One of the cool perks of being on the National Venture Capital Association board of directors is that I get to see lots of interesting data on the venture capital industry.  The research staff, along with PriceWaterhouseCoopers  are constantly looking at trends and data that provide unique and useful insights into the ecosystem and publish under the MoneyTree brand.

Today, however, I got wind of some new MoneyTree data that pulled at my heart strings unlike any data that I had seen before.  In fact, I was all of astonished, proud, humbled and inspired.  The news?  In 2011, Colorado ranked 4^th in the country behind California, Massachusetts and New York for seed/early stage dollars invested into startup companies in the state.  The state has grown in leaps and bounds with 63 firms investing $290 million into 41 companies in 2011 compared to 2006 when 41 firms invested $89 million into 32 startups.

Wow.  I knew that Colorado was kicking tail, but this was really amazing news.  It backs up what I’ve been telling people for a long time:  Colorado is a top five destination for VC investment and I think it’s only getting stronger.

So why is our nearly average populated state so decidedly above average when it comes to starting companies?  It’s combination of many things (great universities, Techstars, lots of engineers, well educated people, great mentors and active community leaders), but one thing really stands out:  our entrepreneurs.

I think Colorado is breeding and attracting a type of entrepreneur that is unique to venture investing.  While driven, smart and motivated as all entrepreneurs are, the Colorado population seem to always be acutely aware of their local communities and always make sure to give back and pay forward to future generations of company starters.  Its you folks, who are creating the amazing companies that investors are interested in.  So much so that we are now the fourth most popular destination for early-stage investing.

So congratulations Colorado.  Congratulations to all of the entrepreneurs who are creating great companies and great jobs while never forgetting about their communities.  I’m proud to be a small part in your collective worlds.

With ongoing partisan politics fostering endless inertia in Congress, it would be easy for us citizens to throw in the towel and assume that nothing of legislative substance will get done this year.  Yet VCs and entrepreneurs are eternal optimists and, in fact, we actually have a bill poised to do great things for venture-backed portfolio companies showing signs of significant bipartisan momentum.

S. 1933 or the “Re-opening American Capital Markets To Emerging Growth Companies Act” was originated in the Senate late last year and is now being considered by members of Congress.  With the House poised to pass their version of this bill at some point this week, there is no better time for the Senate to finish the good work they started and put their bill up for a vote — and pass it — as soon as possible.

Essentially, the provisions in the bill provide a regulatory on-ramp for emerging growth companies (defined as under $1 billion in revenues) for a period of up to five years after an IPO.  This on-ramp allows smaller companies to save massive amounts of time and costs that today are required to be spent because of Sarbanes Oxley compliance and other regulations.  Once the company reaches $1 billion in revenues or five years post IPO – they leave the on-ramp and comply with existing regulations.  The bill also allows for these smaller companies to communicate more effectively with potential investors – something that has become increasingly difficult post the Spitzer settlement which separates investment banking from analysts research.  A good summary can be found here at the NVCA website but suffice it to say that the bill has many provisions that will make the IPO process significantly less daunting than it is today.  Its easy to assume that all is well and good in the IPO market with the hype surrounding the Facebook filing — but it is also wrong.  Make no mistake.  We need more IPOs overall – both large and small.  They are good for the economy and create plenty of jobs.

Here at Foundry Group, we strongly support this legislation and are encouraging our CEOs to do the same.   Given the track record of our Colorado Senators Udall and Bennet in supporting entrepreneurship, I am optimistic that they will act in our best interest.  Still I urge them and other Senators to bring S. 1933 to the floor and vote yes for a smoother path to IPO.

Every couple / few years, I head back to Ann Arbor, Michigan to spend a few days reconnecting with my alma mater and to check out the startup ecosystem.  My visit usually includes meeting with entrepreneurs, spending time with the different organizations that support entrepreneurs and guest lecturing.

I’ve always thought that Ann Arbor has all of the raw materials to become a hot bed for startup activity.  The University of Michigan is a great anchor tenant university, there are excellent students, professors and researchers and it’s a place where people want to live.  To date, I have been unpleasantly surprised with the general process, outside of some notable wins in the biotech and medical industry.  But that all might be changing.

In 2003, my trip led me to almost give up hope.  There literally was no activity on campus outside of university supported research.  I was told by one administrator that Ann Arbor would focus on biotech, medical and manufacturing and that software “was stupid.”  In meeting with students, especially in the engineering department, I felt there was more apathy toward entrepreneurship than excitement.  That trip left a very bad taste in my mouth and I wasn’t sure if / when I would return. (Outside of returning for football games.  That would be stupid to not).

