By Matthew DeBord for 89.3 KPCC

May 15, 2012 (Los Angeles, CA) — Pretend, for a moment, that you’re a computer science student at Stanford University. Chances are good that you’ve thought about taking your degree — or even not waiting to get your degree — and starting a technology company.

It’s the new American Dream. It attracts the most talented international students to our major research universities. It’s made the likes of Jerry Yang, Sergey Brin, Larry Page and, more recently, Facebook’s Mark Zuckerberg and Instagram’s Kevin Systrom (both under 30) multi-millionaires if not multi-billionaires nearly overnight.

Technology. The Internet. Mobile. Innovation. Disruption. Entrepreneurship.

These are the things that make America great in the early 21st century. Many of these new businesses are located in California. And they all have one thing in common: They live and die based on the investment decisions of venture capitalists, arguably the most important reallocators of wealth in the global economy.

Venture capital is the rocket fuel that gives scrappy tech startups in Silicon Valley, Los Angeles and San Diego (and other cities outside California) their liftoff velocity. Wanna be a tech tycoon? Then you’d better meet some VCs.

But where do VCs get their billions? For the most part, from foundations, endowments, pension funds and high-net worth individuals. And as the VC business has gotten tougher in the years since the bursting of the dot.com bubble on the late 1990s, those big funders have begun to ask some serious questions about what kind of return they’re getting on risky, long-term investments in the startup economy.

We Have Met the Enemy…And He Is Us

Last week, the Kauffman Foundation published a paper, jointly authored by Diane Mulcahy, Bill Weeks and Harold Bradley, titled “We Have Met the Enemy…And He Is Us: Lessons from Twenty Years of the Kauffman Foundation’s Investments in Venture Capital Funds and The Triumph of Hope over Experience.”

It didn’t mince words. The conclusion was that Kauffman hasn’t just been investing unwisely in VC — it’s been perpetuating a myth that venture capital is a good way for investors to beat the public markets.

The foundation knows what it’s talking about. “We have structured a compensation system that rewards fundraising,” Mulcahy said of dynamic between VCs and funding sources, and of the way VCs are paid.

So VCs aren’t creating the returns that they’re supposed to. And you might see the headlines — “VC Doesn’t Deliver on Its Promises,” “VC Is a Bad Investment” — and conclude that VC has lost its mojo. That VCs, despite their professed expertise, kind of suck at finding the next Facebook.

But Kauffman tells a different story, one of VCs and their funding sources locked into a dysfunctional relationship that’s actually preventing VCs from doing their jobs — and making it likely that funders will keep failing at theirs.

Bottom line: funders have put so much faith and money into VC that they’ve encouraged VCs to excel at…raising money, lots of money, not at finding great companies that will deliver market-beating returns. And the winnowing of VC over the past decade, with far fewer firms chasing many more dollars, has made the situation worse.

Kauffman is uniquely situated to study this issue. The foundation was started by healthcare tycoon Ewing Kauffman with a mission to promote and enable entrepreneurship. Based in Kansas City, Missouri, it’s been around since the mid-1960s and has been very successful, with an endowment of nearly $2 billion.

But more importantly, it’s been investing in VC for 20 years and has amassed an enviable pile of data on this asset class.

A decent chunk of the Kauffman endowment — almost $250 million — is invested in a portfolio that’s riskier than run-of-the-mill stocks and bonds. In order to garner higher returns, it’s invested in such alternative investments as venture capital and private equity funds. The VC component is the focus of the Mulcahy-Weeks-Bradley paper, which draws on Kauffman’s experience investing in innovative, entrepreneurial startups — quite literally putting its money where its mouth is, as Kauffman’s mission is to promote entrepreneurship.

…

Why It’s Hip to Be Small

However, in an additional negative wrinkle, she and her co-authors discovered that for the Kauffman Foundation, smaller VC funds have performed better than the big boys. “No fund greater than $1 billion has returned more than twice the capital invested, net of fees. The best-performing funds are consistently smaller funds.”

