My presentation slides on Cleantech 2.0 from NYC Cleantech

I was invited last night to present to the NYC Cleantech group in NYC. I don’t think I have ever given a presentation where the view behind me was as distracting as the well-lit signage of Times Square.

I was expecting a decent crowd but was quite pleasantly surprised to hear that we needed overflow rooms with video feeds to accommodate the 17o+ people who registered. Whew! And I don’t think it was an unusually large crowd for them either. Great to see such enthusiasm for cleantech.

Anyways – a bunch of people have reached out since then to ask for copies of the slides I used. I don’t know if these slides say much without the voice-over, but I am happy to share them here.

2012Jan10-NYC cleantech (click here to launch/download .pdf)

MITx can be tremendously useful for colleges and universities in developing countries

Its been fascinating to observe the discourse around higher education in the last few years. As US economy melted down in 2008 and university endowments lost significant percentage of their holdings, strategy sessions were held at colleges and universities across the country to figure out how to cut costs and to increase revenues. From College of Wooster to MIT, just to name my own Alma maters, administrations, faculty and students dealt with this issue and considered big changes. Lots of good ideas – some outright disruptive to the current model of higher education – were discussed as front page news. Right around then Clay Christensen, the guru of disruption and innovation, also penned a book focused on how education needs to be transformed.

This Tsunami coincided with the meteoric rise in popularity of the online learning phenomenon of the Khan Academy. Salman Khan’s simple, direct, easy to comprehend online video lectures didn’t just appeal to his initial audience of students in other parts of the world, but also people here – from the usual online college students to casual learners including the likes of Bill Gates. And Salman is not mincing words when he says he wants to turn education on its head, not just with lectures but also with exercises and analytics platform that lies as the back-end to the short videos.

MIT has been an innovator in the field of education and has not been shy to experiment. It is, then, no surprise that MIT has also stepped into the game to neither suffer with shrinking federal budgets and grants nor to be left behind by competitors. Fortunately MIT does not see organizations like Khan Academy as competitors (that would be insane and futile). MIT is embracing innovation and inserting itself into the mix with its own flavor and strength. MIT is doing something creative. Just before 2011 ended, MIT announced its MITx initiative: free online courses with support and guidance from MIT faculty and staff. If executed on right, I believe it can really be a game-changer in MIT’s reach, influence, and ability to shape higher education. And if done right, it can also bring considerable additional revenue into MIT.

MIT has experimented plenty in the past with distance learning. From beloved physics lectures taught by Walter Lewin to MIT’s engagement via videos and otherwise with universities in Singapore, Malaysia, Abu Dhabi, etc and the Open Course Ware project. But MITx incorporates one major difference: those who demonstrate mastery of the subjects will be able to receive certifications from MITx, but not MIT degrees. There would be a charge for this as well, but it is expected that the MITx program will be more interactive with frequent feedback from faculty, lecturers and teaching assistants to assist learning. There would likely also be online learning exercises, analytics, and some form of the famous MIT problem-sets available for students to tackle. I am told Prof Anant Agarwal is already at work on software needed to manage and deliver all this.

This is wonderful. This is not just great content by MIT professors delivered online – this is using technology to promote learning and rewarding those who watch, practice, and master the subjects with something that can actually be helpful in people’s careers. MIT has a tremendous brand and would certainly carry over incredibly well into the MITx certification. Imagine your high school graduate technician at work showing up with an MITx certificate demonstrating he has mastered the equivalent of MIT course 6.002 (circuits and electronics – likely to be the first MITx course). I would certainly expect opportunities emerge for such individuals.

As I think about MITx, I can’t stop but think how awesome this can be for countless colleges and universities around the world that aspire to learn from MIT, whose students dream of being at MIT, and whose administrations have long wondered how to bring a piece of MIT to their communities. MIT faculty and administrations have hosted many of them over decades but not more than a handful of them are able to spend the millions of dollars that programs like MIT-Singapore cost…but now, for a small fee paid to MIT per student, not only can they get access to curated course content, interactive feedback from MIT faculty and staff, but also have their students collect certifications if they perform well on the coursework. From Vietnam, India and Pakistan to Turkey, Peru and Kenya, students could benefit from this platform.

