American lives, F. Scott Fitzgerald once said, don’t have a second act. As the New York Times’ Gary Rivlin reported in his profile of PayPal co-founder Max Levchin, Silicon Valley hasn’t noticed. More companies than ever are being started by serial entrepreneurs. The second coming of the Internet bubble, Web 2.0, has in some ways been the love-child of Entrepreneur 2.0 — wealthy from his 1990’s success, restless from his time off. Venture capitalists have lined up with funding.

While second-timers’ experience may lower the likelihood of failure, from 82% to 70% according to one study, no one has noticed that it also seems to limit the magnitude of success. Every Silicon Valley colossus — Amazon, Apple, Dell, Ebay, Google, Microsoft, Oracle and Yahoo! — was started by a first-timer 30 or under. Facebook was founded by teenagers.

Yet we still insist on believing in the serial entrepreneur with the Midas Touch. We make celebrities of our entrepreneurs because we’d rather believe in talent than luck. And we tend to overlook reasons why second-time entrepreneurs are actually worse, not better, for their experience.

Entrepreneur 2.0

Here is a super-simplified timeline / decision hierarchy:

1. Investors decide if they should convert their preferred shares to common.
2. Common stock holders decide if they should exercise their options.
3. The proceeds are first distributed to the preferred shareholders up to their liquidation preferences. For example, if they invested $5M with a 2x liquidation preference, the preferred shareholders would receive the first $10M of any liquidation if they chose not to convert to common stock.
4. The remaining proceeds are then distributed ratably to the common shareholders (unless the preferred stock is ‘participating preferred’. In this case, the preferred share holders are treated ratably like the common shareholders).

Simplified, investors typically get their money first and common shareholders (you) get paid based on what’s left.

There are several questions that you’ll need to address to help guide your decision:

* What % of the company do my options represent? If you don’t already know the number of authorized shares, find out. Your percentage of ownership is determined by dividing your options by the number of authorized shares (Keep in mind that ‘authorized’ is substantially different from ‘issued’ or ‘outstanding’ shares).
* What do the investor preferences look like? If your company has taken multiple rounds of financing, this can be very hard to answer. Management should be able/willing to tell you two numbers:
o The exit value where common stockholders get nothing, and
o The exit value that would trigger the preferred shareholders to convert their preferred stock to common stock.
* Can I expect further dilution? (Will the company need to raise more money). If the company will need to raise more capital, dilution will be forthcoming. If the company has lost momentum (or did a very expensive prior round), and needs to raise more capital, expect lots of dilution.

Gauging Future Dilution is hard. Whenever a company raises money, the capitalization table can be entirely renegotiated. This rarely happens at a company with strong momentum that is raising money had a higher valuation than the prior round.

If a company is struggling, the capitalization table can be completely changed. The new investors have tremendous leverage (presumably because others don’t want to invest) and may value the company at a very low amount, effectively washing out prior shareholders. They’ll want to make sure current employees are appropriately incentivized, but former employees are at the bottom of their priority list.

I find it useful to generate several scenarios to see what my financial outcome would look like if the company had an exit. You’ll have to make some assessment of the likelihood of those scenarios and hopefully you’ll at least have enough data to figure out if it makes sense to exercise your options.

A lot of people get excited about their options without doing this analysis or having any of the relevant facts. And they never get a dime for their options, that they paid for.

Startup Stock Options: Should you Exercise your Options? - Dave Naffziger’s Blog

Air traffic as seen by the FAA.

The Flight Patterns visualizations are the result of experiments leading to the project Celestial Mechanics by Scott Hessels and Gabriel Dunne. FAA data was parsed and plotted using the Processing programming environment. The frames were composited with Adobe After Effects and/or Maya.

Weeee airplanes are fun and pretty.

Flight Patterns - FAA Visualizations

I like gangster stuff. This looks very entertaining.

BET.com - BET.com | On TV | American Gangster : Main

Overrides

Sometimes you want to specify which class's method to use, such as when the same named method is specified in two different classes. For example, if the function grind is defined in both Espresso and Qava classes, you can specify which class's function to use by using the :: operator. The following calls would use the call in Espresso:

$mess = Espresso::grind("whole","lotta","bags");

Espresso::grind($mess, "whole","lotta","bags");

The following calls would use the grind() function in the Qava class:

$mess = Qava::grind("whole","lotta","bags");

Qava::grind($mess, "whole","lotta","bags");

You might want to call a method based on some action that the program you are writing has already taken. In other words, you want to use the Qava method for a certain condition and the Espresso method for another. In this case, you can use symbolic references to make the call to the required function, as in the following example:

$method = $local ? "Qava::" : "Espresso::";

$cup->{$method}grind(@args);

Day 19 -- Object-Oriented Programming in Perl -- Over-riding Subroutines

“We will focus on startups at the very early stage, because that’s the hardest money for an entrepreneur to find,” explained Stephen Fleming, Georgia Tech’s chief commercialization officer and manager of the new fund. “Once companies have customers, a product and some traction in the marketplace, they can interest larger investors.”

