I suddenly noticed how many music technology companies have recently sprung up in Georgia!Here's a quick list, but I am probably missing some:

• BandMetrics
• BeatTweet
• FreeAllMusic
• Khu.sh (LaDiDa)
• Maestro.fm
• Music Intelligence Solutions (uPlaya)
• Neurotic Media (Amplified.com)
• Rank 'Em
• Vertical Acuity
• Zooz Mobile

Some of these have raised substantial venture money, some are operating on a shoestring, and at least one has multiple millions in revenue already.  One of the neat things is that these are coming from multiple directions—Georgia Tech, SCAD, even the Athens music scene.

Then you add in all the music studios that call Atlanta home. Think we're seeing a cluster being born? IndieMusicTech seems to think so...

This is different.

ATDC is almost thirty years old. (We're going to have a thirty-year birthday bash next year; be sure to come!) And, throughout most of ATDC's history, it's been a very exclusive club. We usually get a couple of hundred applications a year, and usually accept about a dozen into membership.

That's a lousy way to make friends... since, by definition, we're telling a couple of hundred entrepreneurs per year that they're not good enough to be in our club.

But it's a great way to validate that the applicants who survive the process are solid companies. Companies worth investing in. Maybe even companies worth catching an airplane from Boston or California to invest in. The ATDC "seal of approval" meant that a company was automatically worth visiting when a VC was coming to town to see what was cooking in Atlanta.

And that model served ATDC well for a long time. Since there were never more than a few dozen members at any one time, the ATDC staff could provide some serious personal service to the entrepreneurs: Consulting. Coaching. Making connections. And, since this was such a high-touch model, it was nice to squeeze everyone in as neighbors... originally the O'Keefe building, then the "storage warehouse" on Tenth Street, and finally a set of three top-notch facilities. ATDC currently manages the second floor of the Centergy building, a set of life sciences "wet labs" in the ES&T building, and a corner of the Georgia Tech Savannah facility.

Then the market changed. Lots has been written about this elsewhere, and I assume you've read it... but everyone in the angel/venture capital chain took one step to the right, then sat down. It became a lot harder for a new company to attract VC money. At the same time, in certain sectors, it became much less necessary to attract VC money. For Internet deals: borrow every dime you can, write code like crazy, push the infrastructure up into the cloud, live on ramen noodles until you get someone, somewhere, to pay for something, then finance growth out of cash flow until investors (or acquirors) come looking for you. No VC required. Heck, maybe no offices required. If you're in the cloud, you're not keeping your servers under lock and key, and if you don't need a PBX (hello, Skype and cellphones)... you can run a pretty substantial operation via laptops and coffee shops.

Then you factor in Atlanta traffic. ATDC has always had "remote members"—in fact, today, about 40% of ATDC's members are not bricks-and-mortar tenants—but, honestly, they've always been second-class citizens. They don't get the same intense hands-on experience as the tenant companies. But if you live in Suwanee, or Alpharetta, or Kennesaw, the idea of driving to Midtown every day can be pretty soul-killing. (Not to mention if you live in Newnan, or Gainesville, or Bainbridge! More about that later.)

So, over the last few years, the ATDC model of "run 'em through a gauntlet and only the best will survive" has become less relevant. Some companies—some good companies—have chosen to bypass the gauntlet and simply not apply.

VentureLab

Let's switch gears and talk about VentureLab. I've been running VentureLab for a little over four years now. It's a different model. First off, VentureLab only works with technologies belonging to Georgia Tech. (There are minor exceptions for student projects, but not enough to affect this argument.)

So the "gauntlet" to get in is different... at the time of admission, VentureLab tries to determine if any startup could exist in your target space, not if yours is the potential winner. That's very different. If we decide that there's room for a startup, everything is focused around assembling the resources to build a successful one... business plan, management team, seed capital... all those things that companies already needed to have to survive the ATDC admission process. It's not a coincidence that the VentureLab exit criteria looked a lot like the ATDC entrance criteria.

