Wireless Electricity Update

iContact co-founder and my partner Aaron Houghton has posted a great update on the state of the commercialization of wireless electricity on his blog TechInnoVenture.

He and I have been keeping each other updated on what we hear about wireless electricity–the ability to transfer electric power from one place to another without wires. It’s possible and it’s happenning today.

On August 21, Intel demonstrated their ability to transmit electricity wirelessly over a distance of approximately one foot to power a lightbulb. This Intel R&D was based of prior research at MIT by Marin Soljacic. Profossor Soljacic has dubbed wireless electricity, “Witricity.”

The near-term market opportunities revolve around low-wattage charging of electronic devices like phones, DVD players, and GPS units. But a visionary world of a “house without wires” and “neighborhoods without wires” can be imagined.

Aaron notes, “I envision a go-to-market solution here where 15-20 feet is considered good enough for the first round of devices because it accommodates the size of a standard private office, cubicle, or room of a residential house. Since all of these are already hard-wired from an external source to the outlet the big advantage here in the short term is from the wall outlet to the end device: the cell phone, laptop computer, monitor, projector, digital camera, etc. I think the first company that moves in this space will establish a brand name with builders who will install the wireless electricity sending devices into each room they build alongside traditional plug-in devices. These relationships will then later be leveraged as a product with the required efficiency at longer distances and through more obstacles (walls being the important ones to consider) becomes available and they go into production as the infrastructure that moves power from an external source to every outlet or end device within a building. I haven’t done the math but my gut (Steven Colbert reference) tells me the first opportunity is at least a $50 billion annual market with the latter being 3-5x that annually. Then of course the opportunity that remains is for long distance regional power distribution through the air.”

While our focus is email marketing software for SMBs, it’s always fun to talk with Aaron about what future technologies could bring ranging from wireless electricity to fusion power. As Thomas Friedman says, the ET (energy technology) revolution is upon us.

Well I’m off to read more about the effects of Lehman’s possible collapse and Merrill’s purchase by BOA. Remember, as Buffet always says, “Be fearful when others are greedy, and greedy when others are fearful.” Tomorrow may very well be the best U.S. equities buying opportunity we see in our lifetimes.

Endeavor - Promoting Entrepreneurship in Middle-Income Nations

A Non-Profit Profile By Humanity Campaign Writer Ebs Sutton–

Recently, a non-profit organization by the name of Endeavor was profiled in the July issue of The Economist, in an article which gave rave reviews of the group’s commitment to providing not just access to opportunity, but access to the mentoring and investment which turns opportunity into actuality.

When it comes to promoting entrepreneurialism in developing nations, Endeavor believes that a significant part of the problem is not just a lack of access to entrepreneurial possibilities, but a lack of access to the modeling and mentorship which are available in places like the United States. Endeavor seeks to address this need by using successful high-impact entrepreneurs in developing nations to select and mentor budding entrepreneurs in developing nations.

The Purpose of Endeavor

Endeavor is a non-profit organization whose vision is to change communities and countries by promoting entrepreneurship where it is needed most. Using their internal Search and Selection teams as well as panels of successful entrepreneurs from across the globe, candidates for the Endeavor program undergo a rigorous selection process which can take up to 18 months. Endeavor uses six main criteria to evaluate candidates:

• Entrepreneurial Initiative
• Business innovation
• Value and Ethics
• Role Model Potential
• Development Impact
• Fit with Endeavor

Additionally, through the course of this process, each entrepreneur is given valuable feedback and advice, whether or not they are selected. Once entrepreneurs are selected according to the criteria, they are set up with mentors and access to support and advice. Endeavor matches the entrepreneur with selected mentors who can help him or her with specific challenges faced. Some Endeavor Entrepreneurs can have over a dozen mentors.

Interview with Elmira Bayrasli

I had a chance to interview Elmira Bayrasli of Endeavor’s Outreach Team via email. She described the Endeavor process this way:

“Generally Endeavor looks for high-impact entrepreneurs who are leading companies that are generating between 500K to 20 million in revenues; and entrepreneurs who have role model potential – who will give back to their emerging market communities and not only inspire, but lead, mentor and support aspiring entrepreneurs. Endeavor Entrepreneurs generally are those who have a business that has great high-impact potential to go to scale – to create jobs, generate revenues and investment opportunities.”

