Cash Management for Startups

By Mike Taormina, Wharton MBA alumnus and Co-founder of CommonBond

Editor’s note: This article came out of an exchange on the Venture Initiation Program listserv, where current and former members of the program go to ask the community for help in solving their entrepreneurial problems. We thought Mike’s advice to a fellow VIP alumnus was so terrific that we asked him to turn it into a blog post.

Commonbond logo

There is a wealth of advice out there for startups trying to raise money—and for good reason. Without that first round or seed funding, many great ideas would never become anything more than an idea.

We also live in a highly innovative fundraising environment today, and the attention paid to helping entrepreneurs navigate their options and access capital is critical. As a founder, it’s incredibly exciting to be starting a business at a time when doing so—while I wouldn’t say is “easy”—has never been more possible for so many people.

So, let’s assume for a moment that you’ve successfully raised capital for your business (congratulations, by the way). The question then becomes: “What is the best strategy for managing this newfound cash?

Given the diversity of products and the multitude of providers, this could quickly become a time-consuming, complex process. When CommonBond raised its first round of funding in November 2012, we confronted the same question on how to best manage our cash, and it was incumbent upon us to find the optimal answer.

Here’s how we approached it:

First, the considerations.

1.     Capital preservation is critical.

Angels and VCs invest in entrepreneurs to take risks in operating their businesses, not to take risks in making financial investments. Compounding the issue (no pun intended), any upside in today’s yield environment is so meager that it simply doesn’t compensate for any risk-taking, given the amount of cash early-stage companies have to manage. For example, let’s assume your $1mm account has an average balance throughout the year of $500,000. If we further assumed a yield of 0.10% (which would actually be quite high for a low-risk money market fund at today’s yields), we’re talking $500 for the year. That’s it.

If you instead decide to expose your cash to more risk in the hopes of a higher return, one of two outcomes are likely:

If the investment works out, yes, you’ll have more cash, but probably not a meaningful amount; or,

Your investment does not work out, and you lose principal—a cardinal sin that can quickly lose both your investor and your credibility with respect to subsequent fundraising rounds.

Given the relatively small capital base of a startup, there is simply too small an incentive and too great an investor confidence risk to take much investment risk with your cash management.

2.     Liquidity. Uncertainty abounds in startup land. You may need to liquidate an investment to free up cash, so make sure that doing so doesn’t lead to an uneconomical investment. Bank CDs, for example, typically provide a higher yield than T-Bills or money market funds, but only if you lock up the cash for a period of time. The penalty for exiting a CD early (and the negative yield it can create) may be reason enough for a startup to stay clear of CDs as instruments for short-term cash management.

3.     Cost management. Watch out for banks with minimum balance fees or those that charge a relatively high commission for a simple T-bill trade—a cost which can also lead to a negative yield on the transaction.

4.     Counterparty risk. If you invest in a money market account, make sure you’re comfortable with the counterparty risk—the likelihood that your financial institution of choice will run into bad times that results in either a lock-up or loss of your assets with the institution.

What to do next: 

  • Bank account. If you open a checking or savings account, you have the $250,000 FDIC protection, so this is a great place to start from a capital preservation standpoint.
  • Bank CDs. You could then invest in bank CDs. If you go this route, keep in mind consideration #2 above (“Liquidity”). You don’t want to end up locked up in a CD and having to pay a penalty to get out, negating any deposit income (again, for minimal yield upside).
  • Brokerage account. If you have a brokerage account, you could invest in T-bills, money market funds, or sweep accounts. With T-bill purchases, just make sure the fees being charged don’t lead to a negative yielding investment. So long as the yield covers the fees, this is a great way to preserve capital, since FDIC insurance only covers up to $250,000 for checking accounts. With money market funds, make sure the fund’s investment mandate and holdings align with your low-risk, capital preservation strategy.

In the case of CommonBond, we decided on a combined approach: we set up a checking account and a brokerage account, both at the same bank so that wire fees or transfer time were never part of the calculus. The brokerage account invests in short-dated T-Bills and/or in a bank deposit sweep account, and the checking account is funded to ensure the company has sufficient cash for one to two months of operations—an amount that will likely not exceed the FDIC insurance threshold for the typical early stage startup.

Doing some very basic but important cash management will allow you to focus on running your business. And pushing the business forward should, and will, generate infinitely more value than any cash management strategy could ever deliver.

Mike TaorminaBio: Michael Taormina is CFO & Co-Founder of CommonBond, a student lending platform that provides a better student loan experience through lower rates, exceptional customer service, and a commitment to community. CommonBond is also the first company to bring the One-for-One model to education and finance: for every degree fully funded on the company’s platform, CommonBond funds the education of a student in need abroad for a full year. Mike is a former VP at J.P. Morgan Asset Management and a CFA Charterholder.

Best Time Ever To Be An Entrepreneur In India

By Anirudh Suri WG’12, founder and CEO of

If you read my last post, “Why Is It So Hard To Start A Business in India?” then you know that there are some big challenges to starting a business, especially a tech business, in India. But as I keep saying, this is actually the best time ever to be an entrepreneur in India.

