I was pleased to participate as a VIP Judge at the Plug and Play TechCenter’s Spring Expo. Other judges included folks from LightSpeed, Menlo Ventures, Shasta Ventures, Doll Capital Management, Norwest Venture Partners, and NEA.  I was impressed with the turnout (over 500 attendees, standing room only) as well as the geographical diversity of the startups that pitched.  As always the enthusiasm and unbridled optimism of these startups is infectious and this was an energizing, uplifting experience. Over the past year, it has been interesting to see the pendulum shift within Silicon Valley’s leading incubators away from mostly Consumer Internet to increasingly, I am seeing startups that are embracing big new themes including:

1. Next generation Enterprise technologies: ranging from infrastructure, including networking and storage, all the way up the stack to the application layer, including new paradigms for collaboration and communication within the enterprise
2. Transformative disruption in Human Computer Interaction: moving beyond the point and click keyboard and mouse to touch, gesture recognition, and speech interfaces. From Graphical UX to Intuitive UX.
3. Leveraging the latent powers of Smartphones: we are all carrying these very powerful computers in our pockets and startups are figuring out how these devices and their significant capabilities can be used to disrupt large markets. For example: sensing vital signs for health monitoring to mapping / geolocation for navigation to leveraging location-awareness and smartphone cameras to enrich productivity, commerce, and entertainment applications.

By way of background, Plug and Play Tech Center is a global accelerator that specializes in growing tech startups. Headquartered in Sunnyvale California, Plug and Play’s network includes over 300 tech startups, that have collectively raised over $750 million, as well as 180 investors and a community of leading Universities and Corporate partners. The Spring Expo was held on March 28 2013 in Sunnyvale, where 31 startups told their stories to a crowd of potential investors and journalists.  The three winning startups, which aligned closely with my top picks, included:

1. Stipple: an image-based advertising service that helps brands turn the images they put on the Web into e-commerce opportunities by connecting them to interactive media, advertising and commerce.
2. Speak to It: a voice-activated personal assistant for Android devices before the Expo. SpeakToIt were declared a Top 10 Android app by the New York Times and won demo days at Stanford and Cisco.
3. Stratio: a new infrared imaging technology that works with a smartphone, making it higher-resolution and much cheaper than conventional infrared approaches. Possible use cases range from food quality to chemical analysis and forensic to measuring blood glucose levels in diabetic patients non-invasively.

VC Taskforce is a leading organization that seeks to foster greater connectivity and networking within the innovation ecosystem of Silicon Valley.  The event was moderated by Matt Sarrel, renowned technology analyst (CNN, GigaOm, etc).  My esteemed co-panelists included: Leonard Goldschmidt, Medical Director of Telehealth and Medical Informatics at the VA Palo Alto Health System; Markus Formherz, Chief Innovation Officer (Healthcare) at Xerox PARC; and Nandini Tandon, Board Member at El Camino Hospital, which bills itself as “The Hospital of Silicon Valley.”

I spoke about several topics including the following:

1.  There are so many opportunities/trends in health care today (proliferation of EHRs, mobility, consumerization of health care, telehealth, biomonitoring/sensing, pharmacogenomics, etc.)  From your vantage point, what are 3 of the most exciting opportunities and why?

• Quantified Self movement (e.g., Fitbit, Nike, Basis…). Active sensors (e.g., Happy Fork) and Passive Sensors (Basis: heart rate, perspiration, sleep, blood pressure, calories burnt…)
• Move to Electronic Medical Records / Electronic Health Records (e.g., Practice Fusion…)
• Reducing friction in the doctor-patient interaction dynamic (e.g., Zocdoc, Kaiser’s online portal…) + online healthcare comparison shopping tools for individuals and small businesses (e.g., Castlight health, GoHealth…)
• 134 digital health companies raised $2 million or more in 2012, with four areas representing over one-third of the total investment.
  • Personal health tools and health tracking saw $143 million,
  • Consumer engagement saw $237 million,
  • EMRs (all those that capture clinical information and its corresponding app ecosystem) saw $108 million
  • Hospital administration found $78 million.

