ImaginativePRO Blog

ENTREPRENEURS' MOST COMMON MISTAKES WHEN PITCHING TO VCs

Many venture investors are expecting the pace to pick up in 2010, with more money flowing into more deals. But it’s hardly going to be a funding free-for-all, and entrepreneurs making their pitches must avoid some of the mistakes that raise red flags in the minds of investors.

So said three prominent Silicon Valley VCs – Ryan Sweeney of Accel Partners, Ann Winblad of Hummer Winblad Venture Partners and Winston Fu of US Venture Partners – at a breakfast event Tuesday hosted by law firm Pillsbury Winthrop and auditors PricewaterhouseCoopers.

One common mistake, Fu and Winblad agreed, is pitching a new company as the certain target of an acquisition by a larger company – as opposed to being one that can stand on its own.

“I won’t invest in a company unless I can imagine the S-1,” Winblad said, quoting another partner at her firm, and referring to the document that is filed when a company seeks to go public. “I have to be able to see the S-1, and imagine reading it a few years out.”

Another common gaffe is overconfidence, said Accel’s Sweeney.

“People who come in and have all the answers are just not the right fit for us,” he said.

Their comments were made in a panel discussion that took place as PricewaterhouseCoopers unveiled a detailed study of venture investing in 2009, a study that found last year to be a rival with the worst years of the Valley’s tech bust. But the auditors also found that the drought of IPOs is nearing its end, and that investment activity is poised to heat up again.

The investors in attendance agreed that things are looking up, but said company founders need to avoid the kinds of pitfalls that can harm one’s prospects, either in a recession or a boom.

“There are areas where you can be penny-wise and pound-foolish,” Winblad said. “One area is never being audited. This is a real battle in venture capital, especially with all the new revenue models. The last thing you want is to get to the M&A altar, and have your [revenue figures] wrong. Or to try and do an audit at the last minute.”

Winblad is a well-known name in the Valley, having co-founded Open Systems Inc., one of the first accounting-software companies, more than three decades ago, as well as serving as an advisor or board member for a who’s-who of tech companies and co-founding Hummer Winblad Venture Partners, a Valley mainstay. She had advice for VCs too.

“A good (Series) A round investor takes a lot of meetings,” she said, “and hangs around the developer community. A lot of the innovation in software is starting at the developer level.”

“Go to these meet-ups,” she advised the entrepreneurs in the audience. “What we see as the precursor to health in start-ups is activity in these developer groups.”

COMMENTARY:   Regrettably, this article provided no new, valuable insights that I could determine that would prove helpful and constructive for an entrepreneur in preparing for a pitch. 

I didn't hear a mention of being part of something visionary, new and exciting, that can redefine an industry, create new market opportunities, fill a real need and solve a big problem, that not only creates value for the founders and its investors, but for society.  

I was particularly taken aback by the comment, “I won’t invest in a company unless I can imagine the S-1,” made by Ann Winblad, which I found somewhat short-sighted and something of a pipe dream.  Sure, all VC's are interested in a liquidity event, but to make an IPO the primary requirement prior to investing in a startup, is not realistic for 99.999% of startups.  A late stage startup, perhaps, but many of those never reach the scale needed to go public.  Most are spun-off to private investors or private-equity firms.

The vast majority of startups are bootstrapped by their founders and F&R's, and for good reasons. I talk to a lot of founders, and the comment I hear the most is, "I hate dealing with VC's".  Whatever happened to good old-fashioned risk-taking?  Entrepreneurs put everything on the line, sometimes at the risk of losing everything.  In today's VC investment environment, it seems that there is no tolerance for risk.  VC's want risk completely wringed out of each deal.  But, let me tell you folks, that risk doesn't go away after a company goes public.  That risk is passed on to the public investors.  So welcome to the club.

Courtesy of an article dated January 27, 2010 appearing in the Wall Street Journal's Venture Capital Dispatch blog              

FORMULA 1 LOOK-ALIKE ELECTRICAL VEHICLE SHOWCASED AT CAR TECHNOLOGY EXPO

Tajima Motor Corp exhibited the "EV Mini Sport" single-seater electric vehicle (EV) at the 1st EV & HEV Drive System Technology Expo, which takes place from Jan 20 to 22, 2010, in Tokyo.

The EV was released Jan 15, 2010, at a price of ¥2,079,000 (approx US$23,018, without a battery).

Tajima Motor, which is run by Japanese racing driver Nobuhiro Tajima, manages auto shops and motor sports businesses. Based on the experience in motor sports, the company designed the EV that looks like a formula car and has a light weight and low air resistance.

It is categorized as a motorized bicycle in Japan and has a motor output of 0.59kW. The weight of the EV was reduced to about 300kg by combining a steel tube space frame and a resin bathtub-like body.

Customers can choose a battery and a chassis for the vehicle. Lead batteries and lithium polymer batteries are available. And their current capacities are from 40 to 120Ah.