That makes it simple to figure out how to fix the problem of VC in alternative investment portfolios, right? Just concentrate on small funds.

But that’s easier said than done. For starters, smaller funds may not be prepared to deal with large capital inflows — they have to find good startups to invest in, after all, and while they may not put all of a fund to work right away, they don’t necessarily want to sit on their money. So they can have too much in the bank.

They may be able to solve this problem by becoming “followers rather than leaders.” David Siemer of Siemer Ventures in Los Angeles told me that this is how his $35 million fund prefers to operate: joining with other VCs to invest in early-stage companies, taking some of the pressure off, letting others assume the risk of finding the next big thing.

Click here to read the complete article, good money after bad: CalPERS and the crisis in venture capital.

About the Los Angeles Venture Association (LAVA)

Since 1985, the Los Angeles Venture Association has been creating forums for entrepreneurs and executives of middle-market companies to actively meet and learn from fellow executives, investors, bankers, financial advisors and other providers of professional services. LAVA’s monthly breakfast meetings and Presidents and Distinguished Speakers Lectures feature exceptional presentations by prominent members of the Southern California investment, entrepreneurial, business and academic communities. Their annual conferences and frequent Investment Capital Seminars are the region’s premiere forums on investment capital. LAVA often co-produces events with many of their affiliated organizations.

About Siemer & Associates LLC

Siemer & Associates LLC is a global boutique merchant bank dedicated to offering candid insight and guidance to digital media, software and Internet companies throughout their business life cycles. Composed of industry veterans who have worked both inside and out of technology enterprises, S&A has successfully completed more than 50 transactions that aggregated over $3 billion in sell-side mandates and surpassed $1.5 billion in equity capital. Headquartered in Los Angeles with offices in Singapore and Hong Kong, S&A offers exceptional corporate capital raising, financial advisory services and M&A, specializing in complex cross-border transactions.

Committed to expanding the international technology ecosystem, Siemer & Associates promotes innovative entrepreneurs through its early-stage investment arm, Siemer Ventures, and its incubator, Wavemaker Labs. One of the most active investment funds in Southern California, Siemer Ventures claims more than 40 current portfolio companies and makes an average of 12 new investments each year in digital media startups. Based in Singapore, Wavemaker Labs is a joint venture between Siemer & Associates and Tholons that receives significant co-investment from the Singaporean government as an “approved technology incubator” under the Technology Incubation Scheme (TIS) of the Singaporean government’s National Research Foundation (NRF).

“Digital Hollywood Spring is an important weeklong event which brings together top executives in the film, television, music, home video, cable, telecommunications and computer industries,” said Siemer. “It is an honor to exchange insights with thought leaders among this elite group.”

About Siemer & Associates LLC

Siemer & Associates LLC is a global boutique merchant bank dedicated to offering candid insight and guidance to digital media, software and Internet companies throughout their business life cycles. Composed of industry veterans who have worked both inside and out of technology enterprises, S&A has successfully completed more than 50 transactions that aggregated over $3 billion in sell-side mandates and surpassed $1.5 billion in equity capital. Headquartered in Los Angeles with offices in New York and Hong Kong, S&A offers exceptional corporate capital raising, financial advisory services and M&A, specializing in complex cross-border transactions.

Committed to expanding the international technology ecosystem, Siemer & Associates promotes innovative entrepreneurs through its early-stage investment arm, Siemer Ventures, and its incubator, Wavemaker Labs. One of the most active investment funds in Southern California, Siemer Ventures claims more than 40 current portfolio companies and makes an average of 12 new investments each year in digital media startups. Based in Singapore, Wavemaker Labs is a joint venture between Siemer & Associates and Tholons that receives significant co-investment from the Singaporean government as an “approved technology incubator” under the Technology Incubation Scheme (TIS) of the Singaporean government’s National Research Foundation (NRF).

