The Series A Crunch Survivor's Guide. Got a ton of feedback on my email from Christmas Day titled 'There is no Series A crunch.' If headlines, and people's attention spans for them, allowed for completer arguments, the headline could have been expanded to: 'There is no Series A crunch for startups with these characteristics... " Besides, headlines are best when they seduce you with only partial information. Much of the feedback I've gotten over the past 48 hours came from both sides of the tables: founders and investors, and of course some bloggers and 'social media experts.' This is specifically to founders who are not able to raise a Series A. OK my founders, time for some #realtalk: if you can't raise a Series A, you've learned it's probably because of some combination of the following: How many of these do you have? Heck, my four startups (Silicon Alley Reporter, Weblogs Inc, Mahalo and ThisWeekIn) have had all of these qualities at different points in time.
We can even solve for your lack of a track record. Sound crazy? Can Public Media Organizations Succeed Seeding Silicon Valley Startups? New Fund to Find Out | KQED News Fix. Matter Ventures CEO Corey Ford and KQED President John Boland Three media nonprofits — Knight Foundation, Public Radio Exchange (PRX), and KQED (you’re on it, bub, no link required) have announced they’re creating a $2.5 million accelerator fund for selected media startups — of the for-profit variety — to tap.
It’s called Matter Ventures, based in San Francisco’s SoMa district. Prospective candidates will be able to apply at the web site, which went live today. KQED and Knight Foundation are kicking in $1.25 million each to fund the initiative over two years, potentially taking an equity stake in businesses that develop within the program. PRX will help run the project. The media accelerator was previously announced last December by PRX and Knight under the name Public Media X, and now KQED has come aboard.
The CEO, as reported last year, will be Corey Ford, formerly of Runway, an incubator in ex-Google CEO Eric Schmidt’s venture capital fund, Innovation Endeavors. –Matter CEO Corey Ford. For A Stranger In Silicon Valley, Success Isn’t Only About Who You Know. Editor’s note: Cherian Thomas is founder and CEO of Cucumbertown, a recipe-publishing platform. Follow him on his blog and Twitter. For entrepreneurs, it is now both easier and harder to raise capital: easier because of powerful platforms like AngelList; harder if you’re not part of an accelerator or don’t have a strong network.
Silicon Valley has more startups than ever before. My startup, Cucumbertown, raised its first round a month ago, and during the course of this journey, I realized that, as a first-time entrepreneur without any solid Valley footing, my run toward raising funds as a non-American co-founder was somewhat unique. Valley funding used to be an impenetrable fortress that opened up only by way of introductions. So here’s how my month of experience as a non-accelerator, non-American fundraiser translates into advice.
Make Friends Fast I was scheduled to meet 500Startups Partner Paul Singh on the second day of fundraising. Meet With Companies Who Have Raised Get On AngelList. Black Swan Farming. September 2012 I've done several types of work over the years but I don't know another as counterintuitive as startup investing. The two most important things to understand about startup investing, as a business, are (1) that effectively all the returns are concentrated in a few big winners, and (2) that the best ideas look initially like bad ideas. The first rule I knew intellectually, but didn't really grasp till it happened to us. The total value of the companies we've funded is around 10 billion, give or take a few.
But just two companies, Dropbox and Airbnb, account for about three quarters of it. In startups, the big winners are big to a degree that violates our expectations about variation. That yields all sorts of strange consequences. To succeed in a domain that violates your intuitions, you need to be able to turn them off the way a pilot does when flying through clouds. [2] You need to do what you know intellectually to be right, even though it feels wrong. Harder Harder Still. Blog | What Raising Money Means To Me. What follows is based on my own personal experiences, views and opinions about the world of startup financing. I’m sharing today because I believe in the educational value of other people’s failures. Here are mine. An Introduction I started mophie over seven years ago. It began very simply: I had an idea. I believed the only thing standing in the way of my gift wrap and ribbon prototype of the first “lanyard-headphone” becoming a mass market success was just a little bit of dough.
Like most entrepreneurs and creative people, to me money appeared to be the only barrier. So, with the same instincts that instruct me to breathe and blink every now and then, I began raising money. After endless Excel models, the writing of my first (and last) business plan, promising that I would go to college, and committing not to do anything stupid. My parents invested $185,000. To this day, that first round of money was the hardest to raise—even though it was my parents. Mophie had a rocky beginning. 1. 2. 3. The Truth About Convertible Debt at Startups and The Hidden Terms You Didn’t Understand. This article initially appeared on TechCrunch – with a minor update highlighted in red below. Ah. We’re back to discussing convertible debt again. This time by the efforts of Adeo Ressi to introduce a new kind of structure called “convertible equity.” I applaud all efforts by people to take on this issue and especially be Adeo who – let’s be honest – was really the first champion of trying to make the VC world more transparent by launching TheFunded, which didn’t exactly endear him to VCs initially.