The most inexpensive battery is a lead battery with a current capacity of 40Ah and costs ¥228,480. On the other hand, when a 120Ah lithium polymer battery is selected, the EV costs ¥2,468,580.

The distance capable of being traveled varies depending on battery capacity. And it is about 25km with a 40Ah lead battery (at a speed of 40km/h) and about 90km with a 120Ah lithium polymer battery. The maximum speed of the vehicle is more than 70km/h even though the legal maximum speed for motorized bicycles is 60km/h in Japan.

The EV Mini Sport is a rear-wheel-drive vehicle with a double wishbone type front suspension and a swing arm type rear suspension. Its motor is mounted behind the driver's seat, and driving force is transmitted to the rear axle via a belt. There seems to be only one axle, but it has a differential function developed by Tajima Motor.

The motor is a series-wound direct-current type manufactured by Meidensha Corp. And the controller was developed by Tajima Motor. The reduction gear ratio is 4.6. The dimensions of the vehicle are 2,490 (L) x 1,298 (W) x 1,090mm (H), and the wheel base is 1,855mm

The EV is currently sold at the stores directly managed by Tajima Motor but will be available to dealers in the future.

"We are planning to release a version with a longer width and a two-seater version with an increased length for overseas markets," Tajima said.

COMMENTARY;  I thought that thing, the Apple iPad tablet computer, I mean was a loser, but this car is a joke. It looks more like a child's toy.  Too light to ever drive on any freeway here in the U.S.  And, where is the rollbar for this car?   I would be afraid to drive it across the Golden Gate bridge.  It might actually float away. That $23,000 price tag is just too much for a toy car, but there is probably somebody who thinks it is cool and buy one. 

I suppose this car might be a hit at an amusement park or mini race track, here in the U.S., but at only 70 km per hour, this car just doesn't have the pep that you expect in a Formula I, even if it is electrical and smaller than a regular Formula I racing car.  Furthermore, you would need a roll bar, and anybody driving one of these cars, would have to sign a disclaimer of liability.

Courtesy of an article dated January 22, 2010 appearing in TechOn

APPLE FINALLY UNVEILS THE IPAD TABLET COMPUTER IN SAN FRANCISCO

 

The iPad as a book eReader

Apple CEO Steve Jobs finally introduced the company's long-anticipated tablet computer today, and gave it a name no one seemed to like, at least initially.

But he also gave it an unexpected price -- $499 for the entry-level version -- which will allow it to tear head-long into two lucrative consumer electronics categories: the e-reader, now dominated by Amazon's Kindle, and the new generation of low-cost laptops called "netbooks," which Mr. Jobs has repeatedly derided.

The iPad for reading MAIL

Mr. Jobs, who collected a standing ovation from much of the crowd at his presentation today even before he presented anything, also introduced a new app called iBooks, at one point showing an image of the black-and-white Kindle on the big screen behind him just to drive home the iPad's superior aesthetics.

The iPad for displaying VIDEO 

"Amazon's done a great job of pioneering this functionality with the Kindle," he said, according to one live blog of the event. "We're going to stand on their shoulders and go a little further."

The entry-level iPad is quite a bit more expensive than the $259 Kindle, which has a six-inch black-and-white display, compared with the iPad's 10-inch, multitouch screen. But the price is in-line with the $489 Kindle DX. Prices for the iPad escalate to $829 for 64 gigs of memory and 3G connectivity to go with basic Wi-Fi.

 

 

The iPad for displaying FOTOS

Media on the iPad
Much was made during weeks of hype leading up to the news conference of the impact on magazines, many of which have already been working on tablet versions. But Mr. Jobs didn't give them as much as a shout-out, though the websites of National Geographic and Time showed up early when Mr. Jobs showed off the iPad's Safari browser.

"My big question: Will the iBooks store support magazines or graphics-intensive books?" said a magazine editor in attendance. "And how about subscription models?"

The iPad running iPod MUSIC STREAMING MODE

Monica Ray, senior VP-corporate strategy and development at Time Inc., declined to comment on the presentation itself but had good words for the newly revealed iPad. "There were a lot of expectations around it and I think they met if not exceeded them," Ms. Ray said. "We're really looking forward to working with Apple on this great new channel of distribution for us."

The New York Times made its expected appearance in the presentation, looking slick as a tablet app that will let people save stories to their iPad and play video, among other things. Times executives did not offer details on how and when it will sell that edition, however, and the company later declined to elaborate.

The iPad displaying the iTunes Store site

Media buyers said the iPad seemed very promising for traditional print publishers but demurred when asked those publishers' hope to charge higher ad rates for their tablet editions than they do in print.

"I do think that the tablet is going to be another revenue source," said Brenda White, senior VP and publishing activation director at Starcom Worldwide. "The way I'm looking at it, it's another distribution point. It's going to be a more robust experience for the consumer and to me that's going to lead to increased readership and increased audience."