MITx can simultaneously become a tool for student learning as well as teacher training. Students worldwide could learn online as well as get additional help, support, guidance and personalized attention from teachers in class. Over the last decade I have been involved in various ways to promote higher education in Pakistan. As we worked on a plan to establish the first private research university in science and engineering in Pakistan (LUMS SSE), the biggest problem we faced was the availability of high quality undergraduate and graduate teachers that could bring to their teaching the kind of pedagogical training in problem-solving that makes places like MIT and Stanford special. MITx could be a way to narrow that vast gap. Locally trained faculty working as teaching assistants under a few highly trained and experienced faculty could find tremendous leverage in their work with the content and context of MITx. This would be much better for learning, in my opinion, than individuals in those countries using MITx online by themselves. And this might be good for MIT as well. Revenue generation from institutions in countries where collecting individual contributions might be difficult, complimentary teaching support for their MITx content, and possibly MITx diploma/degree programs in the future.

Needless to say, I am incredibly excited about the opportunities that may come about with MITx. I am anxiously awaiting for more details to be released and, in typical MIT style, early experiments on the system to begin. In the meantime, I would encourage educators and college/university administrators around the world to also take notice and keep an eye out for how they could benefit from this and other such innovations online. We may be close to democratizing education for billions of people around the world. Wouldn’t that be something!

Lesson in parenthood.

I had to share this…just so that other dads can read too. Esp all those dad friends of mine who also lead a very busy meeting to meeting to conference calls to tweeting to networking events kinda life.

I randomly decided today to take off for an hour or so this afternoon to pick up my daughter from school for the first time. I was just trying to be nice to my wife who seemed exhausted and thought it might be nice to show school teachers etc as well that I cared. Well…my daughter, who is only 3, went to bed tonight saying “I am happy because Baba came to school”. Wonderful. Simply wonderful. I will sleep with the biggest smile tonight. And a big lesson learned in parenthood.

Quick thought: Why higher education as we know it will be disrupted.

Lots has been written, and will be written over next few months/years, about the bubble in education, esp higher education. Eg. here is an article on it from The Economist a year ago. http://www.economist.com/node/16960438

Here’s just one reason why higher education is going to be majorly disrupted: universities are in truth run by professors and not by administrators, and most university professors are not interested in teaching. They see that as a pain in the ass that has to be dealt with. Public on the other hand sees that as an important part of their job. Certainly students do. That’s a major disconnect. And the day general population realizes that a boat load of their money gets spent on fruitless research in areas that nobody cares about, that public funding in the name of social good might just go the way of the NASA. Universities better realize that and start figuring out what their benefit is to the general society AND to their student population. And how to make supply-demand work for their students. It would be a pity if research universities were to face tremendous shortfalls in budgets. But if they don’t innovate and stay ahead of the curve, they are only waiting for the inevitable to happen to them.

Advice maybe cheap. But take it even if you don’t act on it.

Until only a few years ago, I was a first-time entrepreneur struggling to get attention & advice from experienced entrepreneurs and investors. I did not need funding from them (we were well funded by angels – to the tune of $23m), but I was looking for people who knew the startup world and could give advice on how to build a business.

I had co-founded a company in the not-so-sexy space of automotive technologies and this was before the hype around cleantech had set in (this was a time when a prominent Boston VC firm asked if we were more like IT or biotech, when we pitched them!). Even the MIT Energy Club had not formed as yet. I eagerly sought advice and feedback but it was hard to gain access. I did not know the VC crowd, I was previously a nerdy Ph.D student who had stumbled into management consulting as my first job out of school before starting my company, and there were not many experienced entrepreneurs in the area with similar interests. Whenever somebody more experienced agreed to give me some time for feedback and thoughts, I would soak it in eagerly. In many cases I wished I had gotten the advice earlier, before we had made some important decisions around our products, hiring and financing – but it was still very welcome. I loved to learn by getting feedback from others and, in fact, I started a blog and began conversing with the world on twitter to increase my reach.

