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The NetSuds (TM) Report
The October 1, 2001 Issue:
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Definition: "com and .com" = Telecom, Datacom, IT or Internet
In this Issue:
1.0
Heard on the Net
2.0 Jobs in the "com and .com" Market
3.0 NetSuds
on Tour - VisualGold
4.0 Broadband Experiences - Part III
5.0 Calendar of Events
6.0 Moore News -- Obscure provisions, covenants, and clauses
7.0 Come to Fall 2001 VON: Where the IP Communications Industry Lives
8.0 Apply to Present at a NetSuds
or MedicalSuds
Entrepreneurs Breakfast
9.0 Tidbits
10.0 Tips for Entrepreneurs
11.0 Guest Writers for this Report
1.0 Heard on the Net
1.1 People on the Move:
Please email:
people@netsuds.com to report a change in
your
job status if you are moving from or to a company in the
"com or .com" space.
Grant Wakelin, former ADC Group President, is the new CEO of
SS8 Networks, a provider of IP-based signaling technology and
services, based in San Jose, CA.
http://www.ss8.com
NetSudser
Chad Vogt is the new VP at US Bank in charge of Global
Trade Services/IT and started on September 17. Contact Chad at
612.973.0775 or
chad.vogt@usbank.com.
NetSudser
Tom Skramstad is the new VP and CIO for Zomax in Plymouth.
Tom may be reached at
toms@mr.net.
NetSudser
George Petrov, former COO of Division21 in St. Paul has
weathered six months at VICOR -
www.vicor.com in Richmond, CA as VP
of Client and Product Support Services. Contact George at
george@vicor-nb.co m.
NetSudser
Rich Snow, former Director of Deployed Systems at Lumapath
in Maynard, Mass is seeking a team leadership role as an IT Director
and Infrastructure Manager in the greater Boston area. Also
providing internet access hosting and telecom consulting in the
Boston area.
http://members.tripod.com/rlsnow
1.2 Companies on the Move:
Please email:
start-ups@netsuds.com to report (1) the
formation of a new start-up, (2) momentum change at an
existing start-up, (3) addition of key hires, or (4) a funding
event at a start-up. Please give details on the above
including any information you do not want made public. We
are very discrete.
Midwave -
www.midwave.com recently announced the formation of a security
practice and the hiring of 7 professionals to provide security audit,
planning and deployment services. These guys used to be part of the
Internet Security practice at Midwest Systems. Midwave is a systems
integration and application integration development firm based in
Chanhassen. For more information, contact Midwave CEO Jim Leslie
at
either 952.279.5600 or
jleslie@midwave.com.
ThoughtForms -
www.thoughtforms.com is seeking an experienced
e-newsletter editor/designer; preferrably someone with a background in
alternative medicine. The position is available immediately. Send
resumes to
mkelly@thoughtforms.com
Broadband Channel Manager opening at a K-12 E-learning company -
Immediate need for professional with 2+ years experience in
Telecommunication Sales/Business Development. Experience with RFP's &
E-Rate programs to the educational/government sector preferred.
Send resume to:
trichard4@uswest.net.
Optical Solutions had a 40-person cutback according to
NetSudsers
familiar with the company. This brings the total employee count
down to about 200.
2.0 Jobs in the "com and .com"
Market
Please email:
jobs@netsuds.com to report job openings in the
"com and .com" Market. In the body of the message, give the
name of the company and a URL link to the job postings.
* Dakota Wesleyan University
http://www.dwu.edu/humanresources/jobopenings/JobOpenings.htm#kelley_center
** Onvoy
http://www.onvoy.com/frames/frameonvoy.html
** Computer Associates
http://www3.ca.com/career/default.asp
** Shumaker & Sieffert, P.A.
http://www.ssiplaw.com/jobs.html.
*** Octiv
http://www.octiv.com/jobs_body.html
3.0 NetSuds on Tour -
VisualGold
NetSuds
loves on-site tours! Email me if you want to show off your
company. I can be reached at
matt@netsuds.com.
3.1 VisualGold
Tom Ramsay and Alan Zenk from VisualGold gave me the tour
in early September
where I met their new CEO. VisualGold is a company built around
technology and is now truly getting the applications and markets figured
out.
