Is the dot com bubble back? Not if you look at total VC Investment, Deal Sizes or Follow On %’s

There’s a growing notion coming out of the Valley that the hey days of high valuations and free investment dollars of the dot com boom are back in full swing.To the extent you’re on the beneficial end of this phenom, more power to you.

Diving deeper into VC investment numbers paints a different picture.


MoneyTree Total Venture Capital Investment Dollars for and Q1-Q3 2010 was $4.93B, $6.94B and $4.82B respectively.

The same for Q1-Q4 of 2000 was $27.43B,  $26.66B,  $25.21B and $20.76B respectively.

Year over year differences aren’t rounding errors — we have a ways to go before it’s even in the realm of an apples to apples comparison.


Average deal size in Q1-Q3 of 2010 is $6.53M, $7.22M and $6.18M respectively.

Average deal size in Q1-Q3 of 2000 is $12.71M, $12.56M and $12.99M respectively.

Similar disparity is found when looking at how many new investments versus follow-on investments are taking place.

I wish I could take credit for this tid bit of information — that goes to a trusted Partner at Perkins Coie; I simply researched the numbers.

Here’s to a follow on post a year from now that’s considerably more optimistic.


Alternate reasons you get rejected by a VC

Source: Zazzle T-shirts.
Source: Zazzle T-shirts.











I have to say “no” alot — par for the course as a travel venture capitalist & investor. Typically 95% of the time or more depending on which firm you’re dealing with. 

Conversely this means 95% of the entrepreneurs & businessmen/women I hear pitches on will hear “no” despite countless hours of sacrifice to get their venture to this point. 

Sometimes a “no” means “no” and an investor doesn’t feel your company, team, business model, market, roadmap or combination thereof is worth investing in. 

Here are some other reasons you may get a “no” from a VC:

• Your company may not be growing at a scale a VC firm needs it to. I just don’t think writing you a $1M check will get me a 10X or 20X return. I see companies all the time that will make sustainable & profitable businesses that I have no doubt will inevitably spin off cash to their owners and investors; just not fast enough to warrant a VC investment.

Remember that 1 out of 10 VC investments is a ‘hit’ — if you’re good — so that means the firm has 4 or 5 investments that go belly up and maybe 2 or 3 companies that return just what the firm put in. These are investments without personal guarantees or collateral so the 10X or 20X return looks greedy but should be taken in context for the risk. 

• The market you’re addressing isn’t large enough or growing fast enough for institutional funding (but may sustain a viable business using other sources of funding/lending).

• Your company does not meet the financial metrics a VC firm follows. 

• You are competing with other deals the VC firm is currently investing in. Your deal may be overshadowed by another deal but could have been funded at another date. 

 You are competing with the return the deals the VC firm has done in the past. Like a batter opting out of going to bat because they don’t want to ruin their batting average. 

• You may not get an outright “no”. I hated this when I was fundraising. VC’s who wasted your time or kept you strung along and typical horror stories. Now that I’m on the other side I only use the ‘until you get more traction’ response if I feel a prospective investment isn’t quite there yet but interesting enough to see if you get further than you are now. 

Hope this sheds some light on the investment process.



There’s a world beyond Silicon Valley.

The south side of the Googleplex building in M...

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The Valley is what it is and we love that about it but it’s NOT the rest of the US. Or the rest of the world.

At some point in the conversation with founders, government bodies, officials within public/private partnerships,  or sometimes investors in Durban, Hong Kong or India, I’m asked (a) about Silicon Valley.

What it’s like in ‘the valley’? How often do I need to visit Sand Hill Road. Have I been to Facebook or Google? I heard they have sheep that eat the grass at Google and they pick you up. How do we replicate their success here? Can you help us make that happen? 

Some truths, some myths — always interesting. I’d be no different if the tables were turned.

Silicon Valley’s success isn’t a fluke.

It’s not new. It’s not going anywhere. It can’t be entirely replicated. You can copy and try and emulate but as Sifry-san says, “it’s not just the water”.

