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I enjoyed watching the first episode of HBO's new show Silicon Valley. The first episode revolved around whether the young entrepreneur should sell his company outright or take funds to grow it.

One of the biggest concerns of the would-be entrepreneur is exactly that: how to fund their business. And one of the biggest misconceptions around funding is  the whole notion of VC's. Entrepreneurs are often under the delusion that all they need to do is find the right investor to write them a big check and all their worries will be over. What they don't realize is: it ain't like it seems on TV. 

First of all, a reality check: VC funding is the most expensive funding you will ever take. If you self fund, or fund through friends and family, all you risk is interest charges or a piece of the profits. But when you take VC funds, you are basically putting your business and your livelihood into the hands of strangers.

Almost all VC deals are boilerplate. That is a good thing. Future investors want to see as plain vanilla a deal as possible. They don't want to see surprises. Which also means, it is pretty easy to find out exactly what you can expect in a typical VC deal.

After the VC calls and says they are ready to invest, thats when the headaches can begin and  it starts with the term sheet: the thing you need to sign in order to get the money. And when it comes to term sheets, time is on the side of the VC and time is the enemy of the entrepreneur. The VC knows this and uses it to their advantage. For instance: did you know that when you are negotiating the term sheet you are not only paying for your lawyer, you are paying for the VC's lawyer as well? It is not uncommon to be in the hole $150k in lawyers fees just to negotiate the term sheet. And the process can stretch on for months, taking up the time, attention, and resources of the founders.  By the end of the process, taking the money is no longer a nice to have, it is a need to have. And the VC's know this.

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In the next few months I’ll turn 60, an interesting age for an entrepreneur: so many distractions and life experiences are behind me. My children are grown and starting their own lives, whatever midlife crises I experienced have been overcome. It is a marvelous time to set up one’s final vision.

In Part One of this series (Visions, Part One) I touched on the vision I had early this summer. Today I want to talk a little about that vision and my plans for the future. But before I do, if you will indulge me, I want to talk a little about the aging process and entrepreneurship.

I was a late bloomer. I started my first full time business at 46. The businesses I wanted to build at age 46 are not the businesses I want to (or could) develop now. For one, there are physical limitations. A lifetime of flat feet and bad knees have caught up with me. A recent business trip to a trade show made me realize that my days traveling and walking the show floor are behind me. And unlike my wild and crazy younger years, I’ve developed a deep love and need for being close to home, creature comforts, routine. I just don’t want to go anywhere anymore.

But the type of business I want to develop now is also different. Early in my career, I wanted to make a name for myself, maybe get rich, and the ideas I had required a large team to implement. Soon I had VC backed company, was managing dozens of people, was commuting 4 hours each day, and was creating an industry around email intelligence. I’m incredibly proud of what we accomplished and continue to accomplish at eDataSource.

But a few years ago, I wanted out and I began to put together a business geared not towards growth, but towards personal freedom. After years of fighting daily battles I told myself, I wanted to create something with no partners, no investors, no large clients I was dependent on. I wanted something that could be run by me alone, from anyplace I wanted to run it from. In other words, I wanted my freedom back.
The success of Only Influencers gave me new insight and eventually led, three years later, to the vision I had this last June, sitting on my deck, looking out on the Hudson River.

And here is the vision I had.

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On Saturday June 22nd, 2013 I had a vision.


My last vision was April 9th, 2008: the vision came to me between 72nd street and 59th street on the West Side Highway in New York City. I remember I was thinking about the fact that the first thing I read every morning is the New York Times Obituary section: I’m fascinated with how people have led their lives.


And suddenly, on that short section of highway in Manhattan, I had the vision: a Facebook-like place where families could archive and share memorabilia and remembrances of loved ones gone. No advertising, the site would maintain itself with tie-ins with pharmaceutical companies and florists. Your uncle died at 63 from cancer? What is the age range of people who died from cancer? How can you prevent it happening to you? The site would also have triggers that would let you know when someone with your last named died, or someone from your high school died, or from your home town. I saw descendants, a century from now, reading well wishes and remembrances by friends of the their great great grandparents. I came up with a domain name. 


By the time I passed 59th street, I couldn’t wait to get to work to see if the domain name that sprung from my head was available. It wasn’t, but of course….after the vision, the work starts. 


That night I was driving into my driveway on my way home from work when I got a call on my cell. A woman I’d never met was calling to tell me that my oldest friend, my roommate in college, had died of a heart attack the night before. Strangely, he had composed a list of people to contact in case of his death and I was number one or two on that list. The problem with Visions: they place themselves at the center of your world view and if the Vision is strong enough, your world begins to morph itself to accommodate it. More on this below.


Visions like this, if you are lucky enough to have them, are rare things. I spent the first half of my life pursuing the life of an artist - musician, painter, writer - so I had some experience with altered states from staring down a canvas and had a great deal of respect for all right brained activity. What separates entrepreneurs (and artists) from the other, sane section of the work a day world, that when we are afflicted with these visions, there is a deep burning desire to see them REALIZED! 


