In the new world, cybersecurity comes down to terrorist protection. This is much bigger than your old Yahoo email password.

As the world of cyber crime has evolved, so has Easy Solutions, which claims to be the only company on the planet focused completely on comprehension and protection of electronic fraud across all devices, premises and clouds. The company recently updated the abilities of its Detect Monitoring Services (DMS), introducing earlier fraud protection, expanded real time monitoring capabilities, and faster fraud protection. The new platform allows the company to neutralize threats even faster, pretty much stopping the fraud in its tracks.

DMS invisibly monitors sites to detect patterns and behaviors associated with the early stages of phishing scams, stopping the threats before they cause damage. The software features a simple interface and works across all devices, premises and clouds.

The new system includes a more user friendly design as well as a cloud-based portal that keeps track of new threats in real time.

Among the nearly 800,000 unique phishing attacks in the last 12 months, the company has held a 76 percent proactive detection rate, with an average deactivation time of 3.6 hours.

With the US economy continuing to suffer from one of the longest economic downturns since the Great Depression, some countries are enjoying far better economic times and using our ingenuity to fuel it.  Where is that economic fuel coming from, and why aren’t we exploiting it?

The US economic July employment report confirmed that a protracted economic slowdown is hovering over the US and we just can’t seem to shake it off as we have in the past. The most recent gross domestic product (GDP) stats show the economy averaging 2.3% real growth over the past year, precisely the average rate of the last three years.

With the US in its continued sluggish economic quandary, China has moved forward and applied serious economic stimulus policy, Brazil is enjoying expansive growth policies, while Europe is aggressively mapping out much needed structural reforms.

We, in the US, just don’t seem to “get it”. The Economist recently reported that many aspiring new business entrepreneurs are leaving their countries for California’s Silicon Valley.  There are now over 50,000 Germans in Silicon Valley, and an estimated 500 tech start-ups in the San Francisco Bay area with French founders. “Germany and other countries have recently set up state-backed agencies to send enterprising Europeans straight to Silicon Valley, knowing that successful founders often recycle their money, contacts and experience into start-ups back at home” states The Economist.

According to the Global Entrepreneurship Monitor, which compiles comparable data across countries, “early-stage” entrepreneurs in the US made up 7.6%, compared to China’s 14% and Brazil’s 17% of newly formed businesses.

Why is this occurring outside the US and not within it?  China, Russia, Brazil, France, Germany, Israel, Sweden, and even New Zealand are experiencing technology gains, and with it, achieving economic boom.  The epicenter of innovation remains Silicon Valley, but our economic ecosystem is rapidly being depleted.

President Obama recently said: “If you’ve got a business, you didn’t build that. Somebody else made that happen.” Clearly, this doesn’t bode a supportive vote of confidence to our entrepreneurial camp devoted to building businesses in Silicon Valley.

Last year the Obama administration backed Fisker, an innovative cleantech car company that received a $529 million federal government loan guarantee.  Fisker announced that it will be assembling its cars in Finland, stating that it could not find a facility in the United States to assemble its cars.  Really? This announcement on the heels of Vice President Joe Biden’s statement that the Energy Department’s $529 million loan to Fisker was “a bright new path to thousands of American manufacturing jobs.”  Amazing…

Intel’s microprocessor research and manufacturing is now being produced in Bangalore, India and in Israel, no longer in Silicon Valley or Hillsboro, Oregon.  Google, Microsoft, Oracle, Cisco, EMC, Symantec, and Applied Materials have also set up major operations outside Silicon Valley.  Once the lifeblood of Silicon Valley, venture capital investment in innovative growth industries like mobile, cloud computing, open source, security software, IT, medical devices, biotech, alternative energies and cleantech are all finding their way to bolster other countries’ economies. These countries are displacing Silicon Valley’s inflow of capital, employment, jobs, technology edge and its stature as a worldwide leader.  As an example, Israel now has 1,800 active high tech start-ups, all hiring and expanding with a diversified pipeline well poised for continued growth as a venture-backed economy.  Both IBM and Microsoft invested in Israel start-up tech companies in excess of $300 million.  We know of course that in terms of jobs, new entrepreneurial firms have an added advantage, they are less likely than large corporates to outsource a lot of their jobs to low cost providers in Asia.

Why is this happening?  Well, because we are no longer as attractive to investors. The governmental uncertainty and the risks in the US are now greater, and the returns lower.  Our governmental tax policies are no longer conducive to new business formation, sustained employment or capital gains offsets. The mainstay capital flow for new businesses, Venture Capital, is geared to precisely targeting the best possible returns. All of these elements signal venture investor caution.

We are quickly dismantling our country’s growth engine with massive deficits, regulatory job-destroying burdens, increased governmental entitlement programs, major tax increase initiatives, bailouts, export-driven outsourcing, locked up credit, carried interest and capital gains tax uncertainties.

Enacting new business growth policies and capital deployment incentives quickly is the key to ensuring Silicon Valley’s survival, our economy’s rebound and long-term success.

Remember that entrepreneurial innovation remains the driving force behind sustained economic growth, robust employment, new jobs, productivity, GNP and rising incomes.

The author, Igor Sill, is a Venture Capitalist, Angel Investor and VFoFs Investment Advisor.  He earned his Masters from Oxford University’s Said Business School, and is a Merton College fellow. He completed undergraduate work at UC Berkeley,  he is a member of the World Affairs Council, Economic Club of San Francisco, The Royal Economics Society, Federation of American Scientists, Society of Concerned Scientists and the Heritage Foundation. He currently works for Geneva Venture Management in San Francisco, CA.

