A close friend of mine is spending a year traveling around with world with his wife and 11 year old daughter.  They are in China right now and he’s been sending me missives from the front lines of his trip.  Most of what I read these days about China is either highly political, technology-oriented, or about the venture capital industry’s fascination with China.  My friend’s emails have been decidedly different (while he’s a successful technology entrepreneur, his trip is about a personal adventure that his family has embarked upon.)  I confirmed with him that I could blog some of his rants – enjoy.

China is wild – definitely glad I came so I never have to come back.

It is so polluted in the air that I feel like I’m sucking on an exhaust pipe while in a middle of a sand storm. Beijing gets these sand storms off the gobi since all the forests have been cut down and everything is covered in a layer of dust that just won’t go away – add in coal burning power plants, no emissions on cars and 15 million people and you simply can’t breathe.  So after 4 days in the capital we went to Xi’an (the ancient capital now 5.4 million people) and it’s just the same – you can’t tell if it’s day or night – it’s almost comical, but sad.

Prices are at both extremes – for western brand stuff in legitimate stores its 40% more than the states – everywhere else it’s cheaper (and there is no shame in selling whatever brand will make them money).  I think communism works well for the Chinese – there are so many people if they had too much freedom I’m sure there would be greater civil unrest.

Internet access has been fine – Skyping everyone without problems and it’s cheap.  Every now and then I can’t get a Yahoo new article on China to load – but if I’m persistent I can get it.  The English China Press newspaper is like reading Soviet era propaganda – it’s just funny their view on world events.

People aren’t as friendly as in other countries we visited – lots of shoving and pushing – not many smiles – everywhere you go it’s packed with people.  Most tourists are Chinese – funny I would have never guessed.  China produces 20% of the worlds cigarettes and consumes 30% – they probably just don’t care with all the other stuff in the air.

We all have sore throats and are dying for some fresh air and blue skies.  The sites are amazing – actually all the tourist locations we’ve visited so far are very clean and well run.  we saw one old lady have all her trinkets taken away from her by a soldier after she sold us a kite in front of a historic statue (she almost cried – I think the kite we bought cost us 75 cents – about 3 dollars of goods was taken from her – I wanted to go up and give her some cash but the guard was watching).  Most people fall into the category of have nots but talking to one of our guides at the Imperial Palace in Beijing – he said that young people will take an entire month’s salary just to buy the new Motorola Razr phone or Nike shoes.

Hey 1.3 billion people can do a lot of stuff – but you’ve got to take care of 1.3 billion people and that’s not gonna be easy – I don’t think China has it in the bag to dominate the global economy in 50 years – plus they might have a peasant revolt in the meantime…

Roger Fillion has a very instructive article in this week’s Rocky Mountain News about the closing of the Colorado Institute of Technology.  I remember when CIT was launched in 1999 with great fanfare by Colorado Governor Bill Owens with the vision of creating “the next Caltech or MIT.”  I remember feeling that while the vision was huge – it was nonsensical and not particularly well informed about what created the underlying and sustainable basis for something like Caltech or MIT.

Roger’s sidebar on “Looking back at CIT” has a very focused set of quotes that puts it all in historical context.

• Lewis O. Wilks, president of Internet and multimedia markets for Qwest Communications, on Sept. 30, 1999, as Gov. Bill Owens launches his new Science and Technology Commission: “There is an absolutely consistent awareness across the world today that Denver is becoming the next Silicon Valley.”
• Gov. Bill Owens, in a telephone interview from Seattle after meeting with Microsoft founder Bill Gates on Dec. 14, 1999. Owens touted his vision for the Colorado Institute of Technology during the meeting: “I walked him through a sales pitch so that when he or his company starts to look for a new campus or research facility, they’ll consider Colorado.”
• John Hansen, then-CIT president, on Aug. 9, 2001, discussing a lack of funding for the institute as the high-tech bubble burst: “If your stock is down 80 percent, you’re not inclined to spend on this right now . . . it’s hard to go in and raise funds from a company that just laid off 500 people.”
• Margaret Cozzens, during her time as CEO at CIT, discussing lack of funding: “Collecting on the pledges (from companies) was nothing short of impossible.”