“I am eager to join a team of colleagues who share my career-long passion for working with entrepreneurs in digital media and technology,” said Chen. “We are committed to providing strong support and sound advice to the fast-growing ecosystem of technology companies emerging in the Southern California market and beyond.”

“Dan will allow us to continue to provide seasoned expertise to the clients we currently have and valuable advice to the growing number of entrepreneurs we meet with daily,” said David Siemer, Managing Director at Siemer & Associates. “Dan’s breadth and depth of industry experience will be an asset to our team for years to come.”

About Siemer & Associates LLC

Siemer & Associates LLC is a global boutique merchant bank dedicated to offering candid insight and guidance to digital media, software and Internet companies throughout their business life cycles. Composed of industry veterans who have worked both inside and out of technology enterprises, S&A has successfully completed more than 50 transactions that aggregated over $3 billion in sell-side mandates and surpassed $1.5 billion in equity capital. Headquartered in Los Angeles with offices in New York and Hong Kong, S&A offers exceptional corporate capital raising, financial advisory services and M&A, specializing in complex cross-border transactions.

Committed to expanding the international technology ecosystem, Siemer & Associates promotes innovative entrepreneurs through its early-stage investment arm, Siemer Ventures, and its incubator, Wavemaker Labs. One of the most active investment funds in Southern California, Siemer Ventures claims more than 40 current portfolio companies and makes an average of 12 new investments each year in digital media startups. Based in Singapore, Wavemaker Labs is a joint venture between Siemer & Associates and Tholons that receives significant co-investment from the Singaporean government as an “approved technology incubator” under the Technology Incubation Scheme (TIS) of the Singaporean government’s National Research Foundation (NRF).

Even more photos have been uploaded to Facebook. Click here to see them.

March 28, 2012 (Santa Monica, CA) — There’s one thing that’s for sure: You need money to make money.

Start-ups launching their first iteration of a product or service already know that. As they approach investors, they perfect pitches, clean up PowerPoint slides, smile, and present the best demos possible.

Dave Siemer, Managing Director of Santa Monica-based investment banking firm Siemer & Associates, said “The L.A. ecosystem has changed dramatically. Whereas in 2004-2005, there was nothing to invest in, there’s now a huge number of start-ups being launched. One hundred have launched in the last six months. The challenge there for many of those new companies is that there aren’t many A round investors in L.A.”

His firm has already invested in multiple e-commerce plays (such as Social Annex). The types of companies he wants to fund now include: the online video space, mobile services and mobile infrastructure platforms, applications for sales forces and apps that aid customer service

Everyone wants to pick a winner. And yet, it’s known already going in, that not all start-ups will succeed.

“The ones that fail — they fail because they don’t do enough market research. Here in L.A., there’s less sharing of ideas. In San Francisco, it’s more open and communal. People talk to their competitors. It’s starting to become that way here, too. But I see a lot of start-ups here now that take this top-secret-idea route. And they end up wasting a lot of money and time,” Siemer said. “If we talk to someone and they haven’t talked with their competitors, that’s a huge red flag for us.”

“We’d love to see real metrics and real customers. If a company is still in beta mode, we’re not that interested,” he added.

He sees the chief distinction between Los Angeles investments and those in the Bay Area as risk factor.

“It’s different here. NorCal is doing decent-sized investment rounds with companies that have no metrics, but have rock star teams and a bunch of users. L.A. is more metrics-driven. Many of the start-ups here already have revenue. I’d say L.A. is a lower-risk market.”

David Young, Partner at law firm DLA Piper, represents emerging growth companies and venture capital firms. He agreed on the space’s rapid growth. “The amount of activity is amazing. You suddenly have New York and L.A. as the #1 and #2 venture capital markets. Whereas before L.A. didn’t even make the top 10.”

He mentioned that the only challenge with so many start-ups coming up at once is that competition for early dollars will be steep.