The recent capital markets have reinvigorated investor confidence in venture-backed companies to the levels of 2004, when the IPOs of Google and Salesforce debuted.  The pent up current IPO pipeline represents a significant liquidity window and exceptional returns for Venture Capitalists and their Limited Partner (LP) investors.

Of foremost interest to investors is venture capital’s emergence as an exemplary financial engine in the alternative asset class. The reasons for venture capital’s success are many.  The venture structure encourages innovation and gives entrepreneurs the tools they need to create, develop and launch their innovative ideas globally.  These inherent incentives facilitate the creation of breakthrough, industry disruptive ideas. The very best venture capital funds have consistently out-performed the industry and, of course, it’s everyone’s ambition to invest in the top names of these funds.  After all, some of the most successful public corporations such as Apple, Amazon, AOL, Autonomy (HP), Baidu, BusinessObjects (SAP), Cisco, Compaq (HP), eBay, Genentech, Google, Hewlett-Packard, HomeDepot, Informix (IBM), Intel, Linkedin, Microsoft, Netscape, NetSuite, Oracle, Salesforce.com, Skype (Microsoft), Starbucks, Sun Microsystems (Oracle), PayPal (eBay), Yahoo, YouTube (Google) and, soon to be public traded, Facebook and Twitter, were all financed by Silicon Valley venture capital funds.  The LP venture investors in these funds realized significant returns, well above capital market returns.

Over this past decade, the rate of technology innovation has rapidly accelerated, challenging traditional corporations’ ability to maintain a competitive edge.  The more established corporations are increasingly dependent on innovative new technologies in order to remain competitive, thus it would only seem natural that these corporations value venture backed companies with considerable above market premiums. The technology innovations and investment returns are obvious– venture-backed technology companies have consistently exceeded every corporate R&D outcome.  It’s no wonder that corporations try to acquire these start-ups at excessively high valuations, long before they can even launch their public debut.

And more recently, a number of corporate investments in this sector are growing at an increased pace, according to the National Venture Capital Association. Corporations represented investments in 214 venture deals for 196 Silicon Valley companies, up from 185 deals in 170 companies in 2010, and 165 deals in 147 companies in 2009, according to the NVCA.  These corporations are eager to optimize Silicon Valley’s tech talents into their R&D realizations. I’ve even noted an interesting trend in the number of multi-national corporations now opening up business development offices to capture access to the explosion of start-ups at a breath taking pace.  Corporate venture arms invested nearly $3.26 billion in Silicon Valley companies last year, up from $2.6 billion in 2010.

Keeping close tabs on venture portfolios has proven successful for acquisitive companies such as HP, Salesforce.com, Facebook, Oracle, Dell, Apple, EMC, Google, Cisco, SAP, AOL, as well as other tech companies.  Mature corporations are balancing their R&D exposure by funding some of their technology development through investment partnerships with venture capital teams. This approach exploits venture capital’s efficiency in developing technology, its access to new advancements, its capacity to respond quickly to changing technology, its ability to leverage additional resources throughout the development cycle all while returning favorable financial returns and creating significant value for those investors in the venture capital asset class.

David Swensen, the Chief Investment Officer at Yale University, has also realized great investment success in the alternative asset classes. When he arrived at Yale in 1985, its endowment was worth approximately $1 billion, and today the endowment is worth greater than $17 billion. Swensen increased investments in private equity funds, venture capital, real estate and hedge funds.  In numerous speeches, Swensen has championed such alternative investments. He argues that while beating the stock market is almost impossible due to the overwhelming available information about public companies and the subsequent valuations, astute managers can exploit inefficiencies in the value pricing of less familiar private assets. Diversification into alternatives, he added, reduces risk. He argues that keeping funds in investments that are more liquid is a tactic of short-term players versus that of endowments, which tend to hold until private equities are sold or go public.  Swensen says “investors should pursue success, not liquidity. Portfolio managers should fear failure, not illiquidity. Accepting illiquidity pays outsized dividends to the patient long-term investor.” Over the past 20 years, no educational institution has achieved a better performance record than Yale.

Playing it Smart in the VC Investment Arena

The decision of whether to invest as a Limited Partner in an available venture capital firm or participating in a “basket” of venture funds (Venture Fund of Funds-VFoFs) is a critical one.  Deciding between direct venture capital participation, or the more conservative Venture Fund of Funds path should entail research on each Manager’s respective track record of investments, investment access, actual hands-on value creation involvement within their investments, the fund managers’ lure and stature within the venture capital entrepreneurial community (deal flow access) the ethical reputation and transparency in reporting performance returns, and, most importantly, alignment with your long term strategy.

In such a fast-paced environment, with over 3,500 venture capital funds competing for the most promising start-ups, FoFs are a very efficient way to construct a balanced portfolio for investors seeking to participate in this market segment through the very best performing venture funds.  Essentially, a good FoFs can offer an investor access to top tier performing venture capital fund managers not otherwise accessible directly.  Do some serious research here, as the term “success has many fathers” applies in spades to self-published venture performance stats. You may wish to consult with an experienced venture law firm or venture advisor who can draw on substantial limited partner (LP) and general partner (GP) expertise and expose the many significant incongruities and styles in how LPs and GPs generate and distribute returns.

I’ve come to learn that consistent, successful returns are achieved from only a few select venture capitalists who diligently identify and invest in technologies and markets on the leading edge of disruptive innovation. They tend to focus on building companies at the forefront of market forces, creating outstanding growth and exit opportunities. These particular venture capitalists are notorious for sourcing and developing fast-growing companies in large market growth sectors. They’ve also built a substantial reputation for value creation and thus are sought after and welcomed into the hot startups by seed angel investors as well as the best founding entrepreneurs.