The Process

Here is an image showing their selection process from their 2007 annual report:

Many selected entrepreneurs go on to become mentors themselves. Some serve as panelists or as members of local boards of directors.

Before this process even begins, Bayrasli says, Endeavor does its homework:

“Before Endeavor starts to identify and support high-impact entrepreneurs, we spend quite a bit of time building local operations. Endeavor will only launch its ‘mentor capitalist’ model for high-impact entrepreneurship in countries where there is actively backing and engagement from leading business talent and recognized leaders. These individuals form the basis for Endeavor’s local board of directors.”

Here is a graphic that shows the Endeavor “idea to impact” process:

Examples of Success

This year Wences Casares became the first Endeavor Entrepreneur to join Endeavor’s Global Board of Directors. An Argentinean entrepreneur, Casares founded Patagon, an Argentinean online brokerage; Wanako Games, a developer of video games fueled by Latin American creativity; and Lemon Bank, a Brazillian bank designed to help the poor.

Of the roughly ten Endeavor Entrepreneurs profiled on the Entrepreneur website, one in particular stood out to me. Natallie Killasy began a company called Stitch Wise which sews mine safety gear in the Gauteng Province of South Africa. After realizing how many miners were seriously and permanently injured in mining accidents, she customized sewing machines to provide work for disabled miners. The products started as protective rainwear and eventually moved into safety equipment to prevent underground collapses. According to the Endeavor website, “these products are now industry standard and are critical to the industry.”

Some Reader Criticisms

Five out of the eight responses to the article posted on The Economist expressed concern. One concern is that Endeavor is addressing the wrong issues when it comes to entrepreneurialism in developing nations. It is stated main challenges faced are not a lack of well thought out ideas or good business strategy but rather the bureaucracy, corruption, unreliable infrastructure and poor access to loans which plague most emerging economies. Another concern is the Endeavor selection process and its rigorous search for entrepreneurs already brimming with potential. The term “picking winners” appeared twice in reader feedback, seeming to imply that Endeavor has an ulterior selfish motive. If Endeavor strives to “picks winners”, one wonders, are they truly developing an entrepreneurial spirit or just helping an elite few gain their feet?

From my perspective, Endeavor appears to be effectively carrying out its mission and creating lasting positive change in developing nations. Certainly the concerns Economist readers raise regarding the “real” challenges facing entrepreneurs in developing nations are undeniable. I spent 13 years in one of the poorest, most corrupt countries in the world and witnessed the bureaucracy, unreliable infrastructure, and corruption firsthand. However, it takes one look at the Endeavor site to see the statistics supporting their success in countries such as Brazil, South Africa, Argentina, Chile, Uruguay and Mexico. Endeavor currently works in 11 countries and hopes to expand its reach to include even more.

Picking Winners

Although it may seem that Endeavor only helps an elite few, “picking winners” could be a necessary part of smart strategy. With all the possible Endeavor Entrepreneurs and limited Endeavor resources, Endeavor has to pick entrepreneurs showing the most likelihood of success. It’s about investing precious time and resources wisely it seems.

At a relatively young 11 years old, Endeavor is a welcome addition to the scene of international sustainable development.This noted, it has so far focused its work in middle-income countries like Argentina, Brazil, and Turkey and not in the most impoverished “developing countries” where arguably they could create more social value. Though certainly not the only organization addressing entrepreneurial needs in developing countries (Technoserve, for example, has a very similar purpose) Endeavor is energetic and effective in fulfilling its purpose.

How to Be a Public Company CEO

I’m out here at the Pacific Crest Technology Leadership Forum in Vail, Colorado this week. The 600 attendees here are a mix of public institutional investors, hedge fund managers, investment bankers, public company analysts, venture capitalists, public company CEOs and CFOs, and private company CEOs and CFOs.

The investors are here to meet the management of the public and soon-to-be public companies and to build relationships with the people that feed them data about these companies–the analysts. The analysts are here so they can publish research on these companies to sell to the investors. The investment bankers are here to build relationships with the management of companies they hope to sell, advise on acquisitions for, take public, or do follow-on offerings for. The CEOs and CFOs are here so they can raise money from the investors and get covered by the analysts. It’s a fascinating dynamic.

