Author: Chris Cameron

The semantic web is one of the leading trends we track here at ReadWriteWeb, so it was big news to us earlier this month when Evri announced it was acquiring Twine creators Radar Networks. Following the announcement, Twine CEO Nova Spivack wrote an inspiring and lengthy farewell blog post detailing the acquisition, and the story behind the development and growth of Twine. Towards the end of the post, Spivack outlined some lessons for budding entrepreneurs based on what he learned through his startup experience.

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The number one piece of advice he suggests is to raise as little funding as possible from venture capitalists, and to stick with revenue funds, bootstrapping or angel funding to get by. Based on Spivack’s experiences with raising VC funding, he believes the conditions and strings that are attached to it aren’t worth it if the company can get by without raising any funding, especially in the current economic situation.

“It is no easy task to get a startup funded and launched in this economy,” he writes. “The odds are not in your favor — so play defense, not offense, until conditions improve (years from now).”

Part of playing defense, he says, is to curtail spending as much as possible – a suggestion that goes hand-in-hand with the modesty of raising as little venture capital as necessary. Spivack urges startups to avoid quickly spending and expanding upon bloating their bank account with investor dollars; instead, he argues for responsible saving and planning for unexpected downturns and crashes.

“Assume the market will crash — downturns are more frequent and last longer than they used to. Expect that. Plan on it,” writes Spivack. “And make sure you keep enough capital in reserve to spend 9 to 12 months raising your next round, because that is how long it takes in this economy to get a round done.”

One of the things we hear VCs look for in potential investments is traction, but Spivack, interestingly enough, says traction is not always a sure-fire bet for funding and success. He says VCs are more concerned with finding a company that is producing revenues preferably at a break-even level – something he attributes to an evolving VC landscape.

“Venture capital investing has changed dramatically — early stage and late stage deals are the only deals that are getting real funding,” writes Spivack. “Mid-stage companies are simply left to die, unless they are profitable or will soon be profitable.”

Spivack provides a number of other lessons he learned from his time with Twine, and be sure to read his entire post for a touching story behind his company. For now, note his most important lessons regarding modest spending and modest fund raising. A lot of startups enter the scene looking to become as flush with cash as possible, but in some cases, with some entrepreneurs, having too much money can be a bad thing.

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When you think of startup incubators, you think of the more well known organizations helping companies in cities like Boulder, San Francisco, New York or Austin, but one incubator is looking to change that assumption. Based at the VT KnowledgeWorks Business Acceleration Center in Blacksburg, VA, DayOne Ventures is a program aimed at tapping the talent coming from Virginia Tech to help local startups get off the ground.

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With fewer than 40,000 residents, Blacksburg is less than half the size of startup hub Boulder, CO, but the city’s ties to Virginia Tech make it a fertile spot for its budding startup community. DayOne Ventures is taking advantage of the growing buzz in the area with its highly concentrated experience which will accept just 3 companies to participate this summer.

Those selected will benefit from up to $16,000 in seed funding, free office space, Internet access and hosting, legal assistance with incorporating their company and setting up stock plans, and mentorship from an panel of experienced entrepreneurs. DayOne co-founder and mentor Bill Boebel has prior experience himself with starting a company in Blacksburg; in 1999 he and a pair of co-founders created Webmail.us, an enterprise email solution.

“It was really awesome doing our startup down in Blacksburg because of the low cost of doing it. We were able to fail three times before we figured out the right idea,” Boebel told ReadWriteWeb. “The cost of failing in Blacksburg is a lot lower than the cost of failing in Silicon Valley.”

Eventually, Boebel and his co-founders molded Webmail.us into a profitable company which was later acquired by Rackspace in 2007. The Rackspace presence in Blacksburg remains to this day and is a reminder of the city’s most successful Internet startup. Now as an experienced entrepreneur, Boebel and others are teaming together to provide local startups (or those that choose to relocate for the program) with the mentorship and resources to get started.

TechStars and Y Combinator aren’t necessarily everyone’s cup of tea; DayOne, one the other hand, brings a bit of small town flavor to the already close-knit startup culture – a flavor that could produce some interesting results with their exclusive incubator. Applications for the 10-week program are open now, so if you’re in the Blacksburg area or wouldn’t mind relocating for the summer, be sure to look into the DayOne Ventures program.

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The Freemium Summit, an event focused on discussing the ever popular business model and how new companies can best take advantage of it, was held last Friday in San Francisco, and since then, interesting stats and bits of information have been popping up on blogs and news sites. New business models have been a hot topic of discussion lately as we’ve debated both the benefits of freemium and it’s possible replacement model, subscriptions. For any company taking its first steps into the freemium model, it takes careful consideration when deciding how to structure a freemium model, from how much to charge, to which services to charge for.

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ZDNet writer Tom Foremski recently published an article on his blog “IMHO” about some lessons he learned during a discussion with a handful of freemium startup executives that could be useful to a startup looking to adopt the popular business model. The execs, all from companies in Emergence Capital’s portfolio, were from Yammer, YouSendIt, SurveyMonkey, InsideView and Echosign, and provided some key tips for getting into freemium.

Foremski provides us with ten points he gathered from the discussion, and at the top of the list is a wise suggestion: “Don’t try and guess how your users interact with your service, and which features to offer, perform multiple tests of usability, features, and pricing. Intuition is the starting point but test it out against multiple variants.”

This lesson points to the fact that no matter how you plan your site, or how you intend people to use it, they will undoubtedly find alternative uses and features for the site that you either hadn’t thought of or hadn’t though were as important as other parts. If your company is launching out of the gate with a freemium model in place, be sure to carefully review feedback and statistics from your users and don’t be afraid to mix up the model if things aren’t working right.

Others might choose to launch without the model in place to see which features are more popular, or to see what customers want that the site doesn’t yet offer. Either way, it may be best to beta test the model before releasing it in order to gauge your customers’ reaction. Also remember that customer reactions to changes tend to be a little extreme at first, so take them with a grain of salt, but engage them and find out what their feelings are.

Another thought to consider that Foremski points out is that most companies offering a freemium service can often find themselves profitable even if only a few percent of their users are premium subscribers. Pandora CTO Tom Conrad recently revealed that less than 2% of the service’s users are paid subscribers, but that they are expected to bring in 15% of the company’s revenues this year. Foremski says to look at the glass as half empty (or mostly empty) waiting to be filled with new customers.