Venture Fund of Funds

The rationale behind investing in a Venture FoFs versus directly in a venture capital firm is simple, there are only 14 venture funds out of those approximate 3,500 which have historically delivered consistent out sized returns. Makes sense, as the smartest and most capable entrepreneurs will only seek the top tier venture partners as investors before pitching the remaining venture “herd”.  The leading firms, consistently topping Red Herring’s Top VCs, Preqin and Venture Economics performance lists are Accel Partners, Andreessen Horowitz, Benchmark Capital, Founders Fund, Goldman Sachs Investment Partners, Greylock, KPCB, NEA, Sequoia, Union Square Ventures, Index Ventures (non-US) and, in the seed investment class, Ron Conway’s Silicon Angels.

FoFs are a very efficient way to construct a balanced portfolio for investors seeking to participate in this market segment through these top venture funds.  Essentially, FoFs can offer an investor access to the very best performing venture capital fund managers not otherwise accessible directly.  Generally, a FoFs has greater leverage in scrutinizing a venture firm’s financial reporting, actual money-on-money returns multiple and negotiating terms, resulting in a better risk-return ratio than individual direct investments. They’re also looking for more than the conventional venture model has traditionally delivered – multiples of cash back rather than straight IRR. They seek a safer, more diversified investment base from which to drive reasonable returns, across shorter investment cycles. The reasons for the impressive growth of FoFs is that they provide diversity among venture fund managers, reduce risk and hold out the promise of net returns higher than the average venture capital return rates by accessing the top venture firms.  Investors are more willing to invest in FoFs for the benefits provided by this pooled investment structure, continual due diligence and on-going oversight compared to investing in a single strategy venture fund.  A balanced, properly allocated venture capital/private equity portfolio generally tends to provide higher returns with less inherent risk.

The brand name venture firms provide a low-risk foundation for consistent top-quartile performance albeit with higher fees to their LPs. Emerging fund managers focused on rapidly growing market sectors offer outsized return potential for their portfolios. But, emerging venture fund managers who follow a more capital-efficient investment model can deliver industry-leading returns while reducing risk with shortened investment cycles at competitive fees to LPs.

The Epicenter of Venture Capital

As to where these venture funds exist and where they generate their magic, well, though there are bright pockets of venture activity globally, the epicenter of premier technology innovation continues to emerge from Silicon Valley. This is a very unique place with a supportive ecosystem ready to back entrepreneurs’ requirements for launching startups successfully. The weather is excellent, the lifestyle is wonderful, and the scenery exquisite. Stanford University, UC Berkeley, USF and University of Santa Clara provide an abundance of research and continually spin off new patents along with a steady flow of budding intellectual entrepreneurially driven graduates. Hence, 80 percent of venture capital and angel investors operate in Silicon Valley, and, not surprisingly, 90 percent of the highest venture returns occur here.  It is also the reason behind Swiss-based Index Ventures’ move to Palo Alto, CA last year.

There exists a massive market with a strong rising tide for quantifying this new venture capital paradigm, one with increased efficiencies, better probabilities and lowered risk.  The opportunities of advanced innovations, globalization and the internet’s disruptive na­ture make it a period of significant transformation that is creating extraordinary value creation and great returns.  Playing the venture capital investment game can be incredibly rewarding, if played astutely.  Seems that learning from success tends to create more success- it’s not merely just a coincidence.

Igor Sill is managing director of Geneva Venture Management LLC, a Venture Capital Fund of Funds advisory firm.  He is also a Silicon Valley venture capitalist and founder of Geneva Venture Partners. Igor manages his own angel investment fund at Geneva Ventures and is also a Limited Partner in Goldman Sachs Investment Partners, Benchmark Capital, Norwest Ventures, Granite Ventures, The Endowment Fund and ICO Funds through his Family Office. Igor resides in Silicon Valley and has 23 years of tech investment expertise. igor@genevavc.com

The venture capital industry is undergoing a major change from its elitist past of restricting investor access to “friends of the firm only.”  As Wall Street embraces dozens of new initial public offerings (IPOs) of venture-backed companies, hopeful investors are flocking to this asset class. These venture capital investments continue to deliver positive returns at a better rate than public market indexes such as NASDAQ or S&P. The venture-backed technology sector led on trading volume with 44 companies going public last year.

As pensions, endowments, foundations and institutional investors increase their venture allocations, they are now also applying closer scrutiny of reported venture fund performance. These investors are recognizing greater opportunities to generate excess returns but are resource constrained on due diligence, accurate performance comparisons and audit reviews. Many seek advice from independent accounting firms and law firms to decipher reported returns. And many delegate the oversight function to specific fund advisory organizations. A recent study by Casey & Quirk projects that outsourced investment assets in the United States have grown to $510 billion as of this year.

Further complicating the process is the venture industry’s notorious lack of transparency relative to their fund’s actual performance. A venture fund series financing in one invested company may report a value considerably different than the same series investment by a co-investing venture firm. Since reporting of venture equity returns is a relatively unregulated process, some firms tend to self-report questionable quarterly performance to public databases and publications so as to attract further investment capital from LPs. Researching public data results from sources such as CalPERS and other pension investors tends to provide a more accurate picture of actual returns.

Why investors are turning to specialized Venture FoFs

With a growing opportunity for investors to construct optimal portfolios by better assessing risk opportunities across the entire venture capital class, investors are turning to the expertise, knowledge and resources that Fund of Funds (FoFs) firms provide. Simply stated, a Venture FoFs is a multi-manager investment strategy of holding a portfolio of venture capital funds rather than investing directly in venture-backed securities.

