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.”

If you are a reader of this blog, or Brad’s you know that we are keenly interested in the ideal that we should be able to arrive at a model document set for venture financings.

Whereas, I argued that he’d never succeed in coming up with a standard set of seed documents, I used the story of the model form document project from the NVCA.  The project actually produced model forms of documents, but most of us were disappointed by the actual usage.  In my opinion, this was because the documents had too many options and took lawyers a while to deal with them.  (For instance founders reps which you never see on the West Coast and things like that).

But at the same time, these documents live and breathe and are updated by some of the great minds in our business on a regular basis.  I feel safe in saying that are more vibrant and accurate than most law firms. 

Today, I’m delighted to announce that our portfolio company Brightleaf has released their platform including the standard form of NVCA documents.  In short, their document automation and assembly software can save lawyers a ton of time using the NVCA forms, while giving them the piece of mind that they are always using the latest and greatest forms in the business. 

Oh yeah.  Did I mention that it’s FREE?

They are offering free “NVCA ASAP” trial accounts to a limited number of VC’s and Emerging Companies law firm practices. For more information about the project (and how to get a trial account) please visit their NVCA ASAP page here.  For a quick overview demo of how Brightleaf works, watch the video here. 

This could quite possibly be the tipping point in getting us to one standard set of documents.  Maybe Brad won’t fail after all. 

I read a lot of M&A deal term summaries.  While I really appreciate the knowledge gleaned from these reports, they all suffer from the same problems:  They are usually biased toward publically filed transactions and those particular deals serviced by the particular bank or law firm whom is author of the report.

Today, Shareholder Representative Services (SRS) is releasing their 2010 SRS M&A Deal Terms Study, which is a comprehensive analysis of deal terms from a sample of the more than 100 transactions for which SRS serves as the shareholder representative. 

The underlying pool of deals differs in important ways from those analyzed by other similar studies.  The transaction agreements analyzed by SRS generally were not publicly filed and are a good representation of what is happening today in venture-backed M&A.

This study will be the first of a series of information products from SRS designed to leverage their expertise and knowledge to help their customers in their deals.  Future offerings will include data regarding what actually happens, long-term, with escrows and earnouts along with an analysis of claims made against the target company.

You can view the full report here.