Whatever happens next, on launch day the iPad seemed to many people like the only thing going on in the world. By midafternoon the device was appearing in 10,000 tweets every five minutes, according to Nielsen.

But not everyone was blown away. "As it stands, a quick, well-structured response from Amazon in the next version of Kindle could easily be a contender here," a Forrester Research analyst said in a note. "That's why I say that the iPad is priced lower than expected because it is less revolutionary than expected."

COMMENTARY:  As I have commented previously, I am still trying to figure out why I would buy an iPad.  Are legions of Apple evangelists going to lineup outside Apple Stores to buy this thing? 

Sure, it looks sleek and cool.  Isn't everything that Steve Jobs has designed and engineered?   Jobs, ever the visionary, innovator and product picker.  One success after another.   The one question you have to ask yourself is, will that string of successes ever come to an end?  

After looking at this thing, the iPad, I mean, I must admit that I have not encountering a single article praising the iPad or giving it overwhelming rave reviews.  I was hoping to see fireworks, and hear the cheers all the way from San Francisco.  In fact, the introduction of the iPad is mostly a muted Duh. 

This is not the technological leap forward that I was imagining.  It is the Apple iPhone, only bigger.  Can you hold it up to your ear and make telephone calls?  Just kidding, of course.

I know I am sounding a bit cynical, but this is my Blog and I can be as big a cynic as I want to be.  I am totally flabbergasted, because I don't see how this thing is going to be the big hit that Apple is known for. 

I sure hope that the touchscreen keyboard can handle repeated use.  I would hate to see this thing in about a year or two, after ones fingers have chewed into that touchscreen and ruined the screen for viewing those beautiful digital pics and video.

It's too damn expensive to be a book eReader, and priced about the same as low-end netbooks, but I would prefer a real keyboard in the classic clam shell design, because you can keep it clean and away from potential damage and scratching.

As soon as the iPad is available in Apple stores, I will make a trek and see if my concerns were real or just imagined.

Courtesy of an article dated January 27, 2010 appearing in Advertising Age

CLEAREDGE POWER RAISES $11 MILLION, FUELS GROWTH IN STATIONARY FUEL CELLS

The momentum for stationary fuel cells continues to grow.

ClearEdge Power, which makes a fuel cell that can convert natural gas into heat and electricity, has raised $26 million, according to SEC filings. It raised $15 million last year and this year added another $11 million. (the extra $11 million was reported by Earth2Tech first, I think).

Like electric cars, methane fuel cells have been discussed for years but now are coming to market. Panasonic, in conjunction with Osaka Gas, started selling a 1 kilowatt methane fuel cell to consumers in Japan earlier this year. In England, Ceres Power says it will start to market its fuel cell through utilities in England and Ireland to consumers next year. Some of the components Ceres Power integrates into its fuel cells come from the auto industry.

And of course, everyone is waiting for Bloom Energy to release its 25 kilowatt fuel cell. Although rumors swirl that it has been delayed again, Bloom has installed and tested a fuel cell at the University of Tennessee.  and tested a fuel cell at the University of Tennessee. Early buyers of Bloom fuel cells are San Francisco Airport, Google, Ebay, according to various sources. Adobe may also install a large fuel cell system soon.

ClearEdge makes a 5-kilowatt system that sells for $50,000 that right now it sells in California, mostly in communities where solar doesn't make perfect sense. California consumers qualify for a $12,500 rebate which comes from a pool funded by ratepayers. That drops the price to $37,500. Additionally, businesses qualify for a federal tax credit of $15,000 while homeowners can get a federal tax credit of $5,000. The state also recently passed a provision that allows fuel cell owners to sell their power, thereby allowing them to run them 24/7.

These fuel cells essentially crack methane molecules (one carbon, for hydrogens) to produce electricity and heat. They are generally around 80 to 90 percent efficient if the heat can be exploited. Burning gas at home is 100 percent efficient. Gas, however, can't be converted into electrical power at home easily: generally consumers can only cook with it, heat their home, or heat water. Combined cycle power plants can convert gas to power and then send the power down the wire. These plants can also exploit the waste heat that gets generated in the chemical reaction. Electricity, however, dissipates as it gets delivered. Ideally, fuel cells can help get around these problems. Although the fuel cells perform the same task, their internal architecture and the temperatures at which they operate can vary wildly.

It's not easy. Nigel Brandon, one of the founders of Ceres, said research began in 1991 on the fuel cell that Ceres will market. The company didn't form until 2011. Bloom, formerly Ion America, has been around since the beginning of the decade and has raised $350 million.

And in other funding news, Harvest Energy, which extracts energy and valuable minerals from biomass, has raised money from Waste Management and Kleiner, Perkins.