FoFs represents a means by which an investor can reach the relatively high minimum capital commitment ($500K+) through pooling their investment with others, thus gaining access and broad exposure to a select group of funds. In addition, a FoFs typically scrutinizes venture capital general partnerships for accuracy of reporting, historical performance and value creation of invested entities, among others.  A good FoFs may also provide access to the very best performing, top tier venture funds.

Institutional investors are rightfully concerned with fulfilling their fiduciary duties by selecting specific venture funds and fund managers with proven market segment expertise. Understanding which market sectors are most likely to outperform, coupled with identifying capable fund managers to exploit those opportunities are a critical component of the investor’s decision making process. The goal remains to seize the benefits of higher overall returns coupled with lower investment risk.

Generally, a FoFs has greater leverage in scrutinizing a venture firm’s investment talent while assessing the accuracy of its financial reporting. They’re also assessing more than the reported returns, such as multiples of cash back rather than straight Internal Rate of Return (IRR). FoFs seek a safer, more diversified investment base from which to drive reasonable returns, across shorter investment cycles, versus today’s typical 10-12 years.

The reasons for the impressive growth of FoFs is that they provide diversity among venture fund managers, access to top-performing funds, reduce risk and hold out the promise of net returns higher than the average venture capital return rates. Investors are more willing to invest in FoFs for the benefits provided by this pooled investment structure, continual due diligence and ongoing oversight compared to investing in a single strategy venture fund.

The most common FoFs fee structure is a management fee of one percent and an incentive fee of 10 percent above that of the underlying venture capital fee structure. The additional fee layer is relatively small with returns generally more than offsetting the added expense. A balanced, properly allocated venture capital/private equity portfolio generally tends to provide higher returns with less inherent risk.

Though there are pockets of venture investments globally, the epicenter of premier technology innovation continues to emerge from Silicon Valley. This is a very unique place with a supportive ecosystem ready to back entrepreneurs’ requirements for launching startups successfully. The weather is excellent, the lifestyle is wonderful, and the scenery exquisite. Stanford University, UC Berkeley, USF and University of Santa Clara provide an abundance of research and continually spin off new patents along with a steady flow of budding intellectual entrepreneurially driven graduates. Hence, 80 percent of venture capital and angel investors operate in Silicon Valley; and, not surprisingly, 90 percent of the highest venture returns occur here.

In such a fast-paced environment, with over 3,500 venture capital partnerships competing for the most promising startups, FoFs are a very efficient way to construct a balanced portfolio for investors seeking to participate in this market segment through the very best venture funds. Essentially, FoFs can offer an investor access to the top tier performing best venture capital fund managers not otherwise accessible directly.

Selecting a venture firm or fund manager

The selection process of either brand name venture firms or emerging fund managers should entail research of their respective track record of investments, actual hands-on value creation involvement within their investments, the firm or emerging fund managers’ lure and stature within the entrepreneurial community (deal flow source) and, most importantly, the ethical reputation and transparency in reporting performance returns.

Do some serious research here, as the term “success has many fathers” applies in spades to self-published venture materials. You may wish to consult with an experienced venture law firm or venture advisor who can draw on substantial limited partner (LP) and general partner (GP) expertise and expose the many significant incongruities and styles in how LPs and GPs generate and distribute returns.

I’ve come to learn that consistent, successful returns are achieved from only a few select venture capitalists who diligently identify and invest in technologies and markets on the leading edge of disruptive innovation. They tend to focus on building companies at the forefront of market forces, creating outstanding growth and exit opportunities. These particular venture capitalists are notorious for sourcing and developing fast-growing companies in large market growth sectors. They’ve also built a substantial reputation for value creation and thus are sought after and welcomed into the hot startups by seed angel investors as well as the best founding entrepreneurs.

Some examples of hot startups that may have crossed the risk chasm include:
3Leaf, BlueWolf, Cloud9 Analytics, Cloudscale, CloudSwitch, Cloudberry, Cloudera, Demandware, Good Data, Kenandy, iCloud, Nuxeo, Quantivo, Quora, Palantir Technologies, Palo Alto Networks, Parallels, ParaScale, ProofPoint, Savvis, ServiceMax, SoundCloud, SnapLogic, SutiSoft, Zazzle, Zimory and Zoho, to name more than a few.

Some of these promising startups are already partnering with public traded Software-as-a- Service (SaaS) and cloud computing companies like Salesforce.com, Cisco, EMC, Oracle, HP, etc., but have extended their customer base to an entirely different, much larger market segment. The SaaS subscription model of recurring revenues provides predictable visibility into cash flow, growth rates and a substantially profitable business, generally achieving a premium valuation for venture investors and, ultimately, the IPO market.

There exists a massive market with a strong rising tide in cloud computing and SaaS deployed IT solutions. This is a period of significant transformation that is creating extraordinary venture investment opportunities. A little research and you’ll find some of the very same venture capitalists invested in many of these hot startups. Seems that learning from success tends to create more success.

Igor Sill is managing director of Geneva Venture Management LLC. He is a Silicon Valley venture capitalist and founder of Geneva Venture Partners. Igor manages his own angel investment fund at Geneva Venture Management and is also a Limited Partner in Goldman Sachs Investment Partners, Benchmark Capital, Norwest Ventures, Granite Ventures, The Endowment Fund and ICO Funds through his Family Office. Igor resides in Silicon Valley and has 23 years of tech investment experience. Contact him at igor@genevavc.com.