In short, the company visionary, Tom Ramsay, is a signal processing
expert
whose epertise has led to enhanced image and video compression
capabilities
using standard algorithms such JPEG and GIF.
At first, my impression of the company was that of proprietary software
compression algorithms. Historically, the user community demands
standardized
algorithms over time. VisualGold figured out that complying to
standards and
building "boxes" was a better strategy than proprietary
software-only solutions.
True, they still have customers who like custom software signal
processing but
that is not the BIG market opportunity.
Boxes refer to the distallation of a core idea in to a hardware/software
solution which can be sold at a healthy margin. The VisualGold box is
UN*X-based
and includes real-time processing of images follwed by a (usually)
compression
using a standardized algorithm. This speeds the transmission of web
pages
because, according to VisualGold, overall image/video compression is at
least
3x better than standard JPEG or GIF. This is a remarkable savings of
bandwidth.
I saw the clarity of the compressed images on a workstation/PC and the
results are
very good for the amount of compression andpre-procesing which gets
done.
Patents protect good ideas and I am told the patents at VisualGold are
fairly
recent.
4.0 Broadband Experiences -
Part III
Actually, this report also includes some experiences with an ILEC
and a few CLECs.
I moved mid-September to an office at Midwave -
www.midwave.com.
Midwave has plenty of bandwidth and I installed the CompleteIS -
www.completeis.com IP Phone (actually a Cisco phone) on my
LAN/WAN.
I have nothing but great things to say about this solution. Give
credit to both Cisco and CompleteIS. That answers the question
why
I have a phone number in the 612 area code but work in the 952 area
code (Chanhassen).
I decided to maintain my copper-based land-line telephone number of
952.934.5424 but found that Qwest does not service Chanhassen
west of
Powers Boulevard. It took Qwest a good 30 minutes on the phone to
figure this out. Of course, they couldn't tell me who could provide
me local phone service so I had to hunt turn to "alternatives". The
first alternative was Sprint. I tried to convince myself that Sprint
would provide a combined cell/copper phone package but they didn't.
Opportunity lost. The sales person could not explain the various
service offerings, prices, etc. so I calmly told them I wasn't going
to connect with Sprint. At first they had told me I could port my
phone number but then told me no such luck. I tried several CLECs
including McLeod. They told me I couldn't port my old phone
number.
They had no clue when I could start service but said it would certainly
be in the next 4-6 weeks ... Eschelon never returned a web
request.
Why do companies have web pages if they can't post a useable user
interface and then respond to it in time.
I was ready to all back Sprint and subject myself to whatever
nonsense I had to in order to get a phone line until I found KMC
Telecom -
www.kmctelecom.com. I luckily got in touch with a
NetSudser
who worked at KMC and he was invaluable in getting me hooked up with an
analog POTS (plain old telephone service) line, with my old number
ported efficiently as requested on the date requested. The price of
service was reasonable and better than that quoted elsewhere. They did
have a last-minute glitch and my installation was delayed 10 days
because they had to call the local ILEC to get a POTS line installed.
KMC originally thought they could break out a DS0 from a T1 but failed
to double-check that before making a commitment to me.
Competition is good. KMC has taken a very customer-centric approach
in their business and I had a pretty good experience. It shouldn't be
that difficult for the ILECs, IXCs and other CLECs to do the same.
In all fairness to my friends at the other CLECs, they may also have
the same great service but just don't service my little piece of
Chanhassen. I'm glad I had some choices, though.
