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Redeye VC

A view of the startup ecosystem from a coastally challenged VC

Announcing FundingSleuth.comJuly 17

About 10 years ago, I helped create a web service called Company Sleuth.  The basic premise was that as a company conducted its business activities, it would leave a "paper trail" online.  And Company Sleuth tried to find that trail by automatically searching a variety of public databases (such as the US patent database, trademark database, domain registrations, job listings, etc.) for "clues" about all US public companies activities.  Users would tell Company Sleuth the companies they cared about and receive a daily email containing a list of all new "clues" that were found.

The service found some interesting data.  For example, while in beta we saw that the domain name "daimlerchrysler.com" was registered by Skadden Arps (Daimler's law firm) days before the deal was announced.  And we also noticed that MCI Worldcom re

The Story of Francis BatesJuly 2

I've spent some time the past few weeks researching the life of a little known Silicon Valley entrepreneur named Francis Bates.  Here's his story:

Francis Bates was born in 1847 in Rhode Island.  His mother, Amy Ann, passed away when he was just 11 days old.  During his childhood, young Francis needed to assume many of the household chores -- make his bed, take out the trash, and fetch the mail.  While making his bed and taking out the trash weren't that bad, Francis really hated fetching the mail.  You see, the Bates house was located off the beaten path -- and pretty far from the main road.  And since his Dad wanted to read the mail immediately after it was delivered, Francis was constantly checking to see if there was mail in his mailbox.  In fact, Francis spent most of his mornings walking back and forth to his mailbox.  Most of the time it was empty, but from time to time he would find something in it. 

During the Civil War, Francis joined the Army and was injured.  In pursuit of health, Mr. Bates came to California in 1896 and settled in San Jose.  Like his childhood home in Rhode Island, his house in California was also a great distance from the road.  Francis reall

The Death of Stealth ModeJune 24

Let's put this post in the category of "Things I wish lawyers told their startup clients."

Here's a situation I see all the time: 

A pre-launch, stealth-mode company just closes a seed round of funding.  Three weeks go by, and the news of the company's funding starts appears in VentureBeat, PEHub, and Venturewire.  The story is then picked up by mainstream tech bloggers and press.  The CEO starts getting phone calls from journalists.  I then receive frantic, angry phone calls and emails from the CEO that go something like this: "Dude!  Did you announce the funding?  We wanted to stay under the radar..."

I want to reply, "No.  I didn't announce the funding.  Your lawyer did."

The answer is culprit is a little known SEC regulation called "Regulation D".  A basic summary:

Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. Regulation D (or Reg D) contains three rules providing exempt

Validate Your Own MarketJune 18

My recent post on patents discussed a fictitious "Founder's Manual For Pitching a VC" which would contain all of the cliche "lines" entrepreneurs give to answer some typical VC questions.  However, just like canned pick-up-lines don't work in a bar, I don't think canned answers work for VCs.*

For example, let's take a look at the standard line used when asked about competition.  The section would say something like: "When a VC asks about what happens if [INSERT LARGE ESTABLISHED PROSPECTIVE COMPETITOR HERE] decides to get into the market, tell the VC that their entry will validate the market." 

I'm not sure what I felt back in November of 2000, when Amazon launched their used-book Marketplace just eleven months after we launched Half.com, but I doubt I was happily validated.  I'm just fortunate that Half.com didn't join the legion of other companies whose business model were validated -- like Wordstar and Netscape were validated by Microsoft. 

Depending on pending...May 23

If someone was to put together the "Founder's Manual" for pitching a VC, the section on barriers to entry would say something like: "When asked about your barrier to entry, tell the VC that you have several patents pending for proprietary technology."   Heck, I'm sure I used the same line when I was raising money for Half.com -- after all, we filed for our first patent in October 1999. 

Well, I'm excited to announce that the original Half.com patent (#7,373,317) was finally approved by the USPTO last week - eight and a half years after we filed it (and seven years after eBay acquired Half.com). 

Most people don't realize that the average software patent will take many  years from initial application to issuance.  (According to the USPTO, software pat