More Funding Won't Magically Fix Your Startup - TechCrunch

Some entrepreneurs think that (more) money will solve all their company's problems. It won't. Like a teenager with a million dollar allowance and an identity crisis, a startup with too much capital and no product-market fit will become capable of making larger mistakes.

Biggie Smalls said it best: "Mo Money, Mo Problems."

As an investor, I root for startups. It pains me to see great teams and ideas collapse under the pressure that sometimes follows fundraising. If you've raised money and you're not sure what comes next, that's fine – I don't always know either. However, I do know four things you absolutely should not do:

This startup could change the game for same-day shipping - Fortune

A lean operation with a brilliant idea—caffeinated club soda—wants to crack the L.A. market during the spring. Sounds like a slam dunk, but they don't want to commit to a long warehouse lease while they're still getting a foothold. Meanwhile, a Christmas-decoration warehouse sits largely empty.

It's a classic missed connection—and it's common.

"At any given moment," says Karl Siebrecht, "There are many, many businesses out there who have too much space, while other businesses don't have enough."

Siebrecht is trying to solve that problem with Flexe, a warehousing marketplace he helped found in Seattle in 2013. Just as Airbnb turns unused guest rooms into a commodity, and eBay EBAY lets you sell grandma's dusty porcelain, Flexe's mission is to connect partially or temporarily empty warehouse space with companies that need short-term inventory storage. (And yes, the caffeinated club soda company is an actual customer).

The biggest obvious fluctuation in warehouse needs comes during the holiday shopping season, when plenty of retailers need all the space they can get. But other cycles are more complementary—you're not going to sell much garden equipment in the Northeast in January, so you might as well let someone store scarves in your space. In sectors like toys, hit-driven boom and bust cycles create unpredictable peaks and valleys in warehouse demand.

Then there are the deeper trends making flexibility more important. As e-commerce continues to expand, warehouses and distribution nodes are moving ever closer to the center of the retail equation. Meanwhile, product life cycles are shrinking, and long global supply chains continue to make true just-in-time planning tough.

With an eye on those changes, Siebrecht is thinking bigger than temporary storage for Halloween costumes. He wants Flexe to transform how companies think about warehousing as fundamentally as Amazon Web Services changed thinking about data, shifting the model from one of big fixed costs to services that can be quickly turned on and scaled as needed.

MORE: Why food delivery is an uphill battle for Amazon, Google, and Uber

Flexe, whose revenue is based on transaction fees, may have its work cut out for it in changing minds and habits. In September, the supply chain researcher SCM World found that only 20% of respondents in consumer products and retail felt that on-demand "Uberization" was important for the future of their operations. That's double the positive response from last year, but numbers were even lower in other sectors.

And while Flexe seems to be the only company building a peer-to-peer commercial warehousing marketplace, it has fairly direct competition from companies like Cubesmart, which offers short-term leases on warehouse spaces it owns and manages. That model, though, isn't as cost-efficient as reselling excess capacity, or as granular—Flexe lets customers lease space by the pallet. It also integrates their goods into a warehouse's existing labor flow, meaning they don't have to provide their own workers or forklifts.

But the fundamental logic of the marketplace model may be its most powerful edge. Consider that while still-tiny Flexe has over 200 U.S. partner warehouses after only two years, Amazon AMZN , which has thrown its massive weight behind building a shipping network, has only around 96.

"It allows you to potentially have this virtual network of facilities," says Siebrecht, "To push your inventory further out into the marketplace, without investing tons and tons of capital."

Shared space wouldn't allow for the elaborate automation needed to fulfill Amazon's breadth of products, but Siebrecht envisions something almost as effective—companies offering same-day shipping on a few top sellers during peak season, all from temporary micro-distribution centers. That could have a big impact in the heated same-day shipping market, where Google's Express service is now going head to head with Amazon.

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Please Educate Your Startup Team About Equity - ReadWrite

Guest author Rob Leathern was the founder of Optimal.

Please Educate Your Startup Team About Equity

I believe that the uncertainty around stock options and equity at startups often works unfairly—to the company's benefit. 

As founders and CEOs, we don't create a safe environment for very smart, technical people to not get embarrassed asking what seem like elementary questions about equity. We startup founders worry—wrongly—about being overly transparent. That makes us get defensive. I've made mistakes and done it too. 

But transparency on company valuations and financing terms also needs to not be reactionary, and to be paired with proactive employee education.

Companies like eShares now providing a better solution for startup employees to see how much equity they have than getting a cut-and-paste email from founders culled from an unwieldy lawyer-provided spreadsheet of stock grants and shares outstanding. 

But many startups still play "hide the ball" on valuation and equity terms during the recruiting process, and most companies still do little or nothing to make equity a better-understood trade for employees.

I wrote "10 Startup HR Ideas for Founders" late last year with some thoughts from my first 5½ year stint as a startup CEO. One of the most important points I made there was that startups owe it to their teams to educate them about equity, both in general and for their company specifically.

