When you have 35 minutes to be inspired, please watch this “box of slides” with Bill Strickland. As I listened to his presentation, I felt invited to dream bigger and accomplish more than I’ve ever believed possible. The sheer scale and magnitude of impact this man has had – on the people in his school, on his funders, on his business partners, and on his friends in every town – convinces me I can do more with my own life too.

from www.ted.com posted with vodpod

The global economy continues to undergo seismic shifts. Previous vertically integrated industries became segmented by horizontal service providers, then disjointed as loosely connected networks of service providers. The value creators in the new economy are providing exceptional experiences by outperforming their niche in the network or tying together the nodes of the network and packaging the whole thing in innovative ways.

As part of my recent course at Darden on Innovation and Integration in Services – The New Economy, I made observations on a number of innovations as examples of value creation in this flat, networked world. This is my submission on Zillow.com and the “web 2.0-ing” of real estate.

THE SERVICE

Zillow.com: online, satellite imagery-enabled web site for real estate listings, guides, and discussion.

HOW IS IT INNOVATIVE? WHY DID IT GRAB YOUR ATTENTION?

Zillow.com combined the mass of information on residential real estate, including public appraisals, tax records, and sales records, to provide the most innovative website for real estate listings since Realtor.com. Users can search by various purchase criteria (price, square footage, home features, zip code, specific street, etc.) and find a zoomable satellite map with currently listed properties highlighted, a pricing chart for local real estate prices over time, recent sales data, and user-generated “Make Me Move” prices for homes that aren’t even for sale – but could be for the right price!

WHAT IS THE PROBLEM OR ISSUE ADDRESSED?

Residential real estate is notorious for its maligned gatekeepers: the Realtors. Since so much of the information surrounding residential real estate is publicly accessible and now coming online, Zillow.com aggregates this information to provide a powerful research base for real estate buyers and sellers. Zillow.com represents a triumph of three “flatteners” in particular: The Age of Connectivity, Uploading, and Informing.

IS THERE A CHANGE, DEVELOPMENT, OR TREND THAT CREATED THE OPPORTUNITY? OR, IS IT JUST NEW THINKING?

The confluence of Internet-accessible public records relating to real estate, geo-spatial satellite imagery, and popularity of crowd-sourcing has made Zillow.com one of the top 400 websites in the US. Its national reach reveals its ambitions to bring top local marketplace information to every local marketplace in the country – and perhaps the world.

WHAT ARE TRANSFERABLE QUALITIES TO OTHER CATEGORIES?

Zillow.com is a prime example of a localized service using a globally-connected network and massively distributed information. By providing real value-added insight into local market conditions, Zillow.com has situated itself as a must-stop destination for home shoppers – if only for local real estate comparables. Traders of other local assets with difficult market appraisals but vast information – such as local produce, automobiles, small businesses, dinner reservations, gasoline, haircuts, etc – could borrow this map-driven interface loaded with telling information that generates a basic spot price for the goods in question.

DOES THIS SUPPLANT A PREVIOUS SOLUTION? WHAT, IF ANYTHING, IS THIS DISPLACING? (Think about The Innovators’ Dilemma)

For many, this solution displaces nights at the county records office or desperate conversations with unscrupulous realty agents. Zillow.com provides much of the publicly-available real estate market information to any Internet-connected computer, informing the consumer with the most up-to-date analysis of real estate market conditions. It certainly ups the ante for the real estate professional.

ANY OTHER POINTS WORTH MAKING:

Zillow markets its services in true Web 2.0 fashion – by giving it away for free. Its advertising-supported business model requires it to produce the most consumer-demanded information in order to drive traffic, then to create a marketplace for real estate services within its site. Startup firm Redfin.com has taken the Zillow model a step further – by adding full, online realty agent services to buy and sell properties. Other prominent industry websites, including Yahoo! Real Estate, are now providing embedded versions of Zillow’s valuations and other data.

Innovation and Integration in Services – The New Economy is a second-year MBA course taught by George Barbee, a Batten Fellow and lecturer at the Darden Graduate School of Business.

Originally published May 30, 2007 at dolechester.mbablogs.businessweek.com.

Microfinance, venture philanthropy, and social entrepreneurship have been generating good buzz for several years now, and I’ve learned a fair amount about the topics in the halls of Darden. But it wasn’t until last week that I actually heard eyewitness accounts of the successes of a microlending organization and connected real stories and pictures with small business loans, business training, and community development efforts in foreign countries.

