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Re: [LUG] interesting points -

 

On 14/12/06, Henry Bremridge <henry.bremridge@xxxxxxxxx> wrote:
> On Thu, Dec 14, 2006 at 09:27:14AM +0000, Aaron Trevena wrote:
> > I've worked for a few of VC Backed companies (before, during and after
> > the dot.com bubble), not one of them seemed to have backers who
> > understood what they had invested in, and at least one managed to do
> > more harm than good by interfering in how the business was run.
> >
> That does not surprise me. From the VC perspective if the business seems
> good they will invest: remember they are looking at it from a portfolio
> approach. Don't look at VC funding as dumb financing. You are basically
> selling your company to them and agreeing to work for them. If you are
> not happy with that then do not accept the money from that VC. Find
> another (easier said than done)

No, you are not selling them the company, they are investing in a
share of the company - same as if you IPO, but with only a very small
number of shareholders, in return for the higher risk, they get a
disproportianately high share for their money, and a seat on the
board. Not control. That's how it is supposed to work, unfortunately
many VC will push their luck and generally use the threat of
withdrawing their funding or vetoing further investment, etc - general
bullying tactics to get their way. Seen it happen, never beneficial to
either party.

> Question: is an opensource company a software company, or a service
> company? The company cannot get rich selling software: that is free. In
> my opinion the revenue can only really come from providing support and
> if so that is a totally different model and different company.
>
> Take for example RedHat: I still do not understand that company's
> business. Microsoft I can understand but not RedHat. As an example I
> note Oracle's decision to start selling linux software and support (or
> did I read that wrong)

Pretty simple really - what do you think IBM, HP and Novell make their
largest margins and have their most expensive staff doing (other than
R&D) - consultancy, which is supporting and related 'value add'.

Redhat (and previously ximian) sell subscriptions to their
upgrade/support packages - Microsoft have been trying to do this for
years but haven't had the success of Redhat - why would they do that -
because it's more profitable than big bang releases every few years.

> > I also worked with some friends on a business plan, seeking VC
> > backing, dealing with the networking companies that 'connect you' with
> > backers was a joke, the agent was more interested in investing than
> > the VC he was showcasing the project to.
>
> There are a lot of horror stories. Any middleman will try to get their
> cut of the cake and I do not really understand what value they add to a
> good VC. If they are a source of funds and you are happy with them..

It's so hard to meet with VC that these middlemen get VC and VC
seekers together, kind of like dragons den, but without the macho
posturing and with real money instead of  a tiny sum smaller than
remortgaging your house.

My friends did a couple of these, and pretty much every VC had a box
they needed to tick for their portfolio (we need a company that does
X), nothing to do with the quality of presentation or business plan.

In fact the whole experience, was rather disappointing - UK VC seems
firmly stuck in the 80s or earlier.

> > Sorry, but UK VC lacks the vitality, quality and availability of what
> > is available in the US - I don't think we have a single UK based VC
> > that you could compare to those in the US like Guy Kawasaki, and the
> > ex-microsoft/hp/etc business angels.
> >
> Yes it is a much bigger market and while competition can be much tougher
> there are more niches to occupy.

Also read James Dyson's book for more about how VC in the UK was
bloody awful - he had a good idea, minimal risk and couldn't secure VC
or Bank loans and like pretty much anyone who has succeded in
kick-starting a business in the UK had to borrow heavily against his
home and invest every penny and moment he had.


A.

-- 
http://www.aarontrevena.co.uk
LAMP System Integration, Development and Hosting

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