I’m learning how to be public company CEO. Here are some of the things I’ve learned.

The Process of Going Public

The general process of taking your company public in the United States is:

1. Build your company to at least $40M in annual sales (the sort-of-hard ‘takes 7 years’ part).
2. Reach breakeven or profitability and have solid positive EBITDA in sight.
3. Invite investment bankers to pitch you in what’s called a ‘bake-off’
4. Buy labels and write on them the price of your cakes and cookies
5. Select two of the following ‘bulge-bracket’ investment bankers to ‘bookrun’ your initial offering of shares: Goldman Sachs, Morgan Stanley, Credit Suisse, Deutsche Bank, Merrill Lynch, Lehman Brothers, UBS, Citigroup, and JP Morgan
6. Select two to three ’boutique’ investment bankers to ‘co-lead’ your initial offering of shares such as Pacific Crest, Jeffries, Piper Jaffray, William Blair, Cowan, Needham (there are dozens and dozens)
7. These four or five banks form your ‘underwriting syndicate’ (the people who help you ‘make a market’ for the percentage of your company that you are selling to the public by taking initial orders from institutional investors).
8. Meet with your bankers to write your ‘Form S-1‘ which is a couple hundred page document detailing every part of your business, every product, every management team member, every metric, every material agreement, every options plan, every differentiation, every risk etc.
9. Determine which exchange you wish to list on. The NYSE has higher revenue requirements than the NASDAQ. The NASDAQ is weighted toward technology companies. NYSE ARCA and NYSE Euronext are also options for smaller offerings, as is the AMEX. The London Stock Exchange (AIM) is also sometimes an option, though it requires different filing steps and doesn’t presently provide the branding imprimatur or liquidity that a New York exchange does.
10. Presuming you are going public on an American exchange, file your S-1 with the Securities and Exchange Commission.
11. Publicly announce your registration and your intent to go public.
12. Respond back to the comments and questions that the SEC provides until they tell you you are good to go.
13. Determine with your bankers which metrics and the definition of each metric you will report to ‘the Street’ (the institutional investors that will buy/sell your shares and analysts which will cover your company once it’s public). You will have to report all financials (bookings, revenue, GM, COGS, Cap Ex, R&D, Sales & Marketing, General & Admin, OpEx, Net Profit, EBITDA, assets, liabilities, ARs, APs) and numbers such as customers, growth rate, ARPU, retention/churn, LTV, and CAC.
14. Work with your bankers to craft your story and prepare your slidedeck for the roadshow, emphasizing your strengths, metrics, and opportunity.
15. If the market timing is good then prepare for your roadshow. The market is rather bad right now (August 2008) for IPOs. There have been no venture-backed IPOs to date in 2008, although there will likely be a few in Q4 and many in 2009.
16. Determine your initial price per share target and how much money you wish to raise, and the percentage of the company you wish to sell to the public market.
17. Hold an ‘IPO roadshow’ in which you and your CFO visit the major U.S. cities to present to the institutional investors and mutual fund managers who may wish to purchase your shares.
18. At this point your ‘bookrunners’ will take orders for shares and help build interest among firms that they know have demand for businesses like yours.
19. Based on demand (# of orders) you and your investment bankers make a final determination on price per share, amount of shares to sell, and who to sell shares to (ideally stable investors that won’t trade out of your stock right away) the night before or the morning of the listing.
20. Ring the bell the morning of your offering and celebrate. Watch the wire of funds go into your corporate bank account. Now the work begins to properly manage expectations, overperform, and gain trust with your investors.

The Advantages to Being Public

The advantages to going public are generally greater access to capital to help grow the business, liquidity for pre-IPO shareholders (though not for at least 6 months after the offering), an ability to command a higher revenue multiple than most private companies can, and a greater level of trust and respect among larger customers or vendors.

The Disadvantages of Being Public

The disadvantages of being a publicly traded company include the 3 months of time you as CEO will have to be fully focused on going public and the 6 months your CFO will have to be fully focused on the process of going public–causing you to lose some focus on operations, having to report many of your key metrics and strategies to the public–including your competitors, having to ‘manage to the Street’ or in other words manage your results and report every quarter which sometimes causes short-term thinking, an inability to be fully flexible, the legal reporting requirements of Sarbanes-Oxley that cost around $2 million per year in compliance costs, and a requirement to be profitable or within clear visibility of profitability that sometimes can limit ability to pursue growth.