“For some businesses as few as 4 per cent of premium users can create a profitable business, you then have 96 per cent of upside — users that you can potentially convert,” he says.

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Back in January, a healthy comment discussion followed a post in which we looked at the topic of “spec work,” or freelance work done for a client before an agreement of compensation is formed. One of the most vocal opponents to spec work is Andrew Hyde of TechStars and StartupWeekend fame, whose blunt opinions sparked a debate over how a marketplace for freelance work should properly function. Today, Hyde and a few friends are launching Pick, a marketplace and directory that connects clients with freelancers.

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Freelancers in fields like design, development, photography, copywriting, marketing and management can sign into Pick and create a profile to share their portfolio and contact information. More importantly, however, Pick asks freelancers to list their work availability and a price range. This allows clients to narrow their search to find freelancers in the specialty they need based on location, availability and price.

“The [freelance] process is a mess. There are a ton of freelancer sites out there, but freelancers never promote them because they largely exploit the community. I thought there had to be a better way,” Hyde told ReadWriteWeb. “I wrote my solution and said someone should build it, and nobody did, so here we are.”

Through the creation of Pick and the growth of its community, Hyde hopes to put a dent in other marketplaces which he says are providing platforms for what he calls “exploitsourcing.” With a 2008 post titled “Spec Work Is Evil / Why I Hate CrowdSpring,” and in 2009’s “An Open Letter to 99designs,” Hyde has become a leading voice in the movement against spec work and the services he believes promote it.

“It is a major ethical flaw of both parties,” said Hyde of spec work in 2008. “Some designers I have talked to have escalated this lack of ethics to be on par with some very serious crimes, while other see it as dumping oil down a rain drain. A lot of people don’t take this lightly at all.”

On the bright side of the negativity surrounding spec work, Hyde has channeled his passion against the practice into a new place for clients and freelancers to meet without the worry of exploitation. For startups that need design, copywriting or other freelance services, Pick could soon become an excellent alternative to the more common marketplaces.

Having just launched, the service is a bit of a ghost town and is currently invite-only, but Hyde hopes to see around 1,000 users by week’s end. Freelancers can request an invite and clients can currently visit the site and browse the available profiles.

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Last week we discussed how no matter how intriguing your startup is to an investor, they may still decline to get involved or look further at your company simply because it’s not a fit for them. While it is important to understand that different investors have different needs and motivations, it is equally important for both parties to know how to correctly take the next step and handle the rejection in the right way.

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Foundry Group investor Brad Feld recently wrote an article for Entrepreneur Magazine in which he explains that when he turns down an email pitch, the worst thing the would be entrepreneur can do is ask for a referral. The interesting thing to note here is that Feld actually wrote about this very same topic on his blog back in 2007, so obviously, it’s still an issue he is seeing three years on.

“In networking seminars, classes and sales conferences around the world, people are told some version of ‘if you get rejected by someone, ask them for a referral’,” writes Feld. “This has never worked for me when dating. (After being rejected, I don’t recall saying, ‘I know you aren’t interested in me, but do you have any friends that are?’) I’ve never really understood why people think this works in a business context.”

As Feld articulates in his posts on the matter, the venture capital community is a close-knit group that places a high amount of trust in one another; by asking an investor to refer you to another VC, you are effectively asking them to endorse you. “Good VCs are careful with introductions because they want to make sure both parties view the introduction as valuable,” says Feld.

And just as entrepreneurs need to know how to take rejection, VCs need to know how to dole out that rejection. Feld was originally prompted to write on the subject back in 2007 when Fred Wilson wrote a piece titled, “Saying No.” According to Wilson, honestly is the best practice when it comes to turning down pitches.

“I’ve tried every way to say no and my belief is the truth, no holds barred, is the best approach,” writes Wilson. “If you don’t think the entrepreneur can run the business, tell them that. If you think the market is too small, tell them that. If you think the competition is too tough, tell them that.”

Not all VCs take the time to respond to every single one of the hundreds of pitches they receive on a monthly basis, but for those who do, they should try to inject as much honesty into their reply as possible. For the entrepreneurs on the other side of the table, take your rejection for what it is, and don’t push back for a referral.

Remember to not take rejection personally, the whole “It’s not you, it’s me” mantra is actually true in some investor rejections. And don’t forget to look on the bright side of rejection, as Bijan Sabet suggests. Sabet says that had he not been turned down for his first job application, he may not have found himself where he his today, both professionally with becoming an investor, and personally with meeting his wife.

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I’ve learned a lot about startup culture since I started writing about it at the beginning of January, and there is a trend that I have noticed that is different from the stereotypical outsider’s point-of-view – one that I had not too long ago. There seems to be a growing number of companies that are holding off from either being bought out or going public because they are more vested in the interests of their company or their idea than they are about having a big payday.

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IPOs have fallen off a cliff in recent years, and it seems like each month we hear about who is potentially looking to buy Twitter or Yelp. Facebook is huge, and makes a good amount of money, but it is still a venture backed company with no IPO. Over the weekend, Spark Capital investor Bijan Sabet published a blog post that reaffirmed my theory that more companies are perfectly content with raising round after round of funding. And when they do allow themselves to be bought, Sabet says that startups are getting a lot pickier with who they will sell to.

“Recently I heard about a startup that turned down a higher offer from one company in favor of a lower offer from a different buyer,” writes Sabet. “It’s not enough to wave a huge checkbook around. That isn’t sufficient for the best startups. Big companies need to show startups how they will fit into the bigger picture, give the startup employees challenging & important positions, demonstrate why the combination will be in everyone’s interest.”

Startups and entrepreneurs are maturing. Quickly launching an innovative idea in hopes of being snatched up by Google in order to sit on the beach and sip mai tais until the cows come home is fading – if not already erased – from the “get-rich-quick” stereotype. Entrepreneurs these days are more genuinely passionate and attached to their companies (or their “babies”) and want to see the product succeed more than they want to benefit financially from it.