Too many of you have heard me tell my tired joke that "If ATDC is an incubator, then VentureLab is pre-natal care." And it works. But... it's high-quality, high-cost pre-natal care that you can't have. (Unless you're based on Georgia Tech intellectual property.) Look at the quadrants below.

If you have Georgia Tech intellectual property, VentureLab would work with you at the earliest seed/concept stage. (We're not just talking pre-revenue... we're talking pre-incorporation and pre-patent-application!) And, if you survived to the relative maturity of "early-stage" (I'm stealing definitions from Lance Weatherby's blog here), you'd be a great candidate for ATDC.

But if you're weren't based on GT intellectual property? Look above, at that vacuum in the lower left.

Nature abhors a vacuum, and innumerable groups, linkages, and organizations have sprung up to help fill this one. (That link is to a blog post talking about those groups, and an animated version of that incredibly cluttered chart in the lower left.)

Today's announcement changes all that. We're not trying to take the place of any of those organizations—they're the symbol of a thriving Atlanta startup ecosystem, and we're not arrogant enough to think we're smarter than the crowd. But we are going to make ATDC available as an umbrella... if any of those organizations can benefit from using ATDC as a clearinghouse, or a sponsor, or just a place to meet—let me know.

(The VentureLab function for Georgia Tech startups doesn't go away... and neither do the employees... and neither does the GRA VentureLab money. It's now just one more program managed by ATDC.)

SBIR Assistance Program

I'm already nearing 1000 words, so I'll keep this short. How many of you are even aware of the Federal government's mandate that the eleven most profligate Federal agencies need to devote 2.5% of their R&D spending to small companies? Companies like yours?

How many of you have ever applied for it?

How many of you would even know where to look?

The state of Georgia pays for a free SBIR Assistance Program (which also helps with STTRs; don't ask) that has helped dozens of companies land tens of millions of dollars in Federal grants and contracts. But you've never called them, have you? Now, by merging this program into ATDC, every member will get asked "Have you looked at the latest solicitations? Any of them sound interesting? Need some help figuring out how to submit a proposal?"

Getting some of your taxes back from Uncle Sam with no loss of equity, and no incurring of debt. What could be better?

Scale

This post is already too long, and I'll come back to some of these topics in the future. But the challenge for the new expanded ATDC will be all about scale. Budgets are tight. We can't provide the same high-touch consulting services to 400 companies that we can to 40. And we certainly can't offer startup-friendly real estate deals to ten times as many companies; you won't all fit in our space!

We have some good ideas about this, but it will mean leveraging community involvement as a force multiplier. Some of you reading this will be helping out other entrepreneurs younger or less-experienced than you. Some of you already do this. Some of you will be asked to start.

And some of you won't be in Midtown Atlanta. By figuring out how to decouple our services from our real estate, we'll be figuring out how to offer access to ATDC in places other than Midtown (and Savannah). We'll want to see ATDC "circles" in Gwinnett, and Alpharetta, and Athens, and anywhere else in the state where there's sufficient entrepreneurial activity to justify it. Stay tuned for more information on how this will work. I can tell you right now—we'll need your help.

Whether you're a first-time entrepreneur needing someone to talk to, or you've already exited three companies and are willing to help the next generation, or somewhere in between... If you're a Georgia entrepreneur and this sounds interesting, please visit the new ATDC Web site at http://bit.ly/svYw6 and sign up!

Disclaimer

There's a professional disclaimer on this site, but I should probably repeat it here:

Any material posted on this site or other personal sites reflects my personal opinion and does not necessarily represent the position of Georgia Tech, the University System of Georgia, or the State of Georgia.

But, for those of you who are asking "Why are we doing this?"... you've just read my answer.

ATDC, one of the nation's largest, longest running, and best-known university-based technology accelerators, is expanding its mission. ATDC has been merged with Georgia Tech's VentureLab and with the Georgia SBIR Assistance Program. By pooling resources, the new ATDC has increased the staff available to serve its expanded mission of helping Georgia entrepreneurs launch and build successful technology companies. The change will allow ATDC to greatly extend its reach to serve more technology companies along multiple growth paths and at all stages of development.