2. From your POV, what do you see are 2-3 key areas of interest for investment?

• In general, capital efficient, disruptive technologies that have a quick go-to-market strategy and initial proof or market acceptance from the key healthcare constituencies they target.  Specific areas that are interesting:
• a) Helping businesses and consumers make more informed health choices (ala quantified self, comparison shopping for healthcare…)
• b) Catering to the megatrends around Obesity and an Aging population – could be more PE-style investmetns such as assisted living centers. Also seeing evidence of FDA getting smarter about risk/reward tradeoffs, a recent example being FDA approval for drugs such as Vivus’ Qnexa that fit a different benefit / risk profile than previously contemplated
• c) Digitizing parts of the doctor-patient relationship. Don’t think telemedicine will become mainstream. But video / electronic diagnosis of certain types of ailments and follow-ups will become more common. Reduce costs and increase efficiency
• d) DNA testing and personal genomics (e.g., 23andMe…):  allow an assessment of inherited traits, genealogy and possible congenital risk factors. Consumer awareness and advance warning system.

3. Macro take on Healthcare investing?

Healthtech investing is going to

• Shift away from administrative, claims processing and Life Sciences TO Digital health and businesses focused on affecting outcomes, those that improve decision support, care coordination and patient engagement.
• Tremendous amount of low hanging fruit in most parts of the healthcare value chain

4. Some other observations

• Consumerization of healthcare is a back-channel way (“disruption from the bottom”) for innovative companies to disrupt the market. The conventional approach relying on cooperation from payors, providers, and patients has taken a long time to see results, and often involves dealing with large complex, bureaucratic organizations.  However, if consumers are able to voluntarily opt-into systems, then data can be collected in a more federated manner and ultimately the larger providers, health systems, and insurers will be more likely to participate if there is already critical mass from a consumer acceptance/ adoption perspective.  Think analogous to what Mint.com did for financial information.
• Healthcare innovation is not being stymied by technology limitations. There needs to be business model alignment. If payor-provider incentives are not integrated, then what is the incentive for a Hospital to adopt an innovative technology that reduces number of nights a patient spends in a hospital?  In fact, it could be anti-thetical to the Hospital’s business model.  Entrepreneurs need to ensure there is incentive alignment from a business perspective as a precursor to gaining marketplace acceptance.
• There is tremendous opportunity in EHRs / EMRs and the market is begging for a change. When I take my car for service, the mechanic pulls up all the past service history from the cloud. When I go for a doctor’s appointment, I still have to fill in the same “allergies and family history” form over and over again.  This doesn’t make much sense. A consumerized / federated approach is likely to be part of the solution here.
• The integrated Payor-Provider-Practioner model espoused by organizations such as the VA Health System and Kaiser Permanente makes a lot of sense from an incentive alignment and transparency perspective, but currently it is the exception not the norm.
• In general, healthcare spend as a percentage of GDP in the United States is very high and the growth rates are not sustainable. In addition to business model shifts (ala integrated payor-provider incentives), reducing waste and inefficiency by leveraging technology, automation, data portability, interoperable systems, and patient (consumer) involvement will have to be part of the longer term solution.

I spoke on a variety of topics relevant to entrepreneurs seeking to grab the attention of VCs. Below are summary responses to the first three questions posed by the panelist, Jeff Kuhn (Managing Partner of FLG Partners).  In addition, I spoke about the minimum criteria investors typically will screen for in early stage companies and expansion stage companies, the pros and cons of using bankers and intermediaries, and the “valley of death” syndrome that some companies can find themselves in, in-between rounds.  I rounded out the discussion by commenting on several sectors that are of particular interest to me from an investment perspective and some of the specific factors I look for to help identify winning companies, teams, and business plans.

1. What is the right way to get to the top of the pile of deal flow you see? How do entrepreneurs stand out and get your attention? What makes you take sit up and take notice?