5.0 Schedule of Events
5.1 - Minnesota
10/26 Marriott SW Minnetonka - MedicalSuds
Entrepreneurs Breakfast
http://www.medicalsuds.com/eb/2001/October/
11/2 Marriott SW Minnetonka -
NetSuds
Entrepreneurs Breakfast
http://www.netsuds.com/eb/2001/November/
11/15 Hotel
Sofitel - MedicalSuds Evening Gathering
http://www.medicalsuds.com/eg/
12/5
Minneapolis Convention Center - NetSuds Evening Gathering
TBA
5.2 - Outside
Minnesota (iSuds)
10/15 Atlanta -
Entrepreneurs Training Camp
http://www.isuds.com/etc/2k1/ga/october
10/17 Atlanta -
Entrepreneurs Lunch
http://www.isuds.com/von/el/
10/18 Raleigh/Durham
- iSuds Evening Gathering
http://www.isuds.com/rdu/isuds/
5.3 - pulver.com Events - http://www.pulver.com/conference/index.html
10/1-
Washington, DC - Telecom Policy Summit
10/2 http://www.pulver.com/policysummit/
10/1- San Jose,
CA - Broadband Home Fall Conference
10/3 http://www.thebroadbandhome.com/bbhfall/
10/15- Atlanta, GA -
Fall 2001 Voice On the 'Net (VON) Conference
10/18 http://www.pulver.com/von/
10/29- Santa Clara, CA
- Location Based Services Summit
10/30 http://www.pulver.com/lbs/
10/29- Santa Clara, CA
- Presence and Instant Messaging Conference
11/1 http://www.pulver.com/pim/
11/12- Hong Kong,
China - VON Asia 2001
11/14 http://www.pulver.com/asia2001/
12/4- San Diego,
CA - Softswitch Expo 2001
12/6 http://www.pulver.com/softswitch/
5.4 - Non-NetSuds Events
11/8 The Depot Minneapolis - MinnesotaBusiness AfterHours
http://www.minnesotabusiness.com/afterhours.htm
11/2,9,16 - Minneapolis - Advanced Speaking
Skills Workshop by Joan Moser
http://www.spokenimpact.com/workshop%20Nov%202001%20-%20Speak%20Like%20Pro.htm
John M. Morrison Center for Entrepreneurship, house on the
Minneapolis
campus of the University of St. Thomas, offers a number of
special
outreach/lifelong learning programs with Just-In-Time
information.
Visit
http://www.stthomas.edu/entrep/programs
for a calendar of events.
------------------------------------------------------------------------
6.0 Moore News -- Obscure provisions, covenants, and clauses
"People aren't afraid of failure, they just don't know how to succeed.
We are each responsible for our own success (or failure). Winning at
what you do is no exception. To ensure a win, you must take a proactive
approach. Prevention of failure is an important part of that process."
-- Jeffrey Gitomer
"Your paycheck is not your employer's responsibility, it's your
responsibility. Your employer has no control over your value, but you
do." -- Jim Rohn
"No one can cheat you out of ultimate success but yourselves." -- Ralph
Waldo Emerson
"There is only one basic human right, the right to do as you damn well
please. And with it comes the only basic human duty, the duty to take
the consequences." -- P.J. O'Rourke
Two years ago, while entrepreneurs and investors were still
running
spreadsheets to calculate how great their options-fueled fortunes would
be
in 2009, VCs were quietly protecting themselves against a downturn by
inserting a host of obscure provisions, covenants, and clauses into
startups' contracts. Said provisions, and the means of exercising them,
go by names more evocative of a WWF match than of the honorable and holy
task of creating wealth through technological innovation. Some
examples:
"the full ratchet," "the cram-down," and "the washout."
Here's a guide to some of the more dastardly moves being used by VCs
these
days.
Pretend that you are the founder and chief executive of a private
company
that makes data storage equipment. Let's call it Network Icebox. Now
that
your hopes of going public are history, you are left to squabble over
the
fate of your hapless company with Kane Ventures, the VC firm that funded
it
and owns 20%.
Your goal: Raise more money so that Network Icebox can last long enough
to
achieve your dream of world domination. Your opponent? Kane's VCs, who
want a return on their money, or at least their original investment back
so
they can put the money elsewhere and continue collecting fees for
managing
it. You own 40% of the company (the rest is owned by other VCs and
angel
investors with minor stakes), but that doesn't mean you've got the upper
hand. Here are some of the moves you need to watch out for:
The Cram-Down
Say you've run out of operating money and need $5 million to keep the
company going for six months. Last year, believing your company to be
worth $50 million, Kane Ventures bought 20% of your company's private
stock
for $10 million. This year, Kane thinks your company is worth only a
total
of $20 million. They'll consider investing again, but only at the new,
lower valuation, in what is known as a "cram-down" or "down round." In
return for their infusion of $5 million, they get an additional 25
percent
of the company. So suddenly your 40% stake, which was worth $20 million
a
year ago, would henceforth be worth $8 million. And after you sell Kane
the new $5 million worth, your stake is down to 15 percent, valued at $3
million. You need the money. You take the cram-down.