Here’s why:

  1.  The cool factor. It’s cool to be an entrepreneur in India today; “startups” have become a buzzword on most top college campuses across the country as well as among the top employers in the country. Parents (and even more importantly in the Indian context, potential wives and husbands!) are beginning to consider “startups” as a good way to begin or further a career. Three years ago, when I moved back to India, my father wasn’t exactly thrilled with the idea of “startups” but today, with all the major newspapers covering new startups every day, he’s excited too! It bodes well for the future of entrepreneurship in India.
  2.  Rapidly evolving ecosystem. The startup ecosystem is really evolving rapidly in India. When I moved back in 2011 to launch India Internet Group, an early stage venture capital fund focused on internet and mobile startups, we were amongst the first early stage funds in India, along with Blume Ventures (run by Karthik Reddy, WG’01) and Kae Capital. Today, I can’t even count the number of early stage funds, accelerators, incubators and other such programs that really help seed startups in India.
  3.  Opportunities for efficiency. India continues to offer many opportunities for successful startups to solve basic problems and make markets more efficient. Often, successful startups have managed to organize unorganized markets in India (e.g., RedBus organized the bus travel tickets market; Ola Cabs has organized the unorganized cab market; JustDial has organized the unorganized services market; MakeMyTrip has organized the air travel and hotel market). Several of these companies have also provided handsome returns to their early investors through either IPOs (Makemytrip, JustDial, Infoedge) or acquisitions (RedBus). Similarly, my own startup,, is trying to organize the offline retail market by aggregating and bringing online the retail inventory of offline retailers.
  4.  E-commerce. Besides organizing unorganized markets, other startups (e-commerce companies, for example) are bringing greater efficiencies to the Indian market and facilitating commerce and delivery of services. E-commerce companies such as and have been a boon to the Indian middle class, especially in smaller towns that haven’t seen their offline retail markets evolve in the same way that their purchasing capacity has evolved. The very Indian model of “Cash-on-Delivery” driven e-commerce in India (which Flipkart in India has become synonymous with) has brought great convenience to the consumers, albeit at sometimes a very high cost to the retailer.
  5. Mobile. India already has the second largest number of mobile phone users in the world (second only to China) with over 900 million mobile phones. At the same time, mobile internet users are increasing in India at a pace unmatched in the rest of the world. The number of mobile internet users is going to reach 185 million by June 2014. Customers who have been deprived of quality entertainment for so long (besides cricket and Bollywood, of course) are taking to mobile-based games and entertainment like fish to water. Still others are starting to search and buy everything on the go. I wouldn’t be surprised at all if more global mobile startups come out of India in the next 2-3 years.

Despite all the hurdles to success, this is a great time to be an entrepreneur in India. With huge open opportunities in travel, Software as a Service (SaaS), mobile payments, gaming, entertainment, marketplaces, and just easier and better access to information and products, the potential for impact is immense. By leveraging mobile and internet technology, entrepreneurs in India have the opportunity to transform the way Indians will lead their lives. And that’s why so many Wharton alumni, including myself, are deep in the Internet trenches of India today.

Anirudh SuriBio: Anirudh Suri WG’12, is currently the CEO of, a location-based product search platform based in India. He is also the Founding Partner of India Internet Group, an early stage venture capital fund based in Mumbai, Delhi and New York. Previously, Anirudh worked at McKinsey& Company, Goldman Sachs, and as a policy advisor to fellow Wharton alumnus and the Hon’ble Minister of State for Communications and Technology in the Government of India, Mr. Sachin Pilot. At Wharton, Anirudh was a member of the Venture Initiation Program and the Entrepreneurship Club; organized the BizTech Conference and the Wharton India Economic Forum; and also partied a lot in Center City Philadelphia.

Why Is It So Hard To Start A Business in India?

By Anirudh Suri WG’12, founder and CEO of

I’ve been in the startup trenches in India for the last three years. I’m currently the CEO of, a location-based product search platform based in India, and I’m also the Founding Partner of India Internet Group, an early stage venture capital fund based in Mumbai, Delhi and New York. I think this is the best time ever to be an entrepreneur in India. However, it’s also an incredibly difficult journey.

In this post, I explain what makes starting a business in India so hard. But don’t be discouraged! My next post will explain why this is actually such a great time to be an entrepreneur in India.

An Incredibly Difficult Journey…

  1. Poor labor market. It’s tough to hire great people in India to work at startups. This is changing, but many smart folks don’t want to join your startup for a low salary, especially since people worry that equity or options won’t pay off in the long run. As a result, the top layer in Indian startups is world-class, but then you see a big dip in the middle and lower levels. While some of the startup founders in India are as motivated and talented as their counterparts in the U.S., motivating employees is much harder in India than it is in the U.S. This hurts the startup’s productivity levels as well as its ability to innovate and scale.
  2. Red tape. India has an incredible way of bogging you down with procedural, compliance and other such issues. As a CEO, I am spending way more time dealing with accounting, legal, and corporate compliance-related issues than I expected. At least twice a week, I have to sit down with our Chartered Accountant or our lawyers or the Company Secretary to ensure that we have met the TDS (Tax Deducted at Source) requirements, completed our compliance with the RoC (Registrar of Companies), etc. Combine that with the time spent motivating un-motivated employees, and some weeks, you have no idea where your week went!
  3. Lack of quality mentors. The quantity and quality of mentors in India (with the possible exception of Bangalore) is not quite up to the level of what you would find in Silicon Valley or other startup hubs such as New York, Philly or Boston.  Not entire surprising, since tech entrepreneurship is still in its infancy in India. The oldest successful tech startup founders are probably 10 years old in the industry, but really the bulk of the companies have been founded since 2008. The founders of these companies will likely become, in a few years, the kind of investors and mentors that Silicon Valley boasts of. Already, some successful entrepreneurs – the likes of Naveen Tiwari (InMobi), Kunal Bahl (Snapdeal, WG’06), Amar Goel (Komli), K. Ganesh (Tutorvista), Sanjeev Bikchandani (Infoedge, – are starting to become active investors and mentors. India could use a lot more such mentors and investors.
  4. Slow consumer traction. The Indian internet consumer is also just learning how to consume the internet, or mobile apps for that matter. This means that customer traction is often very slow, and requires a lot of customer education. For example, OLX and Quikr – two prominent classified sites in India – as well as eBay have had to spend a lot of time, effort and money in educating the Indian consumer on how to sell old products online. Similarly, for my first startup,, it took us a long time to educate restaurants and bars on using the SMS or web platforms for their marketing. The Indian consumer hasn’t quite displayed the same kind of early adopter characteristics as users in California might have.
  5. Problems getting paid. Moreover, the Indian consumer (or the Indian small business) is not very willing to shell out cash quite yet, so recurring credit card subscription businesses (the likes of Netflix, etc.) as well as others that require consumers or small businesses to pay are very hard to build here. With and, we have often had to run after our customers to get longstanding bills cleared. This also requires Indian startups to be even more frugal in their initial stages than their Silicon Valley counterparts.