Now, Colorado has always had a vibrant technology and entrepreneurial community, but the idea that in 1999 that there was “absolutely consistent awareness across the world today that Denver is becoming the next Silicon Valley” made no sense to me at the time, nor does it in hindsight.  Having spent a lot of time and been involved in creating a lot of companies in both places, Denver has never been on the path of becoming the next Silicon Valley (in fact, Boulder is probably a more vibrant entrepreneurial ecosystem than Denver – so at the minimum it should be Boulder / Denver, although there’s still no real similarity to Silicon Valley.)

Rather than try to be “the next Silicon Valley” or “the next MIT”, it seems a lot more sensible for Colorado to focus on its unique characteristics, embrace its differences, and take advantage of that dynamic.  Having been in a few meetings of a group of technology executives and entrepreneurs discussing Colorado and technology for Bill Ritter’s gubernatorial campaign, I’ve seen the same thinking come up – “how can we be more like Silicon Valley.”  I’ve been consistent in my strong opinion that that is simply the wrong goal.

Education is at the core of creating a great, long term, entrepreneurial environment.  While a few people in Colorado – such as Jared Polis – are doing great things, our state government and business leaders should look at the failure of CIT as a major wake up call that we are simply not doing “enough”, or “the right things”, or “managing them effectively.”  I wasn’t involved in CIT – so it’s hard to be specifically critical – as I’ve spent most of my Colorado-based entrepreneurial / education activity working with CU Boulder Deming Center for Entrepreneurship and the CU Denver Bard Center for Entrepreneurship, but I’d hypothesize that if the companies that invested energy and money into CIT had channeled the same energy and money into these two institutions, there would have been a better outcome.

Industry needs to make a fundamental, long term investment in education in Colorado, as does the state and local government, rather than try to create “the next great thing” in times of abundance (such as in 1999.)  We need to take a 25 – 50 year view – this is not a short term game.  Unfortunately many of the people and companies that were involved in CIT appear to have had a short term time horizon and when things stumbled weren’t able or willing to invest for the long term.

I can’t wait until July.  Amy and I spend a big chunk of the summer at our house in Homer, Alaska.  We only have about 5,000 other people hanging around (it surges to about 10,000 at the high point of summer.)  Up until now, most people that I mention Homer to say “huh?”  Men’s Journal just determined that Homer, Alaska is the #1 Up and Coming city in the US (runners up are Newport, VT; Logan, UT; Walla Walla, WA; and Gualala, CA.)  Now – I’m not sure this is a good thing – Amy’s immediate reaction to hearing this was  “well, I guess we need to move to Cordova or Kotzebue now to get away from the coming hordes.”

My favorite quote from the article follows:

“It just doesn’t feel like the lower 48,” says Katie Bennett, a local sea-kayaking guide and drop-dead gorgeous, unmarried blonde. “You can still work hard and get a piece of the American dream.” Campbell, meanwhile, points out a different sense of possibility: the weird abundance of smart, beautiful women like Bennett. “There aren’t a lot of great guys here,” he says. “If you can hold a conversation and not just stare at their boobs, you do pretty well.”

That kind of says it all.  Do me a favor – ignore this article and go visit the California place instead.

This week has already been active for new startups in Colorado.  On Monday, the news broke that my friends Don Springer and Tim Wolters had closed on a $2.6 million financing led by Appian Ventures for their new company, Collective Intellect.  Tim has blogged some about the fundraising process from an entrepreneur’s perspective – good stuff.