Nine Power Questions to Help You Stand Up to Discount Pressure (Without Caving In or Alienating the Customer)

Though the economy has experienced a slight uptick since the harried days of the Great Recession, many businesses, big and small, are still operating in penny-pinching mode. The pressure to do more with less has not subsided. If you’re a business owner, you probably already know where this drive to cut costs and squeeze suppliers is going—and it’s nowhere that benefits you. More and more of your customers are uttering those four dreaded words, “I need a discount.”

Andrew Sobel suggests that rather than respond with a yes or no, you should transform the conversation—and possibly the relationship—by asking a few power questions.

“Clients ask for discounts for different reasons,” says Sobel, coauthor along with Jerold Panas of Power Questions: Build Relationships, Win New Business, and Influence Others. “If you can find out why your customer wants a discount by asking the right questions, you may discover that you can give them what they need without having to undercut your own bottom line.”

Sobel says he has observed at least four types of discount-seeking clients. They are:

1. Red Ink Clients. These clients are in genuine financial trouble. If this is the case, you need to know the full story.
2. RFP Czars. Some clients want to bid every project out and will seek out the lowest possible price. They believe you are a commodity. GE is notorious for this.
3. Bargain Hunters. This type of client always wants to feel you’ve given them a deal, even if it’s just a small concession.
4. Chicken Littles. Some clients just like to complain about how much everything costs and don’t actually need a discount to be satisfied. They want to be heard and understood.

“If your past response has been to timidly reduce your price to keep the client happy or to fire back a resounding ‘No!’ there is a better way,” explains Sobel. “When you instead opt to deepen the interaction by asking the right questions, you can achieve three important things.

“First, you’ll find out what kind of discount seeker your client is,” he adds. “Second, you’ll force your client to reflect on the value you bring to the table and how your business is different from other businesses. Finally, you’ll illuminate what the client really values, allowing you to potentially renegotiate the engagement in a way that preserves your profitability.”

Read on for a few of Sobel’s key questions and when to use them.

To kick start the conversation: “Before I respond, would you mind if I asked you a couple of questions so I can better understand your request?”

To dig deeper: “Occasionally a client requests a discount, and I find I am able to be more helpful if I understand why they’re asking for one. Can you say something about why you think my fee is too high and would like a reduction?”

To size up your competition: “I know you are talking to other service providers about this project. Do you feel my price is dramatically out of line with the market?”

To say “no” while identifying possible terms for a positive negotiation: “I am able to reduce the price when the scope and breadth of the proposal are also cut back. Would you like me to prepare an option for you that would do that?”

Or you might also say, “We are able to reduce price in exchange for terms and conditions that help lower our risk and long-term cost of doing business with you. Would you like me to develop a proposal for a long-term supply arrangement with built-in discounts for guaranteed volume levels?”

To learn more about your client’s buying process: “Where will the budget come from for this? Who can give this final approval?”

To accentuate the value you are offering and clarify what is most important to the client: “I’m not sure we had a thorough discussion about the benefits you expect from this. Can we review those, as you see them?” Or you might ask, “What parts of this proposal are most important to you? Which aspects of it do you find less valuable?”

To differentiate yourself from the competition: “Would you mind if I briefly reviewed several aspects of my proposal that I think represent value above and beyond what our competitors offer? I’m not sure I articulated these very well.”

To tie your proposal to your client’s higher-level goals: “Can we review one more time what your goals are here? What are you hoping to accomplish?”

To go toe to toe: “Do you give your own customers discounts?” And if they say “Yes,” you respond, “That’s why you need me.” And if they say “No,” you respond, “So why should I?”

“The goal here, of course, is to preserve and strengthen the client relationship—assuming it’s a client you’d like to keep,” says Sobel. “If you’ve priced your services properly, you cannot afford to discount. But if you simply say ‘No,’ he might head for the door and never come back. By using power questions, you can delve deeper into his situation and his needs. You might find another way you can show him the value he wants. In the long term that will be viewed much more positively than a one-time discount and is a much better option than turning him down completely.”

Andrew Sobel is the most widely published author in the world on client loyalty and the capabilities required to build trusted business relationships. His first book, the bestselling Clients for Life, defined an entire genre of business literature about client loyalty. In addition to Power Questions, his other books include Making Rain and the award-winning All for One: 10 Strategies for Building Trusted Client Partnerships.

Jerry Panas is executive partner of Jerold Panas, Linzy & Partners. Jerry is the author of 13 popular books, including Power Questions and the all-time bestsellers Asking and Mega Gifts. He is the founder and chairman of the board of the Institute for Charitable Giving, one of the most significant providers of training in philanthropy.

Virtually all of the start-up presentations I see given by first time entrepreneurs fall well short of their intended goal, getting funded.

Essentially, these presentations are primarily nothing more than “yet another idea” delivered via 50+ slides. Though a great deal has already been published on the subject, I continue to see most entrepreneurs miss the key points. Here are a few pointers you may want to consider.

First, think of your investor audience as an interview opportunity with a hiring manager. If you think about the critical 4 elements of getting hired you’ll immediately see the correlation to a successful business funding pitch. First, are you highly qualified and capable of getting the job done? Do you fully understand the market opportunity and your value proposition? Are you passionate and determined to do the job? And, lastly are you reasonably-minded and receptive to working with opinioned venture investors on your board?

Investors need to quickly see the intrinsic value of investing their time, money, experience, reputation and network into your new business and we generally draw that conclusion from the first impressions of the entrepreneur’s ability to articulate their business.

