Is the Economy Affecting Startup Funding?

There was an interesting article in the Wall Street Journal Friday about whether the economy is having an impact on funding for startups. Now the on-line Journal is still a paid area, but if you have access to the paper, the article is titled In Silicon Valley, Start-Ups Begin Hitting the Brakes.

Now one of the premises is that if you are out raising money now, you might want to up your raise a bit in case there is downturn to tide you over. It also said that if you weren’t planning on raising money, maybe you should in case there is a downturn and funding dries up.

I think it is pretty clear that if your startup or plans are to target the financial industry, you might want to re-think your business. The sub-prime fiasco has slammed this industry and will continue to ripple for the foreseeable future.

On the other hand, the rest of the economy is doing fine. Now there might be some jitters or concern that the ripple will spread, but before you get caught up, consider fact versus supposition.

Entrepreneurs working in non-finance sectors might want to take advantage of investors concerns and look to get some of those funds they are probably trying hard to place before the downturn hits.

Hopefully, there won’t be a panic with thoughts of another bubble-burst. Things just aren’t adding up the way they did in the late ’90′s.

ENTREPRENEURS, Know Your Investors!!!

There is a consistent problem that I see with supposed Investor Level presentations. I saw it again today and I can’t figure out how to, if not fix, dramatically improve the entrepreneurs understanding of the investors they are searching out. I looked back and found that my last set of rants on the subject was last November. So, maybe I just need to do a quarterly rant.

It just doesn’t make any sense for an entrepreneur to expend all the time and financial resources around getting in front of investors and then wasting the effort by not covering the things that we want to hear and describing in the presentation and supporting documents a story that meets our expectations.

It just doesn’t make sense to paint a rosy picture of a very opportunistic business, with large markets, unique products and then describe mediocre revenue projections and outlandish valuations. Oh yes, I love how many companies think that they will be acquired using multiples of companies like Double-Click, YouTube, Facebook, or MySpace. They overlook what kind of traction these companies had when acquired or got an investment.

OK, so what are we looking for: well we look for opportunities that have a believable story that looks like it will return 5X to 10X return on our investment in three to five years. If you present opportunities that in no way come close to this, then you are wasting your and our time.

As for valuations, this is always a touchy subject, but most Angel groups don’t want to invest in opportunities where the valuations at the seed stage are greater than $5m. So, what do you think happens when a company with no or few customers, unprofitable or miserable revenues, and a not so clear story has a $10M valuation. How did that happen?

If you want to use YouTube as an example, then show a company that with results similar to YouTube when they were acquired. I saw Chad Hurley interviewed a couple of months before Google’s acquisition where he stated that they still unclear about their business model. In case lots of entrepreneurs want to jump in and say “see there’s our justification for our valuation, we don’t completely understand our business model either”, he went on to describe that 110K new videos were being uploaded each day.

YouTube was launched in November 2005, experienced a meteoric rise in content and membership and were acquired by Google in 2006.

So, if you are going to be out raising money for your fledgling company please take the time to figure out what type of investor you think you will need and then what is important to them.

If you want a little help, I had an article published in the recent edition of Website Magazine on the subject. But don’t take my word on what is important, talk to the investors you are targeting and find out what they feel is important.

Hopefully, I won’t have to go over this again until May.

Blissport – New Company, Unique Concept

OK, so today is Valentine’s Day, another opportunity for many men to do the wrong thing, get the wrong present, forget to make to right dinner reservation or completely blow it by forgetting it all together. I know I am risking the wrath of many but bear with me for a second.

This morning I sat through a number of entrepreneur pitches and one, Blissport, is a new company focused on helping Grooms with the daunting task of arranging the, once in a life time, all important task in the Wedding process, the Honeymoon. So, here is a woman CEO, talking about a sight to help men work through the honeymoon process, an enormous potential minefield for men, on Valentine’s Day.

There are a number of things I like about the company:

• Solid CEO with previous successful startup experience
• Focus on a market segment completely under-served and, at the same time huge!
• Using the social and new media tools to create a unique user experience
  • very cool looking site that will be attractive to the 18-34 year old target market
  • Only focusing on the top 300-400 high end resort properties that excel as Honeymoon destinations.
  • Include reviews by people who use the site. Obviously these will build over time. As a side, Forrester just released a report that looked at what web users want in four different segments that included travel and found the one critical desire was to have access to user rating and reviews.

Their site went live in beta mode a couple of weeks ago and they are currently out raising a seed round to help them get the traction they need to extend the business and develop the metrics they need to go after an “A” round later in the year.  

So, if you have a few minutes, go check them out. If you are an investor and want to know more, you can reach them from the Contact section on their site or, if you have problems, send something to me at jim@socalbuzz.com and get it over to the CEO.

In the meantime, it was nice to hear a woman talking about doing something for men on Valentines Day. Thanks Natalie.

comScore Press Release on Internet Video Viewing

I ran across a February 8th Press Release from comScore that reported that last December, Internet video users watched a startling 10 Billion videos. Now that’s pretty incredible and should give some credence about whether there is an audience.

Another interesting piece of data was that 141 Million Americans viewed these videos during the month.

The real challenge for business is to create videos that are interesting and can get the attention of the viewers and then figuring out how to get them to your videos location.

We are certainly in interesting times.

Is Internet Video the Next New New Thing?

Every so often, I find that I hear about something new or different from a number of disparate places that is something I am looking at. Case in point, Internet video, I have been looking at it for some time and trying to decide how much I wanted to get involved in using it.

I had been considering vlogging for some time. My initial reason for procrastination was my complete dislike for editing video. Audio is one thing, but add the video and you have a whole other set of issues to deal with. I ran into Robert Scoble, the king of vlogging, in Seattle in December 2006 and talked to him about his deciding to do very little editing. Arghhh, one reason falls.

Lately though, I found comments from all quarters from Tony Perkins comments at a conference a couple of weeks ago about him believing that in a couple of years every website will have video. Then there was a Tim Draper interview at a conference in New York where he said that he was looking hard at content companies and investing in Internet video companies. Then, listening to Ron Conway, the legendary Silicon Valley Angel Investor, during a recent session of the Stanford Entrepreneurial Thought Leaders Session, where he mentions one of the hot buttons is currently Internet video.

OK, so I can take a hint. I had recently purchased a Sony hard drive camcorder, bought a lighting system for very cheap off of ebay, and found some pretty powerful editing software for under $100. Out of the blue, my podcasting server folks decided to up the storage and bandwidth for subscribers, so I had no more reasons for not trying out video.

So, I spent some time and created 15 short, under 2 minutes each, videos on the subject of Knowing Your Investor and put them up on YouTube. A very painless process. Nowhere near the challenging and $5k per minute experience of 15 years ago.

So, I am hooked and am looking to use video where every possible.

Let me know what you think about Internet video and if you see a place for it in your business.