Yesterday, my friends Paul Berberian and Karl Maier announced that they’d raised $19.3 million for their new company, Market Force Information.  This equity piece was $11.3 million and was led by Centennial Ventures with participation from Boulder Ventures and Vista Ventures; the debt piece was $8 million from Hercules Technology Growth Capital.  Market Force also announced that they have acquired their first company, Atlanta-based Shop’n Chek, one of the largest mystery shopping companies in the country.

Paul was one of the first entrepreneurs I go to know when I moved to Colorado.  We met at the first YEO Colorado meeting in 1996 at the Boulderado and he helped me start up the YEO Colorado chapter.  I funded – with Centennial – Paul’s second company Raindance, which he co-founded with Jim Lejeal and Todd Vernon.  Raindance went public in 2000 and was recently acquired by West Corp. 

I met Karl Maier through my very close friend and attorney Mike Platt at Cooley Godward a couple of years ago.  Mike and Karl are best friends and Karl has worked closed with Centennial on a number of their companies, including Vector, VIA Net.Works, and Cordillera.  Karl is well known throughout this area as an extremely strong operating exec.

I watched Paul and Karl as they got to know each other over the past year and developed the idea of transforming the established (and technology unaware) “mystery shopping business.”  They learned this business extremely well, determined that there was a huge opportunity to apply technology to it, and decided to acquire a number of mystery shopping companies, consolidating what is currently a very fragmented industry, applying contemporary technology, and building the dominant company providing “store-level, customer experience information for retailers, restaurants, consumer packaged goods companies and the financial and hospitality communities.”

Cool vision.  They’ve taken the first big step by closing both the financing and their first acquisition.  Market Force is now a 130 person company with real operations and a market leader.  It’s a nice new company on the Boulder scene, funded by a strong syndicate of Colorado investors.  Congrats to all.

Yesterday, I wrote a high level summary of this year’s Venture Capital in the Rockies conference.  I thought I’d give the local press one more day to see if anyone was going to write something substantive about some of the companies presenting.  I haven’t seen anything, so here are my thoughts on the companies I saw. 

24 companies presented in two tracks so the most I could see was 12.  I had a couple of conference calls during the day so I only managed to see 7 of them: Collective Intellect, Confio Software, HomeSphere, Solidware Technologies, iPosi, CreekPath Systems, and XAware.  The only company on this list that I directly have an investment in is Collective Intellect, although I have indirect investments (through VC funds that I’m an LP in) in XAware as well as Collective Intellect.  I’ve listed the companies in rank order starting with the one that I thought was most interesting / did the best job.

Collective Intellect: I backed the founders – Don Springer and Tim Wolters – in their previous company (Dante Group – acquired in 2003 by WebMethods.)  Don and Tim are super second time entrepreneurs, and the way they’ve started up Collective Intellect shows.  Their tag line is “filtering new media for the securities industry” – they are using a bunch of hard core computer science to analyze new media content (blogs, chat rooms, discussion forums) for public market fund traders, analysts, portfolio managers, and quants (i.e. the dudes at hedge funds.)  The intersection of new media, heavy computer science, and the massive hedge fund dollars sounds like a good place to hunt.  Don did a great presentation and announced their round of funding led by Appian Ventures.

Confio Software: I met the CEO and primary backer of Confio – Charlie Sanders – about 18 months ago when he first got involved with Confio and its cofounder Matt Larson.  Charlie’s an impressive guy having been a senior exec at Seagate (and previously Conner Peripherals.)  It sounds like 2005 was a very good year for them as they landed 40 new customers, although reading between the lines it appeared that one or two customers accounted for about 50% of their revenue.  Confio’s market – IT performance management – is a crowded one, but they appear to be doing some unique stuff around digging into the Oracle database layer to look for root cause defects (ah – “root cause” – the holy grail of all APM companies.)  Charlie a super salesman and is determined to scale the business up nicely on modest capital.  He’s off to a good start.

