A hearty erin go braugh and top o’ the morning to you.  I’m in a particularly cheerful mood this morning despite having been awake since 3:54 am.  It’s either my wee bit of Irish heritage… or the fact that USC easily handled Arkansas last night… or that I just closed a very promising deal…or maybe it’s something else altogether that has me in such good spirits on this St. Patrick’s Day…   Anyway, I promised some more info on the OC Tech Start-Up scene so here goes.

A very big cheers (and thanks) to Ben Kuo at socalTECH for further illuminating the OC tech start-up environment.  According to the socalTECH database, there are 137 tech start-ups in OC and the break-down is as follows:

Aliso Viejo  15
Anaheim 1
Brea 1
Buena Park 1
Costa Mesa 5
Dana Point 1
Foothill Ranch 3
Fullerton 1
Garden Grove 1
Huntington Beach 1
Irvine 62
La Palma 1
Laguna Hills 1
Laguna Nigel 3
Lake Forest 8
Mission Viejo 5
Newport Beach 9
Orange 1
Placentia 1
Rancho Santa Margarita 1
San Clemente 5
San Juan Capistrano 3
Santa Ana 2
Torrance 1
Tustin 1

As some of his listings are now public companies through either IPO (e.g. Broadcom) or having been acquired by a public company (e.g. Foundstone / McAfee), this list is probably closer to 120 or so if you also factor in those still in stealth mode.  In any event, it suffices to say that OC is developing quite a vibrant start-up economy and I am VERY optimistic that it will only continue to grow in the years to come as the OC VC ecosystem matures.  Ben has also been so kind as to help develop a subset of his socalTECH map for OC tech start-up so stay tuned for this feature (it’s more a matter of me figuring out the HTML/Javascript integration into my hosted Wordpress site than anything else).  Until then, have a glorious and fun-filled St. Patrick’s Day 2007!!!

I was at dinner with Chip Burczak last night at The Clubhouse (thanks again for dinner Chip) and proceeded to take a bit of a hazing for being a VC in what was perceived to be a town with “a different kind of silicon” (not exactly Chip’s words)….so this post’s for you Chip. It’s the least I can do after good food and even better conversation - it was great to catch up.

I returned home from dinner to a sleeping wife and son so I decided to do a little recon on just how many tech start-ups there are in OC and logged-in to VentureSource and ran a search. Turns out, there are 69 tech start-ups in OC (949 and 714 area codes) according to the their database. I realize that this number is just ballpark as some of the 69 are inevitably walking dead at this point and there are some that are in stealth mode that aren’t yet reported (e.g. RF Nano Corporation)…but it suggests promise as that works out to roughly 13.8 tech start-ups per square mile in OC. Hard to believe, huh? You should also consider that those 69 companies represent start-ups only in the traditional information technology sectors and do not include medical device or healthcare IT companies (sectors we’re very well represented in). I’d list the companies at this point but I don’t recall the terms and conditions of my fund’s service agreement with DowJones/VentureSource so I better not until I ensure doing so isn’t a breach of contract (sorry, it’s the recovering attorney in me)…. Stay tuned and I’ll see what I can work out to get you the info either way.

Speaking of OC tech start-ups, what do all of you want to read about here? After all, you are at the CORE of any thriving VC ecosystem so don’t be afraid to speak-out (publicly or privately).

I was watching my Trojans get spanked by the Ducks in the Pac-10 championship game (could you hear me yelling?) while IM’ing a friend and commented on what a solid player I thought Nick Young was - despite his then current performance.  I debated with my friend as to whether Nick would “rise to the occasion at the next level”.  The debate led to a general discussion on what skills it took for different endeavors and eventually got me thinking about what “skills” it takes to get venture capital funding…which leads me to this post.

 Along these lines, most VCs invariably serve on a variety of panels on any given year and, inevitably, are asked what we look for to make our investment decision.  We all typically give the same canned reply about the size and nature of the market being addressed… the technology and/or competitive advantages the company will have relative to its competition in such market… the financial strategy and risk profile associated with building the business in question… and then all agree that the biggest emphasis really is on the people before moving on to another question.  In some cases, we simply respond that it’s all about the folks involved.  So, in light of my previous comments about Nick Young, what type of skills does it take to get venture capital funding?  In my humble opinion, it really comes down to what I call “The 3 Ps”: Passion, Persistence, and Perspective.

 Passion – Simply put, if you don’t believe in your endeavor with all your being, it’s hard for investors to do so.  I’m talking about genuine enthusiasm to the point that it is contagious.  You really have to love what you’re doing and let it show.  VCs meet with several entrepreneurs every day and those that stand out tend to be those that are most passionate about their idea/product/service/company.  If you’re not passionate about what it is you want VCs to invest in, we start to wonder why…

 Persistence – It starts before you even get a chance to pitch.  Odds are that you’ll hear “no”, “not interested”, “we’re going to pass”, or something other form of rejection many times over before you get to a “yes”.  You will also encounter a number of obstacles or challenges while building your business and you need to show investors that you have the ability to persevere despite the inevitable set-backs and the like.  Financing your business through venture capital creates a long-term relationship and your investors need to know that you’re not one to pack his or her things and hit the road at the first sign of trouble.

