FP said: ".... Go chase some customers .. and be prepared for when we come back after Labor Day .... "

That is what I am doing ... booked ~$20k so far in August :-)

AM

Heh heh; was that a challenge when you said "Mat often leaves quite a thoughtful, provocative, critical, critique... who knows what he'll say about tonight's show"?

Yes it would be great to get a dialogue going here at the website. In order to do that, what is needed is email notifications of when comments are made and the ability to make comments on other people's comments; the creation of specific threads that can be followed. These are becoming normal features on other sites.

I once got an email from one of your guests who read my comment six months after I wrote it. A six month lag timedoesn'tt quite foster the creation of dialogue.

I've just listened to this show; about 11 days after it came out. The previous show I listened to was the show on passion, three shows ago.

I was disappointed in the show on passion. Every musician in the orchestra has passion, but that doesn't mean they all have what it takes to be the conductor. Everyone in product development in a large company has passion for the ideas and products they come up with; but cooler heads have to prevail and choose which products to take to market. We don't see the necessary cooler heads in TCA's track record.

When I got the email notification for this show I wasn't enticed. When I read the words "process" and "psychology", I thought, here we go again, another gimmick to have false confidence in.

What drew me back to the shows was that I realized something Frank and I have in common. I'm glad I have listened to this show because it is probably the best show since the Angels on this show started complaining about their poor track record, membership problems, and collegiality, called herd mentality in this show.

Although this show still fails to hit the nail on the head it shows that some Angels are finally coming around, in their own very long drawn out convoluted way, to the same old tried and true methods that have worked since before recorded history. They are not there yet, but this show shows us that is exactly where they are headed as they try to identify the indicators of success.

What Frank and I have in common is that Frank often speaks positively about venture investing in biotech and says he would like to get into it; but he is unable to because those funds require investors to have a background in biotech. That requirement tells us that they adhere to well defined methods for identifying the best biotech opportunities; and that they only want investors with the ability to do that. This idea of limiting the number of investors and therefore the amount of available money seems very different from how most Angels and VCs operate. The priorities are certainly different.

Likewise, I often comment that Angels and VCs should adopt well defined methods for identifying opportunities with the greatest potential for success in their industries of interest. This is nothing new. Can you imagine if any industry, such as cars, or cellphones, had the same track record as most Angels and VCs? My point is that the well defined methods for identifying which new products to develop have existed for a long time, they have even been mentioned by other guests, but many Angels and VCs refuse to acknowledge and or follow those methods. So it should be no surprise when we hear them complain about the lack of successful exits over many years.

I think a show interviewing Biotech Angels about their selection methods, and comparing them to TCA selection methods would be interesting.

TCA often speaks about the amount of money it has invested. That tells us that it is not the amount of money that has prevented TCA members from investing in successful biotech opportunities. Successful ventures haven't shown that the things they have in common are psychology or passion.

This show was on psychology and a previous show that also featured Mr. Sudek was on passion.

The statements made on your shows regarding psychology and passion show us that Angels are making their ability to identify quality opportunities the responsibility of the entrepreneurs. Rather than telling entrepreneurs to focus on developing opportunities that have a high probability of success, they are told to focus on how to get into the heads of Angels.

The executives at companies that conduct product development are not telling their developers how to get into their heads so that they will choose their product to take to market. Rather they work on focusing and directing the development of products that they believe will allow them to outperform their competition.

I had to hit the pause button because I couldn't stop laughing when Rob Wiltbank said "Once you can get a sense of who the investor is and what their bias is and their grading of the actual venture. You can actually predict really highly if that venture is going to move forward into due diligence and ultimately get funding based on the group." I don't think you can call it prediction if you know their grading of the venture; that sounds like it has been indicated to you. I just couldn't stop laughing.

There is another reason besides what is stated on the show, as to why entrepreneurs should understand how an investor sees opportunities. Angels often hold themselves out as mentors and claim their mentorship adds value to the deal. Any Angel that spends time reviewing fast pitches without first screening them for their specific area of expertise is not likely to be a good mentor for the entrepreneur nor have the ability to recognize a good opportunity that is outside their area of expertise. The entrepreneur should quickly move on to potential investors with the necessary expertise to understand the opportunity. The proof of this statement is in TCA members complaining about their lack of success and dealing with membership issues. It has also been said by past guests.