XAware: Tim Harvey, the new CEO of XAware, did a super job of presenting after a mere three weeks on the job.  I generally like XAware – it’s in a market segment (SOA middleware) that I like, understand, and have made some money in.  However, I don’t understand their approach to the business.  While they generated a respectable $3m of revenue last year, it appears that most of it came from financial services customers.  Consequently, I don’t understand why they present themselves as a horizontal SOA middleware provider when they could be kicking ass in the deep pocketed financial services vertical.

HomeSphere: I’ve got to hand it to James Waldrop and his team – they raised money in 2000/2001, survived their market falling apart, focused on growing slower but getting profitable, and have accomplished that.  They now have a respectable $10m business that sells two things: (1) manufacturer incentive and rebate service for through group buying (80%) and (2) construction management software (20%).  While #1 is a solid growth business (and HomeSphere has likely gotten to an interesting critical mass), #2 looks like a flat to declining business.  As a result, HomeSphere is looking to raise $10m to roll out three new lines of business (none of which I can remember a few days later.)  I don’t understand why they’d do this – if I was on their board I’d say “no more money – stay profitable – grow aggressively in segment #1.”

Solidware Technologies: Sue Kunz, the CEO of Solidware, is a firecracker.  I’ve known her and her gang for about a year and watched them do unnatural acts (ah – the joys of entrepreneurship) to get their “Splat Software” up and running.  Splat is an SQA product (software quality assurance) that helps identify software defects through visual analysis of the source code.  I declined to invest last year as I’ve already got an investment in a somewhat competitive company (Klocwork), but I’ve tried to be helpful and encouraging to Sue and her team because I like their style.  I only caught the tail end of Sue’s presentation so I don’t know how she did, but she handled the Q&A nicely.

iPosi: I don’t get iPosi.  They presented a vision for a set of E911 products based on GSM-based location combined with IP geolocation (they are talking to one of my companies – Quova – about working together.)  I listened to the presentation and really didn’t understand either (a) what exactly they were going to do or (b) how they were going to do it.  My brain was working hard when I saw their revenue slide – immediately afterwards my nose started bleeding and I started fantasizing about steep upward sloping exponential curves.  I know – and like – a few of the people involved – I’m sure I’m missing something obvious.

CreekPath Systems: I remember looking at Creekpath in 2000 when it was originally spun off from Exabyte.  I was pretty excited about funding it until one of my partners vomited all over the floor after meeting with the team.  As a result I passed – am I’m glad I did.  They’ve been through a lot of ups and downs and retooled their leadership team – again – last year.  Creekpath is a good example of the endlessly elusive storage success animal (hardware or software) that tantalizes, but eludes, the Colorado VC.  Maybe this will be the one, but as many have gone before them, they have a long road ahead of them.  I keep hearing that none of the storage vendors have this, but then I think about EMC’s software group and just shake my head.

Oh, and Seth and Chris assured me that the skiing on Wednesday was outstanding and the skiing on Friday was social (e.g. not much fresh powder, but lots of friends hanging around, blue skies, and 60 degrees.)

I’m sitting at my office in Colorado writing this (yes – you surmised correctly – that means that I did not get to Chicago today.)  Even though my early morning ticketing experience online went well, my drive to the airport at 5am was pleasant (e.g. no speeding ticket), and my experience with TSA was uneventful (e.g. no strip search by a guy named Joe), imagine my disappointment when I showed up at Gate B26 at 6am – five minutes before we were supposed to board – and saw no airplane.

At 6:30am, there was still no airplane.  It eventually showed up at 6:45am.  People came off the plane and the departure time was changed to 7am.  NFW – United never turns a plane around in 15 minutes.  I checked in with the gate agent who very politely told me that he doubted the plane would leave until 7:15am – maybe even 7:30am.  At this point – best case – I was arriving at O’Hare when my meeting was starting. 

I punted, enjoyed my drive back to my office, got a chai, and am doing the meeting by phone.  Geeze – Denver to Chicago – you’d think United would have that drill down.  At least they refunded my ticket and my upgrade certificate.