“Historically, the hardest piece of fundraising is that first piece of cash. The first million,” Young said. “If young entrepreneurs can raise a few hundred thousand from a crowdfunding model — I think that’s fabulous.”

Click here to read the original article as it appears in Forbes

* For every US$70K WaveMaker invests, the NRF will co-invest up to US$400K per company (a 5.7x match) in the form of a redeemable convertible note

March 14, 2012 (Los Angeles & Singapore) ─ Siemer & Associates LLC, the merchant bank serving the digital media and technology industry, and Siemer Ventures, the boutique early-stage venture capital firm, are pleased to announce that they have jointly expanded their presence in Southeast Asia with the formation of WaveMaker Labs. WaveMaker has been selected as an “approved technology incubator” under the Technology Incubation Scheme (TIS) of the Singaporean government’s National Research Foundation (NRF). WaveMaker was one of eight incubators chosen for this unique program.

This rare privilege allows WaveMaker to incubate and invest in startups that will qualify for up to US$400,000 of co-investment from the NRF. NRF’s co-investment equates to up to a 5.7x matching amount for any WaveMaker startup. (For example, if WaveMaker incubates a startup and invests US$70,000, the NRF will co-invest up to US$400,000, thus providing the startup with $470,000 in seed capital.) The NRF co-investment will be in the form of a convertible note which can be redeemed within three years at a reasonable premium of 5% per annum.

The NRF’s co-investment will catalyze the formation of a large number of technology businesses and will lead to the creation of high-value jobs. While WaveMaker companies will initially launch in Singapore, these companies will be geared to target markets outside of the country. It is important to note that Singapore is situated in the heart of Southeast Asia, which has a population of more than 600 million people and a rapidly growing consumer base. Singapore is also a short three-hour plane ride away from the tremendous markets in India and China.

WaveMaker Labs will be led by Siemer Ventures Partner, Paul Santos, a prolific startup entrepreneur who has co-founded six companies with two successful exits to date, and Debneel Mukherjee, a seasoned technology entrepreneur who took a $1 million investment and turned it into a  profitable $50 million operation with over 150 customers across 14 countries in the Asia-Pacific region. Both Santos and Mukherjee are based in Singapore.

“I’m thrilled to have the opportunity to help budding entrepreneurs in the region realize their vision,” said Santos. “In many ways, WaveMaker crystallizes Siemer & Associates’ and Siemer Ventures’ cross-border reach and ability to create value.”

The formation of WaveMaker Labs was done in partnership with Tholons, a leading business advisory boutique focused on the outsourcing and globalization of IT-enabled services. WaveMaker companies seeking to increase their capital efficiency and/or accelerate their ramp by leveraging highly-skilled, lower-cost talent from places like India and the Philippines will benefit from Tholons’ experience, expertise and network.

“We are excited about WaveMaker’s potential and believe that we have assembled a strong team that has the relevant experience to help create meaningful and valuable businesses down the road,” said David Siemer, Managing Director at Siemer & Associates. “We are fortunate to have Paul Santos and Debneel Mukherjee to lead the charge for us in Singapore.”

“WaveMaker Labs has a powerful operating leverage that’s truly unique in the startup incubator scene,” said Eric Manlunas, Managing Partner of Siemer Ventures. “I’m not aware of any other technology incubator outside of Singapore that’s equipped with such a generous and entrepreneur-friendly co-investment program from their host government. This ─ plus the operating leverage provided by our network of partners and portfolio companies ─ is what we believe will allow WaveMaker to succeed in creating and supporting meaningful startups,” added Manlunas.

About Siemer & Associates LLC

Siemer & Associates LLC is a global boutique merchant bank dedicated to offering candid insight and guidance to digital media, software and Internet companies throughout their business life cycles. Composed of industry veterans who have worked both inside and out of technology enterprises, professionals of S&A have successfully completed more than 50 transactions that aggregated over $3 billion in sell-side mandates and surpassed $1.5 billion in equity capital.  Headquartered in Los Angeles with offices in New York and Hong Kong, S&A offers exceptional corporate capital raising, financial advisory services and M&A, specializing in complex cross-border transactions.