Some Tips for the Public Company CEO To Be

Here’s a few tips I’ve picked up here at the conference on being a public company CEO.

1. Manage Expectations Well: Become very good at managing expectations. As a public company CEO your job is to consistently hit or outperform your revenues and earnings per share (EPS) guidance every quarter. It takes time to develop trust with institutional investors. And if you go out saying one thing and end up not hitting that plan and doing another, it will cause turnover among your shareholder base, which will cause your share price to go down (bad). To become very good at managing expectations, make sure you have a solid financial model in place that can very accurately model future revenues, bookings, gross margins, and earnings projections. Don’t go out indicating you’ll have 10% net profits and then decide that you’re going to have 3% net profits so you can grow faster.
2. Build Relationships Before You Need Them: Just as with raising venture capital, build the relationships before you need them. Start going to the analyst and investment banker conferences at least 18 months prior to your offering and build relationships with both the ibankers and public investors. Make sure they know who you are and like you and the company story many months prior to the roadshow.
3. Pick Sticky Investors: When you are going out, you’ll decide which institutional investors get to purchase your stock and which do not. Ask in your contract with your investment bank that you significant input if not have final say as CEO. Get to know in advance which firms are long-term investors and which are not. You can use a service like the ‘Business Intelligence’ offering from Thompson Reuters to determine which institutions are looking at your deck and materials. Pick the firms that are going to hold your stock and not have high share turnover. Be wary of hedge funds who have high portfolio turnover.

Hope you enjoyed the post! I’ve still got a lot to learn so please let me know in the comments what I’ve mis-stated or altogether missed. Man I love this stuff.

The Opportunity of Our Lifetimes

Our generation–those born in the 70s, 80s, and 90s–has a great opportunity ahead of ourselves. We have the ability for the first time in human history to eliminate extreme poverty within our lifetimes and ensure shared access to prosperity regardless of color, geography, or nationality. This possibility is worthy of a boisterous cheer.

By 2050, we’re projected to have 9.5B humans on this planet, however. Our planet will not allow a world of 9.5 billion humans living in the manner the average citizen of the Western world lives today, yet alone the 6.6 billion we have today.

Here inlies the great connection between sustainability and poverty. Unless we as a global society invest to develop the needed technologies to allow for humans to become sustainable in food, energy, and water production we will end up having less resources than are necessary for 9.5 billion people to live in a world without extreme poverty–let alone a world in which there is true shared prosperity, mutual security, and equality of opportunity. This is the greatest challenge of our lifetime as entrepreneurs, social entrepreneurs, scientists, technologists, and public servants. We must have sustainability to end poverty.

As a friend of mine from high school recent wrote me, “We must work toward the creation of a world where the standard of living, human rights, basic freedoms, and sustainability are all compatible.”

The two billion people that Goldman Sachs projects will be added to the global middle class by 2030 may never make it if sufficient food, energy, and water resources don’t exist. Dominic Wilson and Raluca Dragusanu, showed in a Goldman Sachs Economic Research paper published on July 8 called “The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality” that close to 70 million people a year are entering the global middle class. They define this range as those with per capital income $6,000 and $30,000, purchasing power parity adjusted. They foresee shifts such as:

1. Changing spending patterns.
2. Increased pressure and competition for resources
3. Greater threat of environmental degradation
4. Rising environmental consciousness
5. Political and social changes

Through one lens, we could have resource wars, strife, famine, and terrible droughts, melting ice caps, biodiversity extinctions, and rising sea levels.

Through the other lens, we could have a world of growing prosperity, security through commerce, and gained respect among cultures and religion, a world of ubiquitous broadband, a world of communications technology that will enable humans to gain a common language and understanding, a world in which dictators can no longer use scare propaganda to wedge the false division of us vs. them, a world in which there is access to education, healthcare, nutrition, and opportunity for all, a world in which entrepreneurship thrives and technology drives improves food production, water access, and non-carbon based energies, a world in which our identity as human is so much more important than what divides us.

We have come to a turning point in history. This is both the challenge of our lifetime, and the great opportunity of our lifetime. How can we enable the great economic and creative potential for all humans while ensuring we leave a world of environmental stability to our grandchildren?