These challenges are very real, and any entrepreneur interested in starting a company in India should be aware of them. However, I can’t say enough times that this is truly the best time to be an entrepreneur in India. Stay tuned for my next post, when I explain exactly why.

Anirudh SuriBio: Anirudh Suri WG’12, is currently the CEO of, a location-based product search platform based in India. He is also the Founding Partner of India Internet Group, an early stage venture capital fund based in Mumbai, Delhi and New York. Previously, Anirudh worked at McKinsey& Company, Goldman Sachs, and as a policy advisor to fellow Wharton alumnus and the Hon’ble Minister of State for Communications and Technology in the Government of India, Mr. Sachin Pilot. At Wharton, Anirudh was a member of the Venture Initiation Program and the Entrepreneurship Club; organized the BizTech Conference and the Wharton India Economic Forum; and also partied a lot in Center City Philadelphia.

My Transformation at Wharton Into an Entrepreneur

Editor’s Note: This post was originally published on the Wharton Magazine blog.

By Brett Hurt, WG’99

I was a bit of an outlier when I earned my MBA at Wharton in 1999. I was an entrepreneur in a class of almost all aspiring consultants and bankers. What made the situation even more unique was that I did not just aspire to start my own business—I was founding and running businesses while I was still in school. Today on campus, where 70 first-year MBAs launched or participated in startups before arriving, it is the norm. But back then, my entrepreneurship was a bit odd.


I founded my first business in the craft I had learned right before Wharton: consulting. A senior manager from my prior employer, Deloitte, called me in November 1997 in a panic right before my winter break after my first semester. He had sold a client, the Department of Labor in Louisiana, on a project in which he would build a system to track their adult education system, replacing their current paper-based filing systems with a client-server design. This would allow for more efficiency, better reporting and analytics. The problem: He had a very small budget and no idea how to build it. So he turned to me.

And I was in. I had two weeks during that winter break to create the entire system from scratch. I learned a new programming language with the help of a very smart friend, who happened to be visiting the Wharton campus to consider his own MBA. I was absolutely determined to prove that I could do it. I worked every day and night until around 3 a.m. during that two-week period, including during the ball dropping to celebrate New Year’s Eve.

Fortunately, I have a very understanding and independent wife, Debra, and she wanted me to prove to myself that I could do it.

The confidence that gave me was transformational. I knew after succeeding with the project that I would never have to take a job again. I would be an entrepreneur for the rest of my life, following in my parent’s footsteps. Hurt Technology Consulting LLC was born.

I continued to grow the consulting business throughout my time at Wharton, but I also chased scalable entrepreneurial dreams with three other businesses.

One was a business named MBA ZoNe. I had two co-founders: Brenda and Marc Mizgorski, both WG’99. It was a virtual community for MBA prospects, students and alumni. It was advertising based. I was the CTO, and I built the whole site and sold our first advertising—to Deloitte Consulting. I believe it was a $7,000 banner ad campaign with a certain number of impressions. There was just one problem: I didn’t like selling advertising. So that business ended for me when I sold my equity stake back to the husband and wife, who still run it today.

Another was a business named BodyMatrix. My parents were always retail and direct-marketing entrepreneurs, so I decided to try my hand at retail—but online. I built the e-commerce engine from scratch. We launched after one month and we were getting orders from the U.S., U.K. and American military bases all over the world. We sold sports nutrition products because they are products that customers frequently reorder. Debra and I knew because we were customers ourselves and exercised almost every day (and still do). I negotiated an agreement with a Dallas-based wholesaler, and they handled all the inventory management and shipping for us. It cost about $150 to launch (mostly in hosting and incorporation fees) but with quite a bit of sweat equity.

Then I launched Coremetrics, which grew out of BodyMatrix. The most frustrating part of e-commerce was that all customer behavior was masked by a Web browser. At least in my parent’s stores you could ask customers questions like, “Are you finding everything you need?”; “How did you hear about us?” or “What other products do you think we should carry?” But online, we were blind.

So I built the technology to see. And because I had built the e-commerce platform myself, I did what I thought was most logical: I wrote the customers’ actions as they occurred directly to the underlying e-commerce database. Where did they visit us from? What products did they look at? What products did they buy? What products did they search for? What products did they abandon from their shopping carts?