 Perspective – I think it’s the presence of this trait or characteristic (and the degree to which it is present) that separates those that “get it” and those that don’t.  Yeah, you need to have passion and persistence, but you also need to temper them with the wisdom to know when dial them up or down.  What the heck does that mean?  Simply put, it’s the ability to perceive things in their actual interrelations or comparative importance relative to each other and to the whole (i.e. being able to connect the dots).  Since most successful serial entrepreneurs exhibit this trait in abundance (hence the reason we VCs tend to chase them), you might now question whether perspective is innate or learned.  Good question.  I suspect there is a fair amount of debate on this one amongst the VCs.  Personally, I think it’s both and will always look for it in entrepreneurs I meet with.  Until next time, happy venturing…

I spent the better part of the week up in Santa Monica at the Montgomery Technology Conference where 94 private and 50 public technology companies presented to packed rooms during the 2-day event…so I thought I’d share some observations from my pilgrimage North of the Orange Curtain.  First, Sheraton Delfina spent significantly more renovating their lobby and common areas than they did on their rooms.  I don’t usually pan hotels - because I’ve stayed in some real hovels around the world over the years - but I was very disappointed with the hotel as a SPG member.  Second, either WalkJogRun is a bit off on its calculations, I ran the wrong route, or I really am starting to get old as my “5 at 5″ routine stayed with me all day on Tuesday…  My third observation was that this year’s theme was either “new media” or “digital media” - take your pick - given how many of the companies were in the space and the number of network execs I ran into during the conference.   Finally, I was pleasantly surprised that Tech Coast had such a strong showing.  If my memory and math serve me correctly (a big IF), 21 of the 94 private companies that presented (22%) were from the Tech Coast… and 5 of those 21 were from right here in beautiful OC (24% of the Tech Coast presenting companies and 5% of all the private presenting companies)!!! And who said we don’t have tech start-ups down here???  Given the theme of this blog, I’ll give a shout out to the OC companies that presented (alphabetically,  so as not to offend anyone): Aristos Logic, DATAllegro, iStor Networks, Networks In Motion, and Quartics.  If I missed anyone, let me know and I’ll be happy to set the record straight here.  I also was proud to see the OC VC out in full force with most of our local funds in attendance.

I’d like to wrap this post by circling back to the “new media” theme and simply point out that the consensus among the 500 or so attendees and presenting companies seems to be that what UGC (user generated content)  began with respect to on-line video PPC (professionally produced content) will finish and the race is on between the studios…  To this point, Michael Montgomery led an excellent panel on “Advertising in a New Media World” that included Michael Benson, Wes Nichols, Chuck Davis, Alex St. John, and Michael Yavonditte that discussed the coming tsunami of Internet advertising (yes, we’ve only just seen the tip of the iceberg thus far) and the “hows” and “whys” of the phenomena and I’m excited to see how this plays out both as a consumer and an investor.  So, as they said in traditional media, stay tuned next week…

My wife and I perused through a book fair at a local elementary school yesterday and both of us remarked how much we enjoyed them when we were kids. Both of us are avid readers and being surrounded by all the children of varying ages reading and buying books brought back many fond memories… So, what do book fairs and reading have to do with the VC ecosystem in OC? Well, as they say, reading is fundamental… It is therefore a cornerstone of a obtaining a good education… which, in turn, is a cornerstone of entrepreneurship…and entrepreneurs are at the core of any VC ecosystem. Follow my logic? Good, let’s move on.

Coincident or not, this week just happened to be Entrepreneurship Week in the United States and I spent the early morning hours today in Riverside, CA at Poly High School where I awarded certificates to 24 juniors and seniors in Mr. Rusty Bailey’s Economics class for participating in the NVCA’s “Big Idea Contest” coinciding with Entrepreneurship Week this week. I was impressed by the students passion and enthusiasm for the project and I can see why Mr. Bailey was recently bestowed Teacher of the Year honors. Their ideas were very good and I look forward to getting OC schools involved in next year’s contest – on that note, please email me if you are or have a local teacher/school that would like to participate as I’m on the NVCA MAGNET program’s executive committee and would love to get some local schools involved in the 2008 contest.

Speaking of education, Brad Feld has an interesting post on education and I tend to agree with his sentiment on these matters in that local socioeconomic leaders truly interested in stimulating their local entrepreneurial economy should always spend some time improving education in their region – especially K-12 science and math. We all have our part to do here so let’s get to work. Have a good weekend.