I attended a reception at the home of Phillip Merrick, an important Washington area businessman, to hear his account of a trip he made with his wife to Africa. The Merricks traveled explicitly to meet clients of Five Talents International, a microlending and business training organization with some roots in the Anglican church and office in Vienna, VA. While Philip’s heart is certainly big, the purpose of his trip was to assess the bottom line of loans made to Five Talents’ clients in Africa.

A Kenyan newspaper – what Philip called the domestic equivalent of a Wall Street Journal – captured his attention as soon as he arrived at the airport. “3.5 Million Lifted From Poverty” read a headline, touting the effects of small business investments made in the country. I got to hear stories of several of the special individuals who have been part of the rising tide.

One woman began a brick-making operation, taking out a loan of roughly $150 to buy brick molds and hire a few laborers. Her business is booming and she is now supplying bricks for her burgeoning town – which counts the bricks an improvement from previous building materials used widely.

A man took out a $150 loan (or thereabouts) to purchase two pigs, which went on to have piglets. He was able to sell several and raise the others, profiting from both decisions. He took out additional loans for a tilapia farm, cows, and goats, building “an integrated, diversified agricultural business” in Philip’s admiring words. Applying loans totaling less than $600, this man has built a sustaining, profitable business that is providing for himself and his family – including his 12 children which all are able to attend private school and gain greater hope for their own futures.

One of the statistics offered by Five Talents was that, for every individual they lend to, six people are provided for – providing real measurement of changed lives and impact of borrowed dollars on a bottom line of profound meaning.

Folks from Five Talents also described the opportunities they create to connect successful businesspeople from America with “business missions” in their lending markets – sending eager folks like you and me to provide training programs in marketing, entrepreneurship, management and administration to the clients of Five Talents.

If you’re excited about the prospects of microlending, I definitely recommend contacting the folks at Five Talents to find out how to become personally involved – whether through lending or by contributing your own time to train small business owners in good business practices. If you’re a business school student, you might invite them to speak at your school for a Net Impact, social entrepreneurship, microfinance, or angel investment group; I hope to have them speak at Darden this coming fall.

Originally published April 10, 2007.

Washington DC is a great city if you like a number of things: free museums, great public transportation, the federal government, perpetually losing sports franchises, and – surprise! – entrepreneurial ventures. While DC sometimes gets a bum rap for bureaucracy due to the inescapable presence of Uncle Sam, it turns out that the greater DC area has a strong and somewhat intimate venture community with a few distinguishing characteristics that set the city apart from its west coast peers. (In a spirit of full disclosure, I will be interning at a metro DC startup this summer.) I was able to learn more about the possibilities of starting a company in the DC area through a truly special Darden program called the Batten Venture Bootcamp, a three day drink from the firehose that draws students from MBA programs at Darden, Michigan, Maryland, and Georgetown.

The Batten Venture Bootcamp ultimately pits students in teams as mock VC firms pitching investment terms to a prospective portfolio company (in our case, a real-life company preparing for its Series B fundriasing). To prepare us for our competition, we spent two days with entrepreneurs, VC investors, and legal counsel in sessions of lecture, interactive panel discussion, and social networking. To cap it off, Updata Partners - our VC hosts for the event – sat side by side with entrepreneurs they’ve invested in and grilled us to defend our proposed term sheets for Series B financing. It became a fully ingrained lesson that 80-90% of your work as a venture capitalist truly needs to be done by the time you get to the table. This event provided exactly the kind of education you hope to get during business school but are not likely to find in any classroom environment. (Other firms participating in the Batten Venture Bootcamp are listed at the end of this post.)

I was also fortunate enough to meet with Phillip Merrick, the humble, Australian founder of webMethods – a business system integrator and optimizer that foresaw the tremendous cross platform potential of XML. WeMethods made history as the biggest IPO of 2000 and recently was sold to Software AG for $546 million (not too shabby for a dot-com bust survivor). He offered a few excellent insights on the strategic positioning of Washington DC as a home for excellent startup opportunities:

• If you’re going to sell to businesses, it’s hard to pick a better location. DC gives you access to three major airports (two of which service international destinations), day-trip access to the two biggest financial centers in the US (New York City and Charlotte, NC), and proximity to dense concentrations of Fortune 500 copmanies and international business hubs as well. Not to mention one of the biggest purchasers of products and systems: the federal government.
• The workforce in Silicon Valley is somewhat fluid and (pardon the crude inference) institutionally inbred in the tech sector, meaning folks over at PayPal may have worked together at Yahoo! and Adobe previously, and Google folks may have crossed paths at HP or Microsoft. It almost seems like most folks taking a paycheck are just waiting for their next big startup idea to come before they try it on their own as well. Contrast that with the DC workforce, which is exceptionally well-educated but demonstrates, on the whole, a more stable commitment to the workplace.
• The DC venture community is something of a close-knit network of entrepreneurs, angels, and venture capitalists, making it easy to meet the stakeholders who will commit an interest in the success of the startup. The area is home to some of the very best investors and practitioners in the world.