To illustrate: my first real vision happened in my later 30’s at a time when CD-Rom games like 7th Guest and Myst were popular. At the time I was a lowly salesman selling 3D Animation workstations to special effects houses. My job put me in the path of most of the computer games trade shows, so I would bump up against some of the major players in the industry all the time. Then I had a vision: Dreamland! A puzzle based video game based on Dante’s Inferno. 


The power of visions is that, unlike ideas, they come fully formed - of one piece - and that means they are much more powerful than a typical daydreaming session. My vision of Dreamland was such a powerful idea in my mind that people I talked to were just drawn to the idea. I ran into Matt Costello, the writer for 7th Guest and based on my enthusiasm agreed to help me, eventually introducing me to his agent and being on my board of advisors. Another person who lived in my apartment at the time was a scenic designer for the movies and he introduced me to Krisi Zea, an award winning production designer. I showed her a 5 second clip of some moody 3D trees on a barren landscape that I had talked the artists at the software company to make for me, and both she and our mutual friend were in. 


Weeks after the vision, I had quit my job, I had an agent, a team, my first company (Quartet), an office I rented above a real estate office, verbal interest from Microsoft to distribute this game that didn’t exist yet except in my head, and effects house Digital Domain all set to do the production.


Eventually it failed but not because of the vision: somebody had a bigger vision. Dreamworks had just formed. Our final meeting with Microsoft was set to take place in Redmond where we were expecting to get initial funding. Our meeting was postponed because Spielberg, Geffen, and Katzenberg took our slot! At the end of their meeting, Microsoft had agreed to shut down their gaming division in exchange for being the sole distributor of Dreamworks Games: games, like mine, that didn’t exist yet. 


Yet the power of Vision didn’t go away: it morphed. The fact that I was approaching 40 with 2 small children, a wife, and a house mortgage didn’t affect my decision to keep going. The end of DreamLand and Quartet drove me to get the Vision REALIZED some other way. 3D on the Web in the form of an open source technology called Virtual Reality Modeling Language (VRML). I started writing about VRML and creating games on the Web instead of on a CD. Eventually I was one of the leading tech writers on VRML which prompted SGI, who at the time was heavily invested in VRML, to hire me as their VRML evangelist. 


My first order of business: I developed small 12k VRML Web banner ads. And with a group of similar minded technology companies from Macromedia, Intel, and Unicast, we introduced the world to Rich Media Advertising. The Vision was not the same Vision I had when I was dreaming of creating the next Myst, but it was the power of that initial inspiration that changed my life forever.


In retrospect I feel the development of Rich Media in Web advertising was the realization of that Vision I had a few years before. The vision morphed from a CD-Rom game project that would have probably died on the vine (the computer game industry imploded that year and took years to recover) but instead I was part of the ground floor of a brand new industry: The Web and Rich Media Advertising.


Stay tuned for Part Two of Visions.

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Today was the official announcement that eDataSource has acquired Boxbe. Congratulations to eDataSource's CEO Carter Nicholas who was instrumental in this: what started as a conversation at a trade show 2 years ago has led to a reinvention of eDataSource. 

Having created eDataSource out of my garage in 2003, obviously this is tremendously exciting for me. 

Here is a little history of the start of eDataSource: 

In August of 2000, I launched my first for profit company: Emerging Interest (previously I had started a non-profit called The Rich Media SIG and the money from that company helped provide the seed money for Emerging Interest). Emerging Interest was an interesting idea that is being copied today: I would take vendors in to meet decision makers at agencies and companies in a traveling road show. Over the years, agencies would hire us to find vendors for a particular project. One day Ogilvy contacted me and asked me to find a competitive intelligence vendor for email. One of their clients wanted to monitor the competitors email campaigns. 

After talking to every competitive intelligence company, I found out no one monitored email. Why, I wondered. Well, I reasoned, there was no easy technological solution. You couldn't scan people's inboxes. So what was my big idea? Why not sign up to every list out there and archive what came in? Here I had an idea and a potential customer. I shut down Emerging Interest over the next few months and launched Email Data Source. 

And better: why not create a "virtual panel" with different profiles (sex, interests,etc), so I went about creating all these different types of "profiles" and then signing up different profiles to the same mailing list to monitor segmentation. 

I contacted a guy I had worked with at Comet Systems, Cullin Wible, who created the first version of eDataSource tool. I would process each email by hand every night: which meant looking at each email and categorizing it by company and product type. Soon I was processing thousands of emails a day and had to hire more people to process. In addition, since we used my physical address in signups, suddenly my mailman was delivery huge piles of direct mail to my house all addressed to my different virtual people. It was pretty insane. 

Eventually we had dozens of people processing email and even a team in India, and we were still getting further behind until my CTO had a brilliant idea: instead of categorizing the emails by hand, why not just follow the links in each email and see WHERE the emails were driving traffic to! That turned out to be a game changer: suddenly we could monitor every affiliate marketer, see who was working with who, and we could monitor all the intermediaries along the way. We suddenly had insight into the email marketing world that was unprecedented and unique. 