Will we invest in the creation of a new Apollo Plan for Energy? We will create the Global Bill of Rights that provides access to education, healthcare, and nutrition? Or will we fall into a once great society as the benefit of inexpensive petroleum leaves? Will Malthus finally get his way?

Is growing economic prosperity possible in a world of declining resources and increased commodity prices? Does our lifetime end up being marked in history as the time of resource wars, increased poverty, and environmental damage? Or does it end up being marked by global collaboration, shared prosperity, and sustainability. We have a choice.

This is the greatest opportunity of our lifetime, and our greatest challenge.

$1M Prize for Best Developing Country Technology Innovation

Legatum Group, founded by Chris Chandler and based in Dubai, has announced today at Fortune Brainstorm Tech in Half Moon Bay, California a $1 million prize for the best technology innovation from a for-profit company in the developing world. I will update this blog when they post details on how to enter.

I wanted to write this post as from all appearances, Legatum seems to be making a concerted effort to invest in long-term sustainable development in developing countries and putting their money where their mouth is. They are a sponsor to the Fortune conference here, and are mostly unheard of. Even their original company Sovereign Global, is nearly unheard of. Yet they manage over $4B in capital invested in India alone.

Legatum is the donor to the Legatum Center for Development and Entrepreneurship at MIT. They invested $50M in the Center to obtain naming rights. Here is a short video I took this afternoon of Iqbal Quadir who is the founder and Director of the Legatum Center for Development and Entrepreneurship at MIT.

Although Dubai-based, the group is made up strictly of Westerners, mainy of whom previously worked at Chris Chandler’s Sovereign Global. They claim a 40% CAGR over the lifetime of thier original fund started in 1986. The President of Legatum, Mark Stoleson, attended Occidental College and Duke. The other chief team members attended Wharton, London Business School, Babdon, Oxford, and University of Brisbane and has worked at law firms, JP Morgan, Goldman Sachs, and PWC.

I do wonder if most of these individuals are based at the head office in Dubai, which is slowly on its way toward challenging London and New York for the global capital headquarters. If you can find any statistics on capital under management for equity investment firms based in New York, London, Hong Kong, and Dubai please let me know.

Legatum Group is also the creators of the Africa Prize, which gave away $450,000 in 2007 to the most innovative businesses in Africa. Their philosophy is simply that for-profit businesses are more efficient at creating positive social improvement than bi-lateral foreign aid which in their Easterlyan-like view too often has created dependency.

Celebrating 5 Years at iContact

The team at iContact celebrated the company’s 5th anniversary and reaching over 100 team members on Friday afternoon at our offices in Durham. We had BBQ from Thrills from the Grill underneath two large tents in our parking lot with bluegrass band Second String Fiddle adding to the sounds. Aaron and I went up in a hot air balloon to unveil our new sign on the building as the team sang “Happy Birthday” below. Magicians, balloon makers, bouncy castles, dunk tanks, and a few gusty winds added to the excitement.

Getting iContact to 106 employees and 29,000 customers would not have been possible without a supportive Triangle community, our wonderful team, investors who believed in us when few others would at NC IDEA, and our wonderful Series A backers Updata Partners. Thank you to everyone who has helped make iContact what it is today. Here’s to the future and the opportunity and many challenges ahead.

Thanks especially to Christina Jaromin and Chuck Hester and to our team members who helped organize the event!

Picture courtesy of We Love Durham NC Blog

Two New Podcast Interviews on Entrepreneurship from Stever Robbins and Jim Blasingame

Podcast Description: Ryan Allis is the 23-year-old co-founder of iContact.com, a 95 person email marketing company in Durham, NC. Ryan spoke in this podcast with Stever Robbins about how he ended up where he is and the role passion plays in business.

Download/Listen Now (21:37, 9.9MB)

Podcast Description: When the economy is soft, we have to maximize sales opportunities with marketing campaigns that don’t break our budget. Ryan Allis talks with Small Business Advocate Jim Blasingame about how to use email marketing to pull off maximizing sales while minimizing marketing expenses. Ryan also explains his company’s capitalization strategy, including how he acquired venture capital.