Angels and VCs don't want to hear that they have to specialize in certain industries because it means they will have to go back to school for continuing education and keep up with the latest advances. Another reason they don't like the idea of specializing is that they feel it reduces their credibility as an investor and therefore their ability to attract other investors. They'd much rather claim that their title of Angel makes them an authority on investments of all types. Keeping themselves open to all things is analogous to a small child that does not want to go to bed because it thinks it is going to miss something.

Angels that make themselves available to all types of investments are like the old saying; a jack of all trades a master of none; or the saying he who chases two hares catches neither. Even stock market analysts focus on specific industries.

Focusing on things like passion and psychology are just a confidence trick so Angels can feel they are appropriately narrowing their focus. They want to believe they can identify a single trait that is common to all industries and thereby justify their investments. The problem is, those traits are also common to unsuccessful investments.

Part of the problem in venture investing today is that many of the VCs and Angels have made their money during economic booms of electronics, computers, software, and the internet. Booms don't require in-depth understanding and skill to get in and make a killing, but understanding does help in knowing when to get out and when it is too late to get in. So now they make venture investments with the same lack of developed skill and understanding, but they no longer have the boom to make up for their short comings.

I don't see how "studying the bias of Angels so that they know how they are looking at particular deals" is anything new. It sounds like the exact same jargon one can hear at a typical sales motivation and training meeting.

Saying that Angels who made their money in finance or as an entrepreneur will act this way or that is also nothing new; the earliest writing I read on that was thousands of years old when Confucius wrote to look at how someone made their money. For a long time now people have been saying for entrepreneurs to disregard what a potential investor says and look at their portfolio to know if they should spend time on them. Investors themselves also say look at my portfolio before you approach me.

Wiltbank is not doing himself or anyone else any favors when he claims that the wins in venture investing are random and can't be predicted. Several past guests have stated that they have analyzed the wins and said what they all have in common and what to look for. Those guests include Randy Lunn, Tom O'Malia, and Jim Armstrong. Frank has also featured articles and books on the subject such as Creative Destruction.

The VCs that talk like Rob Wiltbank are the ones now having trouble raising money. Take Guy Kawasaki for example. As a VC he was fond of saying "how should I know what the next big thing is"? Now he is the CEO of All Top which produces search results based on popularity instead of my search parameters. I don't need it.

Studying the difference in the process between super angels and regular angels is not the same as studying the difference between success and failure. I'm sure one can find angels who create a fund which then acts much like a super angel. But who's the bigger winner and why? According to pasts guests the answer is not in the process.

Wiltbank talked about his book The Catalyst saying they have been studying entrepreneurs for over a decade. It's a leadership book, which means no advantage over the competition can be claimed. It also means it still doesn't identify the parameters of a successful opportunity.

Wiltbank's education is in management and finance and accounting, not product or market development. So he naturally focuses on people and not the technology or market. Past guests on the show have all claimed the importance of knowing the market and then the technology, and that people can always be replaced.

This show was all about studying people and not the opportunity. It has been said that in today's economy there is no shortage of people to staff an opportunity. So the investor is not going to have a shortage of the type of people he likes to invest in approaching him. He is still left with the problem of identifying which of these people he likes is presenting him with the best opportunity? To answer that question he is going to have to specialize and he is going to have to take the advice of past guests.

An ironic thing that should be considered is that the fast pitches and video presentations of past TCA contest winners and TCA investments that have gone nowhere can be seen on the web. These pitches focus on the "predictive" just like the guests claim they should. The problem with them is that TCA members have coached these entrepreneurs into making such wild "predictive" claims that there can never be any hope of them showing the necessary "control" to be able to make such claims. This show focused on the need for the entrepreneur to learn these things. But what is an entrepreneur to do when the Angels insist that he acts contrary to what the researchers claim works? In some cases coaching sessions with TCA members is a requirement in order to present. In spite of these fiascos the Angels keep telling us what great mentors they are. Should I bring up Budding Brilliance again?

