Kevin Warnock

Kevin's wife Monika models as a patient in the 2010 Stanford Neurosurgery Magazine

My wife Monika appears on page 25 in the current Stanford Neurosurgery Brochure for 2010. She plays a patient in the picture, but she works in the department, and they asked her to model for the photographer.

This brochure is a work of art, printed on paper so thick it’s almost card stock. The varnish on the pages is so shiny you can see yourself in the reflection. I don’t know what these cost to print, but it must be $10 or more per copy. It’s the nicest brochure I’ve ever seen for any business or practice. I think my wife looks beautiful.

An interesting piece of information is that one of the doctors pictured is Griff Harsh, husband of California gubernatorial candidate Meg Whitman. Monika and I got to meet Meg at her home during a Neurosurgery Department dinner. I didn’t know it was Meg when I shook her hand, but when Monika and I got in the car I said that woman who had shown us how to exit the large house looked a lot like Meg Whitman. It turns out it was Meg Whitman.

One of the great things Intel Capital does for its Portfolio Companies is hold Software Services Days. The idea is to get a set of companies in a big room with lots of Intel executives, and have the companies demo what they’re working on, both to each other and to various Intel people. In my role as Chair of gOffice.com, I set up a demo station to show our patented online typesetting system that under the covers is powered by TeX with the ConTeXt macro package. You can see the gOffice (Silveroffice is written on the table sign, as gOffice is the brand while Silveroffice, Inc. is the company name) iMac in the center of the video at 11 seconds into it.

This event was held at Intel Corporation headquarters in Santa Clara, California in the Robert Noyce Building. Arvind Sodhani, President of Intel Capital, spoke, as did Paul Otellini, President and CEO of Intel Corporation. I’m honored that gOffice was recognized by Intel Capital and included in its portfolio of companies. Intel Capital puts on first rate events for its companies, in particular its annual CEO Summit that I’ve had the privilege of attending the last two years.

Jerry Engel, December 10, 2009, Wells Fargo Room at Haas School of Business. Photo by Bruce Cook.

On December 10, 2009 I attended a dinner at the Haas School of Business at University of California at Berkeley to thank Jerry Engel for his leadership of The Lester Center for Entrepreneurship and Innovation. There were a lot of people in attendance, including Jerry’s son and wife.

I’ve known Jerry since about 1992. I met him while I was working at Cooley Godward Kronish, which at the time was a sponsor of the the Lester Center. Cooley received ten passes per month to the Entrepreneurs Forum, which Jerry had started in about 1991. I didn’t introduce myself to Jerry right away, as I was pretty shy back then. Jerry probably didn’t know me until 1998 when I really started serious work to raise money for Hotpaper.com, my first Internet startup.

Jerry stepped aside as Executive Director of the Lester Center recently to assume the new role of Faculty Director. This dinner was to honor and recognize his leadership.

Keval Desai, Stephanie, Jerry Engel, Laura Oliphant, John Hanke and Kevin Warnock, December 10, 2009. Photo by Bruce Cook.

I am posting this today because I received the pictures from the event from Bruce Cook yesterday. I’ve also known Bruce for a long time, as he’s been a fixture at most every Entrepreneurs Forum that I’ve been to. He’s an independent professional photographer that covers many of the events at Haas. We talk shop about the latest cameras when he has a spare moment. Bruce is a real pro, and is particularly good at gathering people together for group shots when he only has a minute or less to get the shot. Bruce graciously gave me his permission to use these shots on my blog. Thank you Bruce.

Award presented to Jerry Engel in recognition of his leadership of The Lester Center, December 10, 2009. Photo by Bruce Cook.

Keval Desai, Jerry Engel and Melissa Daniels, December 10, 2009, at Haas School of Business at UC Berkeley. Photo by Bruce Cook.

Keval Desai and Melissa Daniels were at the dinner. It was Keval who suggested to Jerry in 1999 that Haas stage a business plan competition. Jerry was cool to the idea, but Keval and Melissa convinced him, and the competition was born. I was a finalist in that first competition with my startup Hotpaper.com, and I firmly believe I would have not sold my company for as much as I did and when I did if not for Keval and Melissa.

This is ancient news. In August, 2000, I sold my first Internet startup, Hotpaper.com, Inc. I am writing about it now because I stumbled upon the public filing for the acquisition today on the Edgar website. The filing brought back old memories, and I wanted to say a few words about the experience of selling a company during an economic downturn.

It was an exhilarating experience. It was difficult. It was fun. It was heartbreaking. It was educational.

Here’s the SEC Form 8-K the acquirer filed in connection with the acquisition. I’ve embedded it into this post via the cool document site Scribd, which thinks of itself as the YouTube of documents.