Download/Listen Now (15.26, 7.1MB)

Under 30 CEO Summit This Weekend in Utah

I’m out in Alta, Utah this weekend near Salt Lake City for the Under 30 CEO Summit being put on by Elliot Bisnow.

We’ve been skiing at Snowbird, heard from Ted Alemayhu from U.S. Doctors for Africa, chatted with Scott Fredrick from Valhalla Partners, and talked a lot about business, entrepreneurship, social entrepreneurship, and how we can work together to make a difference in the world.

Blake from Tom’s Shoes (which donates 1 pair of shoes to children in developing countries for every pair they sell) debuted his video “No Polo Window” announcing the launch of his leather boots campaign to reduce a foot disease called Podo in Ethiopia. Blake gave us each a pair and I’m quite happy to report they are awesome for breakdancing.

The people that are here include Dan Melinger (Socialight), Cristina Miller (Store Adore),
Sean Belnick (Bizchairs.com), Ben Lerer (Thrillist), Blake Mycoskie (Tom’s Shoes), Cameron Johnson (The Big Give), Ben Kauffman, (Kluster), Josh Abramson (CollegeHumor/BustedTees), Rob Jewell (Gratis Internet), Joel Holland (Footage Firm),
Lin Miao (Tatto Media), Ricky Van Veen (CollegeHumor/BustedTees), Jud Bowman (Motricity), Sam Altman (Loopt), Anthony Adams (CreditCovers), Nathan Stevens (Yodle), and Jeff Fissel (KZO Networks).

Yesterday I skied for the second time and went from extreme beginner to beginner. It’s been a great time so far and I’m looking forward to tonight.

Zappos CEO Tony Hsieh Presents on “The Path to a Billion”

Tony Hsieh, the 34 year old CEO of Zappos is giving a talk at the Underground web marketing seminar in Los Angeles. He sold LinkExchange to Microsoft for $265 million in 1998.

His speech is titled The Path to $1 Billion as they are on track to hit $1B in sales this year as a private company that started in 1999, did $8.6 million in 2000 and $32 million in 2001. They have 1,600 employees today and a 500 person call center.

Tony is emphasizing the importance of ‘above and beyond’ great customer service more or less regardless of cost. 75% of his orders are from repeat customers. He talks of ’surprise upgrades.’

Tony shared that they orient new team members with 4 weeks of customer loyalty training at their headquarters in Las Vegas plus week in Kentucky for warehouse training for every single employee. He tells the story of when a customer ordered pizza from their customer service line at 3am and the customer rep found the nearest pizza places in Santa Monica that were still open.

He encourages entrepreneurs to train great people if you want the company to scale as ‘you can’t do everything yourself.’ He provides a culture book to their team members each year. Every single team member writes a couple employee on what the culture means to them.

Their core company values are:

1. Deliver WOW through service
2. Embrace and drive change
3. Create fun and little weirdness
4. Be adventurous, creative, and open-minded
5. Pursue growth and learning
6. Build open and honest relationships with communication
7. Build a positive team and family spirit
8. Do more with less
9. Be passionate and determined
10. Be humble

I am wondering what their customer acquisition cost and customer lifetime value is and what their monthly CPM and CPC spend is and what networks they use to acquire customers via CPA.

Podcast Interviews on Entrepreneurship

Here are two recent podcast interviews on entrepreneurship done by Written Voices and Daxle. Enjoy!

Written Voices Podcast Interview With Ryan Allis (17min 38 sec) - A discussion with Allan Hunkin from Written Voices about:

• Building a team
• My personal motivation
• The importance of finding mentors
• An overview of Zero to One Million including opportunity evaluation, raising capital, marketing and creating sales, giving back, and setting goals
• Finding your core motivation
• Focusing on providing a great product
• Social responsibility
• The Entitlement Generation vs. The Enlightenment Generation
• The Enlightened Entrepreneur
• Finding Your BHALG - Your Big Hairy Audacious Lifetime Goal

Daxle Interview with Ryan Allis (17 min 02 sec) - A discussion with Brian Oates from Daxle about:

• The entrepreneurial itch
• Finding a partner
• Evaluating entrepreneurial opportunities
• Ensuring demand for your business idea
• The value of teamwork
• How internet sales are different from door-to-door sales
• Generating leads from the web
• Bootstrapping and doing what it takes to keep expenses low

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