To validate if this was the big business I had been looking for, I talked with two of my classmates who worked at Amazon and CDnow. I showed them a demo of my analytics solution and how I was using it to personalize offers.

To my surprise, they were blown away. I fully expected them to give me ideas for improvements based on their presumably much more sophisticated systems. But they didn’t; instead, they told me that I should start this business as soon as possible. I remember those meetings like it was yesterday, and I walked out of them more excited than I had ever been. I named the business Coremetrics because if you listen carefully, executives use the words “core” and “metrics” frequently.

I kept all four businesses going until I was about to graduate. I frequently worked through the night, fortunately capturing a little sleep before my classes. In retrospect, this may have been a little bit insane. But I was driven by the passion to be an entrepreneur, and I have no regrets. Once I determined that Coremetrics was the huge market opportunity I had been looking for, I sold the other three businesses as fast as possible and went after Coremetrics with all I had.

My successes and challenges with Coremetrics are well documented, as is the subsequent launch, IPO and acquisitions of my next company, Bazaarvoice, which helps retailers tap consumer conversations for growth.

What perhaps is not as known is my desire now to give back. I do so as an investor—for instance, as a former partner at Austin Ventures and now as co-founder of my own VC firm, Hurt+Harbach—as a mentor (at TechStars Austin and Capital Factory and as a Wharton Entrepreneur in Residence), and as a writer (on my personal blog and now as a Wharton Blog Network contributor).

I am motivated to give back to Wharton in particular because of what the School did for me. I experienced nothing short of a personal transformation on campus thanks to my professors, classmates and alumni. Being on campus is still an empowering experience for me every time I return. Everwhere you look at Wharton, there are aspiring entrepreneurs. I invite all alumni to return to campus, to give of their time or to simply visit, to experience it for themselves. To teach is to learn.

Brett Hurt thumbnailBio: Brett Hurt, WG’99, serves as vice chairman of the board for Austin-TX-based Bazaarvoice and co-founder of Hurt+Harbach, a seed-stage venture capital firm. He received the Serial Entrepreneur Award for 2012 from the entrepreneur empowerment group RISE, the Austin Entrepreneurs Foundation’s Community Leadership Award for 2012 and Entrepreneur of the Year for Austin recognition in 2009. In 2013, the Wharton Club of New York honored him with the Joseph Wharton Award for Young Leadership.

Thoughts On Starting A New Company

By Rob Coneybeer, Wharton MBA 1996; Co-founder, Shasta Ventures

Together with two co-founders, I started Shasta Ventures from scratch.  Questions like “When did I decide to start a new company?” “What was that like?” and “Where did it begin?” are often asked. Here’s where it begins.  

A startup is a product of your imagination, fueled by a burning desire to serve your customers and create something new.  When I teamed up with Tod Francis and Ravi Mohan in early 2004, Google hadn’t gone public yet,  Amazon was about to go out of business, and eBay was at historic lows in the stock market.  At the time, no one thought the consumer mattered in the technology world.  Venture firms were openly abandoning their consumer practices.

When we started Shasta, the three of us took a deeply contrarian view.  We believed in the importance of the end-user and started with a core belief in the power of consumer-driven technology businesses.  We wanted to serve entrepreneurs (our customers) who shared that same point of view.

Our early slide decks talked about the rising influence of consumers in technology.  Computing technology was originally used in the 50’s by governments to compute ballistic missile trajectories, and then in the 60’s by large companies to automate payroll.  Next came minicomputers in the 70’s for medium-sized business, and the rise of client/server technology in the 80’s led to the adoption of PCs by millions of small businesses.  Then came the consumer, with the Internet in the 90’s, but hype outpaced reality, leading to the boom of 1999 and bust of 2000.

Despite the aftermath of the Internet bubble, the underlying consumer demand for technology was clear to us.  Consumers loved technology as it became cheaper, more powerful, and far easier to use.  Internet traffic continued to grow rapidly.  Based on our convictions, and a strong investing track record, we went on the road in 2004 to raise a $210 million inaugural fund based on an end-user-oriented strategy for investing in technology startups.  We had well over 120 “first meetings” with prospective investors.  Thanks to our track record, most institutional investors wanted to meet with us, but because the three of us hadn’t worked together before, and consumer startups were completely out of favor, many prospective investors found it easy to quickly say “no”.  The “no’s” rolled in faster than we expected. Would we ever be able to raise the fund?

As you might imagine, we had quite a few sleepless nights in 2004.

Raising a first-time venture capital fund requires a LOT of investor due diligence, so each “yes” took longer than we hoped, after a litany of “maybes”.  Eventually, we closed the fund after six months of active, full-time fundraising.  In 2005 we started to invest, and since then we’ve built our firm by helping entrepreneurs build great end-user oriented companies – both consumer and enterprise focused – with early investments in companies like, Lithium, Apptio, Nextdoor, Zuora, RelayRides and Nest Labs.  We’ve also had our share of failures, with plenty of investments in companies that haven’t succeeded.

I must say that I’ve found it interesting how accurate we were about the skyrocketing influence of the consumer in technology start-ups.  I’ve also been surprised by how rapidly other firms pivoted back into the space.  Even enterprise technology has been redefined by the widespread consumer trend of “bring-your-own-device to work” instead of company-issued phones and laptops.  Being correct about this trend certainly helped us, but our strategy wasn’t contrarian for long.