My initial reaction to Adeo when we spoke was that while it may have solved some issues (debt versus equity) it didn’t solve the ones that I’ve been warning entrepreneurs about most loudly. To better understand the arguments for / against convertible equity I suggest you read my posts on those topics: So let me weigh in more loudly than in the past. “What if I took some of the worst, most egregious terms in a standard term sheet and made them the defacto standard in most convertible debt deals?
Convertible Debt. Back in the summer of 2010, I wrote a post outlining why I don't like convertible debt investments. USV does a fair bit of seed investing and we have never done a convertible debt deal (although we have done bridge loans for our existing portfolio companies). My wife, aka Gotham Gal, does a fair bit of seed investing and she has done her share of convertible debt investments, always with a reasonable cap, but she also prefers a priced equity round. Convertible debt is being discussed again, I suspect because valuations are coming down and that is causing some problems, but also because there are folks suggesting improvements on the structure of these deals.
My view on this is fairly simple: 1) A priced equity round can be done quickly and inexpensively. 2) When you set the price, both sides know what deal they got. 3) Equity is simple. Mark Suster has a long and winding but very good post on all of this on his blog. All Revenue is Not Created Equal: The Keys to the 10X Revenue Club. May 24, 2011: May 24, 2011: [Follow Me on Twitter] “ Don’t you know that you are a shooting star,And all the world will love you just as long,As long as you are. . ” – Paul Rodgers, Shooting Star With the IPO market now blown wide-open, and the media completely infatuated with frothy trades in the bubbly late stage private market, it is common to see articles that reference both “valuation” and “revenue” and suggest that there is a correlation between the two.
What drives true equity value? Because of the difficulty of getting DCF right, investors commonly use a handful of other shortcuts to determine valuations. The following chart highlights 2012 forward price/revenue ratios for 122 global Internet stocks. Before we talk about why there is such disparity, it is important to highlight a few more points. What causes such a wide dispersion of price/revenue multiples? 1. If high price/revenue multiple companies have wide moats or strong barriers to entry, then the opposite is also true. 2. Former Piper Jaffray executives launch early-stage investment firm - Minneapolis / St. Paul Business Journal.
DotMN — ‘Less TechCrunch & more reality,’ says local angel investor. Nearly two months ago, AMP Partners was introduced to Minnesota’s tech entrepreneurs. Curious to learn more about where things are at, and if AMP is serious about funding local startups, we connected with partner Daren Marhula to hear it from the source: 1) How would you say things are going so far relative to what was anticipated?
Overall, our business at AMP is in-line with our original expectations since launch. That being said, we continue to be surprised by the unrealistically high valuation expectations by many entrepreneurs out there, which has prevented us from making more investments. 2) How would you rate both the quantity and quality of dealflow? Since the article initially ran, we have talked with roughly 30 companies. 3) Has AMP made any tech investments?
Our first investment was in HomeVisor, which is an online Realtor referral service. There were a couple of other companies we met with that we liked and we would have invested in, had the valuations been more realistic. FundersClub. Moneyball: A Quantitative Approach to Angel Investing (Austin, TX -... Why Are B2B Social Media Firms So Hot? For a handful of enterprise social media firms, 2012 has been a version of 1999. The Great Cash-Out got under way in May when Oracle paid $300 million for Vitrue, a cloud-based firm that mans social media communications for McDonald's, American Express and Gillette, among others. Oracle followed that acquisition by gobbling up social media monitoring firm Collective Intellect for an undisclosed sum in early June. Meanwhile, Salesforce.com paid $745 million for Buddy Media, a Vitrue competitor that counts Ford Motor and Hewlett-Packard among its clients.
Soon after, reports circulated that Microsoft was interested in buying Yammer, a provider of a Facebook-type solution for businesses, for $1 billion or so. Just last week, the smallish Syncapse bought a smaller social media firm, Clickable. Why now? One factor is Facebook's IPO, which signaled for some that social media had reached its zenith of positive attention and it was a good time to sell. Peer pressure also plays a role. Publications VivaKi's Tobaccowala Debugs Mystery Of Agency Survival: 'We Are Cockroaches' 06/14. VivaKi Chief Strategy & Innovation Officer Rishad Tobaccowala channeled his inner Kafka Wednesday, explaining to a gathering of clients, agency executives, entrepreneurs, VCs, and a couple of journalists why ad agencies have managed to survive, and maybe even thrive, despite incessant proclamations that agencies were dying during his 30 years in the business: “The truth is, agencies are cockroaches.”