Fast forward a few years. I am now a VC and perhaps among the few ways that I believe I can help new entrepreneurs is through my network and via feedback, advice, and sharing of tips based on learnings from multiple enterprises across the sector and at difference stages of growth. I love meeting first-time entrepreneurs and I purposely carve out time in my schedule to spend with student entrepreneurs who may not at all be at a stage where we would invest in them.

With that background, it was a surprise to me that three times last week I heard from students that some their university advisors and teachers were holding them back from meeting outsiders, esp anybody involved in the investing world. What a crock of BS these guys are peddling to the students in the name of advice! These are probably the same guys who are still teaching their students how to write lengthy business plans and urging them to worry more about patents rather than understanding if the product has any real value prop to create a sustainable business. Some students unfortunately take their advice too seriously, and frankly are totally missing out on learning from real world practitioners how business ideas get generated, teams built and successful businesses developed.

After the most awesome student population, perhaps the biggest thing going for Boston is its entrepreneurial ecosystem that is willing to give and nurture teams and ideas when they are still on paper. Yes, we may not be as good at this as Silicon Valley and are dragged through the mud regularly for that, but we are certainly ahead of almost everywhere else. Our entrepreneurs, founders, executives, investors and lawyers/bankers etc all give a lot of their time (and money) to help and support young entrepreneurs. They do this as a way of giving back, to cultivate this community, and because many of us studied in the very same educational institutions. I know of this first-hand because I have been involved with many organizations locally where this generosity & ‘pay it forward’ attitude is commonplace.

Anyways. I will stop my rant now. I guess I only wish to advise students and other first-time entrepreneurs to reach out and take advantage of the tremendous ecosystem here that is eager to help, advise and see you become successful in your ventures. Don’t listen to those who either never built a startup from scratch themselves, or never had to be in a position where advice was hard to find. Don’t wait until you are in trouble to reach out to those who can help you. Build bridges early, develop your network when you don’t really need it, become generally resourceful and don’t make mistakes that others (including myself) made in the past. If nothing, just know from my previous experience that those same friendly ‘lets grab coffee’ meetings are harder to come by when you are no longer a student. Advice may be cheap. But take it even if you don’t act on it.

Do you want to sell sugar water for the rest of your life or come with me and change the world?

This blog post by Chris Dixon is so int’g that I will post it verbatim. Do something that matters. Find the passion within you to solve a big problem. Maybe you can change the world.

“Do you want to sell sugar water for the rest of your life or come with me and change the world?” – Steve Jobs

I sometimes wish that instead of working on internet and software projects, I worked on cleantech or biotech projects. That way, when I came home at night, I’d know that I had literally spent my day trying to cure cancer or prevent global warming.  But information technology is what I know, and it’s probably too late for me to learn a new field from scratch.

That doesn’t mean information technology can’t improve people’s lives. Google’s search engine helps people find information, which, for example, makes cancer and cleantech researchers more productive. Skype allows companies to collaborate remotely, and connects people with friends and family around the world. In the area of information technology, we create infrastructure and hope that people use it for more good than bad.

That said, the best entrepreneurs seem to follow a path of increasing gravitas. Scott Heiferman started out selling online ads and is now creating new communities. Jack Dorsey created Twitter and is now democratizing payments so sole proprietors can compete on a level playing field with large companies. Elon Musk started with online payments and is now developing electric cars and space programs.

Founders of large companies sometimes also follow the path of increasing gravitas. Google is developing new energy technologies, self-driving cars and other world-changing technologies. Bill Gates devotes almost all of his time and money to charity.

The tech press is preoccupied with investments, trends, exits, and other “inside baseball” topics. But these are all means to an end. Investments provide fuel for entrepreneurs to convert ideas into products. Trends shape the terrain that entrepreneurs navigate. Exits provide financial incentives for investors and entrepreneurs.