“There is certainly a perception that there’s not enough early-stage capital in Atlanta,” he said. “The Georgia Tech Edison Fund will not by itself be a silver bullet that solves this problem, but I think it will help by putting new energy into and a new focus on early-stage financing.”

Fleming plans to make the requirement for a Georgia Tech connection as broad as possible. For example, the Fund will invest in companies that may be founded by Georgia Tech faculty, students and graduates; licensing technology from Georgia Tech; sponsoring research at Georgia Tech; or even hiring a large number of Georgia Tech alumni.

“The Georgia Tech Edison Fund is for the whole community,” Fleming added. “There are a lot of Georgia Tech threads running through the entrepreneur community in Atlanta and Georgia. This really won’t limit our capability very much because a lot of deals we are going to want to make are well connected to Georgia Tech.”

Great news for Georgia Techies.

Academic VC: GT Edison Fund is official!

QuietComfort® 3 Acoustic Noise Cancelling® headphones deliver acclaimed Bose performance in an on-ear design. Just slip them on and experience the difference our proprietary technologies make. Enjoy full-spectrum noise reduction headphones that fade background distractions. Rich, clear audio that reveals nuances you might have missed. And a compact, lightweight, easy fit for hours of comfortable listening.

It's a unique combination of benefits available only from Bose, and now yours with QC™3 on-ear headphones.

These things are the bomb. They work really, really well. I want they.

Bose QuietComfort 3 Acoustic Noise Cancelling Headphones – Headphones and Headsets

The SEVC will showcase the southeast's most promising companies from all technology sectors. Presenting companies are high growth, innovative companies with talented management teams, proprietary technology, and headquartered in one of the following states: Alabama, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, or Washington DC.

Presenting companies will range from early stage firms seeking their first institutional round to later stage pre-IPO firms seeking expansion capital.

The deadline for presenting company applications is November 9, 2007. Companies are encouraged to apply prior to the deadline for best consideration.

To be considered as a potential presenter, please submit a 2-3 page executive summary to present@seventure.org. Summaries should highlight at a minimum: the management team, IP, investment sought/raised, competitive differentiation and top line revenue. Initial presenters will be notified no later than December 7, 2007.

Submissions will be reviewed in confidence by the SEVC's selection committee, consisting of nationally respected venture capitalists specializing in a variety of technology industries.

Questions about the presenting process can be directed to Eric Gregg at eric@seventure.org.

The list of 2007 presenting companies can be found here.

Southeast Venture Conference 2008

Come back when you've got some traction.

Yeah, this makes sense, eh? As soon as I remove all risk, I'll put on my extra large knee pads and pucker up. Okay, a bit graphic, ignore the visual in your head right now. The real point I'm making is you should never put yourself in a position where you hear this. If you go to a firm which doesn't do seed/early stage, you will get something that is close to this phrase. The VC shouldn't have taken the meeting in the first place but since they did, you should at least know and all agree it is a conversation to establish a dialog for a future transaction when the company is more mature and looking for growth/expansion capital. If you are seed/early stage VC and you say this to an early stage/seed company, uh, please don't.

With the exception of a very small group of individuals you probably don't know (who want to start companies in specific areas and then take such an active role in funding companies they are basically founders as well as angels), or if you are out of Georgia Tech's Venture Labs, or if you are lucky enough to be one of a couple companies a year funded by the angel local groups... this is the only thing you will ever hear in Atlanta while seeking funding for your startup.

There is no such thing as pre-revenue funding in this town. Accept it and adjust, or move.

Period.

One of the guys who led one of the round tables at the ATDC one week said the key to getting investment was to build your business to $1 million a year in revenue, and then someone would find you. I thought he was a major dick. But he was just telling the blunt truth.

If you are a business seeking funding in Georgia, you need to generate $1 million in revenue to do so.

The Post Money Value: More favorite VC phrases

A new process for jailbreaking and allowing the installation of non-sanctioned third-party applications to the iPhone has debuted. It’s called AppSnapp, and is unique in two respects: it automates the process on iPhones running software/firmware 1.1.1 (previous methods were multi-step), and it can be completed purely using the iPhone; no interaction with a Mac or Windows computer (as with previous methods) is required. The process will jailbreak the iPhone or iPod Touch then push Installer.app to the device, which contains a catalog of native applications that can be installed directly over a WiFi or EDGE connection (see our Applications page for more instruction on Installer.app).

One-step method for adding third-party apps to iPhone 1.1.1, iPod Touch debuts - iPhone Atlas