In a previous post I pointed out that Stanford University's Office of Technology Licensing has a much better track record than most Angels.

They select which technologies to buy patents for and which ones not to invest in. Then all they do is sell the licenses to existing businesses or to start-ups. They don't care about passion, the psychology of the investment process, or generating excitement.

Over and over again the winners tell us how they do it; including past guests on this show. But we continue to have those who are not interested in doing that kind of homework, tell us it's just a numbers game and winning is just random and it is impossible to tell.

They are refusing to learn from the recent VC crash that saying such things and operating in that manner is harmful to both their own investments and harmful to the venture industry as a whole. Why would anyone want to participate in a venture or a fund when the co-investors and fund managers are insisting it is just luck?

I don't want an investor whose idea of attracting more investors is to tell them that they have no idea if the venture will succeed and it is impossible to tell. That's not the kind of help I need. It also harms the ability to attract and retain quality talent when you tell them no matter how hard they work it is just luck if they still have a job in the near future.

As Angels keep emphasizing that they are unable to discern the upside:
1. They are telling entrepreneurs that they are not suitable mentors.
2. They are discouraging quality investors from participating.
3. They also discourage quality entrepreneurs from participating in ventures.

We tend to think that freedom is always good. This free speech is hurting the venture industry. These researchers have told us they are studying everyone in the industry and drawing their conclusions based on what they all have in common. Not everyone is worth studying. Time is much better spent studying what differentiates the winners from the less successful for the purpose of emulating them.

Then we also hear from these researchers that they are the chairman of such and such investment organization, or in such and such investment firm, and they teach these things at such and such schools. It all makes what they are saying that much more harmful to the venture industry. After all, weren't they in these positions before the VC crash?

Have you ever noticed that the vast majority of the time academicians tell us they have uncovered something new, it more often than not turns out to be just a new way of saying the same old thing?

In the show on passion they said no one has ever looked at it. But I was able to point out a past guest who described the ins and outs of passion with more detail than the researchers. In this show they said "prediction or control" was a new concept but it is actually the same type of thing that is discussed at any typical sales meeting and the parameters they used to determine prediction or control were written about thousands of years ago.

According to what we have learned from past guests on how to identify likely winning investments, it is fair to say that these recent shows on passion and the psychology of the process are putting the cart before the horse.

The winning investments tell us to always focus on the market first and to make sure it is defined thoroughly and accurately. Past guests have told us how the less successful and failed investments either pursued non existing markets or the markets turned out to not be what they thought they were.

Some past guests have insisted that they invest in people and not the idea, product, business plan, etcetera, because all those things are going to change and they need people who are flexible and able to change as the business changes. If your entire business model or entire product or service changes, that's another way of saying you didn't have an accurate understanding of the market the venture was originally pursuing.

Knowing the market well tells you:
1. What you are predicting.
2. What you need to control.
3. What type of entrepreneur you need.

Different markets will answer those three things differently. To jump straight into trying to get the jargon right so you know how to excite investors leaves out the first step of the market which defines all subsequent steps. Angels who are willing to be excited without first comprehending the market thoroughly are not likely to make good mentors.

It is also ridiculous to look at investors as one or two sizes fits all. Just because the entrepreneur has defined the market accurately doesn't mean every Angel will comprehend what he is talking about just because he uses the jargon they like. It takes time to understand the hows and whys of the things that are the controlling factors of any market. Like Sun Tzu told us over 2,500 years ago, it does not take any great skill to see a market that can be easily seen, and if it can be easily seen there is no great profit to be made in it. Randy Lunn, a past guest on this show told us the same thing.

If we're going to talk about the psychology of Angels lets at least be realistic. Angels with poor track records like to think that the reason they make so many failed investments is that they are driven by the possibility of the big score. The actual reason they do it is simply out of fear and they are looking for those entrepreneurs with the ability to calm their fears. If an entrepreneur can help these Angels suck their thumbs, he or she can get funding.

Angels with poor track records intentionally keep themselves in a state of fear by refusing to take the time to thoroughly understand the market they are investing in. They are afraid that taking the time to do so, and that narrowing their focus to specific markets will cause them to miss a great opportunity. Not having enough confidence in their investments causes them to make more and more investments, chasing the confidence and success that eludes them.