It is this passion that has morphed into a stronger sense of self for startups; they are more confident with their positions and are not afraid to turn down a multi-million dollar buyout if the terms don’t look good to them. For many entrepreneurs, a big payday is certainly a goal, and Paul Graham even recently defined success as “the founders end up rich,” but more seem to be holding out and holding on to their companies.

It wouldn’t surprise me to learn that venture capitalists are getting better at identifying the truly passionate entrepreneurs from the ones looking to turn a pretty penny from whatever idea gets the job done. This concurs with the general consensus from a roundup of VC pitch advice last week: you are pitching yourselves just as much if not more than you are your idea. VCs are more interested in investing their money with passionate entrepreneurs than a fantastic idea because, after all, a great idea in the wrong hands can fail spectacularly.

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Eric Ries, the driving force behind the lean startup movement, announced Sunday on his blog Lessons Learned the creation of two scholarships for lean startups to attend upcoming conferences. A lean startup is one that takes advantage of various techniques and technologies to produce a product at minimal cost, while continually revising and iterating based on customer feedback.

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The newly announced scholarships will provide lean startups with the opportunity to attend the Startup Lessons Learned conference in mid-April and the Web 2.0 Expo in early May. The Startup Lessons Learned conference is a pet project of Ries’, and is sponsored by the company he helped co-found, IMVU.

“This conference will be the first of its kind: an opportunity to have a conversation about the future of the lean startup movement,” writes Ries on his blog. “We want everyone who can contribute to that conversation to be there, regardless of their ability to pay.”

Ries has also distributed discount codes for the conference to leaders of various Lean Startup Meetup groups. Those attending the event will have the opportunity to learn from an impressive list of speakers, including Steve Blank, Dave McClure, Damon Horowitz and Max Ventilla of Aardvark, and even Clara Shih, whose book The Facebook Era was mentioned in our Weekend Reading series.

The second scholarship provides access to the Web 2.0 expo and to its Lean Startup Intensive, which Ries agreed to organize with the promise of the scholarship opportunity. Applications for the two scholarships are open until April 12 and April 15, respectively.

Lean startups have been growing in popularity as startups learn to become more independent and to make more from less, especially in these rough economic and tepid venture capital times. It only makes sense that Ries would organize these scholarships since most lean startups that would benefit from attending these events might see them as unnecessary costs. If your startup is looking to run on a low burn, applying for these scholarships is a great idea for the opportunity to learn from and network with other entrepreneurs with lean experience.

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So you want to be the next big shot entrepreneur to come up with an idea that will change the world, but can’t seem to come up with that golden ticket of an idea? Well perhaps you need to look no further than the world of art for inspiration. While looking through Hacker News posts, I stumbled across an illustrated SlideShare presentation from San Francisco-based cartoonist Betsy Streeter that suggests ways artists can unleash their “creative beasts” hiding within – an interesting approach to creativity that aspiring entrepreneurs can also take advantage of.

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According to Streeter, the best way to get started is to first “give it permission to come out and play” by throwing away rules and judgements. For artists this means just free drawing at letting whatever comes to mind make its way onto the paper; for entrepreneurs, this means when you are brainstorming, don’t throw any ideas away – everything and anything is free game, including the “impossible”.

The second step, Streeter says, is to encourage the beast “by appreciating exactly what happens,” no matter what form it takes. “When you look at a drawing, see it as it is, not what you thing it is ‘supposed’ to be,” says Streeter. This is really just an extension of the first rule; by encouraging whatever random results come of your brainstorming, you are telling your brain that its okay to think outside of the box, which allows for the further flowing of the creative juices.

This practice actually reminds me of a method for ideation I learned during graduate school. The process was a bit different but the theory was the same; truly creative ideas are generated through a process of throwing out the rule book and encouraging a free-for-all of ideas, no matter how silly. In the method I learned, a group sits around a whiteboard with markers and a pad of sticky notes and slaps any idea for the given question or problem onto the board.

We started with very broad questions, like “How could life be made perfect?” and would encourage the posting of even the most absurd of ideas. The things you think of when you are actually trying to be obnoxious are often the ones that can be molded into a fresh idea. For instance, someone said life would be perfect if they could instantly know what anyone was thinking, which over time actually morphed into an idea for a mobile translation application.

The lesson to learn here is that truly innovative ideas don’t appear in your brain, and you can’t simply sit down, think real hard and squeeze them out. By brainstorming and teaching your brain accept the previously unacceptable, you have a higher probability of producing a new and creative idea. This process, of course, works even better in groups.

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We have talked about the power of utilizing social networks for businesses before in our Weekend Reading series with books like The Facebook Era, by Clara Shih and Crush It!, by Gary Vaynerchuk, and this week we’ve got another book under a similar vein. Published just last month, Social Networking for Businesses: Choosing the Right Tools and Resources to Fit Your Needs, by Rawn Shah is a guide for companies looking to take advantage of the collaborative communities of social networks to improve their business.

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Author Rawn Shah has plenty of experience in this very subject as he is the Best Practices Lead on the Social Software Adoption Team at IBM. In Social Networking for Businesses, Shah breaks down the essentials and methods of modeling social experiences for businesses to get the most out of their users and customers. One of the most important factors to the success of social business experiences is the leadership of those experiences, says Shah, who points to the success of blogs and Wikipedia as examples.

“The success of each blog is a result of the leadership of its owners, who independently set the rules for what to publish and who can contribute,” says Shah. Wikipedia, he says, only succeeded when its leadership structure changed to let anyone to contribute, allowing the best content to rise to the top and be curated by public editors.

“This defining change in how people could make decisions on the content and direction of the site — a leadership model that allowed anyone to become an editor and leader — drove Wikipedia’s overwhelming success,” says Shah.

Other topics covered by Shah in his book include building skills to create and manage social experiences, building a social culture within your business, collaborating with customers and users on ideas, and measuring the results of social environments.

“Online communities and social computing software are rapidly appearing both on the Internet and within organizations as a means to allow people to collaborate, although quite frequently without a plan or a link to organizational and business value,” says Shah. “By framing collaboration around specific goals and methods instead of herding people towards generic ideas, social computing can help develop and direct innovative development in an organization.”

This book is a little more of a deep-dive than some of the other books we’ve recommended over the last several weeks. If your startup is looking to encourage unique social interaction between your users and your business, this could be a great book to check out.