About Siemer Ventures

Siemer Ventures is a boutique, early-stage venture capital firm dedicated to helping motivated entrepreneurs build sustainable, technology-enabled businesses. Our founders are startup entrepreneurs themselves who have built successful businesses in the past, providing them with a real world understanding of the nuances of early-stage companies. Siemer Ventures makes a fair amount of modestly-sized investments across the board with the goal of creating a highly diversified and quantitative portfolio of technology-enabled, early-stage companies.

By Doris C. Dumlao and Paolo G. Montecillo for the Philippine Daily Inquirer

March 12, 2012 (Manila, Philippines)— Got any new brilliant idea for a technology venture but don’t know where to start? You may literally find the solution in your phone.

Rival telecommunication firms Philippine Long Distance Telephone Co. and Globe Telecom recently unveiled separate “incubation” programs offering seed capital, mentorship and business linkages to start-up technopreneurs.

It is seen as an opportune time for them to do so, given the renaissance of technology stocks globally in the past 12 months that has made Steve Job’s brainchild Apple one of the world’s largest companies in terms of market capitalization.

PLDT chairman Manuel V. Pangilinan recently launched “IdeaSpace,” which he says was his group’s commitment to the future of this country. “We want to help jumpstart the creation of a Silicon Valley-like ecosystem in the Philippines,” he says.

Globe incubator

Ayala-led Globe Telecom also launched its own program, “Globe Incubator,” promising an end-to-end support system integrating the ‘hardware’ of big companies with the ‘software’ of mentorship and community partnership. “There are people with the aptitude and the desire to become entrepreneurs, but they face many hurdles to giving up their day jobs. Even if they did launch their business, they may not have the training, capital, and business network to enable their startup to scale. Incubation makes resources available to those who need them,” says Minette Navarrete, head of Globe new business group.

Pangilinan says his program would support innovative Filipino technopreneurs with great ideas but would go beyond commercial products and services. The program will also include solutions that can support social development and poverty alleviation, he says. And while the program will be open to the public, it prefers start-ups from different colleges and universities.

For her part, Navarrete explains that unlike many corporate incubators, Globe incubator does not have profit or capital gain targets. “It’s not just about the money! The Globe incubator will offer seed funding, yes, but cash is only part of the story. We will make facilities available, offer education and mentorship, and introduce entrepreneurs to the people and companies who can help them expand and succeed,” she says.

Harnessing talent

MVP’s IdeaSpace targets start-ups that can scale up in the industries of water and power utilities, toll roads and transportation, healthcare, mining, telecommunications, media and food—businesses that his group is already in. The program is also open to applicants focused on solutions for other industries but have potentially significant global potential. A national competition will soon be launched to look for the first batch of IdeaSpace start-ups who will be immersed in an incubator program. There will be provision for office and IT space and facilities in Makati and in the Group’s Leadership Academy in Antipolo.

Pangilinan says the program would go beyond “angel investing” or giving capital in exchange for equity ownership. It will provide incubation and acceleration with access to: a wide group of companies to share and learn experiences from and a defined market runway and opportunities to be connected to potential investors, he says.

Aside from funding, each incubated company will go through a structured program hosted by the group’s Leadership Academy to teach them the fundamentals on how to run a successful and scalable business. Benefits include mentorship from executives from the group companies, access to resources including legal assistance and advice, operational control, and a clear partner route to markets served by any company in the group—whose range of business translates to millions of households, subscribers, motorists and others.

MVP’s program will be run by IdeaSpace Foundation, a non-profit foundation to be established exclusively to implement this incubation and will of course be supported by MVP-led companies.