Your pitch should be focused on selling your ability of materialization and market execution of the idea, addressing the anticipated risks, evangelizing your audience, not educating investors.

An innovative idea with a new business model disrupting a huge and growing market is great, however, a fundable company it does not make. Evangelistically presenting a slide deck borne out of a great idea is, essentially just that, slides of an idea.

You should consider an investor’s concerns regarding the risk factors associated with funding early stage startup ventures, as evidenced by the 9 out of 10 failures. There’s:

the founder risk,

the technology risk,

the consumer adoption risk,

the market size risk,

the future capitalization needs risk,

and, most importantly for me, the execution risk.

It may be your idea, but it’s just one piece of the overall business pitch. Unless the other start-up propositions are properly addressed, it rarely finds funding. There is no presentation that can turn a bad idea into a good one, but there are many ways to disguise a good idea.

Let’s look at the technological risk first. If the technology doesn’t work, generally there’s no money left to re-engineer it or start over. It may take years to solve the technical issues, and generally some other entrepreneur working on it will inevitably get it done before you do.

Generally, it’s not about technology, as a competent group of engineers can usually program web-based projects, or find portions of the code that have already been developed and then quickly “paste together” a working prototype via royalty sharing deals. So, essentially, the technology risk tends to be minimal.

Of all the failed internet businesses that I have invested, the culprit is usually a result of customers, or the lack of them, or more succinctly, “it’s the inability to quickly penetrate the addressable market”. Business success is all about gaining customer traction, rapid market adoption and offering a compelling business model. Simply put, internet businesses fail due to lack of customers.

When I reflect on one of the biggest internet successes I funded, from zero revenues to IPO, then growing to $16B in market capitalization within 6 years, I recall that their first product offering was absolutely horrible and the beta customers were less than enthused. Lots of technical assumptions proved false when deployed in the real world.

However, those customers offered key insights into the inner workings of their businesses and the improvements they truly needed—essentially taking a pretty good idea and turning it into an industry changing stellar solution. The start-up team learned the real value proposition to the customer’s pain. So, the second iteration grew from a dozen or so customers to hundreds, then thousands, then tens of thousands.

More insight was gained, more customer satisfaction was earned, much greater value was delivered which evolved into higher product prices, more attractive business terms, bigger margins and an acceleration of both, customers and revenues, ultimately profits.

The key lesson here: all start-up ideas evolve based on customer usage and feedback. Generally, your business will evolve into something much more compelling, much more disruptive and industry changing—all of the great internet successes went through a very similar process.

During this stage of the growth process, the entrepreneurial founder’s leadership and company-wide execution was the key to overcoming the early risks, “crossing that chasm” and scaling that business successfully. The returns to investors proved phenomenal.

So, back to that slide presentation. Show your prospective investors that your idea was refined via actual customer usage, that you learned great insights and evolved them into a meaningful value proposition for your customers.

That your customers benefitted geometrically and that you can now scale that into hundreds of new paying customers, increasing the profit margin as you grow, and your company’s market valuation. That you know the depth of talent you’ll need to grow the business to a leadership role and that you’re capable of recruiting and leading that talent. Keep the slides to a manageable number, less than 24, and your points succinct and impactful.

Essentially, an investor needs to grasp how rapidly you can validate, learn, deploy, evolve and scale that business into the leader of a large, growing market. Investors typically extract that from how committed smart founders are about learning their customer needs and the correlation of market trends and dynamics.

It’s not solely about a brilliant idea and a smart entrepreneur. It’s not about how great you are, what school you graduated from or that “J” curve chart you displayed in your slides. It’s about how prepared you are to attack a huge market, your ability to learn from your customers, evolve and design new solutions, and, ultimately it’s about people.

Think Steve Jobs, Bill Gates, Larry Ellison, Marc Benioff, Tom Siebel, Larry Page, Sergey Brin, Bernard Liautaud, Marten Mickos, Peter Thiel, Pierre Omidyar, Mark Zuckerberg to name more than a few. A clear and consistent pattern starts to emerge.

Remember that 9 out of 10 startups will fail. So the real question is how are you going to continually learn to solve your customer’s biggest problems while minimizing the market risk and scaling your business? Now, go put those ideas on a few good slides.

The author, Igor Sill, is a Silicon Valley venture capitalist and founder of Geneva Venture Partners. Igor manages his own angel investment fund at Geneva Venture Management and is also a Limited Partner in Goldman Sachs Investment Partners, Benchmark Capital, Norwest Ventures, Granite Ventures, SV Angels and ICO Funds. Igor resides in San Francisco, CA and has 23 years of tech investment experience.

When Twitter Inc. announced its decision last week to censor tweets that offend country-specific content restrictions, the backlash from free speech advocates and users alike was prompt and unequivocal. Twitter, critics charged, was losing its way and compromising its commitment to free speech in favor of corporate expansion and profits.

Lost amid this tempest, however, is the fact that Twitter’s new policy – whether or not one agrees with it – creates not only a window into government censorship activities but also opens up a potentially meaningful source of information – censored content – that would otherwise remain hidden from public view.

That was then, this is now

Twitter has always self-censored by removing illegal content. It inspects an average of roughly 1 billion tweets daily, looking for porn, users impersonating other users, threats of violence and other violations of its standards.

Its new policy, however, requires that if a tweet violates local content restriction laws, the tweet will be deleted or greyed out. Twitter users in that country will not be able to see it.

Instead, a notice will be posted apprising that the tweet has been deleted or, as Twitter says, “withheld” at the request of government authorities. Twitter will not pre-screen or monitor tweets but only delete them reactively.