It’s not one company or one person but a long standing ecosystem of interdependent and opposing interests fighting for local, national and international success. What once was an idea on the back of a napkin in a budding founders mind can mix with an accommodating talent pool, funding, time and a bit of luck to live to see the day their startup is a household name in the remotest parts of the world and with a multi-billion dollar valuation. Google, Facebook, Cisco .. instantly recognizable names that either started or rapidly expanded within Silicon Valley. BECAUSE of the Valley some would argue. ONLY in the valley others would vehemently argue.

The flip side to this uniqueness comes in Silicon Valley being an inaccurate representation of the rest of the United States.

I fully agree that trends start in the Valley and permeate out. No argument there. I’m looking at a shorter time frame than this — I’m looking at the time it takes a founder to get buzz in the valley and the 6-18 months it takes them to look beyond the Valley for customers.  That’s where the disconnect between norm in the valley and the norm elsewhere hits founders in the face and right to their bottom line. If your entire and foreseeable target client is within Silicon Valley, this post doesn’t apply to you.

The headquarters of Intuit Inc. in Mountain Vi...

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If you look around Silicon Valley, iPhone and iPads reign. The rest of America is now getting the iPhone and that’s because it’s on sale at AT&T.

BTW, the iPhone grew.2% in total US smartphone subscribers from Feb 2010 to Feb 2011 according to Comscore.

In the valley, the only computer you see are Mac’s — do I need to talk about MS Windows % of the OS market. If your startup builds software — yes the kind you download and install — do you have both operating systems covered or just what you see the most around town?

People still build software? Isn’t everything on the cloud? I love SaaS, invested in SaaS companies, advised SaaS companies, use SaaS company services and can appreciate the time to market value it provides startups (everywhere) but don’t take “being in the cloud” as automatically being a GOOD thing. You’ll get a sharp rebuke from clients, partners and investors in many parts of the world.

Google isn’t the #1 search engine in every country. Facebook isn’t the #1 social network in every country. Are your growth projections based exclusively on Twitter and Facebook?

Image representing iPhone as depicted in Crunc...

Image via CrunchBase

Are you building for a wider common denominator than just iPhones? You’d never hear ‘mobile friendly website’ in the Valley — you’d hear App. Guess what; if you’re selling to most parts of the world, you’re better off with the former.

If you’re a video streaming startup, not everybody is like South Korea with blazing fast Internet or Finland with unbelievable Internet penetration. In South Africa, you pay per megabyte downloaded in many cases. You thought the 400 MB ‘download patch’ from was unappealing before — try paying to download it. (yes this trend is changing thankfully which will make my next trip there all the more enjoyable ..)

If your startup needs to embrace customers beyond the Valley — are you basing your success on shaky or incorrect assumptions? 

If you’re from the valley, your investors are from the valley, your mentors are from the valley, you went to Berkeley or Stanford and initial “traction” came from a post on TechCrunch — those are all wonderful things and should not be discounted — but is there an ‘outside’ perspective you’re missing?

I’ve highlighted international differences but this arbitrage occurs within the US.  Not everybody is going to open “convertible notes” with open arms in Los Angeles or Orange County. Don’t make those assumptions and find out the hard way.

My net is to be cognizant of the way these regional and international disconnects affect your personal or professional success.

Know your industry. Know your customers. Know yourself.

If you’re the founder of a seed staged company looking to get funded, know your industry, know your customers and know yourself.  Let me start with industry.

I deal with first time founders to ones on their 5th company who speak at Davos and one common trait among the successful (or soon to be successful) is their respective level of expertise.

Genuinely come across as having been in the industry beyond your years.

The confidence these founders exude when I ask them pointed questions and the “wow, this guy really knows what he’s talking about” feeling I get back. It separates the funded founders from the rest of the noise filled grandiose pitches investors hear all day.

Tell an investor something he doesn’t already know. The more of an expert you talk to, the better you have to be. You may be able to pull a mediocre answer past a generalist but talk to a vertical VC (that’s a term I coined BTW) and you’ll get your behind handed to you.