Founded in 1980, ATDC has helped create millions of dollars in tax revenues by graduating more than 120 companies, which together have raised more than a billion dollars in outside financing. However, according to Stephen Fleming, vice provost at Georgia Tech, "the startup market has changed dramatically over the past few years. Many startup companies do not want or need to pursue venture funding. Some are not even seeking traditional office space. ATDC's new initiatives directly address the demands of today's startup environment."

ATDC will open its membership to all technology entrepreneurs in Georgia, from those at the earliest conception stage to the well-established, venture-fundable companies. "We're interested in any technology business opportunity" said David Sung, one of ATDC's startup catalysts and a former partner with H.I.G. Ventures. "There are many ways ATDC can help startups, from business coaching and providing networking opportunities to financing through angel investment, government grants and contracts, corporate partnerships, and classic bootstrapping. We will support all entrepreneurs, whatever path they may take, through their entire growth process."

ATDC will continue to offer traditional "bricks-and-mortar" incubation space on entrepreneur-friendly terms, both in midtown Atlanta and Savannah. The center will be expanding its recent SeedSpace offering of small single-office leases in Technology Square for the earliest entrepreneurs and will provide a variety of co-working spaces to promote casual interaction among entrepreneurs. Recognizing the sprawl of the Atlanta metro area, ATDC will offer programs outside the Perimeter where dense clusters of entrepreneurs can benefit from its services. ATDC will also take full advantage of social media to build connections with entrepreneurs across the entire state of Georgia.

Since 1999, the state-funded ATDC Seed Capital Fund has made equity investments in Georgia startup companies alongside angel investors and traditional venture firms. With this new merger, ATDC will also manage the Georgia Tech Edison Fund, an innovative investment fund established in 2007 which draws its resources from charitable donors who are interested in helping expand the entrepreneurial ecosystem surrounding Georgia Tech.

"ATDC has always been a focal point for entrepreneurship in Georgia" said Sig Mosley, president of Imlay Investments and member of ATDC's board of advisors. "With these moves, ATDC now is aligned to support the specific needs of the new startup environment. The open door policy is a strong, positive shift and reinforces ATDC's leadership role in the startup community not just within the Atlanta metro area, but throughout the entire state."

The merger of the three units will bring together a broader knowledge base to provide comprehensive services to Georgia's technology entrepreneurs.

"By working at the very earliest stage with university spinouts—not just pre-revenue but pre-incorporation—we have learned a great deal about the coaching required by brand-new entrepreneurial teams that are still establishing their business model" said Roberto Casas, previously assistant director of Georgia Tech's VentureLab. "To date, we've focused on startups based on Georgia Tech intellectual property. By merging with ATDC, we'll be able to offer similar services to any Georgia startup, whether connected to Georgia Tech or not."

ATDC, the former Georgia Tech VentureLab, and the SBIR Assistance program are part of the Enterprise Innovation Institute (EI2) at Georgia Tech, which helps Georgia enterprises improve their competitiveness through the application of science, technology and innovation. Stephen Fleming, the former head of Georgia Tech VentureLab, was recently promoted to vice provost of Georgia Tech overseeing all of EI2. He will serve as the initial director of the new ATDC.

"Despite the economic downturn, it's still a great time to build a startup company in Georgia" said Fleming. "The last four years have seen an explosion of groups and organizations supporting the early-stage entrepreneur. With this expansion, we're rebooting the franchise of ATDC as the hub of technology entrepreneurship in Georgia. We hope to work with everyone, at any stage, along any path, to accelerate more technology startups and weave them into the economic fabric of Georgia."

All employees of ATDC, Georgia Tech VentureLab, and the SBIR Assistance Program will be retained in the consolidation. The new ATDC organization will continue to assist Georgia Tech faculty members and other research staff in forming new companies, and will continue to provide assistance to any Georgia small business seeking SBIR funding.