Disclosure: A review copy of Social Networking for Businesses was provided to ReadWriteWeb by Pearson Education and Wharton School Publishing.

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Being a resident of the Phoenix area, which is a significant distance from Silicon Valley, I wasn’t able to attend the Demo Day show-and-tell pitch-fest at the end of Y Combinator (YC), but luckily, other reporters were there and have been slowly releasing stories about the companies and the event. Peter Kafka of All Things Digital published a video interview Thursday with YC co-founder Paul Graham from Demo Day in which he provides some interesting insights into how the investment community is rebounding and possibly how incubators are beginning to have influence on the larger VC firms.

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This group of YC grads included 26 companies, of which 20-25% Graham would expect statistically to go on to receive Series A funding. However, this number could potentially be higher with this newest class as Graham has seen a drastic change in the attitudes of the investors.

“Judging by the reactions of investors, the recessions seems to be over,” Graham said in his interview with Kafka. “I don’t think we’ve ever had a batch that had so much investor interest so early as this one.”

As Graham points out, some of the companies had spoken with or secured angel funding well before demo day – another surprise, he says. An interesting opinion he shared in his interview included the idea that it is hard to place a statistical number on how many companies emerge from YC to become “successful” businesses. Who defines what “successful” is?

Graham says that historically, 70% of YC companies have raised additional funding since leaving the program, or have not needed to because they managed to become profitable without additional help. But how does Graham truly gauge success for the entrepreneurs? “The founders end up rich, basically. That’s the definition,” he says.

The other interesting quote Graham gave during his brief interview sparked an interesting thought in my mind about the state of the start-up and investment community as a whole. When Kafka suggested that angel investors tend to get squeezed how by more powerful VC firms that flood companies with cash in future rounds of funding, Graham replied that firms would be foolish to attempt this with YC startups. To paraphrase, Graham basically said, “The firms wouldn’t dare squeeze out the angels on YC companies because that would mean they would be squeezing us too, and that wouldn’t be wise if they wanted to continue to have access to our alumni.”

What this got me thinking about is how the growing popularity of incubator programs like Y Combinator and TechStars is affecting the venture capital community. Are firms less likely to squeeze out angel investors from these kinds of companies because the incubators continually graduate companies with high potential? Is Graham saying that if the VCs want continued access to the best startups around that they had better play nice with the angels?

If so, is this good or bad for the startup community? If this is really having a significant impact on how VC firms approach these companies, then it surely benefits the angel investors, but do the startups ultimately gain anything from it? I wonder if there has been a case of VC firms deciding not to invest in a YC company because they would rather be able to have more control over term negotiations.

I would think that a VC firm would be more interested in the opportunity to work with high-potential companies than in a power struggle in the board room, but I could be wrong. Or I could just be over analyzing a simple quote.

Photo by Flickr user pragdave.

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We’ve talked a lot on ReadWriteStart about how design is an important facet of the development of a web applications for startups. Last week we provided some advice on how to deal with irate customers who hate your design changes, and earlier this month we talked about how small design tweaks can have big impacts of the use of your site.

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The main theme of these posts is that good design is worth the time and effort because it goes a long way in attracting and maintaining users, but really, who is to say what “good design” is? A recent entry on the blog ignore the code by Swiss software engineer Lukas Mathis raises an interesting point about user interfaces and how some users prefer that they maintain their complexity.

They like complicated user interfaces? It seems strange, but Mathis argues that mastering a cluttered interface gives users a sense of superiority. One example of this that Mathis points out is the Bloomberg Terminal, a complexly designed business interface whose users might revolt if it were simplified, as some studies have shown.

“Some complex user interfaces may also give people the perception of having more control,” writes Mathis. “Another reason why people sometimes avoid simple devices is that they perceive them as being made specifically for children, or for ‘stupid’ people.”

So how does this apply to Web startup culture? What it says is that not all users are the same. Not everyone is looking for the cleanest and simplest design; some want more features and more complexity. The thing to remember is there is a difference between having a complex interface and having a complicated interface.

Even the simplest of interfaces, Twitter, has begun to add more complexity with new retweet features, lists, trending topics, and more. Aesthetically, “good design” means design that is appealing to the eye, and is easily navigated visually. With this idea, it is important that complex interfaces are well designed so that the users who prefer simplicity do not feel overwhelmed.

So “good design” may be simply design that is both aesthetically refined, and that also serves to aid both novices and power users in easily finding the features they want without feeling over or underwhelmed – balanced, and right in the sweet spot. I would love to hear what people think of this idea, so please let me know your thoughts in the comments.

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I have a few different friends who are trying their hands at entrepreneurship; some have met with investors already, while others are closing in on their meeting date with anticipation and uncertainty. Based on hearing some of the things they were doing to prepare for their meeting, I thought it would be wise to roundup some of the best pitch advice I’ve come across not only for them but for the other first time entrepreneurs out there who may not know what typical VC pitches are like.

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Pitches range in length from 5 quick minutes to a half hour or more, but what I have consistently seen while researching this topic is that no matter what length the pitch is, the key is to keep things simple and understandable while not patronizing the VC. But don’t take my word for it, here is advice from six venture capitalists on various aspects of the all important pitch.

David S. Rose – How to Pitch an Angel (or VC)

If you’re looking for “Pitching VCs 101,” then look no further than Rose’s 2008 TED University presentation on how to give presentations (embedded below). Rose, who has raised and invested millions through pitches, leads Rose Tech Ventures which after educating prospects on the art of the pitch saw investment rates climb. “Our investment rate more than DOUBLED, and we have funded over $35 million into more than 50 companies during the past six years,” writes Rose.

Highlights from Rose’s speech include taking the VC on an emotional journey during your pitch by telling a story, and remember that they are there to evaluate you more than your idea.

Chris Dixon – Pitch yourself, not your idea

Investor and entrepreneur Chris Dixon reiterated Rose’s point last November that VCs are more interested in the quality of the team than the quality of the idea. Ideas are subject to change, but how people work and interact are pretty solid and unmovable, so remember to be self-aware, he says.

“What you should really be focused on when pitching your early stage startup is pitching yourself and your team,” writes Dixon. “Of course a great way to show you can build stuff is to build a prototype of the product you are raising money for. This is why so many VCs tell entrepreneurs to ‘come back when you have a demo.’ They aren’t wondering whether your product can be built – they are wondering whether you can build it.”