COMMENTARY:  I have covered stationary methane-powered fuel cells because I am very upbeat about the potential for this technology, but the costs will have to come down to make this an attractive alternative to solar and wind for generating electricity.  

I do like the fact that fuel cells can generate electricity year-round, something that solar and wind cannot do, and that you can heat your home or business and generate electricity simultaneously, so you get a double economic benefit.  That's pretty cool.

ClearEdge Power claims that their ClearEdge5 stationary fuel cell electricity microgenerating units can reduce untility bills by 50%, reduce CO2 emissions by one-third, and are 11 times more productive than solar.  If you go their website you will see an animation of their ClearEdge5 unit demonstrating how they work.  

I actually recommended Ceres Power, a U.K.-based startup that has been developing an innovative stationary fuel cell electricity microgeneration technology for nearly a decade, to a potential investor. I like Cere's because their fuel cells burn methane, a readily available and cheaper fuel, and at a lower temperature, and many English utility companies are lining up to install the units when they are introduced in 2011. Ceres appears to be well funded, but having the support of the U.K. utility industry is a big plus because it gives their fuel cell technology a lot of creditability.

I wish I knew more about Bloom Energy's fuel cell technology, including its efficiency, but it seems that they have had a number of delays in getting the thing to work right, delaying a launch.  I was actually introduced to Bloom Energy by a VC, but as I did research on fuel cells, discovered Ceres Power.   

Courtesyof an article dated January 25, 2010 appearing in GreenTechEnterprise

  

10 DIRECT AND DIGITAL MARKETING TRENDS FOR 2010

An increase in mobile opportunities, the death of the digital agency and targeted online display improvements are just three of 10 digital marketing trends Bruce Biegel  discussed at a recent Direct Marketing Club of New York luncheon.

Biegel, managing director of the Winterberry Group, a New York City-based advertising and marketing strategic consulting firm, outlined the following 10 trends he suggests marketers and marketing suppliers stay on top of this year:

1. An acceleration of mobile opportunities. The growing adoption of smartphones and apps—combined with increased marketer and agency experience—will allow for more targeted and effective mobile marketing. "Even if you can't make money from mobile, you still have to keep an eye on it," Biegel said.

2. Local marketing dollars migrate online from traditional budgets. "As geo-targeting capabilities improve via search, display and mobile, we'll see more local advertising online," he said.

3. The rate of consumer social adoption slows. But, marketers "will increasingly understand how to use and manage social media," Biegel said, adding that they'll be doing more listening and monitoring of online conversations this year, as well as collecting data from these interactions to get a better view of their customers or prospects.

4. The death of the "digital" agency. This trend spurs the return of the full-service agency "that blurs the lines between traditional, direct and digital agencies," Biegel explained. "Since marketers think of their programs as integrated, they want to work with agencies that can work across all channels."

5. Consolidation will accelerate. Top-line growth will be driven through the purchasing of "good" companies.

6. Understanding the new data taxonomy. "This will be an imperative for all direct marketing constituencies," he emphasized. "The direct and digital words have to have a common language, a common taxonomy if they want to work together."

7. Audience targeting in online display will grow. "This trend will spur the shift of spend to the long tail of sites," he said, adding that as a result "ad exchange buying will grow."

8. Marketers and marketing agencies will seek new geographies for growth. As a result, globalization will become increasingly important. Marketers also will expect more from their marketing service providers. "They'll say, 'You need to be able to support me in another country, or I'll go somewhere else,'" Biegel said.

9. The economic recession is over. U.S. GDP growth returned in the third quarter of 2009, he noted, dawning a very slow but steady jobless recovery.

10. Do-not-mail legislation no longer is a significant threat. Instead, the primary privacy and consumer control discussion, Biegel said, "has shifted to digital channels and vertical advertising."

COMMENTARY:  I agree with most of these direct and digital marketing trend prognostications, and would like to add a continued growth in the out-of-home digital display advertising sector. Continue to see a shift in ad dollars to the OOH advertising sector.

Mobile apps will continue to be big in 2010.  With the introduction of do-it-yourself app development software, every small business and entrepreneuring consumer will develop their own mobile apps to promote their companies and products.     

Location-based marketing technologies will continue to grow as marketers seek new ways to reach consumers on their mobile devices. Augmented reality, one of these location-based technologies, I predict is going to be what online search was to the Web.  Augmeted reality is a natural fit for search, so I will predict that Google, will develop their own augmented reality technology or acquire them.  Google, in particular, will benefit the most because of their Android mobile platform and launch of the Nexus One smartphone, something I am have been largely critical of, but Google could prove me wrong. Are you listening, Google?  Stay tuned for more.   

Courtesy of an article dated January 27, 2010 appearing in Target Marketing Magazine

PRIVATE EQUITY FIRMS COME UNDER GREATER SCRUTINY BY THE SEC

If members of Congress decide to require private equity firms to register with the Securities and Exchange Commission, general partners should pay close attention to how those rules are implemented, said a former SEC commissioner. Paul Atkins, a co-founder and managing director of Patomak Partners who served on the commission from 2002 to 2008, said the SEC is "out to prove something" and will look closely at any firm it decides to examine, including looking at practices that existed before regulation was enacted.