The new policy, aided by Twitter’s technology, now permits it to block a tweet country-by-country. Before this, the only option was for Twitter to remove the tweet worldwide.

In implementing its new policy, Twitter has teamed with Chilling Effects (www.chillingeffects.org), which is sponsored by the Electronic Frontier Foundation, a prominent free speech coalition comprising leading universities in the United States. When a tweet is blocked, users will be able to go to the Chilling Effects website to find out why that particular tweet was censored.

Consequences, foreseen and otherwise

By harnessing search and other data management technologies, Twitter and its users can relatively easily monitor which countries are censoring what content. Knowing which topics matter to whom raises all sorts of related issues, including many of potential interest to any global enterprise.

Consider, for example, the kind of data that might be mined from censored tweets:

• Let’s say a company has employees, distributors and customers in Country Y. Country Y suddenly clamps down on a broad range of tweets, suggesting possible civil unrest. Important information to know.
• Or, Country X——rich in a natural resource——has banned tweets that relate to that resource. This information might be a clue to turn to other sources.

Given the important role real-time tweets have played in breaking news events, avenues to circumvent these restrictions are likely. When a tweet is banned, for instance, nothing stops users from changing their Twitter country code to pretend that they are in geographic location that does not ban that particular tweeted content. Other workarounds are also likely. It is only a matter of time until websites pop up —— accessible in all countries —— that collect and publish the banned tweets for all to see.

First Amendment issues

Twitter describes itself as a “real-time information network” that connects its users to “the latest information.” Its decision to expand into countries that impose censorship restrictions highlights the uneasy tension between free speech and its own business objectives.

The company could, of course, play hardball and refuse to do business in countries with censorship regimes. But would that decision be worse for free speech rights than agreeing to observe local content restrictions? Is some speech better than no speech? Does capturing and highlighting the censored tweet —— what is silenced —— give the banned content a voice in and of itself?

Some critics of Twitter’s decision are, no doubt, disappointed that the micro-blogger would bow to the pressure of governments that require censorship. But Twitter’s decision to march ahead and expand its presence into these countries has the potential to draw attention to the censorship activities in these countries, highlight exactly what type of speech is being suppressed and, paradoxically, create a new layer of intelligence that otherwise would not exist.

*Craig A. Newman is a Litigation Partner with Richards Kibbe & Orbe LLP and the Chairman of the National Advisory Board at the Cronkite School of Journalism & Mass Communication at Arizona State University.

Venture capital investing is in the midst of a revival and change. It is certainly creating a different story from its past based on Wall Street’s new-found appetite for venture-backed technology companies.

To many investors, the silver lining in 2011 was Wall Street’s initial public stock issuance of venture backed Linkedin, Groupon, Pandora, Zynga, Zillow and Impreva shares.

After languishing for years since the global financial crisis, Eurozone concerns, poor governmental economic policy and with continued stock and bond market volatility, a revitalized initial public offering (IPO) market has begun registering healthy returns for venture investors. Existing venture capital funds are being deployed, new funds are being raised and investor allocations to venture capital and private equity are on the increase. As a result of the recent strong IPO market, startup venture capital and private equity have garnered renewed investor interest. These alternative asset investments continue to deliver positive returns at a better rate than public market indexes such as NASDAQ or S&P which delivered 0% in 2011. It’s nice to have intrinsic investment alternatives with the ever-changing capital markets.

The tremendous success of venture capital funded Linkedin’s public market debut is still fresh on investor minds. LinkedIn shares skyrocketed to a high of $92.99 per share from its opening of $45., establishing a market value of $8.9 billion, virtually overnight. Zillow climbed 80% percent to $35.77 on its first day of trading. Zillow joined other recent IPOs such as LinkedIn, Renren, Yandex NV and HomeAway in gaining at least 49% in first-day trading this year. Another venture backed internet company, Imperva, went public at $18 and its shares now trade around $35, giving it a market capitalization of $800 million. Zipcar jumped 66% over its IPO price on first day of trading. Investors are flocking to those few Internet offerings after some have far outpaced the average gain of about 7% in all Wall Street IPOs in 2011, according to data compiled by Bloomberg. The technology sector led on trading volume with 44 companies going public this past year and many indicators suggest that the momentum prospects are strong as we enter 2012.

Venture capital, IPO, M&A opportunities

Other high valued IPO candidates in the pipeline include Facebook, Twitter, Yelp, Kayak, ExactTarget, Glam Media, InfoBlox, LivingSocial, Rocket Fuel, Craigslist, ProofPoint, Vocera, Angieslist to name, but just a few. An interesting trend, however, is that these newly minted IPOs all issued a very small percentage, ala 10%, of the total outstanding shares, making it difficult for the average investor to purchase significant amounts. Most anticipate this trend to continue into 2012′s IPOs.

As of result of the market’s volatility, a new perspective on venture capital is broadening the view of this alternative asset class. Discarding the old rules, a new era of angel investors (now referred to as Super Angels), Startup Incubators, Pre-IPO mutual funds and Microfinancing groups are re-inventing the start-up funding arena while enjoying venture-like returns. As a result, the traditional venture capital model has moved more towards the later stage funding arena. Many start-up founders and entrepreneurs are seizing new funding source opportunities by utilizing the breadth and depth of expertise that successful Angel investors, former entrepreneurs-turned-investors, incubator communities, ala Plug & Play Tech Center, pre-IPO mutual funds, ala Denver-based Keating Capital, well organized micro-financing groups, ala MicroVenture Marketplace and independent professional venture investing advisory firms provide.