Mark Suster – Who Should Attend Your VC Pitch?

Mark Suster, who has written extensively on pitching to VCs, brought up an interesting decision entrepreneurs need to make before their pitch: who is coming? Suster argues that for most situations just having the CEO is plenty, but that showing “the depth of your bench” can be beneficial too. However, there are several pitfalls he warns you to avoid when you start including more people in your pitch.

“If you bring the full team make sure that you construct the entire storyline in advance so everybody knows how you plan to have the meeting flow,” writes Suster. Who is going to cover which slides, who is going to field which questions, how are you going to answer difficult questions (which you should write down in advance and practice). Definitely don’t “wing it” – have practice sessions to see how each member performs. Honestly I would say a good 50% of team presentations that I see seem like they really haven’t practiced the flow very well amongst team members.”

Guy Kawasaki – The 10/20/30 Rule of PowerPoint

Though originally posted in 2005, Kawasaki’s rule of 10/20/30 in presentations still holds true. We’ve all seen those terrible presentations with way to many slides and way too much text that is way to small. The slideshow isn’t supposed to do the talking for you, its merely a supplement to the wisdom that will come flowing from your voice.

“I am evangelizing the 10/20/30 Rule of PowerPoint. It’s quite simple: a PowerPoint presentation should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points. While I’m in the venture capital business, this rule is applicable for any presentation to reach agreement: for example, raising capital, making a sale, forming a partnership, etc.”

In another related post, Kawasaki points out this presentation as a great example of using visuals and text together with expert ability. It’s not a great example of a VC pitch, but the presentation does a great job of conveying the message of the presenter. In other words, be more like Steve Jobs – that man knows how to pitch!

Don Rainey – The Top 5 Rookie Mistakes in Pitching VCs

Enough about what to do right, lets talk about what not to do. Among Rainey’s list of the top mistakes made by novice pitches is presenting terms to the VCs, being late to the meeting, or asking VCs to sign a non-disclosure agreement (NDA). But the number one issue Rainey sees all too often is when the entrepreneurs come to pitch a VC firm without any prior knowledge of the firm and its investments.

“One doesn’t need be an expert on our history, track record or portfolio but a little knowledge can go a long way. Just a little awareness on our companies, professional background, and current boards, can drive efficiency for the person pitching an idea,” writes Rainey. “If I’ve had three companies in Internet Advertising, for example, you can probably skip explaining simple concepts related to it. If one lacks that awareness, it wastes time AND undermines credibility. Plus, you look [like] someone who doesn’t do what it takes to succeed because, in this instance, you haven’t.”

Bijan Sabet – Startup Presentations

Sometimes your aren’t the only company pitching to VCs in a single day. In the case of this week’s Y Combinator Demo Day, 26 startups presented back-to-back with one intermission. This means that by the 26th presentation, which could be you, the VCs in attendance are likely itching to get out of their seat and go meet the other entrepreneurs, so how will you grab their attention? Bijan Sabet says humor can be a great ice-breaker and get your audience engaged with your pitch.

“A number of entrepreneurs used humor in their presentations in just the right amounts. Too little and the presentation can by dry. Too much and it’s just, well, a joke. But the right amount is a wonderful way to engage your audience,” writes Sabet. “It’s obvious that Paul Graham, the founder of YC, plays a huge role in helping these (mostly) first time entrepreneurs find their way and put together their presentations. And it’s also obvious that these founders practice their pitch over and over again so they can nail it in a room full of strangers.”

So what have we learned? Remember that you are just as much if not more important than the idea you are pitching, figure out before the pitch who is coming in the room and who is saying what, make sure your slides aren’t poorly designed, avoid common rookie errors, and don’t be afraid to spice things up with a dab of humor. Of course, there are a countless number of lessons to be learned before pitching VCs, but hopefully this has covered the basic and most important ones.

If you need an example of a well designed pitch deck, Mint.com (which was eventually bought out for big bucks by Intuit) recently made an early deck of theirs available on slideshare. If you have other suggestions for first-time pitchers, leave your thoughts in the comments!

Photo by Flickr user Dawn Ashley.

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Thanks to the growing popularity of mobile augmented reality (AR) applications such as Layar and Wikitude, as well as countless advertising campaigns from corporate giants, AR is beginning to make its way out of the shadows of obscurity and into popular culture. Once an experimental technology left for expert engineers, AR is becoming more and more accessible to both developers and consumers of the experiences. Now, the greater AR community has another feather for its cap as Time Magazine has recognized it as one of its 10 Tech Trends for 2010.

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“One challenge for 2010 will be harnessing the growing ubiquity of webcams and smart-phones to make augmented reality useful as a tool in day-to-day life,” writes Time’s Dan Fletcher, pointing out the U.S. Postal Service’s virtual box simulator that helps customers determine what size box to use by holding the item they are shipping up their webcam.

Unfortunately, Fletcher merely skims the surface of AR in his 10 part article published Monday, and in doing so he unintentionally labels players in the mobile AR space as “gimmicky.” I can see how it would be easy for someone investigating AR iPhone apps to be overwhelmed at the plethora of apps that let you shoot things in an augmented first-person perspective, but it is still disappointing that he failed to notice the quality apps in the space.

But hey, it’s still great for us augmented reality fans to see our beloved emerging technology receive national notoriety in a publication such as Time, so we’ll take what we can get. AR snagged the #4 position on Time’s list, but when you look at some of the other trends listed, you notice that AR is already taking advantage of most, if not all of them.

Time’s #1 tech trend for 2010 is location, and it points out the growing popularity of services like Foursquare and Gowalla. Mobile AR applications have been taking advantage of location data since day one and it continues to play a crucial role. After location comes “building platforms, not websites,” which Layar has been developing with their third-party POI data-sets and their upcoming layer marketplace. Good thing “frictionless payments” is another trend to watch for in 2010, otherwise Layar’s marketplace would be ahead of its time.

Also on Time’s list is social gaming, and social objects, immediately reminding me of Tonchidot’s Sekai Camera app which lets users leave AR objects in physical space for people to interact with through the application. One could argue that AR uses all of the other nine technologies featured on Time’s list with the exception of the iPad, which unfortunately has no camera with which to augment our realities.