"You all need to be on your toes," said Atkins, who spoke as panelist during the Dow Jones Private Equity Analyst Outlook 2010 conference Tuesday in New York. Even venture capitalists, who probably will get a blanket exemption from registration, need to be wary, Atkins said, because the House bill leaves it to the SEC to define venture capital. "That is very dangerous," he said. He urged private equity firms to monitor SEC rulemaking and to write letters commenting on proposals. Atkins said proposed pay-to-play rules banning the use of placement agents were an example of a knee-jerk approach to an issue. "That's a great example where comments can come in and help inform that," he said. It is unclear when the SEC will act on the ban. Another panelist said that no matter what happens to the registration legislation, limited partners are raising the bar. "That higher level of disclosure is something you're going to see whether the government enforces it or not," said Jon Persson, Geller & Co.'s chief compliance officer. Douglas Lowenstein, the president of the Private Equity Council, which supports registration of large private equity firms, said limited partner concerns, registration and pay-to-play rules are all separate issues and shouldn't be conflated. Some large private equity firms are already registered with the SEC, he said, and the industry has some idea of what the requirements are. Regarding smaller players, Lowenstein doubted that the SEC "is all that interested in PE firms with $1 billion under management as a target." Even VC's should be wary -- leaving definitions in hands of the agency is "very dangerous." COMMENTARY:  I actually believe that some form of regulation is necessary in order to protect investors in some of the private equity firms.  A lot of them are pension. mutual funds, big banks and insurance companies, and we all know what happened to those funds and financial institutions before and after the financial meltdown of 2008. Private equity firms make big investments, particularly buyouts, turnarounds and risky investments like new technologies, so when they screw up, it's a really big screwup.  Take Kleiner Perkins, Caufield, for example.  The firm has not done very well with its investments, and has been severly critized.  Private equity firms need a lot of capital to make their gigantic investments, and their difficulty in raising capital for their funds, has severely impacted their ability to continue to fund their portfolios or replenish their funds. Liquidity is a big problem for private equity firms. They generally take big equity positions, usually controlling interests, and the volatile stock market, has prevented many from cashing out via an IPO. The federal government bailed out the big bangs and insurance companies, because many of them were "too big to fail".  I am not saying that private equity funds fall into the same category, but the new legislation really neds to reign in some of these big private equity firms,      Courtesy of an article dated January 27, 2010 appearing in The Wall Street Journal's VentueWire

NEW FOOD & BEVERAGE PRODUCT LAUNCHES DROPPED BY NEARLY 30% IN 2009

 

 

 

 

 

The number of new food and beverage products launched in the U.S. last year plummeted by an unprecedented 29%, according to the latest analysis of Mintel's Global New Product Database (GNPD).

"In the last decade, Mintel GNPD has only tracked occasional, small declines in new product introductions for the U.S. market -- never a decline as strong as this," observed Lynn Dornblaser, leading new product expert for the research firm.

The total U.S. F&B product launch count for 2009 was 15,675, versus 21,555 in 2008. Prior to the recession's onset, in 2007, the count was 22,241.

The lingering economic downturn clearly caused smaller companies, which typically introduce a wide range of new products, to slow or cease launch activity last year. This was particularly apparent in a category like snacks -- where sales are growing, but product launches dropped 34% last year to 1,568. "Smaller, specialty companies are particularly active in the snack category, and they've been hardest-hit by the economy," notes Mintel senior analyst Krista Faron.

Launch declines also reflect large companies' growing inclination to "streamline their portfolios and be much more strategic about product development and assortment strategies," Faron points out. "Companies can no longer afford to be the third- or fourth-tier brand in a category. They're focusing on their leading, highest-volume, highest-margin products" and retreating from the "unbridled" product development that routinely spawned multiple flavor/product assortment launches within a single line, she says.

Those strategies are, of course, also a necessary response to increasing pressure from retailers. Overwhelmed by display and inventory issues as a result of the mushrooming number of products on shelves in recent years (up about 50% over the last decade, by some estimates), grocery retailers were cutting back on SKUs even before the recession.

"The recession has caused retailers to focus even more on the highest-margin, highest-volume product assortments," confirms Faron. "And in a growing number of cases, third- and fourth-tier national brands are being cut in favor of private-label brands that are more profitable for the retailer. Private label is a major dynamic."

All but a handful of categories showed double-digit percentage declines in their number of launches last year, as compared to 2008. In addition to snacks, categories showing the largest percentage drops included sugar/gum/confectionary (-44%, down to 691 launches in '09); dairy (-43%, 748 launches); baby food (-43%, 125 launches); chocolate confectionary (-37%, 960 launches); savory spreads (-36%, 170 launches); and non-alcoholic beverages (-34%, 2,083 launches). Even alcoholic beverage launches were down 16% (to 552).

