A Sack of Seattle

Something you might not know about TechStars...

Each TechStars company now gets $118,000!

Every TechStars company now receives an automatic offer of $100,000 convertible note in addition to the traditional $18,000 investment.

There was a lot of buzz about the Star Power Fund when it was announced last fall. However, in case you missed it or forgot, I'd like to highlight it here because it's pretty freaking cool.  This additional $100k investment is from about a dozen investors who got together to form the Star Power Fund. To clarify, it's an offer, so it's optional. My hunch is that 99.9% of companies will take it.

Why this rocks for entrepreneurs:

1. Rounds will already have some traction.

2. It's an entrepreneur-friendly investment.

3. No more living on ramen noodles.

4. It's a good indicator that investors are excited about the quality companies they see coming out of TechStars.

5. Teams without a designer can hire one or outsource temporarily.

6. Softens the, "I can't afford to be an entrepreneur because I have a mortgage" problem.

7. More run way if needed.

8. It's $118,000 dollars more than you had before :-) 

I'm looking forward this year's class and how this incredible offer will benefit them.

Applications for TechStars Seattle are open. Early application deadline is May 25th and final deadline is June 15th.

 

So how am I doing (since being diagnosed with testicular cancer)?

It's hard to explain exactly how I am doing. 

Physically -- post surgery I feel fine. I'm walking about and should be back to normal in a day or two. 

However, every creek in my body now gets associated for a moment with potential cancer.  I have a cramp in my side and I wonder -- might that be cancer?  I don't remember feeling that before - I wonder is it connected to some cancer organzism growing in my body? 

My progrnosis -- post treatment -- remains excellent 95%+.  So on one hand -- I feel like the same Andy and a person who ihas it now worse than someone whos going to have a bad reovery from a surgery. Kind of like I'll need 6 months of PT. I sort of imagine myself going through the equivalent to someone post a major shoulder or knee surgery. Most of the time I can hold onto my prognosis -- even though most other people hear the word cancer and associate it with all the bad cancers and bad outcomes they know about. I find myself saying that I was diagnosed with testicular cancer and that it "almost certainly is cureable" and has "95% cure rates" so that people can calibrate what I've got more readily....and so that I can avoid the look of "sorrow" or "portential death" on their face. When I do this -- i do it for them ....and for me. 

The weight of the cancer word on my psyche and on other people's psyche is real -- I am changed through this  in my eyes and in others.....and that's the real impact of this illness.  A couple examples:

1. When I walked down the hall to see the doctor, I felt middle aged and frail and vulberable.  I wasn't the 30 something kid ready to tackle the world.  I was Andy Sack with cancer. 
2. And I've changed in the eyes of others -- on of my friends was asked how he was donig....and his response was ...."my best friend has fucking cancer, how do you think I'm doing". This is significant because I don't feel that bad and doint' think of myself as very different....and yet in his mind and heart I have a fucking cancer and might die. 

And then there's the practical implications of the cancer. Now I find myself worrying about all these associated implications to my life.  I got worried that your partners might want to back out of backing techstars....or that someone might impose a new leader for "my own benefit" . I worry about health insurance and now that I have cancer will i be able to get it if I'm not working at a bigger firm. 

How's that for a real answer to "how are you doing"?

 

Life takes sharp turns: Diagnosed with testicular cancer 1 month ago

This is the post I wrote at the time -- February 7, 2010

I was diagnosed with cancer on Tuesday.  Events have been like a slow motion movie on one hand and like a speeding train on the other.  I had spend much of Monday joking with people that I was scared that I had testicle cancer and had a swollen nut. It was swollen enough and uncomfortable enough to ask my wife to examine it and to call the doctor. When I spoke to the doctor and told him my age, and what was going on he said most likely it's an infection but let's fit you in tomorrow. Go have an ultrasound and I'll examine you. So I went and had an ultrasound.  I remember looking at the screen --and not really noticing anything odd or different. It was 4:50PM and the ultrasound technician seemed to want me to go to the urologist Erik Torgenson before 5PM. Which I did. We talked for a bit about Tom Robey's diagnosis and life....and then he started to examine me ....and pretty quickly told me I had testicle cancer and that I'd be operated on next Tuesday.  He told me to get dressed and come to his office. He drew a diagram that represented a decision tree -- I wasn't allowed to keep the paper because it was my order firm for surgery.