Venture industry outperformance

Traditionally, the very best venture funds have consistently out-performed the industry and, of course, it’s everyone’s aim to invest in the top decile of these funds. The California Public Employees’ Retirement System’s (CalPERS) best performing 2010 invested fund achieved an impressive 154% IRR. After all, some of the most successful public corporations such as Apple, Amazon, AOL, Baidu, BusinessObjects (SAP), Cisco, Compaq (HP), eBay, Genentech, Google, Hewlett-Packard, HomeDepot, Informix (IBM), Intel, Linkedin, Microsoft, Netflix, Netscape, NetSuite, Oracle, Salesforce.com, Skype (Microsoft), Starbucks, Sun Microsystems (Oracle), PayPal (eBay), Yahoo, YouTube (Google), Zynga and privately-held Facebook, were all financed by venture capital funds. The investors in these venture funds realized significant healthy returns while Facebook’s investors continue to realize tremendous value appreciation.

Understanding which tech market sectors are most likely to outperform, coupled with gaining access to exploit those opportunities are a critical component of the investor’s decision making and research process.

Next-generation technology growth segment: cloud-based, software as a service

Potential high-growth market segment examples would be the emergence of cloud computing, software-as-a-service (SaaS), virtualization, cybersecurity, open source, Artificial Intelligence, mobility and financial software technologies. These are major, disruptive tectonic shifts occurring in the global IT ecosystem. Market researcher, Trefis estimates that the cloud-computing market stands at about $65 billion and is projected to grow to more than $300 billion by the end of 2018.

Existing public technology companies, ala Amazon, Cisco, Citrix, EMC, Google, HP, IBM, Microsoft, Oracle, Salesforce.com, etc., are recruiting a new set of next-generation, innovative start-up companies as technology “partners.” Some of which will find their way to becoming public traded companies over the next few years.

Some examples of startups that may have crossed that risk chasm include: 3Leaf, BlueWolf, Cloudscale, CloudSwitch, Cloudberry, Eucalyptus Systems, Good Data, iCloud, Nuxeo, Quantivo, Quora, Palantir Technologies, Palo Alto Networks, Parallels, ParaScale, ProofPoint, Savvis, ServiceMax, SoundCloud, SnapLogic, Zoho, to name but just a few. Some of these promising startups are partnering with public traded technology companies, but have extended their customer base to an entirely different, much larger market segment.

Technology’s self-renewing cycle of new wave innovation continues, driven mostly by cost improvements, easier use and vastly greater efficiencies. The SaaS subscription model of recurring revenues provides predictable visibility into cash flow, growth rates and a substantially profitable business, generally achieving a premium company valuation. Of course, not every cloud based and SaaS start-up will become a successful investment. Great investments in large growing markets have to be coupled with exceptional management teams, disruptive competitive advantages along with a business model that leverages that advantage. Great management teams are generally a sign of exceptional business opportunities. If the opportunity wasn’t truly extraordinary, those talented individuals would be focusing their efforts elsewhere.

Consistently successful returns are achieved from those investors who diligently study, identify and recognize disruptive technologies and start-up management teams on the leading edge. These startups tend to focus on building companies at the forefront of market forces creating outstanding growth and exit opportunities.

Joining a supportive Angel investors network, doing your homework up front and placing your bets wisely in innovative startups can result in significant healthy returns whether through an IPO, merger or acquisition. Investing in private issues are, by their very nature, a long term higher risk, illiquid asset class, and of course, past performance is no guarantee of future results.

*Igor Sill is a Silicon Valley venture capitalist and founder of Geneva Venture Partners. Igor manages his own angel investment fund at Geneva Venture Management and is also a Limited Partner in Goldman Sachs Investment Partners, Benchmark Capital, Norwest Ventures, Granite Ventures, The Endowment Fund and ICO Funds. Igor resides in San Francisco, CA and has 23 years of tech investment experience.

“By the end of 2012, the number of mobile-connected devices will exceed the number of people on earth, and by 2016 there will be 1.4 mobile devices per capita,” the report stated. “There will be over 10 billion mobile-connected devices in 2016, including machine-to-machine (M2M) modules-exceeding the world’s population at that time (7.3 billion).”

What’s more, mobile data traffic grew more than two-fold in 2011, the fourth year in a row that traffic has doubled. The mobile data traffic for the year was actually eight times the size of the entire global Internet in 2000, indicating a rapid adaption of mobile by the rest of the world. Unlike the web of 2000, it’s more than just geeks that are surfing the mobile world in the palm of their hands.
For the first time, mobile video traffic exceeded 50 percent of all traffic.

Average smartphone use nearly tripled in 2011 at 150 MB per month, up from 55 MB per month in 2010. While smartphones represent only 12 percent of global handsets, they represent over 82 percent of global handset traffic. The typical smartphone generated 35 more times data traffic than the typical basic feature cell phone.

Android use has also risen higher than the level of data use for iPhones for the first time.
The number of mobile connected tablets tripled in 2011 to 34 million, each tablet generating 3.4 times the traffic of the average smartphone.

Mobile connection speeds also increased 66 percent for the year, with the average network download speed at 314 kilobytes per second compared to 189 kbps in 2010. The average connection speed for smartphones was 1,344 kbps in 2011, compared to 986 kpbs in 2010.

“Mobile data services are well on their way to becoming necessities for many network users. Mobile voice service is already considered a necessity by most, and mobile data, video, and TV services are fast becoming an essential part of consumers’ lives,” the report concluded. “… The next 5 years are projected to provide unabated mobile video adoption despite uncertain macroeconomic conditions in many parts of the world.”