The categories that saw launch growth or small declines were mainly pantry staples and foods offering nutrition at economical price points. Side dish launches rose 16%, to 584. "Rice, beans and other side dishes are extremely economical, in part because they're often meatless," notes Faron. PB&J and other sandwiches drove a 12% increase (336 launches) in new jams/jellies (aka sweet spreads), and soup launches rose 1% (to 341).

Dessert/ice cream launches held their own (-1%, 869 launches), as did sweeteners and sugar launches (flat, at 76) -- although the latter reflected innovation in the form of new, stevia-based sweeteners, Faron points out.

Looking at launches by product claims, double-digit percentage declines were also the norm -- more reflecting consumers' inability to afford specialized products than declining interest in these, says Faron.

For example, launches claiming added calcium and fiber were down 55% and 32%, respectively. Launches of products claiming "low/no/reduced" -- as in calories, sodium, sugar, fat, transfat, cholesterol, carbs, glycemic count and allergens -- were also down by double digits.

Budget-consciousness has also slowed organic and all-natural launches, at least a bit (down 36% and 34%, to 1,610 and 2,112 launches, respectively).

What launch claims saw growth? New products with explicitly economy-oriented claims on their packaging (such as "economy-priced" or "value size") grew 72% (410 launches). Products claiming environmentally friendly packaging grew a whopping 103% (1,447 launches) -- although those claiming that the products themselves are environmentally friendly declined 6% (254 launches).

Other claims on the launch upswing included gluten-free (up 6%, to 1,246); ease of use (up 5%, to 966); ethical/charity (up 7%, to 324); convenient packaging (up 8%, to 798); high protein (up 25%, to 310); vegan (up 2%, to 323) and weight control (up 3%, to 232).

COMMENTARY:  I see several reasons for the decline in new food and beverage product launches in 2009:

• Grocers and other food outlets parred down their inventories in 2009, and were less likely to try new products from new companies, sticking with recognized brand names and store brands.
• Grocers and other food outlets are notorious for demanding incentives from their suppliers. Not only do they want attractive margins, but expect the supplier to provide marketing support to advertise the new product and free cases of the product.
• There is a growing trend by consumers to purchase lower-priced store brands, and the grocers have responded to the growing demand. Store brands generate higher profit margins and the grocers can pass on the savings to a penny-pinching consumer, particularly during the recession.  A fall-out of the shift to store brands, is that grocers are purchasing less new food and beverage products in favor of their own store brands.   
• The lack of adequate venture capital and tight credit situation in 2009 reduced spending on new product R&D and manufacturers cranked up to fill the demand for store brands, essentially locking out companies with new food and beverage products.

Courtesy of an article dated January 26, 2010 appearing in MediaPost Publications Marketing Daily

 

AMERICANS REDEEMED 3.3 BILLION COUPONS IN 2009, UP 27% FROM 2008

American consumers redeemed a mind-boggling 3.3 billion coupons last year -- a 27% jump from 2.6 billion in 2008, with the recession fueling the first growth year for coupons in 17 years.

Inmar, a transaction settlement provider based in Winston-Salem, N.C., says the first growth period started in October 2008, leading to five consecutive quarters of double-digit growth. Marketers, it says, are investing more money in coupons than they have in 30 years, issuing 367 billion of them, at an average face value of $1.44, in 2009. That has come along with increased pages in freestanding inserts, and a 92% increase in Internet coupons.

The change began in the fourth quarter of 2008, as the recession dominated all the headlines. "We saw a gain of 10% in that quarter," Matthew Tilley, director of marketing for Inmar's promotion services division, tells Marketing Daily, "and while we all expected it would continue to rise, I've been surprised by how big those quarterly gains have been in the last year -- it really is a huge increase."

On average, the face value of 2009 coupons fell by a penny, and they became a little trickier to use, with marketers shaving an average of 10% off the expiration period. "There have been plenty of changes going on in the last two decades that have led to the decline in coupon use," he says, "but with this economy, that has changed, and consumers are clearly getting back to the basics, and don't mind the old-fashioned approach of clipping coupons. And marketers are seeing that if they take coupons off the table, consumers will definitely go to the lower-price options."

Other tracking services are also observing this strict adherence to finding value. "On most shopping trips, large percentages of households are using shopping lists (58%), consulting store circulars (47%), redeeming coupons (37%) and comparing unit prices (50%)," Todd Hale, SVP/consumer & shopper Insights for the Nielsen Co., tells Marketing Daily.

"More planning is driving increased coupon redemption levels, but so is the way consumers are connecting to media. In the last five to ten years, the explosion of TV channels, Web sites, consumer-generated content, social media and smartphones have given consumers access to more information about products, brands and retailers than ever before. And with more and more manufacturers and retailers enabling delivery of coupons right to our favorite gadget, it is no wonder that coupon redemption levels have exceeded the number of coupons distributed."