On a related note, Layar co-founder Claire Boonstra was named to Laptop Magazine’s list of the most influential women in technology. Alongside Boonstra was Google‘s Marissa Mayer, Caterina Fake of Flickr and Hunch fame, and Melinda Gates. This, as well as Time’s inclusion of AR on their tech trends list, is great exposure for augmented reality.

If you’d like to learn more about how companies are using augmented reality for marketing in both desktop and mobile-based experiences, be sure to check out our latest premium report on the subject which was released earlier this week.

Don’t miss the ReadWriteWeb Mobile Summit on May 7th in Mountain View, California! We’re at a key point in the history of mobile computing right now – we hope you’ll join us, and a group of the most innovative leaders in the mobile industry, to discuss it.

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Silicon Valley angel investor Mike Maples Jr., known for his early investments in Digg and Twitter, announced recently that his firm Maples Investments has rebranded as FLOODGATE in an effort to fulfill his experiment of becoming a “super angel” firm. The term “super angel” mostly speaks for itself: instead of carefully picking a few select companies to invest in each year, super angels broadly place more money in a larger number of early-stage startups.

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By making the shift from Maples Investments to FLOODGATE, Maples is jumping into the super angel game with both feet in attempts to take the firm to “the next level.” He hopes that the creation of FLOODGATE will “address a big gap in venture capital” between seed level angel investments and larger rounds from traditional VC firms.

According to the newly rebranded homepage, the super angel strategy is a response the growing number of startups, the falling number of IPOs, and the rising level of VC investments – all of which make finding early-stage funding more difficult. Additionally, the site offers that super angel investments can provide more exit options.

“If a business raises a small amount of initial capital, then exceeds its early milestones and decides to swing for the fences, it can then raise a larger sum at a higher price, while preserving ownership,” the site says. “If the business is not ready for rapid growth, it preserves the option for an exit at around $50 million, while still delivering a high return for investors. This dual-track model is less available to companies that raise large amounts of money early.”

Are we witnessing the birth of a new branch of venture capital? It is interesting to consider the gap that Maples is attempting to fill; smaller individual seed level angel investments at one end, and the hundreds of millions of dollars that VC firms have been known to invest at times. It certainly seems that there is an opportunity for endowed individuals to invest at a higher level than a typical angel would, but at the same time there are smaller VC firms that focus smaller investments on young companies.

Can super angels sit in the space between angels and firms that target smaller amounts at early-stage startups? Will more of the larger firms begin to invest smaller amounts instead of waiting for the companies worthy of a nine-figure investment? Will angels start investing more of their own money closer to super angel levels? Is FLOODGATE’s method of casting a wide net in hopes of catching one or big fish a wise choice? Will their approach put pressure on other angels to invest more or at a higher level?

It is unclear what, if anything, will happen, but what is clear is that FLOODGATE plans to push more money into the early-stage startup market, which is great news for the entrepreneurs out there looking for funding. Let us know how you feel about the idea of super angels and their effects on the VC industry in the comments below.

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There is a significant risk and reward that comes with developing products that leverage third-party application programming interfaces, or APIs. Twitter has used its API to let others spread the word for them; applications like Tweetie and TweetDeck help Twitter reach a broader audience on a variety of devices while making money for themselves. However, downtime for a service offering their API to developers means downtime for every service that relies on it for its API data. In the case of Facebook application developers, continuing reliability issues with the platform have become a cause for concern.

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Nick O’Neill of All Facebook reported Tuesday that the API for the 400 million plus member social network had been suffering from some performance issues that day and that the issues were part of a larger trend of poor reliability. “If you are going to build an application on Facebook, you’d expect that users will be able to access your application as long as it’s developed properly, but unfortunately Facebook’s reliability has not been at its peak recently,” writes O’Neill.

On Monday afternoon, Facebook reported that they were “investigating issues that may be causing some Platform apps to fail to load,” and Tuesday said they were “seeing some site performance issues which are affecting [their] API.” According to O’Neill, the reliability of the platform has “been at an all-time low for over a month,” which is not a comforting fact for app developers.

“Clients pay us for their applications and are well within their rights to complain when things suddenly disappear,” writes Facebook application developer Tony Faria in a comment on O’Neill’s post. “Having to tell them ‘Facebook devs are working on a fix’ loses the confidence clients have in us, yet we work so hard to build.”

It is interesting that the latest issues with Facebook were identified at 2:50 pm on Monday, and 2:40 pm on Tuesday. If we assume that these times are Pacific Standard Time, that would mean that the last two dealys to Facebook’s API came just before 6pm on the east coast. Could it be that the site suffers a significant uptake in usage around this time as people get home from their 9-to-5 jobs? This could be a strange coincidence, or it could be evidence of the platform’s issues with scalability, either way, developers seem worried.

The danger included with using third-party APIs is not a new topic of discussion here at ReadWriteWeb; in December we brought you the story of Totlol which was forced to scrap its business plan when Google suddenly changed the terms of service for YouTube. While the API providers are ultimately responsible for uptime and content, the developers are tasked with dealing with customers when their service doesn’t work, so be cautious when building your company on the foundation of a third-party API.

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Unfortunately, you can’t always explain why a venture capitalist chooses to invest in one startup and not in another. Despite what some will claim, there is no magic formula that entrepreneurs can follow to assure them funding 100% of the time; these are just guidelines to follow to increase your chances, but in the end, a VC’s decision is not always about the quality of the company, idea or founders. It’s like in a relationship when one party breaks it off by saying, “It’s not you, it’s me,” only for VCs they actually mean it most of the time.

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DFJ Gotham Ventures investor Mark Davis, who blogs over at Venture Made Transparent wrote Tuesday about how sometimes, even when looking at a great company with a promising future, VCs (himself included) still say no. The reason? Well, for VCs, investing in a startup is a lot more than just determining whether it will have a prosperous future.

Ultimately, VCs are looking for a financial return on their investment, and while potentially successful startups can mean quick bucks for entrepreneurs, the VC may not stand to benefit as much from investing as they would like. It sounds mean and nasty, but VCs don’t exist to simply shell out cash to worthy companies; they have been tasked with taking a venture fund and investing in companies that will provide high returns.

