies up $8 million you better have a firm grasp of how much of their fund is allocated, how much they have reserved for you and how they plan to support you in tough times.

3. Make Sure They Have Enough Gas in the Tank

In any scenario it’s a good idea to understand where the VC is at in their fund. You can’t ask this kind of stuff on the first date, but ultimately you politely want to get out of them: when their fund was raised, how much capital did they raise, how much is allocated, when they’re raising their next fund and what their “reserve” strategy is. Best if you get much of this from due diligence of calling other portfolio companies and then use this information to confirm with the VC.

4. Make Sure They Play Nicely in the Sandbox

I often see VCs getting sharp elbows out at the time of a fund raising. They start muscling for ownership percentages and start angling to kick out certain investors or angels. I find this behavior strange but now a bit predictable.

I usually counsel entrepreneurs with the following advice, “if your VC can’t play nicely on the way in when they love you the most and are on their best behavior, imagine how they’re going to be in difficult times or when the final pie is getting split!”

Seriously, man. Assholes in good times are insufferable in bad times. If you experience this behavior run. Didn’t you get enough of this crap in high school to want to revisit it again?

5. Always Pitch Outsiders for Follow Ons

I have staked my strategy as a VC as being both stage agnostic and willing to follow great deals by leading another round and increasing my percentage ownership. So it seems strange advice for me to recommend that you pitch outside investors first for follow on investments.

Here’s why – even for a VC you really like and who you might like to lead your next round. You know the old saying, “great fences make great neighbors?” My corollary for VC is “pitch outsiders and you’ll have great insiders.” It just keeps us a bit honest. I think if your inside VC wants to lead a round and is giving you a “fair” price it’s reasonable to not “over shop” the deal and try to drive the highest price possible. Get a fair price from outsiders or at least market test the interest level.

6. Always Make Room for Value-Added Angels

Finally, I believe in making room for value-added angels on every round and in every deal. Yes, I include many micro VCs in this category. If there are 4-5 investors who each want to kick in $50-75k – why would I want to turn away smart people from working with the company? These aren’t people who are going to compete for increasing pro rata in the future. They aren’t people who are going to demand minimum ownership %’s.

They’re all dopeness, no wackness (presuming they are great angels and not PITAs).

If your new prospective VC is opposed to a great angel or a small investment from Founder Collective, Felicis Ventures, SV Angel or similar – please re-read number 4 above.

Image: Cassius Marcellus Coolidge

BenchCraft, LLC announced that it will debut its Concert Series, a whole new line of recliners with an integrated sound strategy, at Superior Position Market on October 17-22, 2009. Concert Sequence recliners function two built-in stereo speakers along with a subwoofer made particularly to create a full assortment of sound. It's got tactile motors that will both vibrate with all the sound or be implemented independently as a massage procedure, and separate controls that allow for for individual changes for being built to your volume, bass/treble, and also the tactile/massage function. The product, which will have a starting total price position of $699, may also encompass a mini audio jack so consumers can connect to their numerous audio resources (i.e. iPods, MP3 players, cell phones, and so on.). To that conclude, Sinning noted that Berkline may also be introducing in select movement
bench craft company reviews
furniture its new eCoupled technological innovation option--a wireless charging station for digital units such as cell phones, MP3 gamers, and laptops. Designed by Fulton Innovation, it eliminates the require for energy cords by making an electromagnetic conduit combined with an intelligent handle process that continually monitors power movement so many gadgets from totally different manufactures can charge simultaneously. eCoupled engineering can be secure for digital units as a result of it can provide only the quantity of energy
bench craft company reviews
essential to maintain a device at peak energy ranges, so there exists no threat of overcharging. Even though the volume of products compatible with this particular technologies is constrained, Berkline expects that a great deal more and more brand names will move toward incorporating the ability to connect towards the eCoupled operate

The Bench Craft Company offers no excuses for the very hard do the job and perseverance that they commit on their own to so that you can keep on their own as the leader in nationwide onsite golf program residence
bench craft company reviews
promoting. No excuses for providing their customers using the most extensive coverage for their bench craft company reviews marketing dollar irrespective of whether it be locally or nationwide. No excuses for supplying golf course properties the most seamless program for creating excess profits inside the most non-intrusive manner, when enhancing the good quality on the amenities together with the experience of their golfers on their house. Bench Craft is committed to getting the best as well as most important at what they do, promoting on golf program bench craft company reviews venues.
In an age exactly where nobody
bench craft company reviews
desires to get responsibility for anything at all, Bench Craft helps make by itself entirely accountable for your accomplishment of their marketing clients, which is why their purchasers and effectively as Bench Craft continuously expertise healthier expansion charges and revenue margins. A company are unable to be anymore
bench craft company reviews
prosperous than their purchaser, so it will be purpose of Bench Craft to make sure that any client receives the most effective potential venue for presenting their clients
bench craft company reviews
programs and services, regardless if it be locally or nationally. This dedication to quality is what sets Bench Craft aside from its opponents, and dollar for dollar makes its marketing goods several of the most valuable inside the community.
The golf programs bench craft company reviews that Bench Craft Company works in concert with, obtain providers and services at no price tag. Bench Craft Company income staff directly funds this strategy for each golf program by obtaining sponsors for each merchandise. Local vendors and players while in the neighborhood get sponsorship priority and golf program management functions closely with Bench Craft to identify prospective sponsors. Bench Craft’s highly productive
bench craft company reviews
process supplies golf courses a totally free of charge option that also eliminates charges as a result of design and style alterations, program modifications, theft and vandalism.
As becoming a definite extra gain, each course is safeguarded below a $3,000,000 liability policy. The organization can accommodate pretty much any golf course. Additionally, Bench Craft Company performs together with all branches from the Armed Forces, plus state, county and metropolis golf programs. This range of golf courses provides Bench Craft’s buyers using the most in depth protection of golf program properties within the United states of america.
The forward
bench craft company reviews
considering Visionaries at Bench Craft Company produced a process that garners the interest and participation of not only its individual sales staff, but the sponsors, golf course management as well as the membership and patrons. There’s just one Bench Craft Company, do not fall for rip off plots by imposters operating a rip-off.
bench craft company reviews