In early 2009, however, I gave it another try and there were signs of life.  Community leaders (outside of paid U of M employees) began to emerge.  Community events and mentoring, as well as burgeoning campus support was seen.  I wrote a blog post here about my thoughts back then.  Instead of apathy, there was a strong level of frustration, which left me hopeful. Normally, frustrated entrepreneurs find fixes to what bothers them.

Fast forward 2.5 years and the energy and progress has leaped ahead.  I was energized by the grass roots organizations like Tech Arb and Tech Brewery.  The sheer amount of younger folks involved in company creation was exponentially higher than just a short time ago.  Instead of apathy and frustration, there was a real sense of excitement, accomplishment and hope.  Also, the whole attitude of the community seemed to have change.  Whereas Michigan has always looked poorly upon failure (which is a natural part of entrepreneurship), people that I spoke to inside and outside the innovation economy looked at these company builders as rock stars.  That, alone, is a huge component to a successful startup community and one that has been sorely lacking previously.  And instead of infighting among the different entities that try to support entrepreneurs, they were much more coordinated and congenial than they were during my last visit.  My partner, Brad, was equally impressed and wrote up a summary of his thoughts here.

There are plenty of other signs that others are noticing including the recent activity of California-based VCs funding Ann Arbor companies, Sam Zell donating $5 million to the law school for entrepreneurial studies.

There are two people, too, that really shined in my visit.  If you are part of the Ann Arbor tech scene and don’t know them – get to know them.

First up is Wes Huffstutter.  Wes works at the Tech Transfer office.  Normally, I avoid folks like this like the plague.  Not Wes.  He is totally tied into all the activity going on and is a super connector.  But he’s also a mentor.  Perhaps my favorite part of the trip was when one of the Tech Arb teams complained to Wes that he missed his mentoring office hours that day, as he and I spent the day together.  Seeing that type of reaction from a startup really showed me Wes’ range in helping out folks.  That, and he completely set Brad and I up to meet all the right people during our  trip with no work from us, whatsoever.

Second up is Dug Song.  This guy is a monster.  (Good type, think Cookie, not Godzilla).  I met Dug the last time that I was in Ann Arbor and we shared some thoughts about how to jumpstart the ecosystem.  Dug gets a ton of credit for creating and mentoring a lot of the activity locally.  If you want to see how thoughtful he is, read his open letter to Brad and I.  It talks about a lot of his and community’s accomplishments (not in a boastful way).

Oh yeah, and the weekend was fun too, as Michigan crushed Nebraska 45-17 and that didn’t suck either.

Bottom line:  Ann Arbor is getting its act together.  There is still a lot of work to be done, but I’ve never been more optimistic.

Dan Primack has a great article today called “The Private Equity Firm that Trusted Too Much.”

It’s the sad story of private equity firm General Atlantic taking the role of shareholder rep and in doing so, acquiesced to an $8 million dollar claim without doing any research to see if it was valid.

What next? Well, of course everyone ended up in court and there was a settlement. Read Dan’s article for the nitty gritty.

Why would anyone take this job? Your upside is that you get to work a lot for free and no one even takes you out to dinner to thank you.

Worse case is well…. this, getting sued (as I’ve done) or spending way too much time with lawyers.

This “public service announcement” brought to you by Shareholder Representative Services.*

(* Actually not brought to you by anything. I just like saying that since they are friends of mine and I’m an advisor to the company. But use them, anyways).

For anyone not familiar with mergers, if you sell a company, you rarely get the full purchase price at the closing. Some of it is usually held in an escrow account for a year or so to allow the buyer to see if there are any issues related to the acquired company that would entitle it to some of its money back. The deal might also be structured so that the purchase price is effectively paid in installments called earnouts based on how the company performs after closing. There are a million varieties of these formulas, and they can get very complicated very quickly.

In the past, there was little information about what the parties to a merger should expect related to these post-closing terms. Much of it is deal specific, but we still wanted to have some analytics around what happens in the marketplace on average. It just never existed.

Last week, Shareholder Representative Services released a study that is the first to do a deep dive on analyzing these questions and to give some insight on what actually happens. It goes into detail in investigating the issues around indemnification claims and eventual payouts. This is critical to understanding both the anticipated economics of a deal and how much total work you might expect before the transaction is fully behind you. This information is tremendously valuable to entrepreneurs, investors and buyers of companies and I believe it’s the first time it has ever existed. SRS is in a unique position to do this sort of analysis because of the high volume of escrows and claims that it manages.

The full study is only being made available to customers and business partners of SRS, but for a copy of the summary of the study, click here

Last Friday, I noticed a tweet from my friend Aziz Gilani (@texasvc) at DFJ Mercury:

“When asked questions by the audience, john doerr just filed groupon under ‘bubble’. The crowd roared! @rbpc2011″

Normally, the half-life of tweets are about 5 minutes for me (if that), but this one stuck in my head all weekend because it is wrong on a few levels.