Tim O’Reilly says that entrepreneurs should try to create more value than they capture. You can make money selling people obfuscated financial products, entertaining them with mind-numbing TV shows, or selling them sugar water decorated in elegant designs.

Alternatively, you can make something that matters and — if you are lucky and smart — change the world.

From: http://cdixon.org

[new blog post] Some memories from a recent trip to #Istanbul #Turkey.

My wife and I spent almost a week in Istanbul, Turkey a couple of weeks ago. For our vacation we really wanted to find a place where we would not totally feel like tourists…and a place that had culture, architecture, history, great food and nightlife. We could not have chosen a place better than Turkey.

We loved it there. Turkey rocks and I am surprised not more people from the US visit there and talk about it. I wanted to share some thoughts and observations from the trip. I HIGHLY recommend everyone to visit Turkey and spend a few days in Istanbul and then other parts of the country.

1. We stayed in the Sultanahmet neighborhood, walking distance from Hagia Sophia, Blue Mosque and the Topkapi Palace. We deliberately decided to not stay in some sheeshy place but a cute little hotel tucked away in the middle of other peoples’ homes, shops, restaurants.That is the best way, in my opinion. Some of our friends had recommended upscale hotels but now we realize they are further away from where the action is, are too expensive, and frankly do not let you have an experience with the local people. We would start each day with a breakfast on the terrace that overlooked the 6 minarets of the Blue Mosque and beyond. A relaxing breakfast was a perfect way to start days filled with walking.
2. Everything is so clean! We were quite surprised. Here is a country that almost feels like Middle East, and yet everyplace we went to felt clean and tidy. We literally saw cleaning crews every few minutes when we walked down the Istiklal Street. That said, I must say spending time inside blue mosque was a bit difficult. Visit there would have been much more peaceful and calming if the carpets were not smelling so much of shoes/socks/body odor.
3. We noticed that despite being a country with a significant tourist population at any given time, a lot of people we met in the biggest city did not speak English. While it wasn’t too difficult to communicate eventually, it was a surprise given how westernized everything else appeared.
4. Istanbul is such a delightful blend of East and West. You can literally be under a bridge and look at Europe on one side and Asia on the other. Turkey also seems to have opened its doors to a lot more people than some other European countries. We met an Iraqi businessman who told us it was the only country where Iraqis could land at the airport and get visas. Hence, he did a lot of his business and spent vacation time in Turkey.
5. We spent almost an entire day at Hagia Sophia. Probably longer than most would but the juxtaposition of Islam and Christianity in a centuries old building was too beautiful to quickly digest. Where else can you see mosaics depicting Maria, Jesus being presented with gifts from St. Augustin at the same time as the pulpit with inscriptions that a Muslim Imam would lead prayers from? History revealed, literally within layers of cement & plaster.
6. Istiklal is quite a street. There are streets a bit like that in Germany, Switzerland and Nederlands that I have walked on, but this is so long and so crowded compared to anywhere else. Shops, restaurants, cafes on top of each other and people amassed as though a rave is happening. No matter which direction I turned to walk on Istiklal, I felt there was a mob walking towards me. It was an interesting feeling – even for someone who grew up in a crowded city like Karachi. By the way, at one end of Istiklal is the local bar scene and yes, it is very European and its very awesome!
7. While food everywhere in Istanbul was interesting and unique, we had amazing meals where we crossed over to Kotakoy on the Asian side. Walk down the narrow streets, have an amazing kebap at a restaurant, dessert of yogurt with honey or Turkish Delight, strong Turkish coffee and then buy spices at half price compared to the Spice market. And while we talk about food: don’t miss the fried fish sandwiches (street food) at Eminonou, and on the European side, if you see just white people sitting at a restaurant drinking wine, move along…Food probably is mediocre and all of them followed some tourist guide book to show up there. Ask locals where would they eat if it was their birthday and you might get the real taste of Turkish cuisine.