About ATDC
ATDC helps Georgia entrepreneurs launch and build successful technology companies. Founded in 1980, the Advanced Technology Development Center has provided business incubation and acceleration services to hundreds of Georgia startups—most of which are not based on Georgia Tech research, but which benefit from the close proximity to the university. ATDC currently has three facilities; two at Georgia Tech's main campus in Atlanta, and one at Georgia Tech's satellite campus in Savannah.

About SBIR Assistance Program of Georgia
The state of Georgia has one of the nation's leading SBIR/STTR assistance programs which, since being established in 2005, has educated and helped hundreds of Georgia entrepreneurs access these sources of federal funds. With the program's direct assistance, 150 companies have submitted one or more proposals resulting in more than $30 million in federal awards. By merging into ATDC, the program will be able to interact with more entrepreneurs across the state, including those who may have never considered applying for federal grants, and bring more of these awards into Georgia's startup ecosystem.

About VentureLab
In 2001, Georgia Tech became a founding member of VentureLab, a program of the Georgia Research Alliance (GRA). VentureLab helps build spinout companies around cutting-edge university research. With its emphasis on technologically-grounded business analysis, access to early-stage funds, and recruitment of experienced management, Georgia Tech's VentureLab has launched more than two dozen successful companies and serves as a model for other universities seeking to commercialize their discoveries. GRA's VentureLab Program now extends to four other research universities in Georgia; with an investment of some $13 million from GRA, more than 150 Georgia-based startups have been created around university intellectual property in the state. GRA also recently launched a new venture fund to make equity investments into these spinout companies.

If you're a Georgia entrepreneur and this sounds interesting, please visit the new ATDC Web site at http://bit.ly/svYw6 and sign up!

(Click for full-size image.)

Those of you at the Atlanta CEO Exchange this evening may have seen the lapel button I was wearing. It generated a lot of attention.

If you've been paying attention to the buzz around Atlanta, it's been almost a year since Jeff Haynie moved west, and left us his farewell message as to "What’s wrong with the Atlanta startup ecosystem and how to fix it."

If you haven't been paying attention to the conversation, here's a quick guide to catching up:

• Jeff Haynie
• Urvaksh Karkaria
• Scott Burkett
• Lance Weatherby
• Sanjay Parekh
• Russell Jurney
• Paul Graham
• Greg Foster
• Fred Wilson

Okay... ever since Hayes Microcomputer went bust, there's been great wailing and gnashing of teeth about how Atlanta isn't Silicon Valley. In my previous role as a venture capitalist, as my not-quite previous role running VentureLab, and in my brand-new role as the chief of economic development for Georgia Tech, one of the questions I'm most frequently asked is "How can we make Atlanta the next Silicon Valley?"

Not to put too fine a point on it -- but that's a foolish question. Silicon Valley is a unique aberration... a confluence of people, ideas, cash, and culture that will probably never be duplicated. And it's futile to try.

But, for most entrepreneurs and most companies, it's also irrelevant. Build a fabulous product that delights customers while solving a real problem, and geography is irrelevant. To quote Fred Wilson from his post above, "You can build a great startup in any of the dozen to two dozen startup hotbeds around the world. Pick a place you want to live and work and possibly raise a family. And then get busy."

Atlantans, repeat after me:

• We're not Silicon Valley.
• We don't want to be Silicon Valley.
• We don't need to be Silicon Valley.

If you agree, stop me and ask for a "Not The Valley" lapel button. If anybody wants them, I'll print stickers, too. And, if you disagree... well, I grew up in Atlanta, and Delta has been my hometown airline for my entire life. For me, they'll never have a slogan as memorable as this one from the 1960s and 1970s:

Delta is ready when you are.

I made an expedition to Gwinnett County recently to look at a blimp. (For those reading this who aren't familiar with Metro Atlanta, Gwinnett County is a huge fast-growing region northeast of the city of Atlanta. It has a substantial high-tech base and a committed evangelist. Those of us Inside the Perimeter make a lot of jokes about those hinterlands Outside The Perimeter. They return the favor with nonsensical blather about big houses, great schools, and the absence of random gunfire. De gustibus non est disputandum.)