The Full Ratchet
As Kane descends upon you in mid-cram-down, you discover they inserted
a "full ratchet" clause into the term sheet you signed last year. The
full ratchet basically gives Kane the right, in the new round of
financing, to retain their stake's former valuation while everyone
else's stakes evaporate. So while your startup's total valuation drops
from $50 million to $20 million this round, Kane Ventures still owns
$15 million worth (the original $10 million investment, plus the latest
$5 million round). You thought you still owned 40%, worth $8 million?
After Kane drops the full ratchet on you, it has the controlling
interest --75%-- in Network Icebox. The remaining equity -- all $5
million worth at this point -- gets divided among the company's other
investors.
The Washout
A VC with a controlling stake will force a severe cram-down, sometimes
combined with a ratchet, in order to "wash out" unwanted investors or
management teams. In other words, you are no longer in control of the
company you founded. You have been washed out. You tender your
resignation.
Hiding the Baloney
Okay, this term isn't really making the rounds of the VC community --
yet. But it's an apt heading under which to file the many variations
on the following maneuver: merging two troubled companies that have
nothing in common in order to avoid shutting both down.
How does this technique work? Imagine now you're a partner at Kane
Ventures. Six months ago you expertly washed out the management of
Network Icebox with a cram-down/full-ratchet combo. You still think
Network Icebox has great technology and could be huge someday, but,
alas, it has burned through all its cash and will cease operations
next week. You're also invested in RicoShot Inc., a wireless-access
company with no future whatsoever but $15 million in the bank left
over from its second round of funding last fall, when the company
had a valuation of $50 million. Do you shut both companies down and
distribute RicoShot's remaining $15 million to your limited
partners? Heck no. You use a merger to hide the baloney! Now you've
got a single company with a valuation (on paper, at least) of $70
million and $15 million in cash. The real value of the new company
may be closer to zero than $70 million, but this maneuver, also
known as a dowry deal, at least lets everyone keep the dream alive --
not to mention your management fees on that $20 million.
By: Josh McHugh
Public Relations "PR Leads"
by NetSudser
Dan Janal -
dan.janal@netsuds.net
Are you a small-business or expert who needs publicity to sell more
products
or services?
I'd like to tell you about a new service called "PR Leads". PR Leads
puts
experts in touch with reporters who are writing articles for newspapers
magazines and trade publications. This service could be invaluable for
helping you get the publicity you need to sell more products and
consulting
services.
Here's how the process works. Every day, hundreds of reporters
send story
ideas to PR Leads. They want to interview experts on everything from
business
strategies, sales and marketing case studies and technology trends. PR
Leads
sorts through these opportunities and e-mails them to their clients.
Many PR firms use this type of service for their clients. But if you
can't
afford a PR firm, PR Leads is your best source.
It is also extremely cost-effective. A year subscription to PR Leads
and
listing in their database of experts normally costs $695. However,
NetSuds
readers can save $100. For less than $10 a week/year you can get
access to
reporters at high-level publications that might otherwise cost you
thousands
of dollars a month!
For more formation about the PR Leads service, contact Dan Janal
at either
dan.janal@netsuds.net
or 952.380.1554. You may also visit their web site at
http://www.prleads.com.
Email dan.janal@netsuds.net
to get your discount!
7.0 Come to Fall 2001 VON:
Where the IP Communications Industry Lives
by Jeff Pulver -
http://www.pulver.com/von/
While some people may feel that Chicken Little was right and in fact
that the Telecom sky is falling, the sky is not falling inside the IP
Communications Industry.
The IP Communications industry was not really affected by the dot com
bubble or its bursting and really hasn't felt all the effects the
traditional telecommunications industry recently has. In fact, the IP
Communications Industry will be greatly accelerated with the coming
launch of Microsoft's SIP enabled Windows XP in late October.
Sandwiched safely in a space somewhere far, far away, the IP
Communications Industry continues to grow.