Inmar, in fact, reports a 360% jump in use of Internet coupons, but points out they are still just a tiny splash in the coupon bucket. "Still," Tilley says, "FSIs -- those paper coupons cut from the Sunday paper -- account for 90% of all coupon redemptions."

COMMENTARY:  I have been posting articles and commenting on the increased use of direct marketing, particularly discount coupons for months now.   As food prices increased earlier in the 2009, food coupon usage increased dramatically.  Penny-pinching consumers are struggling to make ends meet discount coupons have been a godsend.  All you have to do is look at the huge number of coupon inserts stuffed into your Sunday Newspaper. 

Grocery chains have been issuing discount coupons for years now.  Just look at the back of your grocery receipt.  They come pre-printed with a discount coupon for something, usually a complementary product.  If you purchase a box of breakfast cereal, there's a good chance that your grocery store receipt will include a discount coupon for the same thing, only a different type of cereal. 

When the year-end 2009 numbers came out, it did not surprise me that discount coupon usage was up by a whopping 27%, and that 2009 was the first time in 17 years that coupons were up.  If you are counting, that's 3.3 billion coupons redeemed by consumers.  I believe discount coupons are here to stay, and consumers expect them. Somehow I have a feeling that 2010 will be a banner year for discount coupons.

Courtesy of an article dated January 26, 2010 appearing in MediaPost Publications' Marketing Daily 

 

VENTURE CAPITAL FUND-RAISING GAP SIGNALS HARD TIMES AHEAD FOR STARTUPS

Despite a significant drop in venture capital investment last year, VCs still spent a lot more money than they raised. That spells trouble for start-ups this year.

Dow Jones VentureSource

In fact, the gap between fund-raising and investment looks a lot like 2003, a tough year for the venture business. But back then, many firms were still running on piles of cash they raised during the dot-com bubble. That’s not the case today.

U.S.-based venture firms raised $13 billion in 2009 as many of limited partner investors pulled back, their investment portfolios crushed by the global financial crisis. Investment in U.S.-based companies fell as well, to $20.5 billion, according to data from industry tracker Dow Jones VentureSource, which also provided the fund-raising data. But that still left a gap of more than $6 billion between fund-raising and investment, the kind of disparity last seen in 2003 when the dot-com bust put a damper on the venture industry.

U.S. venture firms have been making significant investments abroad, so fund-raising and U.S. investment don’t necessarily track exactly. Also, venture rounds sometimes include corporate and private equity investors. This was particularly true during the Internet bubble. Now, however, those investors are scarcer in venture deals. Corporate-only financings for venture-backed companies totaled $6.4 billion in 2000 and less than $1 billion last year, an indication of the extent of the pullback.

It’s possible that a flood of IPOs this year will dazzle limited partners, who will come rushing back into venture in 2010. But don’t count on it. A more likely scenario is another year like 2009. That means VCs will have to keep a tight hold on their checkbooks no matter how many great opportunities they think they see.

COMMENTARY:  The above numbers speak for themselves, and I could not agree more.  If you are a business startup it is going to be damn tough to raise venture capital.   I recommend bootstrapping or relying R&F's as your key sources of funds.  Prove out your business model.  Get new customers, generate revenues.   Find a good size niche, with little or no competition. Create a compelling value proposition to differentiate yourself from the competition.  To successfully raise venture capital, you should ALL of the following:

• Filling a real need in the marketplace.
• Large market with high barriers to entry.
• Compelling value proposition (patents, trademarks, trade secrets, no competition, control of scarse resources or complementary assets, well ahead of the learning curve, disruptive or breakthrough technology, high profit margins, low production costs)
• Experienced management team in your chosen industry sector.
• Successful business model evidenced by customers and revenues.

Courtesy of an article dated January 25, 2010 appearing in The Wall Street Journal's Venture Capital Dispatch blog

 

FIVE FUTURISTIC APPLICATIONS THAT ARE HERE NOW

How do you feel about new software applications or new ways of doing business?  Are you eager to try something new or do you prefer the tried and true?   Sometimes I feel like I’m the only person in the world who hasn’t complained about Vista or the new user interface of Office 2007.  I love to see how art and engineering come together to make computing fun and easy.  

This is why I’ve decided to examine 5 up-and-coming applications – and how to turn them into a daily tool.  

1. Augmented Reality and Reality Browsers.  You may not be familiar with this phrase, but you’ve already seen this in action on TV and the movies.  When you see actors interacting with a virtual computer screen that’s actually an overlay on the space around them; moving files with the swipe of their hand, opening documents in mid air – that’s augmented reality.  Augmented reality applications can already be found on mobile phones.  The new Android has an application called Layar.  Layar is a “reality browser.  Users will simply use their phone’s camera feature to point at scenes or objects and the technology will overlay additional information or data on the screen about those objects.  For example, say you’re in a new city or town and are looking for a Chinese restaurant, you would point your phone at the street or neighborhood where you are and Layar will tell you what businesses are around you.  Think of this application as on-demand Yellow Pages.

