XPost: sci.electronics.design, comp.dsp
From: invalid@invalid.invalid
Robert Baer wrote:
> Le Chaud Lapin wrote:
>> On Jul 9, 8:54 am, Joerg wrote:
>>> Robert Baer wrote:
>>>> Joerg wrote:
>>>>> Robert Baer wrote:
>>>>>> Le Chaud Lapin wrote:
>>> [snip]
>>>>>>> My small company will likely do this the old-fashioned way:
>>>>>>> bootstrapping. We have a consumer product to get us started. The
>>>>>>> revenue will not be large, but it will be a start. This method is
>>>>>>> treacherous also, but at least, after our products are exposed,
>>>>>>> there
>>>>>>> will be a clear point of attribution, which can be valuable in
>>>>>>> itself
>>>>>>> for the next venture if things go sour with this one.
>>>>>>> -Le Chaud Lapin-
>>>>>> Bingo!
>>>>>> Develop other consumer products as the more there are, the greater
>>>>>> the possible income and Moses (profit).
>>>>>> They do not even have to be directly related to your idea; what you
>>>>>> need is $$ to fund that idea.
>>>>>> If i was rich like i used to be, i would give you $100K to start
>>>>>> with; the catch being 10 percent of gross sales over a 10 year
>>>>>> period; keep the initial amount (by which time the initial amount
>>>>>> would be pocket lint).
>>>>> Only 10%? That's pretty generous of you.
>>>> Think about how LARGE the market is; ten percent is a very large
>>>> amount of money; at a few megabucks payback, i would tear up the
>>>> contract.
>>> IF the whole plan pans out, and that's usually a big "if". I have heard
>>> from Japanese VCs that on average one out of ten make it. The other nine
>>> just burn through an awful lot of cash and then fizzle.
>>
>> This gets back to the whole random-vs-deterministic debate, and is
>> rooted in a kind of class struggle among investors and entrepreneurs.
>>
>> People who are inept at choosing the right horses would have you
>> beleive that winning is random. People who are adept at choosing the
>> right horses would have you believe that winning is deterministic. In
>> between is a spectrum of ability to choose the right horses.
>>
Basically correct. However, if you are really working on the cutting
edge for example in medical the determinism coefficient is miniscule.
You simply can't know if a certain procedure will work. Nobody can. Else
one of the big pharmaceutical or devices corporations would already have
put it onto the shelves at Long's Drugs.
>> I had the conversation with a VC in New York City this past January
>> who had invested $5US million in a company doing IPTV. The company was
>> stuggling badly, near bankruptcy, and I had learned of it through one
>> of my ex-students who introduced them to me for a consulting project
>> that they wanted completed. It was difficult trying to figure out what
>> they wanted, because the person in charge of the project could barely
>> tell me what he wanted. He was polite, professionally, but
>> frighteningly ignorant. It took about 12 emails back and forth to
>> realize that the reasson I was having so much trouble understanding
>> him was because he did not understand himself. When I finally realized
>> what the other all goal was, It took all of 5 minutes of poking around
>> to realize that:
>>
>> 1. With the exception of my ex-student and another engineer, the
>> technical depth within the company was too low for them to be doing
>> what it was they are doing [data compression - they had stolen a
>> compressor from another company, essentially].
>> 2. someone in company had grossly distorted the truth about capability
>> of product (flat out lied in fact) to customers.
>> 3. The VC who invested the $5 million didn't have a clue.
That is a classical mistake. I will never understand this but VCs and
corporations are willing to spend six figures per case on legal counsel
but they balk at retaining a few engineering consultants for less money
to check things over. Naturally, that leads to tons of failed
investments. The worst one I've witnessed: I wrote a proposal to a
struggling VC-funded firm about how I and a FPGA/CPLD engineer could
help them pull through. This is because I saw quite clearly where they
were heading down the wrong path and how we could fix things. They
pondered it and then turned us down. Subsequently the whole business
went belly-up. And I knew it would :-(
>> 4. The CTO of the company had recently spent 35 months in Federal
>> prison for burning down his own computer store. He was convicted on
>> certain evidence:
>>
>> a. being seeing on camera running from the store holding a gas can a
>> few seconds before the store went up in flames
>> b. reeking of gasoline at the hospital where he was treated for 2nd
>> degree burns over his body (he didn't run fast enough)
>> c. his own employee's testimony that, the day before the fire,
>> employee was told to "get anything of value you own out of the store
>> by midnight tonight."
>>
Oh man, they didn't even do a criminal background check before investing
big money? Now that's pretty daft. What would that have cost? $100? $200?
>> Anyhow, I was introduced to this VC for potential investment. As
>> mentioned, he understood very little about IPTV, let alone network
>> protocol stacks. It was obvious that I would get no traction with him,
>> so I asked him about the IPTV company, and the the word he used to
>> describe the investment was "problematic". It took the opportunity to
>> poke him a bit, to try to figure out what goes through the mind of a
>> VC when he writes a check for $5 million for an ex-asonists who claims
>> to have technology that, if it existed, would violate several
>> fundamental laws of information theory, not to mention was just plain
>> dumb to any engineer worth his salt in the field.
>>
>> The VC starts up with the, "well...you can never tell with these
>> things...it's all random......the technology looked good...the guy
>> could sell snow to Eskimos!!!"
>>
>> I disagreed and asked him if he understood the technology, and he got
>> angry and that was the end of that.
>>
>> The point is that it's not entirely random. Just ask Andy Bechtolsheim
>> about his $100,000US investment in Google and other investments:
>>
>> http://en.wikipedia.org/wiki/Andy_Bechtolsheim
>>
>> It is more random for some VC's than others. Having worked for a few
>> startups, I can tell that most ideas, IMO, are mediocre at best (copy
>> cat, limited market, etc.).
>>
The ones I was actively involved in as engineer all took off. So far ...
But I also never participate in anything I do not believe in.
>> Products like the Rubik's Cube, OTHO, were so compelling...not only
>> was the marketing initially bad, it was non-existent, and the product
>> still fared well.
>>
>> In summary, better products typically do better.
>>
>> -Le Chaud Lapin-
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