As an industry we are finally at a protocol detente, and VoP
technologies will be used end-to-end across: Broadband, Wireless and
Wireline networks of the future, by Carriers, Enterprises and Consumers.
The IP Communications Industry represents telecommunication
technologies for the future, and we are not going away.
While it is true that some of our friends have recently lost their jobs,
for this reason, pulver.com is hosting our first Job Fair
(
http://pulver.com/jobfair
) in Atlanta on October 16th. For our
friends who find themselves without gainful employment when Fall 2001
VON commences, as long as they have attended VON since 1999, they are
welcome to come as our guest by taking advantage of pulverAID.
(
http://pulver.com/pulveraid
)
Many of the problems affecting our friends was that they worked for
companies which were disrupted by the effects of IP Communications,
while at the same time trying to embrace them. Some business models
just break down and don't accept change. There is always a natural
evolutionary process going on and in cases of too many vendors
focusing in one area of a solution, it always has been a game of
survival. This is nothing new.
The VON conferences are known for their forward thinking thoughts as
a leading indicator of the future directions for the industry. While
some companies might treat VON as a tactical event, the smarter
companies have made VON strategic and have seen their success as a
result of it. Companies traditionally have made VON their focal point
for related announcements in the IP Communications space and this
tradition will be followed at Fall 2001 VON (
http://pulver.com/von ).
Since the inception of the VON events there have been a handful of
companies who have come into existence because of something that
happened at VON. Companies like: Sonus Networks, dynamicsoft and
Cbeyond.
During our five year history, VON has become known as 'deal central'
and
quite a number of deals have happened at VON. Whether you are seeking
venture funding or working on a M&A deal, the action takes place at VON.
While it is true that some people may not be back due to changes in job
position or a change in their company's strategic direction, there will
be many new faces at Fall 2001 VON as our industry shows off how dynamic
it really is and as the new players continue to enter our space.
If you are involved in the IP Communications Industry and have an
interest
in seeing where we are and helping to move things forward, I'd strongly
suggest that you consider doing whatever it takes to come to Atlanta
this
October and see for yourself that the sky isn't falling inside the IP
Communications Industry.
It is a mistake not to come to Fall 2001 VON just because budgets are
tight and costs are being watched. As far as I'm concerned, budgets
should ways be properly managed. It is in times like these that the
true leaders shine and the winners of tomorrow start to become clearly
evident.
8.0 Apply to Present at a MedicalSuds or NetSuds Entrepreneurs Breakfast
Every month since Autumn 1999 NetSuds has had an Entrepreneurs
Breakfast (see http://www.netsuds.com/eb/ for past and current
events). If you
are a pre-IPO "com or .com" start-up, you can apply
to present your
company to the investment community at a future
breakfast event.
Apply online at http://www.netsuds.com/eb
Apply to present at a MedicalSuds Entrepreneurs Breakfast (coming soon)
at http://formmail.to/medsuds
9.0 Tidbits
9.1 NetSuds
Change of Address
Effective October 1, NetSuds
is moving to new offices in Chanhassen.
The new address is 1460 Lake Drive West, Chanhassen, MN 55317. We
are officed witih Midwave -
www.midwave.com. The new phone number
is 612.279.2154 - an IP Phone!
9.2 Copper Free ... Sort of
With the recent move of NetSuds,
our office is now 100% IP-centric.
Instead of an ISDN line for Internet access, we are now being served
with an Ethernet drop via a DS3 line (router and switch inbetween).
The same ethernet drop provides telephone access to an IP Phone from
CompleteIS -
www.completeIS.com - and is the reason I have a "land-line"
phone with a 612 area code even though Chanhassen is in the 952 area
code. I can even bring my IP Phone with me on road trips (home, cabin,
business trip) and appear to be working from the 612 area code.
I say "sort of" because I decided to keep my 952.934.5424 POTS line
for 2 reasons. One, fax. Two, so people with my old phone number could
find me in the short term.
The IP phones are expensive but when you consider the cost of
administering moves, adds and changes, the long-term cost of ownership
should be considerably less expensive than analog or PBX (analog or
digital) solutions.