I remember being in the car and thinking how alone I felt. I called my parents and told them. My mother thought I was joking. I wasn't.

I went to my niece Lola's birth day party. 

I remember feeling my mortality as I drove over a hill. I could really die today. That's a scary thought. 

If I don't' die to day what should I do differently in my life?

I'll be posting to catch you up on the journey of the past month -- you should all know that the progrosis is very good. It helps reassure me through what is undoubtedly going to be a really shitty couple months!

 

the game is changing

I'm speaking on a panel next week as part of the MIT Enterprise forum here in Seattle. The topice of the talk is Venture Funding - It's a New Game. The game has for sure changed, and I think the success of Founder's Co-op, TechStars and Lighter Capital shows some of the ways entrepreneurs and investors are adjusting. 

The panel is a good mix of people across the startup funding landscape, with a wide range of experiences. I think it should be a really interesting talk, so no matter where you sit in the startup funding world (entrepreneur, investor, service provider), I think there will be some juicy nuggets you can catch here. Check it out next week - details below.

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Have you heard about recent exits in which start-ups have been acquired for several million dollars within a couple of years of founding with little or no outside investment? Or clean energy start-ups that can’t raise the millions needed to grow their business? Or a game company that sold for hundreds of millions of dollars with relatively little VC participation? What’s going on? 

Join us as Rebecca Lovell, Chief Business Officer at GeekWire, moderates our panel of industry insiders including:

• Frank Artale, Partner, Ignition Partners
• Tom Duterme, Corporate Development Director, Groupon
• Andy Sack, Co-founder of Lighter Capital, Judy's Book and several acquired tech companies
• Dan Shapiro, Kept Entrepreneur at Google

Our panelists will tell us where acquisition and venture money is coming from today, including specific deals. They will explain new venture funding models such as revenue financing and incubators that offer mentors, connections to investors, and significant cash. More importantly, they will provide a framework for understanding how funding in the Northwest has been transformed by increased capital efficiency, technological development, and the global economic malaise, as well as explain the impact on entrepreneurs and funders, such as angels, VCs, and corporations.  

Audience Takeaways

Audience members will learn:

• Details of recent Northwest exits and financings
• What has changed in the last two years
• About the explosion in new ventures and trends in capital efficiency
• What acquirers and investors are looking for today
• What is hard to fund and why
• About new venture funding models such as revenue financing and incubators with advisors, connections to investors and cash

How to be a fintech company

There are 5 fintech companies that I've been paying attention to as I try to figure out the model for Lighter Capital -- actually -- there's many more than that...but for the purpose of this blog post, let's focus on:

1. Second Market
2. Receivables Exchange
3. Wanga (UK)
4. Kabbage
5. OnDeck Capital

There are lots of differences and variants to these businesses but I like all of them and it seems like they follow a somewhat simple formula.

• Market segmentation -- Each company in its own way focusses on a market that is underserved by the capital markets.  One way or another, the underlying businesses need capital. 

• High rents (i.e charge a lot) The above businesses make capital available to the customer via the internet and charge a rather high rent. Wanga is off the charts!

• They've figured out repeatable customer acquisition --  to varying degrees the above customers has each figured out how to acquire customers cost effectively.

At lighter capital, we're trying to make sure we accomplish these goals as quickly as possible. 

Risk adjusted returns: Struggling to balance the gas and brake pedals

My career as an entrepreneur and as a seed stage equity investor has me look at a company and a team and think about what could go right.  It has me dream the possible. While working on refining the boundaries of a RevenueLoan, I find myself really thinking hard about reality -- and what could go wrong.

I find myself focused on risk-adjusted returns and yield. Prior to Lighter Capital, I never really thought about those concepts. Internally, we're debating the benefits of providing smaller revenueloans to companies earlier in their revenue life cycle. So, I find myself wondering -- what risk am I taking by moving earlier? Traditionally, people would say that moving earlier increases the risk -- and that's the obvious answer. But there's some benefit from a risk perspective to moving earlier. The main thing I find myself thinking about is that the fixed costs that get a company in trouble further into the revenue life cycle are not yet in place and so the entrepreneur is able (theoretically) to better able structure the organization to include those fixed costs.