Successful founders don’t know it all but they know their space very well. By virtue of (a) reading trade and trade blog posts, (b) taking the time to think through trends and their impact on the industry and their company, (c) to actively pattern match and eliminate incorrect assumptions, (d) to accurately convey facts and figure from reputable (and not always mainstream) sources, (e) to stay hyper vigilant on their competitors & potential competitors and most importantly the courage to (f) execute upon their conclusions. They attend conferences, they speak at conferences and leverage social media and blogs to embody thought leadership. They aren’t afraid to dig deep into SEC filings for research. They seek out contrarian points of view and engage in active listening. They aren’t afraid to admit they’re wrong yet aren’t afraid to argue a point without feeling defensive or making the other person feel the same way.


Simply having the right information is not enough. If a little knowledge is a dangerous thing, bumbling through an explanation is arguably a close second.

You must be able to effectively communicate your point of view, with the least yet most effective number of words possible and be prepared to back your opinion up with supporting evidence.

Investors look at team and product or some combination thereof depending on the stage of company and in every scenario, they want to know you’ve done your homework on everything (the industry, competitors, trends, threats, who’s gotten funded and who hasn’t, analyst reports, social media buzz — the list goes on and on).

That you’ve thought things through. That you’ve played out ‘if then’ scenarios and not just regugitated what you’ve read on TechCrunch. From what features your product will have in 6 months or 9 months, to the headcount, to how you intend on attracting talent to what competitive advantages you seek to exploit. That you didn’t just put this startup on a whim based on a few Google searches and some “personal pain point” you wanted to fill.

  • What are the pro’s and con’s of addressing your current niche versus another?
  • Why does your product actually matter? How do you know that?
  • What companies could come into your space that would positively or negatively disrupt your business?
  • That you realize your weaknesses and have an answer for them. “We know we are overly reliant on ____ CRM package but that’s only the case for 6 months; after which we’ll have an API and can connect with SalesForce and SugarCRM”.
  • If you rely on 2 key suppliers, what happens if they merge. If you rely on PayPal as your merchant provider, what happens if they turn you off one day? What % of your revenue have you set aside of chargebacks? What is the industry chargeback average and how you expect to be lower than that?
  • What trends need to catch on for your business model to skyrocket or fall off a cliff? And what are you going to do about it? What threshold needs to be reached before you start to worry? Are you waiting for SaaS storage pricing to drop to 10 cents a GB versus 15 cents now.
  • What truly differentiates you and what evidence do you have that others will pay you based on these factors?
  • How are customers going to find you without you throwing money at acquiring them? And how you know they’ll be around after the 30 day trial is over?

Founders sometimes stop after identifying the low ball questions — if you run a CRM company, a SalesForce question is highly probable.

It’s intelligently answering the deeper dive questions that will truly separate you and tip the funding percentages in your favor.

Your travel company is as vulnerable as it’s rudest consumer facing staff member.

Despite the hundreds/thousands/tens of thousands/hundreds of thousands/millions you spend on advertising, your company is as vulnerable as the first person I speak with. That $8.00 an hour, or $12.00 an hour, or $6.00 individual is who I talk to when I call up, what I’ll tweet about in good times and in bad, and what will largely determine whether I use your travel agency again. Day to day customer satisfaction is tied to your people, not your brand. That’s a mentality and a practice that we need to embrace.

The same theory applies to the first person I see when I visit your office. Is she nice? Is she happy to see me? Is she juggling 5 phone calls, irritated, stressed and ready to bite my head off? Guess what, now she’s not the only irritated one. My bank spends millions a year on TV advertising but it’s the teller, the branch manager and the person greeting me that gives me the “I’m not just my account number” feel inside (yes I said something nice about my bank..)

I was watching a documentary on the other day and realized more travel companies need to mimic what they do. They can help train your company (for a fee) if you’re interested.

A large part of the happiness Zappos customers feel is directly tied to the happiness of their telephone agents. Agents who are empowered to take care of problems and not run to a manager for every little approval. Their agents don’t follow scripts — that’s too much for my comfort level but if I still ran my agency I would give it a try at least. Agents who want to be there and buy into the culture of “WOWing” the customer.