Hotpaper Aquisition Public Filing

Hotpaper made document assembly software that was well suited for the Internet and Intranet. The premise was that it’s difficult to write complicated documents from scratch. It’s much easier to start with a template. It’s sometimes easier yet to use document assembly software that prompts you for answers to questions, and then uses your answers to automatically fill in a template. This is the core idea behind Turbo Tax, the tax preparation document assembly software that is perhaps the most popular document assembly software in the US.

Hotpaper didn’t have anything to do with tax forms – they’re far too complicated for a tiny startup to automate, especially when you consider you have to make dozens of versions per year for all the states with an income tax.

Hotpaper concentrated on business and legal documents. Customers would send us their documents and Hotpaper would build a question front end and host them on the Internet for a monthly fee. One of our large customers was Salesforce.com. We built a private API for them so their CRM users could automate their own custom documents. Their customers could even write the questions and build the templates themselves, without having to work with any of our employees.

We were approached in May 2000 about selling Hotpaper. The acquirer, GoAmerica, which is now named Purple Communications, at the time was a nationwide aggregator of wireless connectivity for Blackberry and Palm, the two big handheld assistant makers of the day. Purple had competition in this agregation business from companies with much higher market capitalizations. Purple wanted to differentiate their connectivity offering, and they identified Hotpaper as one way to accomplish that goal.

Since it’s tough to type a long document on a Blackberry, the idea was to make it possible for users to just have to answer the questions that drive an automated template filler that would run on the Hotpaper web server. The user would just need a web browser on their handheld, and having this, they could generate very complex documents, provided there was a template on the server for them.

Purple built this system after they bought my company. They called the service Mobile Office. It won top honors from CNet.com two years in a row —  best enterprise application if I recall correctly. CNet was the TechCrunch of the day, and had a multi-billion dollar market value.

I was fortunate to sell Hotpaper to Purple. They had completed a public offering in April, 2000, just after the stock market began its long collapse. They raised $160,000,000 and had the money in the bank when they met us the next month. They offered us $10,000,000 and agreed to assume the stock option obligations to my team, so the overall consideration approached $11,000,000. We accepted their offer with almost no changes, as there was outright panic in the air, since the stock market had dropped dramatically from its recent all time high. Remember, the Nasdaq was in the 5,000 territory, much higher than it’s ever been since, a decade later. I also liked the Purple plan for Hotpaper, and was a believer in the future of mobile devices. I was on board and enthusiastic, though I did have a few anguished thoughts along the way since I was selling my baby I had been working day and night on for six years.

One of the reasons I was so enthusiastic is that I had been dreaming of mobile document creation for years, before there were handheld wireless devices on the market. I even built a prototype where I attached a Ricochet wireless modem to the bottom of a non-wireless Palm handheld and connected it to the palm via a serial cable. Ricochet built a wireless network in San Francisco in the 1990s that offered speeds similar to a 28K phone modem. It offered an unlimited data plan for $29.95 a month. The modem was hefty, about a pound and about the size of two iPhones stacked up. But it gave the Palm wireless capability in the San Francisco Bay Area. There was a third party web browser for the Palm on the market called Hand Web. I bought it, and then I was on the web wirelessly in about 1998. I proudly showed the contraption to Jerry Engel, then Executive Director of the Lester Center for Entrepreneurship and Innovation at the Haas School of Business at the University of California at Berkeley. It didn’t work since there was poor wireless reception in the sturdy concrete building at Haas. But Jerry got the idea and agreed to help me. He joined the board of advisors at Hotpaper, and he years later agreed to join my board of advisors at my current company, Silveroffice, Inc.

Sadly, the world changed for Purple. The big wireless carriers came out with their own nationwide wireless plans, which limited the role for Purple. The eventually abandoned Hotpaper and their own business of selling connectivity for general use. They remain in business today as leaders in the small but vital field of providing wireless communications solutions for the deaf. My hat is off to them for their sheer tenacity to stay in business and help people communicate. I wish them all the best success, and I want to thank them for adding Hotpaper to their offerings, if only temporarily. The acquisition forever changed my life, and I am extremely grateful. I wouldn’t have the life I have now if not for Purple Communications.

I was reading a story on TechCrunch.com today, the influential technology blog based in Silicon Valley. The story says First Round Capital has set up an echange fund for their portfolio companies to use to diversify their risk. The idea is founders will put some of their stock in this fund, and if they go out of business, they will share in the results of the companies in the fund that have successful exits.

I think this is a great concept, and it’s particularly great that a venture firm is sponsoring it, since to participate you have to have received an investment from this firm. So participating startups are already going through a tough screening process to get in. I hope more venture firms set up funds like this.