Aside from PLDT and Smart Communications, it will also involve First Pacific Co. Ltd. of Hong Kong, infrastructure holding firm Metro Pacific Investments Corp., MPIC hospital group, Digital Telecommunications/Sun Cellular, Manila Electric Co., SPI Global, ePLDT, Indofood, Philex Mining, Maynilad Water Services, MediaQuest and TV5.

Globe incubator also offers start-ups access to various platforms of Globe which are usually open only to large established companies.

It targets people who are already working but are wishing to become their own boss. It aims to help its start-ups launch their company faster and provide introductions to partner companies within the Globe, SingTel and Ayala networks here and abroad to help them scale bigger.

Given the nature of the founders and backers, Globe’s incubation program targets start-ups engaged in developing new ICT applications, websites, and other tech-related undertakings.

They could equally be traditional businesses which would use technology to create a better customer experience, improve operating efficiencies or expand their reach.

While there is funding available for good ideas, Globe believes that the most successful incubators have learned from the painful lessons of the dotcom bubble bursting. It recognizes that the old fire-and-forget model of simply handing out seed capital and providing facilities is not sufficient in this day and age.

“Shot in the arm”

“This is what we have been waiting for as a venture capitalist for the past 20 years whose objective—aside from delivering superior returns to our investors in the funds we manage—is to help develop and establish an entrepreneurial ecosystem in the Philippines,” says Martin Lichauco, managing partner of Global Gateway Venture Capital (G2VC).

Lichauco, who is also managing director for Asia of global boutique investment bank Siemer & Associates LLC apart from his role in G2VC, says India and China have been successful in this regard but investors were are now looking for other countries with the same quality of talent of entrepreneurs.

“We are no longer the chosen destination just because of low-cost labor…Investors are looking at the Philippines because of the quality of work our entrepreneurs are able to deliver. On the entrepreneurial front, I can confidently say that the quality of entrepreneurs and start-ups in the Philippines has increased 10-fold,” he says.

The Philippines was outside the radar screen of investors for long but this has now changed, Lichauco says, adding that the country was now on the global map with the quality of start-ups being set up onshore.

“Smart and Globe’s incubating endeavors are a shot in the arm to the Philippine technopreneurship ecosystem, providing the local start-ups not just with funding but the right mentorship and infrastructure. This is the best validation of the quality of Philippine entrepreneurs today. Today, we find ourselves at the highest point of technopreneurship in the Philippines. Things are looking up,” Lichauco says.

The venture capitalist adds, however, that the companies funded by the telcos would have to scale up and be in a position to do cross-border transactions. “They can’t just be Philippine-centric,” Lichauco says.

Beyond PR?

The rival telcos will also have to prove that they are committed to their respective incubation programs for the long haul, that these will really benefit Filipino talent and are more than just a PR-booster.

By getting into this incubation program, the assumption is that these telcos would like to be in control of disruptive or game-changing technologies that may arise in the future.

“I see two reasons why they should engage in venture capital for technology entrepreneurs: First, they have the capital to fund these entrepreneurial investments and, second, they stand to benefit from successful investments,” says Jose Mari Lacson, head of research at Campos Lanuza & Co.

“However, there are also reasons why this seems to be more of a public relations effort than a serious thrust on their part. Venture capital investing or incubation is not their core business,” Lacson says. If the investment becomes successful, for example, a PLDT-Globe “technopreneur” invents the next Facebook, Lacson is wondering about the exit strategy.

In the US, Lacson says pioneers could easily lock up gains from the incubated company public by launching an initial public offering (IPO).

“But if PLDT or Globe is the main investor, there’s a chance they wouldn’t want to take that path. Why let go of a winning invention that can be used against you? Without an IPO, the technopreneur may eventually be diluted, bought out, or eventually become an employee,” Lacson says. He adds that in case of a buyout of a successful investment, pricing would be another issue.

While incubation may finance and encourage the generation of ideas, Lacson says investors and technopreneurs should still take heed of Plato’s wisdom that “necessity is the mother of invention.”