Through a close contact, I was introduced to the New York Angels where we ended up raising our A round. Later B and C rounds followed. It was my first experience in dealing with investments and VC's. An incredible experience. 

A few years later, I no longer was interested in the CEO role, which took me away from coming up with product ideas as most of my time was dealing with investors, operations, etc. Carter Nicholas was introduced to us by one of our Board Members Bob Rice. Carter turned out to be great, so great in fact, that there was less and less for me to do which is when I decided to leave to start Only Influencers: I needed to build something from scratch again. 

To all you would be entrepreneurs out there: I always said, if I can do it, anyone can. My background was always in the arts, not business, but I found out later in life that building a business is one of the most creative and exciting art projects there are. 

Every day as I think about the direction of OI, I look back on my experiences building eDataSource with pride. Not bad for a theater major from Bucknell!

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hud-smalt-whskThis weekend I took a ride up to Gardiner, NY to visit the Tuthilltown (pronounced Tuttle Town) Spirits Distillery. I was expecting a quick 5 minute tour of facilities followed by a tasting of their Hudson Whiskey. What I got was instead was one of the most interesting stories in entrepreneurship I've ever heard about.

Started 7 years ago, Tuthilltown Distillery became the very first Distillery to open in New York State since prohibition. Seven years later, Hudson Whiskey is available around the world (20 cases where headed to Lebanon while I was there) in their distinctive Pharmacy bottles and employees about 27 people, growing to 40 according to their growth plans. The success of Tuthilltown is a story that touches on every exciting aspect and stage of entrepreneurship, and the reason I love entrepreneurship so much.

Rule One: Adapt Or Die.

Ralph Erenzo, a professional rock climber and founder of ExtraVertical Climbing Center in Manhattan, had a dream of creating a Climbers ranch near The Gunks, a popular spot for climbers near Gardiner, NY. After purchasing the land, neighborhood opposition prevented Ralph from creating his dream. Now what?

Rule Two: Take advantage of a Change in Circumstances

Opportunities come at times of change. Ralph looked out on the farm he now owned and thought: what else can I do with a farm. How about distill whiskey from grains the farm produced? Only problems were that Ralph had no idea how to distill whiskey and the state licensing fees where $60,000 a year. This was the main reason no distillery had opened since prohibition: it was too costly due to government licensing fees and taxes. But that year, the state of New York change the laws and reduced the cost to around a $1,000 for two years. That was the opportunity that Ralph needed.

Rule Three: On the Job Training

Ralph's partners decided to take a tour of the southern distilleries to see what they could learn and what they learned one was going to give them any information about how to make whiskey! So they had to figure it out themselves. First up: they spent months trying to figure out why their yeast was not creating alcohol. For months, they spilled out vat after vat of mistakes. Then workers at a local Hasidic bakery told them: you don't know much about yeast: they needed to wait another 24 hours for the yeast to do its job and start generating alcohol.


Rule Four: innovation.

They got better. At first they produced Vodka because in order for Whiskey to be called Whiskey on the label it had to be put into white oak casks and the casks could only be used once. Casks were expensive and since they couldn't reuse them, they had an expense cask that couldn't be reused and raised their overhead. They also had the problem of time: They didn't have the resources to sit around for 4 or 5 years waiting for the whiskey to age and create its distinctive color, which comes from sitting in the barrels.

But after reading the laws carefully they realized one thing: while the law states the whiskey must be put in white oak barrels, it doesn't say for how long. By putting the whiskey into smaller barrels, they increased the surface area to liquid ratio and thus the whiskey aging process for shortened. They also found out that distilleries in Scotland do reuse barrels and where happy to purchase all the used barrels they wanted to sell.

In addition they found that pouring a Manhattan Cocktail Mix (Rye, vermouth and bitters) into a 5 gallon first use whiskey barrel and letting it sit for 90 days would create one of the most incredible Manhattans you've ever had: soon every bar in Manhattan was looking for their used 5 Gallon whiskey casks.

But the aging process still took to long: They thought about putting stave's from the barrel in the whiskey in order to create more surface area but the laws specifically state that you cannot add anything to the whisky cask. BUT it didn't say you couldn't REMOVE something. So their idea was to drill wholes in the stave's and on the inside of the barrel, thus increasing the surface area (an idea they immediately patented) and were able to reduce the aging process to 20 days per gallon of whiskey.

Their distinctive bottles, that look like they came out of a pharmaceutical shop, are exactly that: a relative had 1,000 bottles sitting in the basement of former pharmacy, and the rest is history. Each bottle is hand numbered with the year, the batch, and the bottle number. Each batch tastes different because of the home made nature of the the way their distillery works.

I don't want to give away all the secrets: but if you go ask about their unique method for stiring the barrels. If you find yourself in the Catskill region of New York, do yourself a favor and stop in for the tour. And pick up a bottle of their Hudson Single Malt Whiskey.  You'll love it.

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Tagged in: Entrepreneurship