That being said, there are a lot of different VCs out there with lots of different goals in mind, so those looking for higher returns are less likely to invest in a company with a mildly promising future. If a VC turns you down, it could be simply that they are looking for something different than what you are offering.

“When a VC passes on a company that seems poised to succeed, he may do so because the company is not a fit with the VC’s thesis,” writes Davis. “The company might be based in a geography or sector in which the VC doesn’t invest [or] the company is not likely to scale sufficiently to meet a VC’s investment requirements.”

So before you trash your pitch deck and slam your head against the wall, take time to consider the fact that all VCs have varying motivations and your company might be perfect for a different investor. I would assume any decent VC would tell you why he has declined investing, but if for some reason they don’t, make sure you don’t leave the meeting without getting some feedback and constructive criticism from them.

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Over the last few months, as data has been released by the National Venture Capital Association, we have spoken about how the venture capital industry struggled in 2009. Though things appear to be returning to normal, 2009 was still a tough year for both VC investments and fund raising. Investor Seth Levine offered his opinion Monday on where he thinks the industry is headed and raised some interesting points on how VC firms will be funded in the future – an issue which could impact the way startups get funding.

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Interestingly enough, according to VentureSource, VCs have been investing more than they have been raising themselves – $14 billion more over the last five years, to be exact. The strange thing is that $9 billion of that difference came in 2009 alone when VCs invested $21 billion but only raised $12 billion for themselves. This is a steep decline from the previous four years which saw fundraising and investment hover around $25 billion.

Levine believes that because of the drop in fund raising, VCs will begin settling into a lower level of investment. “Somewhere around $15Bn is the right ‘steady state’ investment pace for the venture industry as an asset class. At this investment level the return profile of the industry maps to a reasonable expectation of inputs and outputs (the money invested in start-ups as compared to the exit activity),” writes Levine.

Additionally, he believes that VC fundraising is headed towards an inverted bell-curve distribution where the majority of the money goes to the “outliers” of the industry. Larger funds with diverse portfolios will continue to attain large funds (like the $750 million we saw go to Battery Ventures earlier this month), while smaller funds which place higher investments in fewer companies will also grab a majority of the VC funds. It’s that middle group of funds that will likely suffer, he says.

So what does this mean for startups looking for funding? Unfortunately, if this trend continues, lower VC funds means fewer investments, so the pool of money available to startups is shrinking. However, if Levine’s idea of the inverted bell-curve holds true, then that means more money will be pumped into the smaller venture funds that provide many early-stage investments. In other words, it could become significantly easier to snag seed funding, but much more difficult to raise those subsequent rounds of funding later on down the road.

This, of course, all hinges on Levine’s subscription to the idea of the $15 billion “steady state” (an idea he attributes to investor Fred Wilson) that he thinks the industry is headed to. But if early indicators of 2010 activity show anything, VC investments could be making a rebound from 2009 instead of heading for the “safe zone”. It will be interesting to watch the numbers to see which way this scenario plays out, but it seems that either way, seed investments should stay steady or go up in 2010.

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Investors get lots of emails. Jason Mendelson of Foundry Group wrote just this morning on how he wishes email were slower so he wouldn’t suffer from what he calls “Email Compulsive Disorder.” That being said, there are ways to write better messages when communicating with investors (or anyone who receives a lot of email daily) that will make the process simpler, quicker and will better your chances of hearing back from them.

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Babak Nivi over at Venture Hacks wrote today on scheduling meetings with investors via email, and how he hopes the the back-and-forth can be simplified. Using dummy emails, Nivi shows that scheduling a meeting with busy, email-laden investors requires more to-the-point conversations; instead of vaguely proposing to meet “sometime next week,” be specific and outline your availability right now and in the near future.

Nivi also suggests using services like Plancast to see if a potential investor will be in your area soon and use that to schedule a meetup. If not, get on the horn. Other ways to streamline this process include keeping your email short, but not colloquial (stay away from Internet abbreviations), and including some good news about your company that provides some context.

These guidelines are great for entrepreneurs looking to communicate with investors, but the same rules can be used in other situations. To be honest, I am probably guilty of not being terribly specific when people want to chat with me on the phone; I let the email chatter go back and forth until a time is agreed on instead of asserting my availability. At the same time, startups and PR agencies could potentially learn some lessons from Nivi’s article when reaching out to media to share their story.

Personally, I only like press releases when they accompany a short personal message. I get a lot of press releases sent to my inbox, but as 37signals‘ Jason Fried and David Heinemeier Hansson said in their new book Rework, press releases are like spam to journalists. We get tons of them every day, so chances are simply sending a press release won’t get you as far as taking a different approach.

The emails I respond to most frequently have a short personal message. I get a few emails each week that not only talk directly to me, but will also mention something else I have written about in the past. It may seem gimmicky, but I’m more likely to read an email from someone who understands the topics I cover.

Sometimes when emails pile up, I may not respond to some messages I may have genuinely been interested in because they got lost in the deluge. Now and then I rediscover and older email when the sender pings me by sending another message under the same conversation. This lets me review their first message and reassess, plus it tells me they actually care enough to send a friendly reminder, and that I’m not just another writer on their email list.

If you know you’re emailing someone whose inbox bulges each day, do them a favor and keep your emails short and to-the-point. When scheduling meetings, be specific, not vague; it helps to keep the volume of emails down, and is less stressful in the long run.

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In the waning moments of Sunday evening (quite literally the eleventh hour), the U.S. House of Representatives passed was some are calling the most comprehensive changes to the American health care system in over 100 years. The bill passed by a narrow margin of just seven votes, and could be signed into law as early as Tuesday after the Senate passes a small amendment known as the “fix-it bill,” though many changes won’t be seen for several years. For entrepreneurs, startups and venture capitalists, the legislation ushers in an entirely new set of circumstances and opportunities.

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By 2014, the bill requires states to set up what are known as “SHOP Exchanges,” or Small Business Health Options Programs, which allows SMBs to group together when buying health insurance. “Small businesses” are defined as having fewer than 100 employees, but individual states can choose to only allow businesses with no more than 50 employees to participate for the first two years.

