Hi Frank,

I thought that before your listeners spear me, I would concede that I have a view on what will work, but not a definitive formula.

As we discussed, there simply is no magic formula, and there's a high reliance on luck ... thus the failure rate using the current criteria.

Thanks.

Regards, Andrew

Good morning Frank,

Andrew's opening remark is an expression of 'pain from previous investments'.

He must have been really burned from 'inventor' run companies.

Don't share this statement with Steve Jobs.

LOL. Don Nagy :-)

I'm currently bootstrapping a fashion based website with a friends and family round and have found your podcast extremely valuable. In 2 months I have downloaded all of the episodes and listened religiously. I've listened to so many Frank Peter's Show podcasts that my friends and co-workers ask why I always say, "Let's switch gears..."

As I have downloaded all of your podcasts and I know that bandwidth isn't always cheap, I subscribed a month or two ago. Although I understand the logic of why some folks would prefer the small fee of $2 a month for your podcast, I would have preferred the option to pay a yearly fee of $24.00 and didn't see that option on your site, (may have missed it.) Having these monthly PayPal charges come through my bank Account and Quicken clutter things up a bit. Not a huge issue but a small suggestion that may increase your subscription rates.

Finally, I'm currently not looking for angel or VC dollars as it is too early. However, I desperately need some grey hair to assist me as I raise this company from the ground up. I have many questions and find I spend entirely too much time Googling. I sent an email asking for assistance from the Orange County Small Business Development Center and never received a response. Would the TCA ever consider holding a conference of sorts for entrepreneurs looking for assistance in the early stages? I would gladly fork over a fee to attend such an event. I also often think about the knowledge and years of experience that reside in the room when you have one of your TCA meetings. That type of wisdom, I believe, could charge a very high premium in a consulting environment. Have you ever considered branching off a consulting arm of the TCA? Although my little start-up couldn't afford to pay consultants of the caliber of your membership, I imagine there are many start-ups that could afford such fees. I apologize for the unsolicited suggestions. I can't help myself...

Thanks again for the podcasts, they are a bright spot in my week!

Frank, I hope all is well. Great title to this program. Very funny.

I'm Giving Up

At the time I subscribed, the shows were getting more revealing. So I made the comment that I believed that "Because of the level of honesty on these shows, I think we are likely to learn the new direction of the venture industry here first." I'm giving up on that statement.

The shows started to become more revealing but then stopped short of solving the problem and identifying a new direction. We now see Frank proposing that TCA create funds, but that's an administrative or process change, and not an identified investment direction or criteria. We all know that there are funds that do not succeed. Therefore a fund in itself cannot be the answer.

If one takes all The Frank Peters Shows together, it is obvious to see a repeating theme among the Angels. They have a lack of respect for each other, for themselves, and for their money. This lack of respect comes from a deep seated fear that existed long before the current financial crises, and it is the reason they complain about the lack of exits for the past ten years.

In one of his shows, Frank made the comment that before he joined TCA he was part of another group that invested through a fund. So he was use to speaking out against opportunities that he did not agree with. He learned that in TCA his comments were not appreciated. This is the crux of the problem and what the fear has lead to.

In another show the problem was identified as collegiality. But what is the cause? The Angels think it is dealing with friends, but it is actually fear that is leading to the lack of respect.

The TCA members live in fear of not attracting co-investors such as VCs and other Angels. So they don't want to step on anyone's toes, and what we hear on the Frank Peters Show is anyone is allowed to spout any baloney they want, without any proof of what they are saying.

On Frank's shows one can hear people state:
1. that something is a market indicator when it is not,
2. non-existent markets,
3. that something is a hot area when it is more than a year too late to get into it.
4. and so on.

All these ludicrous non-wisdom statements lead to bad investments. TCA members are so afraid of offending anyone who might be a future co-investor that they allow their "friends" to make financial mistakes. They forget that after their friends are broke from bad investments, they won't be around to co-invest.

Frank recently interviewed people from two different Angel Groups that are experiencing success. Examining their websites and portfolios shows that in those groups the debate of what is and isn't a good investment is open and lively. No one is being told to shut their mouth as Frank experienced with TCA. They actively define their criteria and hold themselves to it. Their investments also show that they were not following the VC hype, and therefore didn't take on investments that would fail without VC involvement.

In past shows one can hear the TCA members were serious about investing in the things that VCs wanted them to invest in without considering if the exit potential is what was claimed. They felt they had to stick to what the VCs wanted without challenging the wisdom or lack of it.

We also hear examples of this in today's show from both Frank and Andrew; both of them spouting things that the facts say otherwise.