Not to see the world strictly through rose-colored glasses, DC area term sheet valuations tend to fall below those of their west coast peers, and east coast venture capitalists tend to demonstrate a stronger proclivity for financial management than startup management.

2007 Batten Venture Bootcamp participating firms:

• Updata Partners
• New Vantage Group
• New Enterprise Associates
• Novak Biddle Venture Partners
• Arlington Capital Partners
• Intersouth Partners
• H.I.G. Ventures
• Valhalla Partners
• New Markets Growth Fund
• Toucan Capital Corp
• Cooley Godward
• Allpoint Network
• Opus 8
• Lockheed Martin Investment Management
• Network Alliance
• Harmony
• CMWare
• Appfluent Technology
• Object Video

Originally published January 13, 2007.

There are a few hubs of venture capital and entrepreneurship in the world, but Silicon Valley is the undisputed king of them all. So, after dutifully finishing my Quarter 2 exams, I boarded a plane straight to San Francisco to check it out. Two other Darden students and I organized a trip for nearly 30 Darden students on a corporate and venture tour of Palo Alto, Mountain View, San Jose, and San Francisco. Some 14 companies opened their conference rooms (and fridges!) to us over the course of a week as we learned about companies at every stage of life – from startups that never made it, to the Google monster that’s eating Silicon Valley and the venture capital firms that finance and guide the whole thing.

In this Part 1 of my winter break reflections, I will offer some comments about the culture of starting new ventures in Silicon Valley to contrast with the comments of Part 2, which will reflect my experiences at the 2007 Batten Venture Bootcamp in the Washington, DC area.

First: Some insightful comments from a venture capitalist about working in venture capital. “Move to Palo Alto.” That’s career step number one for anyone hoping to make career inroads in the Mecca of venture capital. If you want to start a company and need to build a management team, start by asking your waiter – chances are he has a PhD in computer science and just got laid off from a tech firm downsizing or outsourcing and is just itching for a startup. Or just drive around town and start knocking on corporate doors – talent is traded pretty fluidly throughout Silicon Valley, and it seems like many folks have been part of a startup (it’s only the rich ones that you hear about in the papers) or are just waiting for the next big idea.

If you do start a company, congratulations. You’ve got the densest cluster of venture capital firms in the world to compete for an equity stake in your business. With high competition and good track records of success, you can expect generally higher valuations along Sand Hill Road than you’d fetch in Boston, New York, or DC. By the way, Sand Hill Road has got to be the most beautiful death march for some entrepreneurs, who go door to door peddling their business plans in hopes of million-dollar funding.

If you don’t start doing business soon though, you’d better make friends with some of the wealthy residents of Palo Alto who might put you up for a few nights in their home. Because real estate prices are averaging $3 million for a single family home, or about $1,000 a square foot. See that floor tile you bought from Home Depot for $4? You’d better have a grand to buy enough land to put it on. Even the investment bankers in San Francisco, who are making a horde of cash, complain about residential real estate prices.

And give up golf. Instead, invest in a good wet suit and a surf board that can hack it in the mobs of Santa Cruz or the daredevils at Mavericks. One student on our trip was having trouble finding an interview invitation at a company until he mentioned that he surfed, which sealed the deal.

If you’re coming from any other business school in America, recognize that Stanford students can wake up one day in June after graduation, realize they need to get a job, and walk three blocks down the road in a Stanford hoodie and meet with some of the biggest and best venture capital firms and portfolio companies in the world. At least the Berkeley gang has to take the train, but those two schools combine to supply a boatload of great talent into the Silicon Valley marketplace every year.

All in all, I found the venture community from San Francisco to San Jose to be wonderfully intoxicating, and copmanies are changing the world every day there. Even tech regulars like eBay and Google are maximizing the value of their business platforms by launching new services that reach millions on day one.

And my wife says hi to all you in the blogosphere.

Companies on my Silicon Valley visit (in order of appearance):

Labrador Ventures

Sequoia Capital

eBay

Google

TellMe Networks

Adobe

frog design

GI Partners

IDEO

HP

I also met Darden alumni who joined us for evening receptions from the following firms:

Piper Jaffray

Bear Stearns

Deloitte (Consulting)

SideStep

Microsoft

Originally published August 14, 2006.

