While we are working hard to get our BIG core feature out really soon, I wanted to highlight one nice little feature in our service that we added in our previous update – The Market Trends.
When the startup profile is listed in our service with related industries that the startup is working on, we can pull out real time information about what’s being said in twitter about those topics. – So those that are interested to learn more about what going on in each startups industry, will always have easy access to trending information.
Again this post in Funding post continues from the topic of serious bootstrapping trend. More start-ups being capital efficient (good thing for entrepreneurs) etc. This comment below highlights the current trend very well:
“I see a lot more capital entering the lower level of the ecosystem probably because… the opportunities for being capital efficient are actually more available now than they were before,” said Owen Davis, managing director of NYC Seed.”
More about the subject in the video below:
There is a reason why this is also looking more appealing for VC’s. The VC’s problem is well outlined in this post: The Venture Capital Match Problem, by Fred in Ask VC.
Below is my dialog with Fred (in comments):
Me:
I think this just shows that money does not solve problems. The problem here is not too much money, but how it’s now distributed.
VC industry is starting to look like the newspaper industry – better to wake up, the blogs are coming…
Fred:
What are the blogs of the VC business?Things like Y Combinator are great but they are feeding us even more opportunities so I see them as additive, Although I also see blogs as additive for the newspaper business if they’d just see themselves as curators and aggregators instead of content creators
Me:
I guess the closest thing to “blogs of VC industry” today are angel investors. But that’s for today. Also Y-combinator and the likes are great too and could be considered as “blogs of VC industry”. However their “next step” need to change away from just VC’s.
The fundamental change will become, when there are “platforms” for anyone to start a “blog for VC industry” and that’s what we are doing in www.growvc.com.
Overall, we feel that in long term the money will be spread to more potential start-ups and more of them will not go via IPO but just buy back of shares, mergers etc. with lower ROI. But that’s OK if the time for ROI is shorter and cost of management is lower.
So – be more direct, spread wider, lower the management cost, speed up the ROI cycle and you can accept lower ROI.
If you think about the structure of today, from where the VC money really comes from, you start to see the “big picture”. – basically it means that individuals like you and me pay for pensions funds etc. and these funds then invest to VC funds. VC’s then make investment decisions and “manage” the investments, all the way to take it public (hopefully). Basically just to sell it back to us…
When more people will start to understand this cycle because of more info and transparency online (if they are interested), people will not accept this structure. Because in the long run what matter is, if the companies in question sell what matters. And that is not a question of size.
Forbes’ article is a good summary of VC’s dilemma: VC’s want to be larger and avoid risks. Forbes says: “Venture firms raising ever-larger investment funds–which produce ever-larger fees, of course, and rich lifestyles for the VCs getting them–have simply backed too many crummy companies over the last 10 years.” And it continues: “Geoff Love, whose U.K.-based Wellcome Trust is an investor in many top VC brands, said onstage at the conference that he thinks larger funds and fees have made many venture capitalists more risk-averse.”
I think this is nothing new for people who are working in start-up and VC business. But it once again highlights many relevant issues. And especially this is a problem for early phase web and mobile companies. They need smaller money to prove that they can launch a beta version and start to get users and market feedback. During the last six months I have talked with several people who are launching their new web or mobile service and they have been interested to get investors. My advice is to find smart business angels and/or try to make it with so small money as possible, get users, and learn how the business model works. But of course all entrepreneurs haven’t enough money to do it without external investors. Hopefully Grow VC can help them soon.
Few days back I got an email from Chris Mottau at North Venture Partners. In his email he says that “he feels, we share the same vision” and that he became very excited about what we do; “I love the mojo of your blog” – in his words.
Sure enough, I really did. It’s well written, up to date, quality piece (33 page of reading) and it’s really good overall view to current funding climate and to various problems that exists. What I really like about it personally, is that it does covers many of the latest and new emerging services that are trying to help change things in these currently broken models of early stage funding.
I asked if I can highlight some of my favorites from this piece in our blog and he said: “I’m glad you enjoyed the document, feel free to share it on your blog…it represents a good deal of work for us of which we are very proud”.
So here are some of my personal favorites:
Early stage investing will always be considered a high risk, high reward game. But what if there were smarter, more efficient tools that enabled both investors and entrepreneurs to optimize the process by making the investment process “less gut” and “more guided”? Could we eliminate some of the fear and confusion surrounding early stage investing and begin to truly optimize entrepreneurship?
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This all raises the question; what is the early stage investor community currently doing to optimize entrepreneurship and increase the success rate of their investments?
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On one side there are the mysterious “deal makers” who might seem easy to reach with the click of a mouse, but in reality are incredibly difficult to engage with meaningful dialogue. On the flip side, there are the passionate entrepreneurs who are eager to find out what an experienced investor thinks of their “big idea,” but usually hear back nothing at all after submitting their materials for consideration.
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Start-ups are now cheaper to launch than ever before, as $500K has become the new $5 million. Primarily because basic software that was once absurdly expensive is now free (open source), and astonishingly good hardware (or virtual processing power) is now very affordable.
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To change our future we need to re-think the past. Moving forward into an era of collaboration and transparency isn’t just a nice idea; right now it’s an imperative.
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The cold fact is that most investors still won’t even glance at a business plan unless it’s gotten a referral from a credible third party. It’s not only about who you know, it’s also about how you know them. Entrepreneurs and business plans referred by others who have proven to be good filters for garbage ideas, often float to the top of the pile. How else do you expect investors to filter through 34 years of reading material? Everything else usually gets dumped into the circular filing cabinet. Today most investment deals come down to personal TRUST, which is pretty hard to create in a virtual world.
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“The real issue is that getting financing is difficult and inefficient for the investor. I’m having to create a whole slew of personal relationships, networking, etc… – just to get small amounts of money. While I like being social and getting out there, it’s slow. We need a Wal-Mart model for “common’ money” (i.e. under $500k using a typical business model). The real issue is that many people could be funded so much more efficiently, with better returns, if the industry was more transparent.” – Adam Nelson, Founder of varud.com
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“With Angelsoft, all of the personal aspects of Angel investing seem to be removed from the equation. My materials are submitted through Angelsoft forms, and then disappear into some system that encourages a group of busy angels to evaluate the opportunity in a black box. Do they like it? Do they hate it? Do they even read it? I have no idea, since I have never heard anything!” – comments a disappointed entrepreneur.
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Remember, investors (like Hollywood studio executives) see and hear of thousands of deals a year and have very little time to spend on them. If your idea doesn’t fit into their “box of knowledge”, it’s going to be quite difficult to break through and earn a second meeting. If you can’t narrow down your business to a sticky single sentence, you’re probably not ready to get in front of an investor anyway.
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Paul Graham, a prominent Silicon Valley entrepreneur and Angel investor sums up the feeling of many entrepreneurs when he said, “VCs that suck less are all about disclosure and transparency.” To truly produce fundamental change and foster innovation it’s time for investors to allow entrepreneurs to see the world from their side of the table.
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Note: one other insight that can be pulled from the real estate market is the standardization of deal documents and terms. The liquidity of real estate hinges upon the simplicity of the standardized paperwork. Just imagine the efficiencies that could be gained from standardized deal terms in early stage venture investing.
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– better to wake up, the blogs are coming…
Forbes’ article
Few days back I got an email from Chris Mottau at ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=29dfe066-73dd-4e6b-a1bc-cdcc41eb0abf)