8. We enjoyed our visit to Ortakoy as well. Take a ferry over or a bus from Taksim Sq. Its a gorgeous riverside village. You can join the pizza lovers at the fancy “House Cafe”, or take my advice and grab a “kumpir” and “waffles” and sit on the benches along the river. This village comes alive in the evenings. By the way: Kumpir is a baked potato with stuffings dish that I think I will never stop salivating over. If it arrived in the US, it would take the country by storm!
9. A trip down river Bospohorus is a tourist must. Its actually fun, and summer breeze is wonderful. But we also stopped at a place towards the end of the trip and had lunch at a secluded restaurant on top of the mountain. Most relaxing 2 hours we ever spent anywhere. Serene, quiet, gorgeous views, great food, and a sense of detachment from the general pace of life.
10. Some other observations:
1. Grand Bazaar is super touristy. Not worth the time for the shops…but interesting environment and architecture around the Bazaar.
2. Spice market is over-priced. But even some locals were surprised that we bought spices at >50% discount to negotiated prices in the spice market on the Asian side.
3. People generally seemed over weight. Not good. I wonder how the health indices track in Turkey?
4. Ciragan Palace is over-rated as a place to stay. Go there for coffee, take in the view, and walk out before the resident pianist starts belching out western tunes on the Grand Piano
5. If you don’t have Turkish coffee at least once a day, you are missing the most amazing drink from that country/region.
6. I had the most expensive coffee I have ever had – that also tasted like crap. I ventured under the bridge near Eminonou and decided to have a latte. Cost me nearly $8 and it was so terrible I had to dump it.
7. We decided to buy some semi-expensive decorative items at the Museum Shops. Just before paying for them I convinced my wife to try and find the same things outside the Museum shops even though the sales people kept telling us these things are not available in general markets. Well, we found them outside for 50% the price and saved hundreds of dollars. Later we saw the same things at 400% price at the airport.
8. We were surprised at how many bookstores we could see all over Istanbul. A great sign that society values learning and literature….but I wonder how they will fare as digital media infiltrates ever so deeply. While we could, we bought tons of books there.
9. Service at the airport is kind of crappy, which is disappointing and surprising. We were scammed by the tax return booth who was were literally returning only 50% of money they should. I bet the rest was going into their pockets. Turkish friends: this is really not what you want your visitors to take away on their way out of your country.
11. Last but not the least, my wife and I had such an amazing time learning about and discussing the history of the Ottoman empire.
1. this was a grand empire. this was a rich state. and these people lived a lavish life. wow.
2. the treasury at the Topkapi place blew my mind away. There were so many diamonds and rubies and emeralds there that I tried to convince my wife these must be replicas. Holy smokes. I have never a diamond as big as the one I saw there.
3. I saw relics of important people in Islam at the Topkapi Museum. As a religious person, it was spiritually quite interesting.
4.  We spent a few hours inside the Dolmabache Palace and countless hours debating if the westernization of the Ottoman rulers brought the empire down? It is said that the King mortgaged his empire to build this lavish palace that simply does not fit the local climate or culture. It is like the Palace of Versailles but maybe a little too much. Crystals from France, Vases from Germany, plates from England etc etc. But it lacked life and warmth. Unfortunately. We saw photos of the Ottoman empire in the 1500-1600s and they seemed happy, elaborately dressed in their velvetty garb. Those from 1800s look more run down, and odd in British type uniforms. The beauty of Turkey today is that it blends some of the best from East and West. But did the Ottoman rulers go too far too soon, or did they get enamored with the least useful elements of the Western civilization? Or was it the palace intrigues that distracted them away from their people’s welfare?

Needless to say, we loved our time in Turkey. We will go back and we would like all our friends to visit there. Turkish people were extremely friendly to us, and we felt like home. We felt safe and witness to a country that is only now starting to emerge again as a leader at the global stage. If I could, I would try to find a way to go back there often so I can learn more about their economy, politics, culture, and prospects for the future. Hey startups in Turkey, kick it up so I can find work reasons to visit too!