Reflecting on the last nine years, I’ve often thought about when exactly I decided to found a company. The answer is, I don’t really know.  I think most entrepreneurs will tell you the same thing.  There wasn’t a single moment in which the company was started – it was a continuum of events, starting with leaving my former firm.  In fact, I still feel like it hasn’t ended yet.  We still have so much to build and prove at Shasta and we work every day like our lives depend on it.  Most entrepreneurs feel the same way about their companies, even after an IPO or other liquidity event.


Rob photoBio: Rob Coneybeer brings to Shasta Ventures deep experience in building startup companies. Prior to co-founding Shasta, he was a general partner at New Enterprise Associates (NEA) where he led 15 early-stage investments in core infrastructure technologies spanning semiconductors, software and networking equipment. Prior to joining the venture-capital industry, Rob served as a lead integration and test engineer in the Astro Space division of Martin Marietta. While at Martin Marietta, Rob helped build the first EchoStar spacecraft. Rob earned a master of science in mechanical engineering from the Georgia Institute of Technology and a BS in mechanical engineering from the University of Virginia. He also holds an MBA from the Wharton School, where he was named a Palmer Scholar.

“Buy When There’s Blood in the Streets” and Other Lessons from Venture Capitalists Fred Wilson and Josh Kopelman

By Chadwick Prichard, Wharton 2014, Vice President, Alpha Kappa Psi

On Tuesday, February 5, I hosted back-to-back events with Fred Wilson, Partner at Union Square Ventures, and Josh Kopelman, Partner at First Round Capital, on behalf of the Alpha Kappa Psi Aspire to Excellence Speaker Series. It was demanding, but the opportunity to listen to Fred and Josh–two of the most prominent venture capitalists on the East Coast–speak about their paths after Wharton, and lessons learned along the way, was well worth the effort.

Fred Wilson – On Being A Contrarian

Fred Wilson (WG’87), who has invested in companies such as Twitter, Tumblr, Foursquare and Zynga and who blogs on AVC, spoke about being a contrarian and the importance of going against the current, beginning his speech with a quote from 18th Century investor Baron Rothschild, who said, “Buy when there’s blood in the streets, even if the blood is your own.” He added that when there is panic in the markets, and everyone has lost of fortune, including yourself, “this is the time to stand by your convictions and buy.”


 Here are few more takeaways from Fred’s speech:

  • It’s good to be a contrarian—not only as an entrepreneur, but for life, in general. You have to stand by your convictions and refuse to go with the flow if your intuition says otherwise. Do what you believe in.
  • Product comes first. You don’t have to know how to make money right off the bat. You don’t need a business plan. You shouldn’t even have a business plan in the earlier stages. Build a product that solves a problem, and can scale, and you are well-positioned.
  • Your network is important. In school, it is important to spend time with people who aren’t studying the same things as you. It gives you a different and valuable perspective, and will be useful years after school.

Josh Kopelman – The Entrepreneurial Mindset

Later that day, Josh Kopelman (W’93), managing director at the Philadelphia-based First Round Capital, who sold his company (the world’s largest marketplace for used books, music and movies) to eBay for $350 million in 2000, discussed his path as an entrepreneur, which he began as a seven-year-old with more neighborhood businesses (and business cards) than he could count. Josh explained that influential entrepreneurs do not just want to start businesses—they want to solve problems.


 Here are my main takeaways from Josh’s speech:

  • Entrepreneurship a mindset, not a profession. The most successful entrepreneurs recognize a problem that needs to be solved, and can’t sleep until they do something about it.
  • Irony can be funny, and sometimes you just have to laugh. Josh once flew out to the West Coast to close a deal for $50 million as an entrepreneur, and since he was under 25, Hertz would not let him rent a car. He was responsible enough to handle $50 million, but not a rental car.
  • Sometimes it is better to be lucky than smart. Josh sold his company to eBay for $350 million at the height of the Internet boom in February of 2000. The bubble burst just a few weeks later in March. No one could not have predicted the peak of the boom.

When all is said and done, organizing these two events was not easy, and I had a lot of help from some great people. Evan Rosenbaum, Daniel Weizman, Daniel Fine, Jimmy Kwon and Brandon Gleklen from the Wharton Undergraduate Entrepreneurship Club were immeasurably helpful in planning and execution, as were Jill Anick and Emily Cieri from Wharton Entrepreneurship and Peter Winicov from Wharton Communications.

Vernon Hill – Billionaire Founder of Commerce Bank

Remember to RSVP for our next event with Vernon Hill (W’67), Founder of Commerce Bank (bought by TD for $8.5 billion), next Tuesday, February 12, at 4:30PM in G60 on behalf of Alpha Kappa Psi, co-sponsored by the Wharton Undergraduate Finance Club, the Wharton Hedge Fund Club, the Wharton Management Club and the Wharton Undergraduate Entrepreneurship Club.


chadwickBio: Chadwick Prichard is a junior in Wharton and Vice President of Alpha Kappa Psi. He has interned with Waterman Entertainment (Stuart Little, Alvin and the Chipmunks) and Platform Media Group in Hollywood. He is interested in film production. Follow Chadwick on Twitter.

The Current State of VC in Brazil

By Thomas Baldwin (WG’13/G’13)

It’s midnight as I write this on my buddy Wolf’s couch here in São Paulo. Despite a long and exhausting day full of meetings, I’m restless, antsy, agitated… not even close to tired. This city has that effect on me. I’ve talked about this before, but the energy here is electric, the city is raw and real, humanity unleashed. I love that amidst the chaos of this city, more and more entrepreneurs are creatively addressing serious problems to create meaningful social (and economic) value. Oh, and lest I forget, I should also mention that people here are consuming. A lot. Walking through the mall these days makes you feel like a sardine. They’re packed.