One issue too is the short timeframe given to employees to exercise when they leave—often just 90 days. Pinterest announced it would give employees seven years to do so, and I've since encouraged companies I've been involved with to extend exercise windows to a minimum of 2 years, especially if they are not issuing incentive stock options. (Incentive stock options, or ISOs, have different tax treatment than nonqualified stock options, or NQSOs—but that's a topic for another post.)

At Optimal, one of our earliest engineers decided to leave the company in February 2011 to join a bigger company with a better base salary, and didn't exercise their vested shares, which would have cost about $2,760. Because they were ISOs, they wouldn't have had any immediate tax consequence to exercising, and in 2013, when we sold the business, those shares would have been worth about $83,000. (I consider our outcome quite modest by comparison to what some startups have achieved.)

 My cofounder and I tried to encourage the engineer in question to figure out some way to come up with the money to exercise, and we offered to extend the window three more months, but the engineer still chose not to exercise the options.

Most equity grants have a 12-month cliff—meaning you don't get any credit for staying less than a year. My position is that if a resource-and-cash-strapped startup lets someone they consider "undeserving" of equity stay that long, the issue is with their management, not the employee. Don't try to claw these shares back, in other words.

Finally, remember that the company's current valuation and the percentage of the company an options package represents if exercised don't give a complete picture. Liquidity preferences, particularly for early investors, can dramatically alter how much employees end up making. To help employees understand this, I recommend Dan Lopuch's Venture Dealr, a visualization of what can happen as a company raises money.

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A big day for startups in Cincy - Cincinnati.com

Cintrifuse's annual meeting took place Wednesday at at 1311 Vine St..(Photo: The Enquirer/Fatima Hussein)Buy Photo

OVER-THE-RHINE - Assembled in front of some of the country's top venture capitalists, the startup community in Cincinnati showcased its best and brightest, in hopes of garnering more outside investment into the area.

Both the Brandery and Cintrifuse held annual events, outlining what they have achieved over the past year.

Cintrifuse held its annual meeting Wednesday at its new space at 1311 Vine St., in front of a group of roughly 200 people, including investors in the accelerator, area business leaders and potential angel investors.

The organization connects the region's high-potential, venture-backable startups to advice, talent, funding, and customers.

"We want to get people, especially our big companies, invested in what we are doing here," said Wendy Lea, CEO of Cintrifuse, who will have completed one full year on the job next month.

Lea said as of current, Cintrifuse has a $58 million dollar fund, backed by 11 venture capital funds and other private organizations. Now, 71 percent of the fund is currently in use to help back a portion of the 155 startups that are clients to the organization.

"What we need right now are more investors, and part of this event has to do with inviting people to put money in the companies we have here."

"We have so many wealthy people in this community who are open to giving to the museum or the symphony – we want to figure out ways to get them to invest," she continued.

Attendees focused on the profitability of startups here.

Blair Garrou, managing director of Mercury Fund, a Houston-based startup venture capital fund, said his group has invested $75 million in total in Cincinnati startups for the past 11 years.

"We're feeling excited about Cincinnati and the startups we're seeing here today," Garrou said. "I see more investment in the future."

Earlier in the day, the Brandery held its sixth annual Demo Day, presenting the latest startup class' work to investors and area business leaders.

The 10 startup companies, including Oros, which developed hyper-insulated outerwear, and Wyzerr, which uses neuroscience to learn from mobile game usage for consumer brands.

Tony Alexander, general manager of the Brandery, said he thought the event was a success.

"I am confident each of the startups will find funding," he said, adding that the average investment in a startup that comes out of the Brandery runs from $500,000 to $1 million.

The Brandery, which operates at 1411 Vine St., works with select startup companies each year and provides them with mentoring, business development assistance, co-working space, access to potential business opportunities and in-kind services.

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Brickell startup stalls on road to disrupt car rental business - South Florida Business Journal

[unable to retrieve full-text content]South Florida Business JournalBrickell startup stalls on road to disrupt car rental businessSouth Florida Business JournalCarHopper has hit a sp eed bump on the road to disrupt Miami's car rental business. The Brickell startup has been trying to raise $500,000. It has been sponsoring tech community events. And it has been garnering media attention, including stories in the ...

New Orleans startup scene believes in angels - NOLA.com

New Orleans is making its mark as an entrepreneurial hotbed, with multiple incubators fostering business ideas into fledgling companies. Success stories have emerged from the likes of Idea Village, 4.0 Schools and the BioInnovation Center.

A steadily growing list of locally spawned startups -- Kickboard, Dinner Lab and Lucid (formerly Federated Sample) to name a few -- is bolstering the city's reputation.

But in order for more emerging companies to stand on their own – and develop into sizeable employers down the road -- boosters in the local entrepreneurial community say New Orleans needs to attract investors with the means to keep cash flowing into new businesses. It requires someone with a stomach for risk, and the willingness and resources to eat a loss on occasion.