The Second Cycle of Cleantech Startups

Cleantech industry is still in its nascent days and an ecosystem that promotes sustainable production, distribution and consumption of energy is still developing, especially the entrepreneurial and managerial talent that will lead us hopefully into a new era of job creation, economic growth, and global competitiveness.

Startups play an outsized role in bringing clean energy technology and innovation to market, creating new jobs, and defining a new American competitiveness. We are now in what I would define as the Second Cycle of modern cleantech startups (not the 1970s era environment focused companies). The First Cycle of cleantech startups began in early 2000s and came to an abrupt end in 2008 when economic turmoil hit the country. This was a period during which some excellent Cleantech companies were created by top notch Cleantech entrepreneurs. For example, Enernoc with Tim Healey, Tesla Motors with Elon Musk, A123 Systems with David Vieau & Ric Fulop, GTSolar with Kedar Gupta, and several others. This was a time when entrepreneurs and investors regularly raided academic labs across the country to find licensable technologies, but these were mostly innovations that had sat on shelves for decades collecting dust since they were not considered ‘economically viable’ before. During the First Cycle we saw creation of large numbers of new companies, a swath of venture dollars invested in them, and a significant scale migration of entrepreneurs from other fields, such as IT, into Cleantech.

The Cleantech startup frenzy of the First Cycle was dramatically slowed down by the economic downturn in late 2008 (it is just a sidebar note that one of the last IPOs of 2008 was GTSolar, a cleantech company). 2009 and 2010 were very difficult years for new Cleantech startups, and many entrepreneurs, especially those who had turned to cleantech from other fields such as IT and Biotech, went through hard times finding investors to fund their ideas. I met many entrepreneurs who were left wondering if the problem was their business plans, investors suddenly running out of money, or the entrepreneurs themselves. Many dreams went unrealized. That said, we still did see some amazing companies form even during this difficult period. In fact our investment pace at General Catalyst Partners accelerated because we saw great companies raising money at more rational valuations, and with better thought through business plans.

2011, I believe, has already seen an optimistic turnaround for the cleantech startup industry. I am calling this the Second Cycle of cleantech startups. Companies from the First Cycle are now starting to find healthy exits via M&A and IPOs, and investor confidence appears to be returning with those exits. Pace of innovation has picked up and new companies are being formed again in significant numbers. So is there anything different this time around?

From my vantage point as a cleantech investor, I think there are already, and will be, a few differences:

1. Technologies that were developed over the past 20-30 years have already been picked off and we are now in a real-time technology development mode to solve specific energy issues. Good news is that we are better prepped to identify innovations that may be truly ready for commercialization versus those that need further gestation. But this also means there will be more continuing involvement necessary from the founder academics than may have been the case in the past. The technical visionaries are now needed inside the companies to help steer the ship, and pivot when needed.
2. Investors are now more focused on managing capital intensity of projects that they take on. This does not mean they are all looking for Energy IT and services based companies. But there is greater emphasis on the capital versus milestones equation, and syndicates that are put together are expected to walk together the entire way. Good investors are also more aligned with the objective of what I call “building businesses and not exits”. From entrepreneurs’ point of view, it should be more obvious now “who gets it?” and “who’s in it for real?”. We will also see a greater degree of interaction and collaboration between corporate partners and traditional VCs. By this I don’t just mean venture arms of large corporates, but operating divisions as well. It is becoming common to find startups focusing on direct customer feedback early, and locking up strategic corporate or utility partners – sometimes even before series A. We have already seen some cases where LPs have invested directly in startups alongside VCs, and we may see even more of this going forward, especially in capital intensive businesses.
3. Entrepreneurs in this cycle are likely going to have more sober and deep tech-oriented backgrounds. Flashy resumes of dot-com IPOs are not really helpful when a company is struggling to negotiate complex supplier and strategic technology development agreements across different parts of the world. Serial entrepreneurs who have successfully built large energy, communications, infrastructure and materials type businesses would make great co-founders for younger technologists (and not just management you bring on at some later stage). To be more successful than the entrepreneurs of the First Cycle, this generation of entrepreneurs would need to be scrappy, big thinking, and resourceful (see related post here). Putting the team first is a core element in my investment thesis, and a motto for my firm General Catalyst Partners. I believe we will see this become more common among other investors as well (see related post here).
4. Markets will be competitive and truly global. Not only will this be ever more true, but the fact is that some international markets are already further ahead of the US when it comes to adopting clean energy solutions. This is a great opportunity but also a threat. Startups will find themselves stretched thin in resources, management may have to travel furiously, and juggle between various technology, business, culture and regulatory paradigms. International customers may prove to be more fickle & less reliable, and IP may be at greater risk – but these markets are real, huge, and extremely hungry for innovation. And they cannot be ignored. Take an example: Solar industry was a major part of the First Cycle. However, for a majority of this world’s population, solar was somewhat unaffordable, required subsidies, and considered a luxury (exceptions would include countries like India where economic growth rate is limited by access to energy). Solar took off in some developed nations but more slowly in many others. In contrast, LEDs are expected to constitute a major industry in the Second Cycle. Use of low energy consuming bulbs and fixtures is an immediate source of high ROI to industries, businesses, governments and even residents across the world – especially so in the developing parts of the world. When you don’t have much power to begin with, stepping down from consuming 40W to 6W to still light up your house at night can be a no-brainer, especially if payback periods are counted in months, not years.