I just finished an invigorating read through Jim Collins and Jerry Porras’ best-seller, Built to Last.  I love the way these researchers capture the epic mythology of doing great work – of finding purpose and meaning beyond the dollar signs.  Their research showed that “visionary companies,” as they defined them, are more often built with some motivating purpose other than making money when compared to less successful competitors.  This point is one that captures my entrepreneurial spirit – to do something that matters for the long haul, something that makes a lasting impact on the world around me and improves the lives of others. 

The MBA program guides and consultants I reviewed during my application to business schools all seemed to have one thing in common: discussing the ROI of business school.  The rationale was always the same – since you’re going to business school, now’s a great time to examine the return on your investment!  It’s generallly a winsome argument, since many MBA graduates leap ahead to substantially higher salaries among multiple job offers than their pre-MBA careers would provide.  But this argument woefully discounts the non-financial return of two great years of investing in one’s self and a tremendous network of peers who are capable of leading the next generation of world-changing organizations.  To put it more directly, the prospects of learning extensive practices to create and guide organizations have much more value than the immediate salary commanded by MBA graduates.  That is why my MBA admissions essays focused on learning to make an impact on others more than making more money for myself.

As I see it, my MBA studies are a priceless time to learn about the development and management of organizations, a time to learn more about how to impact teams of people motivated toward a common goal.  I expect my education to be valuable both in my professional career and in my volunteer efforts, as I join the leadership of my church and community non-profits to make lasting impacts in the social sector as well.  While I do find it important to believe that my education will pay for itself in career successes, I also believe one of the greatest advantages of an MBA education must be to share it with those who could benefit from my service but could not otherwise afford it.

Please do not misunderstand me: I am not opposed to earning high salaries and ensuring that one’s MBA education earns significant results.  I am, however, suggesting that making an impact on others is more important than will be reflected in one’s salary, and that the financial rewards of doing good work are best invested to increasing the impact of future work.  For those who share this vision (particularly those who are  Darden MBA students), I look forward to meeting you and exploring the possibilities.

And, as a post-script, it turns out the purpose-driven “visionary companies” of Built to Last dramatically outperformed their comparison companies and stock market indices…

Originally published July 3, 2006.

One of the most attractive aspects (to me) of venture capital is the chance to partner with some dramatically transformational people and businesses to shape and improve the world around us.  A handy little write-up from a recent Wharton conference titled Innovation and Organic Growth: Balancing Risk and Reward gives a better perspective of the venture capital world at large, and the risk management strategies employed by venture capitalists.

The VC financing industry typically funds less than 1% of applicants; in several discerning firms, funding is provided to as few as a quarter of a percent (1 in 400) of applicantes.  This gatekeeper strategy is a primary filter to build a portfolio of big winners, not big wipeouts.  Further VC industry insights from the Wharton conference point out why the early-stage investment risk places large corporations can be at a disadvantage for investing (waiting for big payoff may cut too sharply into earnings) and small venture capital firms are more appropriately structured to take on the high risk of early-stage investing (effectively, the rewards of success are largely concentrated at the partner level in a venture capital firm).  For this reason, venture capital firms maintain strategically small numbers of partners; with too many, rewards are spread too thin to justify the risk.

For the complete article, including audio direct from the conference, visit Knowledge@Wharton: Managing Risk in Venture Capital Investing

Originally published May 18, 2006.

A reader sent me a thoughtful email about the difficulties for young innovators and the structures of the educational system that don’t seem to lend themselves to developing new innovators and entrepreneurs.  This is a provocative topic, so I thought I’d post a copy of my reply and invite others to join the dialog:

Thanks for your comments about my blog and your provocative thoughts about entrepreneurship and innovation.  What are you studying at
Virginia?  I was an Electrical Engineering undergrad at UVA, which gave me the opportunity to take a number of design and invention-oriented courses (and I’d be happy to recommend courses and professors).  I think the Architecture school also has a number of “innovation enhancers” in its curriculum.  I personally know a number of very successful ventures (and serial entrepreneurs) to come out of UVA.I think I understand your concerns about innovation among the twenty/thirty-something set.  Especially as I work around DC now, I feel greatly undervalued by my age – in this town, until you’ve got a crown of gray hair and a record of financial giving (politically) and success (business-ly), it’s hard to be taken seriously.But I also understand that professional innovation is a highly risky venture – those that do it well are celebrated because there’s inherently a high amount of experimentation.  Just starting a new business is a risky venture, particularly for recent graduates which may have limited business networks and experience as well as college debts to pay (to say nothing of rent, food, insurance, car, and other expenses).  New businesses may typically go several years before turning a profit as the venture traverses its own growing pains; business incubators are established all over the country (there’s one at Darden) to help shelter those businesses from the high-risk environment of a start-up. Often times the “risk equation” makes it much more palatable for new young professionals to work several years, develop business acumen and networks, then consider a new business venture (or continue their ascent through corporate ranks).I also think there’s simply a very small percentage of the population with the business sense and creativity necessary to innovate marketable solutions (much less to build successful and growing companies).  It’s more sensible (but not necessarily right) in our economic constructs to “create jobs” than to create innovators.  For most people, who need a lot of support to even enter the workplace, they rely on others to create jobs.  But as for the smaller percentage of the population which is really eager to innovate AND capable of doing so profitably (e.g. with good management, marketing, manufacturing, logistics, etc), I don’t know that there are sufficient development tracks in the educational or professional systems to identify and “incubate” those future business leaders – perhaps there’s an opportunity for innovation!Is there also a sense in which successful innovators buck the system, as did Bill Gates or Richard Bronson?  Would efforts to form a support system for entrepreneurs (who may be fiercely independent) be doomed to fail?  I suspect not, and I would offer the Kauffman Fellows Program as one high-profile example.  But how do we link these programs to undergraduate and graduate education?  How do we identify and actively develop those young business leaders who will transform the world?

Originally published May 17, 2006.

Venture capital investors seem to have one major, common point of reference – the dot come bust of 2000-2001.  That bust followed a record year of VC fundraising – some $106 billion in 2000 among top benchmark firms – and preceded a major fallout of invested dollars across the economy.  The lessons learned all seem to point to greater discipline in VC investments, but that’s not holding back (re-)growth in VC fundraising.  The Associated Press reported in April that venture capital firms had raised some $6 billion in the first quarter of this year, more than 20% over last year’s figure for the same quarter, with projected annual fundraising around $30 billion.  (See the article as published in the Washington Post online: Venture Capital Fundraising Rises in 1Q.pdf.) [Update: The New YorkTimes ran an article suggesting that the renewed vigor in venture capital is not a sign of a new bubble: A Few Signs of Froth Do Not a Bubble Make]

The trends of last year indicated strong venture capital interest in “clean tech” and alternative energy as solar and wind technologies matured and new ventures generated profitable cash flows, buyouts, and IPOs.  In fact, three of the top IPOs of 2005 were solar power companies, as reported by the Wharton Private Equity Review.  [Update: See BW interview with Bill Joy, co-founder of Sun Microsystems and current partner at venture capital firm KPCB: Green: The Next Big Thing.  He thinks greentech is going to provide the next Google in terms of revolutionary wealth-creation.)

Now, the energy market is showing no signs of decreased demand despite continually high gas prices.  As Americans (and others around the world) effectively say “no” to conservation (see James Ellis’ op-ed piece in BW, No Sacrifices, Please), energy demand will continue to grow while limited stocks of fossil fuels (not to mention the political delicacies surrounding the international energy market) keeps a ceiling on supply.  With the proven returns in solar and wind power, and wide interest and policy incentives in ethanol, biomass, and energy storage technologies, the stage could be set for continued successful investment in clean tech industries.

And hopefully in two years the stage will be set to hire this Darden MBA into a successful and growing VC clean tech fund.

Originally published April 14, 2006.

At the Darden School’s recent “Darden Days” welcome weekend for admitted students, I serendipitously met Professor Jeanne Liedtka, the director of Darden’s Batten Institute for entrepreneurship and innovation.  We talked briefly after a “mock case” discussion that introduced the prospectives to the case method, and I learned more about her courses in strategy and research in corporate innovation - my own fields of interest.

Well, BusinessWeek just turned out a few excellent pieces on innovation, so I thought I’d create a little home for them in this blog as well.

I was really caught by surprise by some of the answers in this Innovation Quiz.  (I scored 5 out of 12, apparently good enough for the quiz to recommend me as chief innovation officer for my company.)

There’s also a great Innovators in Our Midst slideshow (one of my favorite features of BusinessWeek online) on corporations leading innovation in all kinds of industries.

Then there’s the fine analytic piece, Innovative Writing on Innovation, offering five themes emerging from a survey of corporate leaders.

Finally, I’ll add the link to 25 Innovators, 6 Industries.

Hope that’s enough to spark the creative business thinker on a rainy Friday afternoon!