The researchers in this show say that toward the end of the investment process Angels are more concerned with the ability of the opportunity to control its outcome. That's just another way of saying that the past guests on the Frank Peters show who emphasize that correctly defining the market comes first before anything else, are right. If the Angel hasn't correctly defined the market they have no ability to evaluate the opportunity's ability to control its destiny.

This emphasis on control is the reason I said in a previous comment that this show indicates that Angels are finally coming around to accepting the proper tried and true business practices. Instead of looking at research from people who have backgrounds in finance, management, and who made their fortunes during a boom; given the facts stated by this research, the next logical step is for Angels to develop understanding of the elements of control which can best be learned by people with successful business experience that depended on these elements of control.

Currently Angels are spending too much time studying both themselves and entrepreneurs in general, when they should be studying how to determine the level of control a particular opportunity actually has. They think they already know how to do it, but their track record says otherwise.

Frank, I challenge you and any Angel or VC who reads this.

We can often hear Angels being condescending toward entrepreneurs on the Frank Peters Show. They lump us all into the same category of "bozos", and talk about their bozo filters.

Now they claim to have been looking for opportunities that have demonstrated their ability to control their destiny, but at the same time they tell us the business model, and or product, and or service is likely to change. This tells us the control they thought they had did not exist at the level they thought, and in some cases not at all.

So if control is what Angels are looking for, but in the end it turns out they were seeing something that wasn't there, who is the bozo? Angels are in need of a bozo filter that they can apply to themselves and not just to entrepreneurs. Better yet, a filter that they can apply to both so that anyone coming out of that filter is already seeing eye to eye.

As someone offering a seed stage opportunity, I've received negative and even condescending comments from Angels, VCs, and fund managers, including from a Frank Peters Show guest. What every single one of them have in common is that not a single one of them have qualified their negative opinions based on the parameters of control specific to the market that I am pursuing. None of them could be bothered to verify if the market's parameters for control support their opinions.

The challenges I propose are:
1. To prove if the elements of control for the market I am pursuing are not what I say they are. And or,
2. To prove that the size of the market in units is smaller than what I claim it is.

I offer to be on your show Frank and discuss the elements of control that affect the market I am pursuing and your listeners can make comments to prove me wrong and or you can have a follow up show where Angels and VCs can comment on my claims. You could have a panel on the same show to challenge my claims, but I think it is fair if they are given time to do their own research and then comment.

Since you have said my comments can be worth people's time to go to your website and check them out, perhaps they are also worth putting on your show.

Since you have had several guests say that Venture Investors need to understand the market they get into, a show like the one I offer can be very educational and helpful to your investor listeners. It will either identify a market opportunity for them or identify one to stay away from.

Jim Armstrong And John Huston On Control

Control? Are you sure this research is accurate? Maybe it's just that the Angels and VCs THINK they are investing in control.

If you're going to be like John Huston and tell me that the business is going to change entirely; or be like Jim Armstrong and say the difference between the winners and the failures is that the winners are the ones who took the time to accurately define their market. That means those changed businesses and failed investments did not even know what they were supposed to be controlling and neither did the Angels.

So it seems that the investors thought they were investing in an opportunity that showed an ability to control but actually what happened is that the entrepreneur came along and said don't worry, Daddy's here, you don't have to bother yourself with verifying the market forces that dictate what the venture must control, Daddy will take care of everything. Pay no attention to the man/market behind the curtain.

According to the statements made by Jim Armstrong and John Huston, if we look at the failures we will see that Angels kept themselves in the dark regarding market forces that dictate what an opportunity must be able to control in order to succeed.

An Analogy To Show That Angels Were Investing Too Fast And Too Often Out Of Fear.

We can use recent events in today's economy as an analogy to show that Angels were investing in too many deals too fast out of fear. Long before the economy stabilized, large corporations started posting profits even though their sales were lower than the previous year. They accomplished this by laying off thousands of people and closing factories and offices.

Since it is possible for them to make these profits without having all that overhead, why did they have all that overhead to begin with? Because they were in a race to acquire more customers before their competition did. But when the economy went south, it reduced the number of new customers to chase after.