I am super excited about this Second Cycle of Cleantech innovation and startups. Macro-trends favor solid growth across all sectors, and traditional industries are also looking towards startups for across the board innovation, cost reduction, productivity increases and job growth. Our regulatory framework may be lagging, but I hope this won’t deter us. It won’t be easy but it promises to be a very fun and fulfilling period. And I look forward to partnering with amazing entrepreneurs and technologists on this journey. If you are an entrepreneur in this Second Cycle, I want to hear about it.

Also published on New England Clean Energy Council blog and Mass High Tech

[New blog post] Investing in People. What defines a ‘backable’ entrepreneur?

I attended a startup conference in NYC last week. Some amazing entrepreneurs and very successful startup CEOs on stage. Lots of interesting issues discussed, but the most interesting conversation that stayed with me was a discussion among some panelists if people or ideas were more important in determining an investment decision? One very successful entrepreneur thought ideas were key (he did say people were important as well), while an investor made a strong case for investing in people.  Yes, in general it is a combination of team, product, markets, exits, etc. But what is most important? What comes first?

I am firmly on the side of investing in people first and then in ideas. Our firm’s  motto is “Entrepreneurs Investing in Entrepreneurs”. We love scrappy entrepreneurs who have a hunger, eagerness and capacity to build large, sustainable businesses. We want to back entrepreneurs who build industries, not just exits, and who are looking for real partners and not just financial investors. I myself invest in deeply technology focused businesses (cleantech, materials, industrial products etc), and find myself walking away almost every week from ideas that could otherwise garner Nobel prizes in the future but the team fit isn’t right. I spend a lot of my time looking for brilliant entrepreneurial talent and working with them over many months, sometimes years, to find good ideas and building companies from scratch. Given that focus on entrepreneurs at GC, it shouldn’t be a surprise that some of the more amazing GC portfolio companies were started by EIRs that we were able to attract to spend time with us.

But people-first is not just a GC mantra. Quite often we see investors backing entrepreneurs and entrepreneur teams because of who they are instead of a fully flushed out business plan or model. So what makes one a strong and ‘backable’ entrepreneur?