The other thing to I find myself wondering about is that for each marginal dollar earlier in the revenue life cycle, I think I'm likely increasing my potential return by much more than one dollar. One dilemma for me is how to think about pricing this risk -- and there, frankly, right now, I have no clue! ;-)

Market education and awareness is top of mind

One of the topics that is top of mind for me at Lighter Capital is where and how are we going to get customers familiar with revenue based finance broadly and our RevenueLoan product specifically.

Once entrepreneurs and small business owners understand what we're doing, we should be a lot more effective in coming to terms with them and closing investments. That said, it's clear to me that we're in the early stages of market development for a new type of financial product. We have this new product that has some compelling advantages over other types of funding -- but if no one knows about the product and those benefits, it's hard to get customers.  We have the added challenge of not only having to educate small business owners and entrepreneurs but we also have to educate the lawyers that represent these business people.

In order to educate people about our product and our firm, I think I need to be communicating more about the process of growing this company. This should be straight forward as long as I have the time -- there's lots of interesting nuances and challenges we face.

blogging at Lighter Capital

Phew, in case you didn't hear - TechStars demo day happened last week which was both an awesome event with a lot of great people and another great moment for Seattle startups. For me personally, it marks the end of 3+ months of hectic schedule balancing the whirlwind time I spend running TechStars here in Seattle with my ongoing work at Lighter Capital and Founder's Co-op.

Among the things that I struggle to keep up with (sleep, family time), it's harder for me to find time to blog. So expect me to get back into the swing of things very soon. But as we build Lighter Capital into a full fledged, web-based site, I plan to split my blogging time between here and there. There's stuff I write about here that wouldn't fit for the brand we're building at Lighter Capital, and vice versa. 

As such, today I wrote my first blog post yet on the Lighter Capital blog. Expect more to come, and it may not be of interest to you, but wanted to let you all know that there's now more literary gold from yours truly that you can find over at www.lightercapital.com/blog.

My first post is about fighting financial fraud as a tech-enabled lender. Sound awesome? check it out over there.

Opening a Community Section at TechStars Seattle Demo Day!

TechStars is all about the community. Community-driven, community-supported. So, for the first time ever in Seattle, I'm excited to open a Community Section* at TechStars Demo Day!

Come join us November 3rd, 2 - 4:30pm at the Showbox Sodo. 

The 10 TechStars companies have been working around the clock for the last 3 months - doing more, faster. The most hyper-productive months of their lives. We're showcasing all their progress with presentations from each company. Come check out what they've built!

I can't wait to celebrate with you!

The first 100 people to do these two things will get to join us at TechStars Seattle Demo Day!

1. Tweet about why you love TechStars Seattle. Best, most creative, funniest tweet wins TechStars swag :) We'll track via hashtag: #tsdday. 

2. Make sure you follow @andysack I'll DM you the invite.

See you there, Seattle!

*Important disclaimer (aka buzzkill)...totally excited to invite you to demo day, but unfortunately that does not include the after party. Immediately following the presentations, we will ask the community section to exit. Please forgive me in advance (I've actually sicked Kayla on this - she'll be doing her best bouncer impersonation). We don't mean to be rude, but we have to set up the dinner and investor networking portion of the event. Thanks for understanding!

 

Inappropriate Use of Email

Financing is top of mind here at the TechStars offices. Not surprising...10 of 10 teams are raising capital. I'm happy that most of the companies already have commitments and are actively looking for angels/vcs to close out their round. At today's all-hands meetings, I was asked questions about financing. Here's a quick peek into how the conversation went today...

ME: "Don't discuss terms or ask for money over email. It may seem more efficient but deals don't get done over email. And worse, emails can be misinterpreted. The process of raising money is relationship management. And if you're managing a relationship...it's gotta be verbal...I mean telephone or in person. 

It's like trying to manage your girlfriend, your spouse or mother via email...can't be done. You gotta talk to her."

SMART ASS QUESTION FROM TECHSTAR: "But what if you have multiple girlfriends?" 

MY SMART ASS RESPONSE: "Well, then YOU certainly don't want your answers in writing." 

Full steam ahead...Demo day is 2 weeks from Thursday!

p.s. Are you an investor or member of the press and want to come to Demo Day on November 3rd? Email kayla@techstars.com for an invite.