Brazilians love to shop. Both offline and online.

But I digress. In this post, I want to discuss a topic that is of relevance to anyone looking to raise capital down here. Over the past few days I’ve met with a number of startup founders in Sao Paulo. Many of them are singing a common refrain about how the ecosystem – particularly with respect to VC funding – has changed over the course of the past year and a half. I thought I’d write a quick post to share what I’ve learned, and offer a few thoughts of my own.

Allow me to provide some context. I traveled to São Paulo in the summer of 2011 as part of the Lauder Program’s summer immersion session.  I was a bright-eyed MBA looking to absorb as much information as possible about the exciting world of Brazilian startups. I had a blast and learned a lot.

Boy, those were heady times. In the summer of 2011 – a year and a half ago – lots of people were raising capital. A lot of freshly minted MBAs came down, and many of them raised sizable rounds relatively easily, on very generous terms, with great valuations, without having to demonstrate much in the way of traction or revenues, without having a minimum viable product. In some cases, the ease with which these entrepreneurs raised was warranted by truly phenomenal ideas and / or excellent entrepreneurial track records. Davis (WG’11/G’11) and Kimball are an example of this with And they continue to crush it.

In other instances, however, the money may have come too easily. Some entrepreneurs probably shouldn’t have gotten as much money they did. Peixe Urbano, for example, is struggling mightily right now, and their investors are worried.  Like I said, these were heady times, and I think a lot of VCs got caught up in the hype, felt like they were going to get left out of supposedly hot deals, may have shirked a bit on diligence, and as a result may have made some hasty decisions. It’s obviously easy to say this in retrospect, so I’m not criticizing anyone. All I’m saying is that TIMES HAVE CHANGED.

Fast forward to the present. Today we exist in a venture environment much different from the one I described above. Pre-product capital raises are few and far between. Investors want to see traction, they want to see an MVP. They are pushing back on valuations. In general, it’s harder to raise capital right now.

Why has this happened? A couple reasons:

(1)    As I alluded to above, not all the investments that VCs made in 2011 are performing well. Home-grown Brazilian VC is relatively new, and when things heated up, I believe certain VCs made some mistakes (yes, VC is a hit-driven business, we expect lots of companies to fail even in a successful portfolio, but I’m saying that some avoidable mistakes were likely made). So the Brazilian VCs are learning, they are becoming more sophisticated, they are no longer as impressed by a flashy deck and great salesmanship as they were before. They are becoming more astute in their assessment of business models, of what is likely to work and what will likely fail.

(2)    The Brazilian “sexiness” factor, and a few high-profile capital raises by MBA-types, resulted in a huge influx of ambitious aspiring entrepreneurs from abroad. On the home front, more home-grown talent began to view entrepreneurship as a viable career path. You also have successful Brazilians returning home from abroad to launch businesses here. Bottom line: the space has gotten MUCH more crowded. VCs here used to have to search pretty hard to find entrepreneurs, now the entrepreneurs come to them in droves. It’s tougher to get their attention, and quality expectations are higher.

(3)    Diversification. Brazilian VCs are over-indexed to certain segments, particularly eCommerce. They put a lot of cash into eCommerce startups in 2011, and as a result they are shifting focus to other areas, like healthcare, financial tech, and education. A lot of the entrepreneurs on the ground are still pushing eCommerce ideas, which has resulted in lots of folks getting turned away. The eCommerce spigot seems to have closed (unless of course you’re doing B2B eCommerce, which I think is an entirely different story, and which I’ll cover in a separate post).

(4)    Some (but not all) of the US venture firms that are investing in Brazil have “placed their bets” on Brazil and are holding tight for a while until they see how things play out with existing investments. They are excited about Brazil, but they don’t want to over-expose themselves, so having put money into a few companies here, they may be pulling back for the time being. Unless they find something incredibly compelling, of course.

What does all of this mean for entrepreneurs looking to build big, capital-intensive businesses in Brazil? Think carefully about the factors I’ve written about above, and act accordingly. In the current environment, you need more than a beautiful deck, a magnetic personality, and a compelling vision. You need to show traction, you need to demonstrate some results (ideally revenues), you need to show you’ve got a sustainable competitive advantage. If you’re bent on B2C eCommerce, recognize you might have a tough road ahead of you (I’m not saying it’s impossible, just that you’re swimming upstream). If you’re looking to raise from Brazilian VCs, don’t pitch them on an idea that taps a theme they’re already invested in (don’t go to Monashees with anything Baby related, for example).

Most important (and most basic of all), do your homework! Unfortunately (or fortunately?) there are a lot of people down here who are pitching crappy ideas, who haven’t done a solid market-sizing, who don’t understand how local dynamics impact imported models, etc. Use this to your favor and differentiate yourself by getting genius-level smart on your chosen idea & market before you step inside the shark tank!

Até a próxima gente!

This article was originally posted on 12/20/2012 on Tom’s blog Tropical Considerations: Insights on the Brazilian VC/Startup Ecosystem.


My name is Tom Baldwin. I’m a veteran Brazilianist with a passion for startups and entrepreneurship. I’ve spent a little over a year living and working in Brazil at different points in time. I’m a dual citizen of Mexico and the US. I’m a student at Wharton / Lauder.  My blog, Tropical Considerations, chronicles a 5 week adventure in São Paulo that began in December of 2012. I’m here to build relationships, explore opportunities, and work on a few ideas of my own. Find me on linkedin and twitter.