Often I hear people introducing an entrepreneur to me as “really smart”. Well, unless you can really bang on the table and tell me s/he is one of the smartest people you have ever met, describing someone as “smart” alone isn’t helpful. That’s too generic. Maybe I can share a few other things I look for in an entrepreneur to back:

1. Their personal history. What motivates them?
2. Where did their idea originate? Is there a personal connection with the entrepreneur, or did s/he just fall into it? Are they builders or renters?
3. Do I believe they are capable of ‘writing the book’ instead of reading from it? Can they define what this company will be all about?
4. Why does the entrepreneur’s opinion matter in the space they are in? What validates their view? Have they thought about the space/industry carefully and in detail?
5. Are they resourceful? (see more here)
6. Have they shown an ability to attract amazing people around them as team members, advisors etc? This is especially true for first-time entrepreneurs.
7. Have they sold anything before? Do they understand that startups have to build AND sell?
8. Have they shown an ability to take advice and learn?
9. What is their decision making process? Internal? External? Consensus-based?
10. Why do they think I/we can be a good partner for them? It informs me how they find people to surround themselves with.

Just this afternoon I spent a few hours with a brilliant scientist who is trying to get a company going on a new semi-conductor technology. We spent approximately 2 hours with the founder educating me on the complexity of the science, the competitive dynamics in the market place, and the value proposition of his idea. Afterwards he sought feedback. He was surprised that instead of focusing on the technical discussion points, I chose to focus on the team instead – i.e. who he might want to seek out as co-founders to help him launch the company. I think during our discussion he realized why having a strong team that’s a good fit for the task at hand would be so beneficial to him – may be even more so than the quantum efficiency metrics. Let’s see what he comes back with.

This world is an amazingly small place. Now.

I came to the USA in 1995 on a student visa and with $200 cash in my pocket. I came to Wooster, Ohio – a small midwestern college town – for my undergrad studies. My first job was washing dishes in the college cafeteria and for that I earned approximately $5/hr. By US laws I was allowed to work maximum 20 hours/week and I don’t think there was ever a week when I did not work 20 hours. Hence I earned ~$100/week  for all my non-tuition/non-room expenses.

I am thinking of this today because back in 1995 I paid approximately $3/minute to call Pakistan from my dorm room. We had to use AT&T that the college had contracted with and could not use any calling cards etc as well. Given my meager earnings I used to talk to my parents and siblings in Pakistan two times a month for approximately 10 minutes each. You can imagine how ~$60/mth for phone bill seemed like a significant dent in my post-tax pay check. Honestly, it was depressing. I would barely explain to my mom what new and amazing stuff I saw in the USA in a few minutes, while she tried to urge me to eat better and write more often. She would do the job of narrating to my dad offline all I said to her. I think I only got to speak to him once or twice during my first year since my mom lovingly hogged the limited phone time. My dad had to make do with my letters, and emails that I would sometimes send to a friend’s house who would print and give to my parents (my parents did not have such a thing called email). My parents eventually even bought a fax machine so my letters could become more real-time but I wasn’t able to find fax machines easily as a student.

15 years fast forward and the world has changed so much technology-wise. Approximately 10 days ago or so I heard about AOL.com/AV. That weekend I had a simultaneous video chat with my parents in Pakistan, my brother in Dubai, my sister in Chicago and my family in Boston. That is 4 different locations around the globe seeing each other simultaneously and chatting. My parents were able to see their three grand children at the same time for the first time ever! They were overjoyed and could not thank me enough for finding the site. I must thank aol.com/av for making my parents so happy.

And then today! My wife allowed me to borrow her iphone while I took our two children out for a walk in a public park near our house. She had the skype app installed and I tried using it to call my parents. And it worked! We video-chatted while my children played in the park, ran through sprinklers, and we walked along the River Charles. My parents have not been able to get visas to come visit me in the USA. They saw me walking in the city I have called home for 13 years of my life. They watched my daughter learn how to balance on a scooter and my son sit on a grass patch while we picnicked. They were quite enthused to see Duckboats and a group of Segway riders that were probably on a Museum of Science sponsored trip.

How freaking wonderful is this! Even as an avid technology user I am blown away! Thank you technology and technologists behind them. AV, Skype, Fring, Tango etc: you rock! Thank you for making this world an amazingly small place for those of us who truly consider ourselves to be global citizens.

(screen capture of my family in 4 locations using aol.com/av)