Anyhow, Tamir Sagle, the CEO of TopEyeView, invited me to a demo of his product. Unlike most demos I see, this one couldn't be done in a Starbucks or in a university lab. This one required an empty parking lot, a honkin' big truck/trailer, and a handful of people. (Tamir says they can do it all with three people in twenty minutes, and I see no reason to disbelieve him.)

Out of the truck comes a partially-inflated blimp. You can get an idea of the scale from the pictures above. You can't ride it, but it can carry a few dozen pounds of useful payload. In this case, a gyroscopically-stabilized broadcast-quality video camera.

Click on the photograph above for a better view: there's a pair of nylon ropes stretching up to the blimp, which is hovering at 450 feet. (TopEyeView has been cleared by the FAA to operate up to 500 feet just about anywhere in the U.S. that's not near an active runway.) A wireless transmitter on the blimp shoots the video signal down to the control station; the line-of-sight ground antenna is about the size of a big hardback book.

The flight director sits at a portable control station where he controls the camera with a joystick. He can zoom in and out, pan up and down, and rotate it 360°. The blimp acts like a huge weathervane, so if you're filming a static target (like a concert stage), the director has to manually keep the camera aimed in the right direction. That job will belong to software in a future version.

The zoom is incredible. The image above is of a baseball field three miles from our parking lot. (All I had was my iPhone camera; it looks a lot better than this photograph implies.) Keeping the image stable was no problem, and the quality was clearly good enough to put on the national news.

When you're done, you let out some of the helium, winch it down, and stuff the partially-inflated blimp back into the truck.

Who would need such a thing?

• Television news stations, obviously. It would have been riveting to have one of these filming from 500 feet up, a quarter mile away from the burning Georgia Theatre this morning.

• Major sporting venues. The Goodyear blimp is an icon over the SuperBowl (although, with roofed stadiums, I don't know why they bother) but this could be deployed for college football games. (Or, in Plano, for high school... )

• Concert and festival promoters. That's a twofer... a security "eye in the sky" during the event, and top-quality video footage to be used for the TV special or DVD later.

• The Border Patrol. The Secret Service. Greenpeace (what's really going on on the other side of that factory fence?). The list goes on.

TopEyeView provides the same quality video that you'd get from a broadcast-equipped helicopter. But you can use it to silently observe your event from the sky all day long for just a few thousand bucks. A helicopter plus a pilot will run you tens of thousands of dollars per deployment, plus they make a hellacious racket, plus they can't fly low over crowds, plus they can only stay on station for a limited time until their fuel runs out. UAVs like this Georgia Tech spin-out are stealthier and quicker to deploy—handy for your local SWAT team!—but can't provide the staying power ("loiter time") or crowd appeal of a blimp.

Tamir and TopEyeView have done all the right things... built a working prototype, gotten some early customers, navigated the FAA's regulatory path, and are—if you'll pardon the pun—ready for takeoff. The next step is to upgrade the blimp to transmit HD video, so they're looking for investment. I met then through Space Angels Network, one of the investment groups I participate in. If you're interested in more information (on the company or on Space Angels Network), drop me an email.

It's refreshing to see an old concept thoroughly reworked with modern technology. And this demonstrates one of the strengths of Atlanta's entrepreneurial community... we're not all Web 2.0 developers (although we're good at that). We're aerospace, and materials science, and semiconductors, and telecomm, and medical devices, and vaccines, and solar cells, and biofuels, and Lord knows what we'll see next. Amid all the economic doom and gloom, Tamir is a reminder that it's a great time to be an entrepreneur in Atlanta!

Sometimes, it makes sense to sit back for a moment and reflect on how much things have changed in four years. For those of you who were part of the Atlanta entrepreneurial community, think back to May of 2005. Pretty different, wasn’t it?