• How to take advantage:  You’ll want to make sure that your business appears accurately on Google Maps.  Bryce Sady, a Boston-based healthcare marketer recommended the following: “Enter in the address (not the business name) on maps.google.com and see if it shows up.  You can advertise your business for free on Google Maps .When adding the category of business you are in, think about search terms that someone would enter in on their phone or GPS to find a business like yours.  Also, be sure and upload an updated photo of the storefront.  Prices, hours, credit cards taken are all helpful information for users.  If you are listed, you will want to verify the listing, so that it shows up as "owner-verified" in results.”

2. Location-Based Applications:  With the widespread incorporation of GPS devices and applications, it’s easier than ever to get real-time information on where your friends are and what’s around you.  This trend is related to augmented reality applications because it’s “location-based” technology that is one of the first consumer-accessible ways that we use it.  Twitter was a pre-curser to this trend when people were using it to tell their friends where they were and connect in real time.  BrightKite was another location-based application that was a little before its time in giving you updates as to where your friends are.  The latest in the mix is Foursquare:  A location-based service based on your Twitter network with an added layer of social gameplay.  Currently Foursquare is gaining traction in big cities.  

• How to take advantage: You have to be visible, listed and tagged in all the right places, Google Maps and Yelp.  Another important way to take advantage of these applications and trends is to build an active community that sincerely promotes your product and talks about it online.  If you’re a small business, you must start a customer community program this year.  Make it a point to build an accurate customer list that includes e-mails.  Create a Facebook Fan page, Twitter, Foursquare, BrightKite and any other location-based application account and offer specials and promotions through those channels to your customers.  Also check out:  Google Latitude to Loopt and  FireEagle,

3. Interactivity and Crowd Sourcing –Wikipedia is a great example of crowd sourcing.  But as the trend has become more commonplace, people have come up with increasingly more creative ways to use it.  Take Dahlia Lithwick, for example.  By day, unassuming Supreme Court reporter, but for her special project, she decided to write her novel, "Saving Face", using input from her Facebook Fans.  From the other end of the spectrum, budding inventors can use the power of crowds to think up, develop, manufacture and market new products on Quirky.  Say that you have a great idea, but don’t have the engineering skill to design it.  Submit it to Quirky and engineers will help.  The community serves as the market test site and the proceeds from products that actually sell are divided among the community according to their level of input.

• How to take advantage:  Make it a point to add “interactivity” to your products and services.  If you’re thinking about writing a book, involve your audience in the process.  If you’re planning on a new product, create a space where customers and users can put their two cents in.  Put a crowd sourcing button on your web site from IdeaScale and let your customers tell you what new features to add.  Create a Facebook Fan Page or a blog-style web site dedicated to your next new venture and engage your readers in the conversation.  Use social media tools like Search.Twitter.com to search on your company name or industry terms to see what people are saying about it in real time in their own words.

4. Real time collaboration: Google Wave is an innovative new way for people to communicate and collaborate. Wave is already being used for projects and collaboration among many small groups and organizations around the world, in large part because of its strength in combining familiar communication platforms.  But it’s really no fun or no good if everyone you work with isn’t on the system.  Maybe that’s why it’s been so slow to build steam.  Because I run so many virtual teams, I think that Google Wave is an amazing way to stay connected, work collaboratively and efficiently with people from all over the world as if they were right next to you.

• How to take advantage: Get yourself on Google Wave and get everyone you work with to sign up too.  Connect with associates and customers and collaborate on projects in real time.

5. Digital Branding/Real Time Branding:  The internet revolution has made it hip to be small.  Small businesses can increase their brand equity by becoming ubiquitous participants on social media sites.  But there are more opportunities for small businesses who want to build their brand in a more subtle, more cost effective way.   Ex-Yahoo Real Estate executive, Arjun Dev Arora  used his expertise in real estate to create   ReTargeter, a brilliant way to get past visitors BACK to your site.  The technology places a little “burr” of code onto your web site – much like the little burrs you might collect on your pants while your hiking.  Then once visitors that have been to your site, they collect these digital “burrs” as they wander off to bigger sites like CNN.com, for example.  As they wander the web they see a subtle ad for your site on the sites they are visiting (such as CNN.com, that have ad spaces) thereby increasing the perception of your brand and enticing them to return to you.

• How to take advantage:  Look at digital advertising opportunities.  Do your customers have a favorite site in your industry?  Offer to sponsor a page or become a regular contributor.  

 

Courtesy of an article dated January 21, 2010 appearing in American Express' Small Business Open Forum