What Keeps You Up At Night?

By Andrew Trader (W’91/WG’99), Serial Internet and Software Entrepreneur & Venture Partner, Maveron

What keeps you up at night?  It’s a question I ask many entrepreneurs.  When I ask it as an investor, I’m really asking it as one entrepreneur to another.  Especially in early stage companies, there’s a lot that will keep you up at night.

Unfortunately, the answer often comes back that it’s fundraising.  What I’d rather hear from the team is that product development, product/market fit, user issues, customer acquisition, competition, hiring, or something else related to company building are the culprits.  Of course fundraising is critical.  A start up dies without it.  However, fundraising is a successful outcome of addressing and resolving the big issues and opportunities, also known as execution.

My belief about what makes a great company and investment opportunity is very consistent with my firm’s approach and values (Maveron). We heavily overweight the people component.  We want to have great confidence that the team will be agile and decisive, intensely focused and flexible given new information.

So in the same way that I offer advice about the company’s product roadmap, I also advise on what to look for in a great investor.  Too many times I hear from entrepreneurs that they have an advisor who knows a guy that has a friend at a Sand Hill Road venture firm.  Hopefully they get a meeting!  You don’t leave anything to chance in your business, so why would you do that for fundraising?!

Rather than treating the process like a high school mixer and hope someone picks you, turn that approach on its head.  Just as you would every other aspect of your company, review all your options and pursue the smartest alternative with urgency and tenacity.

Here’s what I tell entrepreneurs about what I believe is important in an investor:

Willingness and ability to help. Investors must roll up their sleeves and dig in to the important areas of the business.  An investor with one, but not the other, is a liability.

Operating experience.   There’s no substitute for experience.  An operator understands what the team is going through, can help see around corners, and empathizes about the level of effort and energy required to hit milestones and achieve results.

Domain knowledge.  Product matters, especially in my world of consumer tech.  Investors who rely on their experience and instincts will help you get to better answers faster.

Equity preservation.  Any investor who tells you not to worry about valuation or dilution, isn’t telling the truth. Entrepreneurs must preserve equity because you never get it back.  The balance is raising capital in a way that enables the company to win without risking the company.

No maintenance.  It’s the team’s company.  When they don’t need your help, you have to be comfortable and confident not getting in the way.  No ego!

Mutual trust and respect.  Being direct and transparent is the best approach for a successful long-term relationship. I’ve been part of startups where we had to look over our shoulder and translate every conversation.  That’s a terrible use of time and energy.

Super supportive.  The investor must be with you in good times and bad.  Talk to the companies in the portfolio, but also talk to the companies where things didn’t work out.  You will learn a different side of the investor when things get tough.

Funny thing…having been on both sides of the table, as an entrepreneur and as an investor, it all comes down to great people.  So what keeps me up at night?  Finding more great people!


Andrew Trader

Professional Bio

A.T. is a serial Internet and software entrepreneur.  He’s currently a Venture Partner at Maveron, an early stage consumer technology venture capital firm.  In 2010, he joined Maveron’s San Francisco office as an Entrepreneur-in-Residence. (

Zynga: In 2007, A.T. was part of the founding team at Zynga and helped create the social gaming industry. At Zynga, he built and managed all business operations, including revenue management, marketing/user acquisition, business development, and strategic partners. A.T.’s work was instrumental in driving Zynga to over 60 million daily users and to $500m revenue run rate. ( Before helping start Zynga, A.T. was the CEO of Utah Street Networks, operator of, one of the first social networking sites. He led the sale of Utah Street Networks to Cisco in 2007.

Coremetrics:  A.T. was also the co-founder of Coremetrics, a leader in website marketing, and served as the company’s VP of business development, growing the company to over 100 employees and raising $65 million in invested capital.  Coremetrics was acquired by IBM for $277m. (

He holds both a BSE (W’91) and an MBA (Wh’99) from the Wharton School at the University of Pennsylvania.

Recent Lessons for a VC

Ravi Viswanathan

By Ravi Viswanathan, PhD

At my firm, New Enterprise Associates (NEA), we think a lot about the ingredients to creating huge companies – disruption, great entrepreneurs, big markets.  The disruption aspect is interesting as this has evolved over the years – in the 80’s and 90’s, much of the disruption was really technology based (a new molecule, a new piece of code, a new piece of hardware).  Now, disruption comes in a lot of ways – business models, go-to-market, value chain, market evolutions, as well as pure technology.

One disruption that has happened is the new wave of enterprise technology companies that have hit the public markets over the past 18 months.  Each are innovators in their own sectors, but as a group, they are shaking up the public markets in a very positive way.

Over the past 18 months, there have been 10 IPOs launched in enterprise technology companies with market values in excess of $1bn.  These include companies such as ServiceNow, Splunk, Fusion-io, and Palo Alto Networks.  These elite companies took 7-10 years to get to the public markets, but it was certainly worth the wait for their investors.  Annual revenue growth rates range from 30-70%, with valuation multiples also quite high (5-10x 2013 revenues).  The median revenue for this elite class of companies was over $200mm (for CY2012).  The message that the markets are communicating is that hyper-growth companies where solid business models exist with good revenue visibility will get rewarded.