You can see the final version of my "Entrepreneurial Atlanta" chart below. But you don't get the real impact until you click on the slide and watch the animated version.

Click here to animate the slides!

If you'd just like the PDF, you can download that here.

No surprise to anyone who's active in the startup community... investment in early stage companies is down but not out. Deals are still getting done. And the most savvy investors realize that prices of early-stage equities are as cheap now as they will be for a long long time... it's a good time to buy.

(That's not the greatest news for the entrepreneurs, but don't let it stop you. Waiting for valuations to go up just means you're letting your competitors run unopposed.)

The most interesting discussion so far was led by Basil Peters. He's crunched a lot of numbers in writing his book "Early Exits" and come up with some non-intuitive conclusions.

Premises

First, check his premises:

1. Venture economics dictate that VC funds must have a certain number of home runs to make up for the number of deals that simply go broke.
2. The average size of a venture fund has grown from $100M to $350M in ten years. That means the home runs have to be bigger... as a rule of thumb, you probably need to exit at $200M to "move the needle."
3. The angel market has matured so that syndicates of angels can now invest $3-5 million over the life of a deal.
4. The rise of cloud computing, SaaS, Asterisk, BPO, and other outsourcing services means that many companies now require an order of magnitude less capital than they did a decade ago. (Not true for biotech, but certainly true for software startups!)
5. The IPO market for venture-backed companies is dead. Thank you, Sarbanes-Oxley.
6. 92% of U.S. M&A exits are for less than $20 million.
7. Related: The number of potential acquirors is much larger for a $20M purchase than a $200M purchase. As Basil relayed, a Fortune 500 friend of his said "I can get a $20M deal approved at the divisional level. A $200M deal requires the board of directors, and that's not going to happen right now."

Any issues on that list? Any one of them is probably worth a blog post, but it's hard to argue with any of them as representative of the current situation in 2009.

And one item that Basil didn't point out, but it's probably in his book:

• The death of the IPO market means that participating-preferred shareholders (meaning VCs with liquidation preferences) will get a disproportionate amount of cash out of an M&A transaction.

Alright, toss all that in a pot and simmer. What do you come up with?

The interests of angel investors and venture capital investors are inexorably diverging.

That's a big deal. It has the potential to change the dynamics of the entire early-stage investment market.

I'm typing this sitting in an ACA session on the current angel market. The angel and VC markets have always been synergistic, and somewhat intertwined. Getting a VC to invest in your early-stage firm has always been a "seal of approval" for your angel investment, and 62% of angel deals last year attracted VC funding. Some angel groups won't invest in a company if they can't convince themselves that the deal will attract VC money. A lot of senior or emeritus VCs are active individual angels. Now, VCs are even inviting top-end angel groups to join their Series A syndicates.

And Basil claims that it's all headed for divorce.

Venture Fund Economics

The economics of a venture fund are pushing them towards deals where they can put at least $5M to work. Do the math: a 10X exit means the VC equity has to be worth $50M; if they own a quarter of the company, that means a $200M acquisition. And deals are taking longer... the DLA Piper presentation emphasized that average holding period from Series A to liquidity has grown from barely two years during the Bubble to over eight years today.

Ten-year funds aren't ten-year funds anymore. The average ten-year fund doesn't wind up until Year 14, and a non-trivial fraction last until Year 18 or even longer.

Time is the enemy of VC firms. The longer you hold the equity, the higher multiple you need to hit your IRR target (and venture firms live and die by IRR). Waiting until Year Seven for a 10X exit that you expected in Year Five means your portfolio IRR can drop from 35% to 20%. That may be the difference between raising a new fund and being invited to explore other career opportunities.

So all the forces are pushing VC firms to do bigger deals, that consume more capital, that deliver the potential for ever-higher multiples. 10X may not be enough... maybe your target now needs to be 20X, or 30X. You're swinging for the fences every time.

If you're an angel investor, this may not be a good idea.