Frank often poopoos technology transfer from universities. But from a speech given by Katherine Ku, Director of Stanford's Office of Technology Licensing which can be viewed at http://ecorner.stanford.edu/authorMaterialInfo.html?mid=1292 ; we can deduce that Stanford is roughly doubling its money on tech transfer.

Ku mentions some of the many constraints that she has to work under that prevents her from maximizing the profits. This means that business people often get a good deal from the university.

Ku says that out 5,600 inventions that the university buys patents for:
1. Two will make $50million or more.
2. 13 will make $5million or more.
3. 43 will make $1million or more.
4. Many only make tens of thousands.
A total of more than $208million from just 58 of the inventions. The cost of the patents for those 58 inventions is probably less than $3million. Because Stanford has to be concerned about its relationships with its professors and students, they end up purchasing patents for a lot of inventions that go nowhere.

Stanford's statistics flies in the face of many venture investors who will not touch investments that need money for patents. It should be noted that Stanford does not fund the start-up, just pays for the patent applications and then markets them for licensing. No start-up management team to worry about.

Lately Frank has been talking about the benefits of investing via a fund but hasn't mentioned the direction the fund should take. I propose that university professors and students are not the only inventors having problems affording patents for their inventions; especially inventions that require multiple patents. Considering how much money Stanford is making by investing in patents and then licensing them, patents seem to be a reasonable investment focus for an Angel fund. Especially if the thousands of small time inventions that Stanford engages in are eliminated.

Andrew was almost comical in this interview as he directly contradicts the advice of Tom Perkins, one of the most successful VCs and one of the founding fathers of modern venture capital. Andrew has a negative view of inventors based on one bad experience with an inventor and he will never invest in a company controlled by one again. So I am left to assume that if all it takes is one bad experience, he has never had an entrepreneur that failed him.

Andrew says his problem is that the inventor focuses on the product instead of building the business. Tom Perkins insists that in order to make the really big money, one has to invest in the inventor/technical founder specifically for the reason that Andrew is against it.

Perkins says one cannot attract quality people to run the business at the early stage. So whoever Andrew invests in at the early stage, Perkins would say it is not the right person for the growth stage and the contract better state that he can be replaced.

The inventors/technical founders of Google say it was their strategy to create a quality product first and attract revenue later. They say that's what allowed them to beat out the competition even though they were late arrivals on the scene. They also say it took them a year, from the time they identified him, to get the CEO they wanted.

It is obvious that Andrew's problem is not the inventor. He screwed up on the contract that he prepared and agreed to. He did not give the investment money the respect and protection it deserved. Instead he trusted the inventor on a handshake, and he shouldn't have done that. But now he is badmouthing inventors, and Perkins says Andrew needs them to make the big bucks like he did.

I am an inventor who like Perkins and the founders of Google, would love for an entrepreneur to take over when the time is right. However, like Perkins and Google, I want it to be a great CEO which means that person enters the picture a little later. I wouldn't mind an interim CEO, but I want to eventually get to the great one. On the other hand, Andrew is painting all of us inventors with a broad brush as if we are all bad.

I like Andrew's attempt to define a "true entrepreneur". I think it has already been done in the book "4-Hour Work Week" by Timothy Ferris. You can hear this discussed in the interview of Derek Sivers the technical founder of CD Baby, at Venture Voice. The link is http://www.venturevoice.com/2008/10/vv_show_50_derek_sivers_of_cd.html#more. Derek mentions several books.

But getting back to Frank's shows. Because nothing is challenged, and people say what ever they want without proving their statements, listening to Frank's shows can be like gathering the scattered pieces of a puzzle, and trying to figure out what's what.

Matthew,

Thanks for the feedback... yes, the first contract was bad, but the subsequent observations about inventors are consistent.

By the way, constantly associating yourself with Tom Perkins and Google does not mean they associate with you. Google is the greatest exception ever, and Perkins has funded the exceptions.

Just like you, every inventor I deal with thinks that they are the exception. Their invention can be a billion dollar market, it's completely unique, it's the only one, it's the greatest ever, etc etc etc... they just need someone else to put up the funds. Sound familiar?

I am not sure why you think that you will get yourself funded by coming here week after week with thinly veiled insults of Frank, his colleagues and guests.

If I concede that your are brilliant and insightful, and the rest of us are stupid, will you follow through with your threat and "give up" and stop posting?

Living in hope.

Regards, Andrew

Dear Andrew Fern,

You are the definition of "smart money".

GH ~ if you are looking for "gray hair" try SCORE. This is an effort supported by the SBA to provide startups the experience of retired executives. Check the website for local contacts: www.score.org
Disappointing to hear that your local small biz dev. center did not respond. Try your local economic development office and see if they have a small business/entrepreneurial development contact, who might provide some guidance. This is a huge area of interest in the stimulus bill, so these local resources may be more pro-active than in the past.

Good luck!