Customers get upgraded shipping so they are expecting it in 3 to 5 days but they get it in 2 days. We used to do that at my travel agency and people loved it. Nowadays everything is e-ticketed so I may be showing my age a bit.

Don’t quote me directly on this, but Zappos agents don’t have call timers; that’s something I advocated and implemented when I ran a call center. It simply didn’t make economic sense for my company to rush through phone calls so the customers problem wasn’t solved and they are angrier than ever and calling back — to then receive yet another agent looking to get his bonus for staying under 3 minutes on a call.

Is there an opportunity to give your line agents and consumer facing staff more credit and more incentive? To reduce their load so the quality of their work is better? To recognize those staff members that get positive feedback from customers?

When’s the last time you called your key customers and thanked them? When’s the last time you upgraded their shipping or sent them a personalized free gift? When’s the last time you remembered their birthday, their anniversary date or something unique about them that showed you actually cared?

If you don’t have time to do all your customers, then make the time for your key customers at least (the 80/20 rule).

I’m not saying you should implement what Zappos did lock stock and barrel — I argue that some of the things just can’t be done by a smaller company but that’s for another post — but I am recommending to tackle the low hanging fruit.

If you don’t, there are travel companies that will.

BTW, if you’re interested in the Delivering Happiness book,

There’s Not Enough Innovation in Travel

This is a simple diagram known as a Business O...

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There’s Not Enough Innovation In Travel

Looking just at the growth rate of travel startups like Hipmunk offers a simple example of why innovation hasn’t reached it’s peak. You may like Hipmunk, you may not. What you can’t argue against is people are using it. $70k a day in sales very soon after launch is not something you can ignore. You can argue the novelty will wear off or you can argue it’s a fundamental change in how search is done. Regardless, customers are using it. That’s my point. What once was booked on X travel agency (or online agency) is now being booked on Hipmunk.

In retrospect, it’s not surprising. There hasn’t been a fundamental change in the to/from search box in years. Why is that? Have we reached the travel innovation plateau? Absolutely not.

Travel innovation is just getting started. It’s a great time to innovate in travel — but you have to do it right. There are different approaches to innovation depending on where you stand in the travel ecosystem (are you a new company or old? Is the innovation a feature or a business? Do you have a company to put the innovation to use on? Do you know how to bring the innovation to the masses?)

You don’t need to base your livelihood on investing in travel companies to realize this is the case. Though in fairness to my colleagues in travel, it’s hard to separate the trees (innovation) from the forest (the travel ecosystem) if you’re not doing it on a full time basis. Travel isn’t known for it’s innovation and limitless budgets and boundless budgets.

I had a few thoughts come to mind on what travel companies can do about the lack of innovation; sparked by Tom Tunguz’s post on “The single greatest reason for the failure of new ventures”.

Large Travel Companies

“Not to innovate is the single largest reason for the decline of existing organizations.”

Established companies don’t put enough time or money into new growth areas. They may even know the growth areas — social travel, location travel, all the things we invest in — but can’t find the time or mental bandwidth to act on it.

Some suggestions,

  • Ideally take an investment in a promising travel startup. Work with a professional on identifying one if you aren’t sure.
  • For the more savvy TMC’s, perhaps a skunkworks internal project that gets its own staff and budget led by a trusted member of the internal team. Maybe a mid-level manager or director that’s worth investing in who’s been yearning for extra time and money to pursue “the next big thing in travel”.
  • If you can’t buy or invest in a company, become an early (beta) customer. Travel startups are always looking for early key customers to validate their business or revenue model, for feedback, for mentoring. Contact me if you’re a big shot somewhere and have an interest in doing this.
  • Mentor these companies. Informal ‘help’ and advice and to be a sounding board will put a pep in your step if you’re an executive at a more stodgy travel company. Who knows, maybe you’ll like it enough to jump ship.
  • Be on the Advisory Board or Board of Directors. You can choose a formal or informal structure that you’re most comfortable with.
  • Contact me, I love matching travel companies with travel startups.

Travel startups face an entirely different scenario.

Travel Startups

“Not to know how to manage is the single largest reason for the failure of new ventures.”