Companies with 25 or fewer employees could potentially be eligible to receive a 35% tax credit for buying health insurance as early as this year. By 2014, those companies could see that credit rise to 50%, while even smaller companies could receive a full tax credit to provide insurance for their employees granted their average salaries are below $25,000 annually.

My guess is that a majority of startups (especially smaller, younger startups strapped for cash) would fall somewhere under these tax break brackets, which could entice them to provide coverage. Having the ability to affordably provide health insurance to employees is a tool that could prove useful in attracting and maintaining a talented team at a smaller level.

For companies with fewer than 50 employees, there will be no penalties for not providing insurance, but for larger companies, steep fines could be levied should they fail to purchase insurance. Some fear that this could halt companies from growing past 50 employees should they choose to not want to provide insurance, but others argue that only a small amount of the nation’s small businesses would be affected.

Another fear is that in the time between now and 2014, health insurance companies will drastically raise rates in an effort to shore-up as much cash as they can before the new rules kick in. Five months ago, San Francisco-based company TriNet surveyed small business executives and found that for over 75% of respondents, as much as 10% of their companies’ revenues were being spent on health care.

Furthermore, 63% said their rates went up by as much as 20% over the last year, so the possibility of further insurance rate hikes is unfortunately a continuing trend. So will smaller companies jump on board with health insurance or will those already participating be forced to jump off with increased rates? For their sake, I hope they have fewer than 50 employees or they could be fined as much as $2,000 per employee for not providing insurance.

Representative Joe Donnelly of Indiana tried to reassure small business owners Monday morning: “I would not have supported this bill if I didn’t think that it was a benefit to small business and to mid-sized business, [and] made our companies more competitive in international markets,” he said.

While business owners argue the possible benefits and detriments of the new bill, venture capitalists are already looking for ways to take advantage of the changes. Dr. Bijan Salehizadeh, an investor with Highland Capital Partners, wrote recently about how he is keeping his eye out for startups that can streamline and improve on the health care industry, especially those focused on chronic disease management, practice profitability tools, and CRM for practices.

“Why is it that every other category of small business in the country has figured out CRM other than physician practices? I’m talking about electronic scheduling, reminders for visits, etc. Really basic convenience oriented items that make a huge difference to patients/consumers,” writes Salehizadeh. “If restaurants can do it, then doctors offices must be able to do it in 2010.”

One such startup looking to help small businesses deal with the shifting seas of health insurance premiums is Bloom Health. In a nutshell, Bloom allows companies to pay them a fixed rate and then Bloom offers the employees the choice of any insurance plan on the market. In other words, it lets small businesses outsource their health insurance for the security of fixed premiums. More VC firms will likely be putting money behind companies like Bloom, such as Chrysalis Ventures, whose managing director David Jones predicted this practice last July.

“Whatever form health care reform takes, we believe companies that can improve the productivity and efficiency of improvement of health care services and avoidance of medical problems are going to prosper, and we’re putting our money behind that belief,” said Jones in an interview with the New York Times last summer.

So now that the health care reform bill has passed, and sweeping changes are coming to America’s businesses, what do you think? Will the benefits outweigh the costs and help smaller businesses provide for their employees? Or will larger companies pay the price for not providing insurance lest they be forced into paying for coverage? This is a truly complicated issue, and it is unclear which way things will go, so let us know what you think of it all in the comments below.

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This week we’ve got a book hot off the presses for your weekly dose of entrepreneurial reading as 37signals founders Jason Fried and David Heinemeier Hansson are back with their second book. Released earlier this month, Rework, a no-nonsense rethinking of how to successfully start and run a business, is the second book from Fried and Heinemeier who earlier authored Getting Real: The smarter, faster, easier way to build a successful web application.

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This time Fried and Hansson take a more general approach to business by examining the ways that new companies are disrupting traditional business practices and making a big splash. They cover their entrepreneurial bases by reminding us that “no time is no excuse” and that “a business without a path to profit isn’t a business, it’s a hobby,” but then also elaborate on less traditional practices that have helped them succeed.

The main theme of the book is to trim the fat and do fewer things better; simplifying every aspect of your business and doing a smaller number of things at a higher quality is far better than trying to do too much and a mediocre level. There were times when customers of their products wanted more features and they refused to comply because it would slow them down and decrease efficiency. They decry time-stealing meetings, lengthy contracts, childish office politics and bloated inventories because they weigh down companies from reaching their full potential.

Rework is a great read for entrepreneurs because it is very focused and doesn’t waste any time with lengthy use cases. The book itself is an example of the principals it teaches; the quality of a written work is not based on its length, so why should company be judged by how many features it offers? Fried and Hansson admit that the book, which comes in at a dense but brief 288 pages, was originally drafted to be nearly twice as long, but why say in 600 pages what you can say under 300? Another reason the book is a great read is because of the authors’ open and honest tone.

“Ever seen those weapons prisoners make out of soap, or a spoon? They make do with what they’ve got,” one passage humorously points out. “Now we’re not saying you should go out and shank somebody, but get creative, and you’ll amazed with what you can make with just a little.”

Other useful and easily digestible analogies for their unique business ideas include comparing your company to a hot dog stand. They advise that the best way to trim down an inflated company is to find the “epicenter” by asking yourself, “If I took this away, would what I’m selling still exist?” The best hot dog stand doesn’t worry about the decorations on the stand, or the condiments – it worries about the hot dogs.

There are dozens of other valuable pieces of advice in Rework that are sure to inspire any entrepreneur or small business owner. But as LeVar Burton famously said at the end of each episode of Reading Rainbow, you don’t have to take my word for it. Seth Godin, who has authored several books on business and entrepreneurship including The Dip which we profiled earlier this year, had nothing but high praise for Rework.

“Jason and David have broken all the rules and won. Again and again they’ve demonstrated that the regular way isn’t necessarily the right way,” says Godin. “They just don’t say it, they do it. And they do it better than just about anyone has any right to expect.”

This book is an obvious buy not only because the of the expert advice dispensed by the successful founders of 37signals, but also because the book is an easy, quick and inexpensive read. Personally, in a few short hours I was able to breeze through the audio version, which can be found online for less than $10. But if you prefer reading words on a page, the Kindle version is also $10, or a hardback copy is just $3 more at some online retailers.

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