9.3 Suds Update
The Washington, DC (includes DC, Maryland and Virginia) NetSuds/iSuds
group has had 6 evening gatherings and has grown steadily in
participation.
The August gathering drew 225 people. September's gathering suffered
because of the terrorist attack and the fact the President Bush decided
to address the nation on the night of the iSuds gathering.
The initial iSuds gathering in Raleigh/Durham is scheduled for
October 18
and the RSVPs are over 50.
Our second iSuds gathering in the San Francisco Bay area is now
scheduled.
The first iSuds gathering in Atlanta is on the drawing board as
Minnesota
NetSudser Kimberly West moves to Atlanta to start iSuds Atlanta.
MedicalSuds
had 500+ people at the August 16 evening gathering. Not bad
for our second event.
In the wake of the war effort and reduced travel plans, local events
such
as NetSuds
are more attractive than expensive national events.
10.0 Tips for Entrepreneurs
During the last 3 years, I have seen a few good presentations and
quite a few poor presentations from entrepreneurs trying to raise
venture capital. I offer some tips to help entrepreneurs to get
funded. The outline can also be used by anyone trying to justify
an internal project.
A VC usually knows in about 2-5 minutes if they have an interest
in funding an entrepreneur. Don't blow it in the first 2-5 minutes.
Have prepared the following presentations: a 30-second pitch, a
1-minute pitch, a 5-minute presentation and a 20-minute presentation.
I'll describe the 20-minute presentation. The others are
condensed
versions of the 20-minute presentation.
For the 20-minute presentation, prepare a 15-slide PowerPoint slide
show and cover the following:
1. Company name, URL, CEO contact information,
2. Problem Statement,
3. Solution,
4. Market Size, Addressable market size and justification,
5. Unfair competitive advantage (patents, trade secrets, execution),
6. Management Team,
7. Competitive analysis,
8. Amount of money needed and use of proceeds,
9. Why you are presenting to this VC firm,
10. Exit strategies.
Most items above require a single or at most, 2 slides. Item 4 should
be somewhat specific as to who your customers are and how you sell to
them. Better yet, if you have some customers, talk about them
and how
they are using your product. You are asking people with money, time and
talent to share it with you in order to help you make lots of money.
You
better be convincing, passionate and crystal clear.
Most entrepreneurs don't include their contact information. They tend to
jump straight in to 5-10 slides of their solution without describing the
problem. They may talk about some market research data but couldn't
name
3 potential specific customers if you turned them upside down and shook
them. They typically don't say how much money they want and rarely give
too many specifics about use of proceeds.
Perhaps the most-often overlooked item is item 9. Each
presentation should
be tailored for the specific VC firm you are presenting your plan to.
If
you want partner John at XYZ Ventures on your Board because John is an
expert with oodles of customer and strategic contacts, you should state
it.
If you're just interested in his money and don't care about his
background,
you're probably not going to get funded.
VCs want portfolio companies who aren't going to require lots of hand-
holding. They like experienced management teams and they like being
able
to help you recruit and round out your management team. They want to
know
your (because it will be their) exit strategy. IPOs used to be a very
nice
exit strategy. You might be better off making a compelling case for an
acquisition or merger exit strategy in today's market.
11.0 Guest Writers for This Report
I have opened up the Monthly NetSuds Report to guest writers. If
you have a passion for
a topic, and you can write (at least no worse
than me), send an
email to me at matt@netsuds.com. You can even send
copies of your work.
It needs to be on "com and .com" topics and can
include entrepreneur/investor
activities. Good information from our
service providers and
vendors is also welcome so long as it is not a
"commercial"
for any one company or individual.
We will consider both
sponsored and unsponsored columnists and guest writers.
If you are aware of others who
would like to receive the NetSuds Report, ask them to visit http://mailman.netsuds.com/ to subscribe or unsubscribe.
Please send your comments and feedback regarding this issue of
the NetSuds Report to matt@netsuds.com.
Matt Noah
P.O. Box 277
Chanhassen, MN 55317
612.279.2154
fax: 425.795.2019
matt@netsuds.com
(c) 2000, 2001 NetSuds.com, Inc. All Rights Reserved.
We help people build and enhance their network of contacts in the
"com and .com" world.