For the last 23 years, the Venture Capital in the Rockies conference has been the signature fund-raising conference in the Rocky Mountain region.  A full day of presentations from companies looking for venture capital (with the presenters mostly in suits – a rarity in this part of the country) followed by a day of legendary skiing (and – while I don’t ski – this year was phenomenal) makes for a great conference.  320 attended this year – 100 were investors including a number from out of state.

It was fun to look through the list of presenters since 1996 and see the following companies that I’ve been involved in:

1996: Mercury Mail – IPO as Exactis

1998: Email Publishing – acquired by MessageMedia
          Vstream – IPO as Raindance

1999: Service Metrics – acquired by Exodus
          Tellsoft – unsuccessful

2000: Finali – acquired by Convergys
          Service Magic – acquired by IAC

2001: Deuxo – unsuccessful
          Latis – now StillSecure – current portfolio company
          Prosavvy – acquired by eWork

2002: Dante Group – acquired by webMethods
          Npulse (Xaffire) – acquired by Quest
          Wideforce – unsuccessful

2003: F4 Technologies – now Rally Software
          Finali (again) – acquired by Convergys
          Newmerix – current portfolio company

2005: Oxlo – current portfolio company
          Rally (again) – current portfolio company

It was also interesting to see all the companies I haven’t invested in over the years that presented at this conference that have either been successful (oops – missed that one) or unsuccessful (sorry – but I’m glad I didn’t invest.)

Chris Onan from Appian Ventures did an awesome job hosting the conference this year.  He followed a tough act from Chris Wand of Mobius Venture Capital who hosted the preceding two years – and did great.  Maybe they should rename the conference “Venture Capital in the Rockies: By Chris.”

All the local papers have now written up their piece on the conference at this point.  The Boulder Daily Camera had a light weight piece on the conference in general.  The Rocky Mountain News ran two pieces – one that highlighted David Moll – CEO of Webroot (and the article said that he didn’t stay long because he had more important things to do – ouch) and one that announced ITU Ventures new $120 million fund.  The article in the Denver Post was the most substantive, actually highlighting several companies including Collective Intellect, Accucode, and Groople.

Given the lack of actual focus on the companies, I’ll write up a separate post talking about the ones I saw at the conference, offering feedback and (hopefully) constructive advice.

As the next election cycle in Colorado gears up, I’ve been jumping up and down reminding everyone who cares about politics that the solution to the “growth of the technology industry in Colorado” is to improve our education system.  Our current governor has done everything he can to ignore education and at least one of our potential gubernatorial candidates can’t spell the word education.  Colorado has an excellent entrepreneurial and technical base – we just need much more supply at both the K-12 and college levels.  This isn’t a quick fix – at 20+ year view is required.

I think CU Boulder is the best college in Colorado and the one most likely to have a huge impact on the region in the next 20 years.  It’s always great to see additions to the faculty that have a clue about entrepreneurship and technology.  Phil Weiser – an Associate Profession in the School of Law with a joint appointment in the Interdisciplinary Telecommunications Program has been doing a great job as head of the Silicon Flatirons Telecommunications Program.  He sent me a note over the weekend that Vic Fleisher, a law professor at UCLA and a blogger at Conglomerate with a deep interest in entrepreneurship, has just joined the faculty at CU Boulder.

I don’t know Vic, but given Phil’s note, I hope to meet him soon and welcome him to Boulder.

Ah – a second great quote from Hickenlooper this morning for those of you in the audience from Colorado.  John just said “Denver Is Nothing Without Boulder.”  When I first moved here in the mid-1990’s, Boulder was definitely viewed “snidely” by many people in Denver, especially in the business community.  It’s great to hear the Mayor of Denver thinking about the region, rather than just the city that he’s mayor of.  Denver (and Boulder) are lucky to have John as Mayor.