First, I don’t think Groupon is a bubble, or indicative of a bubble. While I don’t have a ton of inside knowledge, from what I do know they are creating substantial profits at the company. I guess you could file Groupon next to Facebook, Twitter or Zynga if you are that cynical, but in each of these cases, there are real businesses here. What are reasonable valuations for these entities? No clue, I’m an early-stage investor, but profit is profit. And I don’t think any of these markets are fads.

Whether or not any of these companies are long-term successes, I don’t know (my guess is they will be), but these don’t look like bubble companies that I’ve seen in the past.

I think the term bubble referred to the Dot Com blowup a decade ago. Many of these bubble companies had no viable business models and were acquired or taken public due to hype. Many of these companies had negative margins for every good they sold. I’m sorry, but volume doesn’t help you here. (Note to self: shipping kitty litter is expensive).

And why be a hater Mr. Doerr or audience? In the case of Mr. Doerr, he is one of the most prolific investors of our time, so I’m not sure why he has to be negative. As momma used to say….

As for the audience, I’m not sure if this reaction was spurred by jealousy, or some desire to see the VC ecosystem do poorly, but all of us in the startup community should be rooting for our industry, whether or not we invested in these companies or not.

I wasn’t at the event, so perhaps I’m taking too much issue from a third-hand report in 140 characters or less, but this just hit me the wrong way.

To celebrate the 65th anniversary of the venture capital industry and the outstanding entrepreneurs that the venture capitalists have funded and supported, Xconomy, in partnership with the National Venture Capital Association and the MIT Museum, is organizing a conference and celebration to take place on April 6. Held in concert with the National Venture Capital Association’s Annual Meeting in Boston, Xconomy’s VC65: Celebrating the 65th Anniversary of Venture Capital in America will include more than 500 venture capitalist attendees at the NVCA Annual Meeting, as well as leading company founders, entrepreneurs and academics in the wider innovation community. There will be a lot of celebrating, informative panels and controversy, as I plan on shaking things up a bit on my panel.

If you want to come, the link is here.

If you’d like to see what the student start-up scene is like in Boulder, check out the Third Annual CU New Venture Challenge Championships on the evening of Thursday, March 10^th in the Wolf Law Building on campus. Supported by Silicon Flatirons and several other academic partners, this campus-wide business plan competition encourages students from different disciplines to come together and form a team that includes many different areas of expertise, from law to engineering. Teams are mentored by local business leaders in a similar system to the TechStars model, encouraging a stronger connection between the campus and the community.

Final business plan presentations begin in the Courtroom at 5:30pm with a job fair beforehand at 4pm in the law school café featuring local start-ups such as Next Big Sound, Power Tagging, and more. In addition to the winning teams, the event will feature recognition of several successful CU graduates who have gone on to start their own companies like Sarah Schupp of University Parent and Nathan Seidle of SparkFun. Refreshments and light snacks will be served.

Last year’s winner was strEATchefs, the popular gourmet food trailer inspired by Top Chef winner Hosea Rosenberg, and many past participants who may not have won any official prizes or even decided not to formally compete ended up becoming very actively involved with entrepreneurship in Boulder, such as Everlater going on to participate in TechStars.

This will be a great showcase event highlighting how entrepreneurship at the university is connected with Boulder’s exciting start-up scene. Register here: http://cunvcfinals.eventbrite.com/

About 4 years ago, I founded the Boulder Open Coffee Club.  It’s been a massive success with about 50-70 people attending each event.  The popularity of it, in fact, has led to the creation of a Denver Open Coffee Club by local entrepreneur Michael Sitarzewski.

The Coffee Club has become a real local hub where we’ve gotten to know each other and help each other learn from each other’s experiences.  It’s been a ton of fun, too, and we’ve even got some airplay on TV recently.

From time to time, I get an email from another open coffee club telling me about what they are doing.  I’ve done a poor job keeping track of all the OCCs in the US and I am wondering whether or not it would be worthwhile to create a network between them.

If you participate in an OCC, drop me a line or leave a comment.  I’d like to see who else is out there.

From website FormDs.com, this is a somewhat surprising map of Form Ds from the last year by state.  Form Ds are filed when a company raises money, so it’s a great proxy of where companies are getting funded.  (The original map can be found here).

You’ll note that per million people, Colorado is in the top bracket for financings.  Now, many will argue that a place like California has a much greater population and therefore there is dilution to this study.  However, the population difference is 37 million to 5 million (7x), but there is way more than 7x the amount of venture capital money and presumably amount of startup companies as well in California compared to Colorado.

The conclusion:  Clearly Colorado is importing a lot of VC money has has high quality companies to fund.  As we like to say in Boulder:  ”We Love Our Bubble.”