I do have a question: Would it be possible for the entrepreneurs to hold their ‘exhange shares’ of the other companies in the fund within their Roth IRAs? To my knowledge, you can’t have your own Roth IRA buy stock in your own startup. But it is OK to have your Roth IRA buy stock in tiny private startups, provided you don’t work on them at all. So I suspect there is a way to get these exchange shares into your own Roth IRA. Maybe by segregating the shares in your own startup from the shares in all the other member companies.

The beauty of having your Roth IRA hold startup stock is that if there’s a big exit, you pay no capital gains tax, even if there is a Google sized exit. Then you could have your Roth IRA sell the stock and diversify. The downside is if there is a loss, you can’t deduct your losses on your taxes, as far as I know.

I’m not a lawyer, so don’t act on this without consulting with one. I have had my Roth IRA buy private company stock several times, so I know that can be done. Not many financial institutions will handle this transaction. For example, Fidelity won’t. But T Rowe Price will, and their fees are reasonable. I pay $35/year for them to hold private stock in my Roth IRA. I think there was a $100 fee to set everything up in the beginning.

Here’s the link to the TechCrunch story that inspired this post: http://www.techcrunch.com/2010/01/29/first-round-capital-entrepreneur-exchange-fund/

I just read a great article on how to increase sales at software companies.

Find what’s blocking sales with under a day of work

This is from the blog of Jason Cohen, a software entrepreneur in Austin, Texas.

Intel sponsors another significant event annually, the Intel + UC Berkeley Technology Entrepreneurship Challenge. This year, the two events overlapped. The Intel Capital CEO Summit was November 16-18, and the Entrepreneurship Challenge was November 17-19.

I don’t have anything to do with the Entrepreneurship Challenge, but I was invited to the dinner on the 18th. Sadly, I had to miss it since I was still in Huntington Beach at the Summit. However, I was able to attend the Challenge final event tonight, the 19th, at the Haas School of Business at University of California at Berkeley.

The Entrepreneurship Challenge is a business plan competition for teams from all over the world. The semi-finalists and finalists presented their plans tonight in a public forum, and the four winning teams received cash prizes totaling $45,000.00.

I love business plan competitions. I’ve been a judge in the Haas Business Plan Competition for over five years. Generally, the judging day is the most exciting day of the year for me. It’s exciting because I get to meet some of the smartest and most enthusiastic people in the world.

The semi-finalists received 30 seconds each to deliver their ‘elevator pitches’. The finalists received about 10 minutes each. The finalist presentations were outstanding, but I did not capture them on video for this blog, as I consider them to be somewhat confidential. Yes, they presented in a public forum, but I don’t think the teams would want the presentations to be posted to the Internet. I did capture the elevator pitches on video for this blog, however, as they were so brief that I think sharing them online is not likely to harm the companies.

As you can see in the clip above, the ideas are quite varied, and are of high quality.

The winners of the competition were all non-US based teams. One team was from China, one was from Germany and one was from Singapore. The team from China won two prizes, the first place prize and the audience awarded prize for favorite team.

The winners were:

1st prize and people’s choice: iHeath Group
2nd prize: CaptchAd
3rd prize: Zimplistic

Here are the descriptions of the winning companies from the event’s website (EntrepreneurshipChallenge.org):

Ihealth – Tsinghua University, P.R. China

Ihealth Group aims to improve life quality with its revolutionary new product—MPHB biodegradable bone screws. Ihealth has developed MPHB bone screw in light of bionics which has been granted a national patent in China. Our product overcomes the disadvantages of the existing materials and provides a nearly perfect solution for the rehabilitation and fixation of bone injuries.

CaptchaAd – Technical University Munich, Germany

The CaptchaAd GmbH is the world’s first company to combine enhanced SPAM protection with interactive video advertising and thus increase the security on websites and facilitates visitor’s use, while at the same time ensuring a more conscious perception of advertising by the user. Instead of distorted codes conventional CAPTCHAs (an anti SPAM function used more than 250 million times a day worldwide) use to differentiate between humans and machines, CaptchaAd (Captcha Advertising) uses questions concerning the content of the spot. A CaptchaAd is a short commercial including a question which can easily be read and answered by site customers to substitute the “normal” CAPTCHA process. This results in a higher level of attention and involvement by the user to the viewed content.

Zimplistic – National University of Singapore, Singapore

Roti is staple diet of 800 million Indians eating 2.4 billion rotis everyday. Making rotis is a very time consuming, tedious and skillful task and since there is no fully automatic home appliance that makes rotis, people resort to unhealthy and expensive alternatives like frozen rotis. Zimplistic is a Singapore based startup that has designed & developed the first ever, fully automatic “Rotimatic”. It is like a coffee machine. It is the size of a mini microwave oven, the user just has to enter no. of rotis, and it measures, kneads, flattens, roasts and puffs rotis out.