Tobaccowala, who is known to strike striking metaphors to make a point, likened agencies to roaches, because like the insect, they have proven themselves to adapt and persevere regardless of what is thrown at them. Tobaccowala said his point about agencies’ ability to survive was that they “cannot do it alone,” and must rely on outside “third parties” to help them adapt and develop new business models and services to help their clients evolve their businesses. That’s the reason, he said, that VivaKi Ventures was founded 7.5 years ago, and why it continues to thrive. A preacher, 500 startups, and a dream to change it all. Dave McClure speaking at the US Embassy in Mexico City.
Photo by David E. Weekly It’s around 8:30 on a warm Friday night in Mexico City, and we’re all milling around a podium set up in the lobby of the private residence of the U.S. Ambassador to Mexico, Earl Anthony Wayne. Dozens of Mexico’s tech entrepreneurs and investing elite are mingling with more than 40 members of Geeks on a Plane, a traveling tech-revue of sorts organized by the Silicon Valley investment group, 500 Startups. Just outside the lobby, an expansive manicured lawn leads up to a massive, high rock wall. The Ambassador gives his polished remarks, followed by one of Mexico’s rare venture capitalists. McClure thanks the Ambassador for the special night and starts to speak.
“For the last two heads of states that I met with I was also wearing flip-flops, so please don’t take it as any slight. McClure is trying to do something a little bit different. These principles are also where Geeks on a Plane comes in. Will it work? Airbnb's first pitch deck. 8 Hard-Earned Insights Into Raising Startup Capital. Approaching investors for the first time is a daunting exercise for any startup. Regardless of whether you’re raising venture capital, approaching angels or still trying to figure out where to get started, it’s critical to stay level-headed about what you’re really pitching - and what it’s actually worth. The best way to do that is to leverage the hard-won experience of real-world startup.
So we asked a panel of eight successful young entrepreneurs from the Young Entrepreneur Council (YEC) about their startup funding successes (and failures) and the lessons they learned. Turns out that while every startup is unique, they share some common difficulties in trying to find just the right strategies and tactics for funding their companies: 1. Ask for what you need – and nothing more. “Funding is an exhausting experience, but worth it. 2. “One of the biggest startup mistakes I made centered on asking for funds – or rather, my failure to do so. 3. 4. 5. 6. 7. 8. Fred Wilson: what crowdfunding means for the VC business. For the past couple of decades, venture capitalists have had the upper hand. They’ve had the funding and, traditionally, they’ve held most of the power in the startup ecosystem. But, Fred Wilson, managing partner of Union Square Ventures (and beloved blogger), believes that balance of power is shifting (As noted in Stacey’s take on a similar notion advanced by the Kauffman Foundation earlier Tuesday.)
And as it does, venture capitalists themselves must rethink their role. Speaking to a crowd of entrepreneurs at the Grind work space in New York this morning, Wilson said that since the mid-1990s institutional investors have poured $30 billion into the venture capitalist business every year, but venture capitalists have only been able to figure out how to generate good returns on half of it. (Actually, venture capitalists haven’t seen that much money flowing in since 2007, according to the National Venture Capital Association, which notes the recession dramatically lowered investment.) How to make a cap table. Summary: A cap table lists who owns what in a startup.
It calculates how the option pool shuffle and seed debt lower the Series A share price. This post includes a fill-in-the-blank spreadsheet you can purchase to create your own cap table. A capitalization (cap) table lists who owns what in a startup. It lists the company’s shareholders and their shares. This screencast walks you through our cap table: The cap table is free We used to charge for the stuff but now it’s free. “This is great; we (probably like many other entrepreneurs) tried our hand at hacking up a similar spreadsheet on our own but this is a far more flexible and easy way of visualizing various scenarios.
The cap table shows you what you really own Many entrepreneurs think their pre-money valuation determines their percentage ownership of the company. Use this cap table to sketch out how much you will really own after the financing. This cap table is simplified Disclaimer — read this We are not lawyers. DotMN — Dear Minnesota Angel Investor. Sequoia Confirms Existence of “Stealth” Scout Program. Who’s Next? Crowdfunding: How Indiegogo Connects Concepts With Cash. Startup says what? - Entrepreneur. [Excerpt] Fundraising: From $1,000 To $1,000,000. 500 Startups Raising New $50M Fund, Names 4 New Partners, With 250+ Investments To Date. Aileen Lee Launches Kleiner-Backed Seed Fund - Kara Swisher. Why The JOBS Act Is Good for Startups - and for America | Revolution.
Crowdfunding Law Will Turn the Start-Up World Upside Down - Tim Rowe - Voices. Online-Services Firms Catering to Businesses Look Good Again to Venture Investors. Tide Shifts on Web Start-Ups - Ben Worthen. Calling Bullshit On The Series A Crunch. Accel forms $100M fund to feed big data apps — Cloud Computing News. So, is venture money drying up or blowing up?