If you can put $2M into an angel investment over two rounds and sell your stake in Year 3 for $6M... that's only a 3X multiple, but a a 54% rate of return! If you own a third of the company, that means an $18M acquisition... as mentioned above, that can be done as the divisional level at many, many large companies.

No substantial VC is going to be interested in a deal that sells for $18 million. "Doesn't move their needle." "Failure to launch." If they have one of these in their portfolio, its counted as a failure.

But if you're an angel investor, investing your personal capital, that's a darned good deal! It's not going to let you retire to Cayman Brac, but it's certainly going to pay for some nice trips and toys.

And for those of us concerned about economic development and technology-investment ecosystems... the funds from that exit are available for reinvestment in the next deal much more quickly! Once the angel is back from a three-week golf trip or dive trip or whatever, he or she has substantial liquidity available, and is likely to want to do another deal, and another... and probably in the same local market. By contrast, the VC fund exit, whenever that occurs, gets distributed back to their institutional LPs. With all the chaos on Wall Street, who knows when, or if, that money will ever make it back to the local market?

Conflict

The conflict arises if you are the angel investor looking at a potential $18M acquisition, but you've taken VC money. As seen above, the VC is pre-programmed to need a $200M exit. The VC syndicate is going to control the board, and they're likely to "double down"... rather than taking the early exit, they'll plow in more money (most VCs have plenty of money), maybe try to roll up a competitor, and build that $200M exit. If they miss, the deal goes into their list of writeoffs. And it's probably too late to go back and make that $18M sale that was available four or five years earlier. That potential acquiror has moved on.

Basil quoted a study by Robert Wiltbank of Willamette University (funded by our indispensable friends at the Kauffman Foundation). He looked at a large historical database, and compared results for companies that only received angel investment versus companies that received a mix of angel and VC dollars.

When angel investments attracted VC dollars, the overall number of exits in the 5X to 10X range increased by about 8%. That's good.

But the number of exits in the 1X to 5X range fell by nearly 20%. That's bad.

And the number of complete failures increased by about 12%. That's terrible. How many of those companies would have had solid "base hits" exits if the venture investors had not been swinging for the fences?

Impact on Entrepreneurs

So if you're an entrepreneur... what does all this mean for you?

It depends. (The answer to almost any reasonably complex question is usually "It depends.")

If you're discovering pharmaceuticals or building medical devices, nothing changes. Structural issues in your market, such as FDA approval, will continue to drive you towards raising large amounts of venture capital from VC firms.

If you're developing a new Web 2.0 service... you might want to think about an angel-only strategy. Your likelihood of a profitable exit goes up, even though the likelihood of being on the cover of Wired goes down. Make enough money to fund the next company yourself... and that one might get you on the cover!

And if you're in another sector... well, it depends. Cleantech deals are looking more and more like biotech (heroic amounts of capital, long holding periods). Some software deals may begin look like SaaS deals, where you can run them on a relative shoestring. It's certainly worth understanding these dynamics before you start mixing streams of angel capital with venture capital.

Venkman said "Don't cross the streams!" It's still good advice.

Canaan Partners is a first-class venture capital firm, and they've assembled a "how to" document for entrepreneurs coming in to pitch. They explain very clearly what they're looking for in a first meeting, and you should pay attention. It applies to any early-stage VC or angel investor.

Click on the full-screen icon (next to last on the bottom of the image).

I've recommended Edward Tufte's books many times... you can see some of my previous comments here and here.

He's going to be in Atlanta next month. If your job consists of presenting complex information on paper or on screen, you should go: <http://www.edwardtufte.com/tufte/courses>. People travel from all over the country (world?) to attend these one-day seminars. If you're reading this blog from anywhere in the Southeast, you have no excuse for not taking advantage of the day!

Disclaimer: I have no relationship with Tufte other than having shaken his hand after the Atlanta course a few years ago; I don't make a dime if you sign up. If going to the course isn't convenient for you and all you want is the books, buy them from the links below and I'll make a buck per book.

• The Visual Display of Quantitative Information
• Envisioning Information
• Visual Explanations
• Beautiful Evidence