Brainy and Cool: Danica McKellar and Math doesn’t suck

danica McKellar math doesnt suckWho is the first person who comes to mind when you think about Percolation theory and Gibbs states for Ferromagnetic materials?

If you guessed Danica McKellar (”Winnie Cooper”), the lovable pre-teen icon of “The Wonder Years”, you would be right. Danica has starred in several other successful TV shows and movies including The West Wing and Inspector Mom.

In 1997, while at UCLA completing a Bachelors in Mathematics, Danica McKellar co-authored a paper dealing with the statistical states of ferromagnetic materials. She won the distinction of being the only undergraduate student invited to present a paper at a Statistical Mechanics conference at Rutger’s University, and was featured in the Science section of the New York Times in 2005.

Now Danica McKellar has another potential hit under her belt. She has written a book “Math Doesn’t Suck” which is geared towards teenagers, and was released on August 2nd, 2007. The books is aimed at helping middle school girls get over their fear of numbers.

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Another fun fact about “Winnie”. Danica has an Erdos-Bacon score of 6. The Erdos-Bacon score (a modification of the original “6 degrees of Kevin Bacon”) is the sum of the number of degrees away you are in writing a paper with the mathematician Erdos, and in acting in a movie with Kevin Bacon. I am sure not that many people can compete on that score!

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Mundu IM for iPhone : Let them charge for the application, please.

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TechCrunch has an article about Mundu’s IM application for iPhone titled “Mundu Has A Great iPhone Chat Application. Why Will They Charge For It?”

It really burns me up when I see articles like these. What’s wrong with charging for an application that has already been rated as Great? Why should everything be “free” or “ad supported”

People need to get off from this this binge of “free software.”

_Just put an ad_ has become such an overused mantra; I wouldn’t care much except that the advice is not effective and may even be counter productive. Don’t make all the start ups go down this slippery slope of free software.

The battle of free vs. paid, for content, was fought between NYTimes and WSJ; and who won? The correct overall answer is “both”; but the narrow business answer is that NYTimes admitted that the everything free mantra has limitations by starting the Times Select paid service.

I have no relationship with, or particular affinity, towards Mundu; Putting an ad during an IM conversation, and monetizing it is not as simple as putting a snippet of code on a web page, and then laughing all the way to the bank. It is not.

We can’t expect all software, to be free, all the time; So many of the people who suggest just putting an ad, are the same people who run Adblock on their Firefox browsers, and have modified their registries so they never see an ad from Yahoo.

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There is room for free, ad supported and paid services. Let companies decide which revenue model works best for them.

Mundu has to figure out what they want to charge for their service. If the product is exceptional, people will pay the $11 for the software. After all, the folks who bought iPhone have already shown that they are willing to pay a premium for something that they like.


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The Venture market: Is there trouble brewing at the exit?

exit signPeople are wondering if the mega buyout party is coming to a close.

The private equity and debt market have been been in bed, for a little while, and it was looking to be a cozy relationship - like that of two people who sorely need each other. Large buyout funds were using the arbitrage opportunity between debt and equity, and easy access to cash, to fund large deals.

Now, one of the partners is not so rich, and not so free wheeling, anymore. With the sub-prime snafu in the debt market, LBOs are finding themselves up against the wall as far as access to easy debt capital.

The doomsday scenario is already starting to play out a bit, according to WSJ. Two anticipated IPOs in the hedge fund business, Man Group and MF Global fared less than, well, stellar. Both fell short of their targets in initial raise.

Then there was Blackstone and their spectacular IPO (highest ever for a Fund). That IPO is also finding itself in the doldrums, now.

So what does all this mean for the venture market? Used to be that start-ups that fared well, would go one of two ways. They would have an IPO on Nasdaq, or they would get bought out by larger companies, which in turn have been snapped up by large hedge funds in recent years.

First came Sarbanes-Oxley, and taking a company public became like a political race. You couldn’t go to the party unless you had really rich parents. Worth about $500 million and up. Some companies dodged the bullet by staging an IPO on AIM, the London stock market, where it costs 60% less to IPO. Nasdaq certainly became a less attractive option for all other than the well heeled and the brazen.

Then came the LBOs and a wave of, we hope, rational exuberance. Suddenly venture firms could see the “Exit” sign in the distance. The money started flowing into start-ups again.

Now there are rumblings of discontent in the private equity arena. If the deal flow slows down, it could affect the venture market, which is down the financial food chain.

There is also the dynamics of the venture funds raising capital. The PE funds are the pick of the litter there. Large pension funds such as Calpers, which invest in PE and VC funds, prefer to place larger amounts of money since, as they see it, it is about the same amount of work for them (in due diligence etc.) to invest $5 million in a fund, as it is to invest $100 million. So late stage funds have an easier time raising funds, than early stage funds.

In principle, one would assume, that if the PE funds were to fall out of favor, smaller venture funds would swoop in and pick up the extra cash. But I don’t think that is going to be the case. If there is a perception that the pipe is choking up at the exit, it will affect all sizes of funds, in their ability to raise and deploy capital.

So far, the numbers show an upbeat picture in venture land. The large companies like Google and Cisco which have been snapping up start-ups in the last few years (this year, Google surpassed Cisco in venture backed acquisitions - 5 versus 4 as of early June), aren’t that sensitive to the capital markets, as long as they keep growing and hitting their numbers. This year, the total volume of mergers and acquisitions in the first half of 2007, was above a $1 trillion, an overall record according to Dealogic.

Notwithstanding the shenanigans in the hedge fund IPO business, the market for Venture backed IPOs continues to hum. Venture backed IPOs raised $2.73 billion for 22 companies that debuted in the second quarter of 2007, an up higher already, than all of 2006.

It is not clear if there is trouble brewing further down the road, but so far, venture traffic continues to move along smoothly.


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What valuations/ exits are VCs looking for?

The question is often asked, what is considered a “good return” when there is an exit in venture land? Here are some rough guidelines for early stage companies, along with some “VC-speak” that you might hear, when such exits are discussed.

1. Company exited at 0-1x (ie 0 to 1 times the money invested)
“What company? What investment?”

Nobody made money. Founders are broke.

2. Company exited at 1-2x
“We broke even on that deal”

This is not the deal that the VCs are going to brag about.

Generally VCs have “liquidation preference” clauses which mean that they get to take out their money first. Very likely the investors made nothing after the debts were paid off. Founders are, very likely, still broke.

3. Company exited at 2-5x

“We had a good exit”

VCs made some money. Founders made some depending on how good they were at ironing out the initial term sheets. The founders are planning their next venture. Unless the numbers were large, this is not enough to retire on.

4. Company exited at 10x and above

“I told you this was going to be the next Facebook!”

This is the 1 in 20 or so “make the fund” deals that funds hope and pray for.

VCs are entitled to crow, and they do! Everybody is happy - mostly.

Side note for entrepreneurs on valuation: When presenting a business plan, if you are showing a company that is going to be worth 2x in 3-4 years, then it is time to go back and look at the market size and other factors. Most investors will beat a fast path to the exit sign unless they can be shown an expectation of about a 10x or more, or more on their investment, in 3-5 years.


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