I just got home from the Intel Capital CEO Summit in Southern California. Intel puts on such a compelling event for its Portfolio Companies.

Kevin Warnock at Intel Capital CEO Summit 2009

I met some really interesting CEOs.

Jeff Liesendahl of Accertify, LLC (Accertify.com) in Illinois runs a fascinating company that helps online merchants avoid selling to customers that are using stolen credit card numbers. He has some crazy stories of fraud well beyond anything I have read about. I won’t post the stories here since he might not appreciate my repeating them in a public forum. But one story I can share as he said it hit the newspapers. He said there are criminal gangs that create fake profiles on eHarmony, looking for targets to defraud. One such profile showed a hunk of a man that advertised himself as a widowed engineer. It turns out he was a scammer living in Nigeria. He pursued a woman he met on eHarmony for nine months, and they got engaged without ever having met in person. eHarmony discovered the gang, and their security staff contacted the woman and told her this man was a criminal and that she must break off contact with him. The woman did not take heed, and said they must have made a mistake, as she was planning to marry this man. The man later convinced the woman to sell her house and wire him $160,000.00. Once she did that, she never heard from him again. What a story.

Jeff’s company has an apparently very solid business, as they seek to compile the same type of fraud detection databases the credit card companies maintain. These databases are used to detect fraud in progress by looking for unusual activity. What many people do not know is that the credit card companies don’t share their databases with online merchants, as they have no financial incentive to do so, as the merchants are 100% responsible for fraud. Jeff said online credit card fraud is a $100,000,000,000.00 per year problem, and the card companies want no part of that liability. Merchants have a very strong motivation to buy his company’s products and services.

Gail Kantor of eJamming (eJamming.com) also has a company I think is fascinating. eJamming allows musicians to play music together live over the Internet, no matter the location of each musician. They have spent five years perfecting their peer-to-peer software that, among other things, moderates the effect of different latency values that different Internet connections have.

Jens Nikolaj Aertebjerg, CEO of NeuString (neustring.com), has a company that makes predictive analytics software for the telecommunications industry. They promise to provide customers with a return on investment in just two months, the shortest ROI time frame I’ve ever heard of.

Finally, I got to meet Human Ramezani, in the IT Innovation area at BMW Group. I got to tell him my wish list for car features, and he graciously promised to pass them on to the right people at BMW.

Briefly, I would like to see ‘TiVo for radio’ where the car radio would record my favorite National Public Radio shows so I could listen to them no matter what time of day I am driving.

I would also like to see a system that would phone rescue personnel if a baby is left in a parked car. He said this one should be easy for them to implement since there is already a motion sensor inside the passenger compartment for break in detection. I suggested the car first phone and text message the owner, and if there is no quick response, the car would then call rescue personnel.

Finally, I would like to see motor vehicles cool themselves while parked in hot climates. This could be done with a small solar panel in the sun roof directly connected to a fan. The fan need not be connected to the vehicle battery, to avoid any danger of the fan draining the battery. The fan would only activate when there’s enough sun to power it, so there is no need for a power switch. I suspect a fair amount of oil is used in the world to cool hot car interiors just after starting. If the car interior were close to the outside air temperature, drivers wouldn’t have to run the air conditioner on high for the first minutes, thus saving fuel.

One of the most helpful features of the Intel Capital CEO Summit is the formal matchmaking between Portfolio Company CEOs and industry executives. The matchmaking is set up in a large ballroom. There are about 100 tables for two. A senior representative from such companies as BMW, Disney and Walmart is sitting at each table. The portfolio company CEOs are matched via a web application ahead of time. At the matchmaking event, each Portfolio Company CEO gets a private one-on-one meeting with five industry executives. This year I was matched with BMW, Agco Corporation, Corent Technology, Capgemini and NEUSoft Group International. One of these meetings was very good, and there was a direct match in interests, so I consider the matchmaking a valuable success.

There is a lot of energy in the room during the matchmaking meetings. Here’s a short video clip I shot showing the activity.

I saw three dimensional television for the first time tonight. It’s a remarkably captivating experience. I don’t know if it will ever take off, but it sure made an impression on the audience at the Intel Capital CEO Summit today in Huntington Beach, CA.

Here is a video I shot of a 3D television camera. It looks very expensive, perhaps in the hundreds of thousands of dollars. The flat panel TV in the video costs $8,500.00. When you put on the 3D glasses, look at the flat panel, and move your hand toward the TV camera, it looks to you like your hand is coming out of the TV screen. It’s stunning.