Which is worse, knowing you don’t know and doing nothing  — the predicament large travel companies find themselves in — OR doing something in a way that is never going to succeed?

Two sides of the same coin but I’d much rather be in the first category. Yet the latter happens all the time in travel startups; particular ones without travel industry executives as founders.

Being outside of travel has it’s benefits but it also has it’s limitations. The problem is, most travel startups don’t know where the line is.

Some thoughts,

  • Find a former travel executive to help you.
  • Be open to new ideas and actually implement them; especially if you come across somebody who’s in the space you’re going after. If somebody from Meetings & Incentives tells your M&I travel startup will go nowhere, think long and hard if that’s true.
  • Attend travel events and association meetings for your particular niche in travel.
  • By all means, contact me.
  • Find mentors through SCORE or through your contacts.
  • Be prepared to give up equity based on how involved the executive will be.

I come across business models and revenue models and ‘next steps’ from travel startups that will never work. NEVER as in never ever. One step up are travel startups which follow a plan that may succeed but will take forever to do. Even when they get to the promise land (revenue, clients, customers, “traction”), I’ll all but guarantee it won’t be worth it.

The ones that avoid these landlines are the ones to watch (and in our case, invest in!).

7 Simple Suggestions for Any Online Travel Company

One look at industry wide customer satisfaction numbers for online travel speak for themselves; they’re abysmal.

offer random cash back

Are you nuts? You want me to give money away !@#$!@#??  I know how low your margins are. Relax. Start with the customers booking for the 2nd or 3rd time. If you don’t have a system to track that, your punishment is randomly giving money away. Call customers and ask what their favorite charity is and give the rebate to them. Better yet, give $500 USD (or some %) every month to a different cause.


Make me feel like I’m your only customer. I wrote a whole post on personalization that I think every OTA should start to implement. Make the traveler feel special and you’ll marvel at your higher revenue & conversion rates. Whether it’s “Dear Abrar” and not “Dear Traveler” on e-mails, to calling after my trip to see how things went, to more intricate customizations like answering the phone in my name (based on my Caller ID).


Don’t listen to them, answer them. I learned more on those calls than I ever did on the weekly status reports I received. Use the exact same systems and processes your agents do. You’re no longer the CEO or Owner, you’re Joe Travel Agent answering the phone. How many times do you need ‘manager approval’? How many times did you need to ask for help? How many ‘clicks’ on your agency CRM and GDS system did it take you to complete a transaction?


Buy using the exact purchasing flow your customers do. Goes for online or offline purchases. I made the mistake of buying through ‘internal’ channels for my own trips. I would email or call one of our agents, put multiple reservations on hold, they’d call ticketing when I was ready and I was done a few minutes later. In case you’ve forgotten, the rapid pricing, rapid ticketing and personalized updates is exactly what your customers want too.

Watch Non-Techie Non-Travel People

Look over their shoulders while buying online or listen while they’re on the phone. Avoid ‘helping’ and ‘explaining’ while this happens. Observe where they stumble, where they needed more information, where they didn’t understand something, if they understood your agents, if the agents actually solved the problem or not. Much to be learned.


You thought buying as a customer was eye opening? Try doing a ticket change/cancellation with those ‘rules’ you setup for agents. Even if you know changes are not allowed, call anyway. See what your agents say. Speak to a manager. If you work at a big enough company or an offshore call center, chances are they don’t know you’re the CEO of the company so don’t worry about changing your name, etc.

call customers and talk to them

Here’s an idea, call your customers. Shoot the breeze. Get to know them. Tell them you’re the CEO and their booking has been ticketed and you wanted to say thank you. You’ll be AMAZED at their reactions. One, that management called (bigger the agency the more effective!). Two, that somebody called at all. Isn’t that sad?

I know you don’t have time to call everybody but you can call somebody. Now that the customer is in a good mood, ask them a few questions like “why did they book” and “who else did they consider” and “how much cheaper/higher your OTA was?”.

Does this work? YES.

I know, I did it. It took me a few years to figure it out but I did.

Good luck!