Friends and family can chip in enough money for a single business, and crowdsourcing can expand that reach. But it typically takes deeper pockets to take a startup from an idea with potential to a tangible product or service.

That is the angel investor, who typically provides the money needed to take a company from its nascent stage to a point where it can generate inventory or hire employees. Until recently, New Orleans has struggled to build a solid base of these front-end investors.

Enter Mike Eckert, former CEO of the Weather Channel, who arrived in the city in 2013 and helped pull together a group of independent investors to form the NO/LA Angel Network. His vision included those already financially engaged in the New Orleans startup scene and angel investors around the state.

"There was no one market in Louisiana generating enough deals for those local angel investors," Eckert said. So he set about building the network to identify and finance businesses around the state. A key qualifier for companies seeking the network's support is that they maintain their base and concentrate their growth in Louisiana.

NO/LA Angel Network's membership has been on a rapid ascent, growing to 114 within a year and a half -- well above the average size of 68 among its peers in the national Angel Capital Association. Since making its first investment in October 2014, NO/LA Angel Network has put more than $2 million into local early stage companies, including Servato, MicroBiome, SmartPak and MobileQubes.

While their names have yet to reach household status, these companies and others are part of the buzz New Orleans is generating on the national startup scene. Even this brief history is enough to raise awareness of the city among outside angel investors.

"Angels are always looking for good deals, and there's interest in Louisiana," said Marianne Hudson, executive director of the Angel Capital Association. "There's a curiosity about New Orleans."

Tim Williamson, co-founder and CEO of Idea Village, said this growing attention from angel investors is part of the anticipated evolution of New Orleans as an entrepreneurial center. As new companies scale upward, he said, they lean on the professional community for guidance. Incubators offer access to lawyers, accountants, and bankers, and angel investors are typically part of this supporting cadre.

Williamson expects more angel groups to form locally, with breakout entrepreneurs "making exits" and seeking to put money back into the organizations and programs that fostered their growth.

"I think they care about paying it forward," he said.

It's that community spirit that helped Eckert persuade the Angel Capital Association to hold one of its annual Angel Insights Exchange in New Orleans, marking the first time the group will meet in the city. On Nov. 9-10, hundreds of investors will meet for idea-sharing and networking sessions in a members-only event at the Pan-American Life Conference Center. They represent 240 angel networks in an organization with more than 13,000 individual accredited investors.

That accreditation is important, Eckert said, because it means the investor can afford to lose his or her entire investment in a startup. According to the Securities and Exchange Commission, an accredited investor has a net worth of $1 million and makes at least $200,000 a year.

In addition to forging potential "syndicate" opportunities to pool local money with contributions from outside angel networks, Eckert said the exchange event raises New Orleans' profile among business investors.

"The idea is to showcase that New Orleans is back in a big way, particularly with the capital structure" needed to make deals, he said.

Servato, which creates backup power supplies and monitoring for computer infrastructure and is based at the BioInnovation Center, was the first company to tap into the resources of the NO/LA Angel Network. Co-founder and CEO Chris Mangum said the original plan was to seek $500,000 in "first round" financing from West Coast investors, but a meeting with Eckert convinced him to seek the backing of local angels.

The decision proved fruitful, with Mangum raising $750,000 quickly and linking him to potential syndicates for a larger Series A round of investment reaching $2 million to $3 million.

He and others point to Eckert as being instrumental in linking Louisiana startups with the right investors, which is critical when these backers join the management or boards of the new companies. Personalities and preferences come into play, and a complementary partnership is often the difference between failure and success.

Eckert has an ability to "match the hatch," said Mangum, using a fly fishing term describing a lure that closely resembles the insect that fish are most likely to eat.

Williamson expects more angel syndicates to forge financial ties to New Orleans companies as the city develops a talent pool of managers who specialize in leading early growth stage companies. With those people in place, he said investors will take a closer look.

"The only way syndicates can work is to have good people on the ground," he said.

With a critical mass of angels in place, the next phase would be attracting venture capital to New Orleans, Williamson said. At this stage, investment banks, specialized financial institutions and wealthy backers provide "Series A" money, the millions that allow a company to expand rapidly.

Williamson notes 75 percent of U.S. venture capitalists are based in New York, California, and Massachusetts. But in the South, he said there is no solid concentration of VC wealth.

With its star quickly rising in the entrepreneurial world, "maybe New Orleans is a hub in the South," he said.

With Startup Sols' New App, 3D Printed Custom Insoles Are One Quick Phone ... - Forbes

[unable to retrieve full-text content]ForbesWith Startup Sols' New App, 3D Printed Custom Insoles Are One Quick Phone ...ForbesBut until this week, would-be shoppers who wanted SOLS had to go to a podiatrist that worked with the startup. SOLS hopes its printers are going to get a lot busier now that it's launched its first consumer app. Take three photos of your feet with the ...and more »