It is also similar to alcohol and tobacco companies targeting the youth. They want to create brand loyalty with those customers before their competition does.

The modern venture industry came of age during the dotcom bubble in which there was this race to IPO before competing similar businesses. This hurried frenzy to invest continued long after the bubble burst. Angels continued to run in a race that no longer existed. In a hurry to be part of the next big thing but in no hurry what so ever to verify the market.

Every new venture is in a race. It is the Angel that pulls the trigger on the starting gun by investing. Before an Angel pulls that trigger he should verify if the race really exists, and how to navigate the course by identifying the cash-flow within the industry and the market forces that dictate what has to be controlled in order to win.

The thing that would probably do the most to encourage dialogue here at your website is if you made it a point to participate Frank. After all, you are the celebrity of the site and the show.

Even if you disagreed with me it would probably still foster dialogue. I'm sure there must be some that don't like what I write and they might enjoy you shooting me down. The most worthwhile dialogue seems to be when opposing views are acknowledged and when an attempt to reconcile them is made.

Another way to encourage dialogue is for you to read and discuss any opposing or worthwhile points on your show. Like radio shows that read letters and emails form callers.

You don't have to dedicate an entire show to listener comments. It could be just a segment of your planned show. It would also showcase your website and encourage people who are interested in the specific comments being made to go and make some comments of their own. Unless you bring it up on your show, many will never know certain issues were even raised on your site.

People might be encouraged to make comments in the hope that you will read their name and comment on your show.

We should be honest with ourselves and admit that the data used in the research comes from a time period in which the Angels themselves are not proud of their returns. The conclusion drawn assumes that the Angels are going to continue to act in the same manner that they are unsatisfied with. Therefore the helpfulness of this research is limited to how much the Angels refuse to improve how they conduct themselves. Angels say they want to improve, and if they do change how they do business this research becomes less meaningful.

It will be interesting to see if Sudek leads his organization in a manner that improves their results or if he will lead his organization in a manner that justifies his research.

Contrary To What They Are Telling Us The Researchers Have Failed To Identify How Angels Invest

Sun Tzu would say this idea of control as proposed by the researchers is a farce. Sun Tzu told us the strength of your venture depends on you and the weakness of your competition depends on your competition. You are not going to do anything to create weakness in your competition. You just have to outperform them and take advantage of pre-existing weaknesses.

The researchers are using the word control incorrectly. They say they have studied the Angels and the process. But they don't say they have studied the opportunities and the reasons they failed. Only by studying the ventures can they determine if control is what truly was invested in.

Until they show that the control they talk about actually existed in the opportunity, they cannot claim the Angels invested in control. Not having shown that means they have yet to identify how Angels invest.

Angels Tell Us They Do Not Invest In Control.

Angels say they don't care when an entrepreneur or inventor comes to them with an idea or invention and tells them how it is the best and there can be nothing better. They tell us someone always finds a way to improve it. Angels don't see any "control" in the invention or business model. Angels have told us they don't invest in products, ideas, or businesses, they invest in people.

There is absolutely nothing a venture is going to do to control its competition to perform in an inferior manner. There is also nothing a venture is going to do to control potential customers to choose only it. Anything of value that it offers to potential customers, the competition will find a way to do the same or better.

This leaves itself as the ONLY THING a venture can CONTROL. So when the researchers talk about control what they are really talking about is SELF CONTROL. In other words what really is sought after is the ability for the venture to PERFORM, because it is not going to control anything other than itself. Maybe hundreds of hours of research were conducted, just to tell us the same thing Angels have been telling us for years. They invest in people.

Both of the researchers are from academic institutions. Such institutions typically require their professors to conduct research. Many times the researchers are in a bind to show that they have studied something new, or were able to draw new conclusion, so that they can show their research has value. It is not uncommon to see new terms applied to the same old data to make it look like value has been added. It's the easiest way for a professor to show that he has met his research requirement.

If Angels buy into this idea of control, they can end up wasting a lot of time and money chasing something that doesn't exist. They should continue looking for a venture's ability to perform but first study the market because that tells them what the performance requirements are.