Here are some additional takeaways:

Investors (public market investors as well as VCs) are enthusiastically investing in enterprise-focused startups:

  • There have been many well-received IPOs with <$100M in revenue, such as Demandware, Eloqua, and Brightcove
  • However, enterprise revenue is very “high quality”, e.g. sticky enterprise customers, recurring revenue through SaaS business model
  • Additionally, these companies are solving critical problems in the enterprise, and are easy for investors to understand on that level
  • Recent enterprise IPOs actually have generally lower margins than recent consumer IPOs, but investors have accepted the importance of reinvesting/investing in the business (growth at the expense of near-term profits), in large part due to a sticky customer base and the strong economics associated with acquiring these customers

Innovative business models are being well-received in the enterprise:

  • Startups are freely experimenting with business models to find the right fit for each market, e.g. Splunk offers freemium software and Workday generates substantial revenue from professional services such as training
  • A broad range of sales models are also employed, including selling directly to knowledge workers without initially going through a CIO, such as for Jive and Box (of course this was also a tactic Salesforce used heavily)

Enterprise companies are being rewarded with premium valuations in the public and private markets:

  • Strong growth rates support these valuations, e.g. Workday has a forward revenue multiple ~3x higher than Facebook’s, but it is also expected to grow ~70% in 2013, versus ~30% for Facebook
  • EBITDA and earnings multiples are also extremely high as investors accept low earnings during periods of fast growth
  • Public market valuations reflect strong M&A activity, including the acquisitions of Taleo, SuccessFactors, Yammer, and Buddy Media.  (On the subject of M&A, there is a broad discussion to be had about a “cloud land grab” and how difficult it has been for incumbents such as ORCL to develop products internally)

As a venture investor, the biggest takeaway here is that these companies can take a very long time to mature and hit scale, but that they also had a very strong entrepreneurial culture pervasive through their organizations.  This was critical given the length of time needed for “success” as well as the fact that in many cases, each of these companies were facing tough entrenched competitors.  But, the rewards can more than compensate for the risks.


Ravi is a member of the Wharton Entrepreneurial Advisory Board. At NEA, Ravi focuses on investments in information technology and energy technology. Prior to joining NEA, Ravi worked at Goldman, Sachs & Co. where he was co-head of the technology practice in their private equity group and led direct, fund, and secondary investments in the areas of information technology and life sciences. Prior to Goldman Sachs, Ravi worked for McKinsey & Company and advised clients in the software, communications, and pharmaceutical sectors on strategy, acquisitions and new business building. Ravi received a master’s degree in Business Administration from the Wharton School at the University of Pennsylvania and a PhD in Chemical Engineering from the University of California at Santa Barbara where he focused his research on materials science applications in molecular electronics, biomaterials, and nanotechnology. Prior to graduate school, Ravi received a BS in Bioengineering from the University of Pennsylvania.

Working to Keep Entrepreneurs in Philadelphia

By Emily Cieri, Managing Director, Wharton Entrepreneurship

Last Wednesday, September 19, I was fortunate to attend the opening of First Round Capital’s Philadelphia office.  As many of you may know, FRC has had offices in Conshohocken, PA for about 10 years.  They subsequently opened up offices in San Francisco and New York, since their investments began focusing in those regions.  Josh Kopelman (W’93), Managing Director of FRC, has made a bold statement in moving into West Philadelphia; he is now is going to take a leading role in the Philly entrepreneurial eco-system – as explained in his video previewed on Wednesday.

I was in attendance at the FRC opening — which was a Who’s Who of the Philadelphia entrepreneurial community.   There were remarks by Mayor Nutter (W’79) and Penn President Amy Gutmann, who both praised Josh for making this bold move.

Philadelphia Mayor Michael Nutter (W’79) and University of Pennsylvania President Amy Gutmann speak at the First Round Capital Event on September 19.

It’s no accident that his office is one block off of Penn’s campus at 4040 Locust Street.  It also happens to be around the corner from Josh’s fraternity house when he was a student, which he mentioned during his comments on Wednesday.

Josh mentioned four startups: AdMob, Warby Parker, Invite Media, and Milo, and asked what they all had in common.  My initial thought was: That’s simple they were all founded by Wharton alumni! But no, that’s not the commonality Josh sees.  What he mentioned is that all of these companies were started in Philadelphia, but quickly moved out – AdMob and Milo to Silicon Valley, Warby Parker and Invite Media to New York City. Josh wants to reverse this tide and work to keep these and other entrepreneurs in Philadelphia.

The new FRC space is fabulous! Lots of community space, dedicated space for start-ups, and dedicated space for student entrepreneurs.  It’s obvious that the students are what’s really exciting him – and why not, he knows the same thing we do –  that entrepreneurial-minded students are smart, hardworking, fun and interesting to be around.

As is customary with Josh his actions speak louder than his words and he’s starting now.  Here’s what is lined up for students:

  • The Dorm Room Fund – a $500K venture capital fund that will be run by students to invest in student-run startups – initially those located in Philly (at Penn and Drexel).  Read Josh’s post here that shares his story and motivation behind the Dorm Room Fund.  He’s looking for a total of eight students to run the fund and application information is available on the Dorm Room Fund website.
  • Interns – FRC is looking to hire 2-4 undergraduate student interns to work in their Philadelphia office.  More information is available here.
  • A plan for the student space mentioned above is scheduled to launch in October or November.  We’ll be sure to share more information once it is available.

I am thrilled to have Josh and FRC in Penn’s backyard – Josh has always been very active at Wharton Entrepreneurship and across campus.  But now the game has changed and our students and programs will benefit immensely from this – as well as Philadelphia.  Welcome back Josh!