• Get a warm introduction through a mutually respected connection
• Clear and compelling articulation of Market, Team and Business Model
• Know the investor’s stage and criteria and tailor an elevator pitch to quickly qualify the deal
• Articulate (convincingly and with credibility) how you and your investors will make money.

2. What are the 3 biggest mistakes you see in business plans?

• Focusing too much on the “Why” and “How” rather than “Why Now”
• Selective presentation of data / misleading data – sends negative signal given limited time, credibility
• Misaligning incentives [e.g., large secondaries / one-sided terms / focusing only on a high valuation – to be a constructive partnership both parties have to do well]

3.What should founder CEOs do to enhance their personal and leadership skills so they can scale with the company?

• Self-awareness: know your core competencies and where you need to delegate
• Be able to delegate
• Surround yourself with advisors and mentors who will give honest feedback
• Remember it is harder to give feedback than to receive it
• Hard work compensates for a lot

The best ecommerce businesses start with a nifty front end but always have a robust strategy towards building a back end for scale.  These businesses realize that ‘Front End is Revenue, Back End is Profit.’  Ecommerce has always been a lower margin sector than say, SaaS or Software.  Bottom-line focus and an obsessive analytical orientation from the CEO down is crucial.  I believe this was a critical success factor for Diapers.com, acquired by Amazon for several hundred million dollars.  It is also something that ecommerce leader Beyond the Rack has taken to heart.

When it comes to scaling, ecommerce businesses face a new echelon of challenge.  Logistics, supply chain, order management, fulfillment, merchandising, returns, automation, and customer service all become geometrically more complex.  And guess what is the leading indicator of customer satisfaction and repeat purchase?  Delivery Time.  The faster customers can get their purchases, the more likely they are to be satisfied and demonstrate repeat purchase loyalty.  Not rocket science, but oft overlooked.

Speaking in front of an audience of over 200 entrepreneurs, CEOs, corporate executives, and investors, I enjoyed sharing my thoughts on the ‘VC and Investor Outlook for the Global Silicon Valley.’   There was immediate coverage of the panel in Forbes, as the panel set an upbeat and optimistic tone for the remainder of the conference and I reinforced my personal beliefs on the evolution and trajectory of disruptive innovation in Silicon Valley and beyond.

Congratulations again to my friend Tony Perkins and the entire AlwaysOn team for organizing a very successful conference, which left attendees buzzing with excitement over the holiday season.  You can watch the full video of the panel below.

• “Remember that failure is an event, not a person.”
• “You will get all you want in life, if you help enough other people get what they want.”
• “People often say motivation doesn’t last. Neither does bathing—that’s why we recommend it daily.”
• “There has never been a statue erected to honor a critic.”
• “People don’t buy for logical reasons. They buy for emotional reasons.”
• “Expect the best. Prepare for the worst. Capitalize on what comes.”
• “If you go looking for a friend, you’re going to find they’re scarce. If you go out to be a friend, you’ll find them everywhere.”
• “A goal properly set is halfway reached.”
• “Your attitude, not your aptitude, will determine your altitude.”
• “If you can dream it, you can achieve it.”

You’re a game-changer! You’ve created the new product or service of the millennium, but have no money to take it to market. Your best options: beg your FFF (family, friends, fools) circle, tap an angel for seed money, or convince a venture capitalist to invest millions. Our experts have a lot to say. Chris O’Connor / Taptera : “You’ve got to have a pretty face (user experience) to get attention; the old ‘desktop’ solution isn’t very sexy with VCs.” Sanjay Parthawarathy / Investor: “When the VC’s ego is valued higher than the funding, it’s better to look elsewhere.” MR Rangaswami / Sand Hill Group: “In these frothy financial times, how many entrepreneurs want to use the strategy of a company that is ‘Built to Last’ versus ‘Built to Flip’?” Gaurav Tewari / SAP Ventures: “Picking the right investor is one of the most crucial decisions for an entrepreneur. If you thought getting married is a commitment, try raising money.” Join us for more on the Sweet and Sour of Investing – Part 2.