Comments on: VCs to Entrepreneurs: Outlook for Software Startups Is As Good—or Bad—As Ever http://www.xconomy.com/san-diego/2009/01/14/vcs-to-entrepreneurs-outlook-for-software-startups-is-as-good-or-bad-as-ever/ Business + Technology in the Exponential Economy Sat, 11 Feb 2012 09:14:03 +0000 hourly 1 http://wordpress.org/?v=3.0.4 By: StyleHop Blog | Message to Startups: Risk hasn’t increased….it’s just changed http://www.xconomy.com/san-diego/2009/01/14/vcs-to-entrepreneurs-outlook-for-software-startups-is-as-good-or-bad-as-ever/comment-page-1/#comment-44496 StyleHop Blog | Message to Startups: Risk hasn’t increased….it’s just changed Thu, 15 Jan 2009 18:03:00 +0000 http://www.xconomy.com/?p=8736#comment-44496 [...] VCs to Entrepreneurs: Outlook for Software Startups Is As Good—or Bad—As Ever [...] [...] VCs to Entrepreneurs: Outlook for Software Startups Is As Good—or Bad—As Ever [...]

]]> By: James Geshwiler http://www.xconomy.com/san-diego/2009/01/14/vcs-to-entrepreneurs-outlook-for-software-startups-is-as-good-or-bad-as-ever/comment-page-1/#comment-44461 James Geshwiler Wed, 14 Jan 2009 20:32:58 +0000 http://www.xconomy.com/?p=8736#comment-44461 I really wish we'd get over all this hand wringing. Yes, financial risk is up, but that is not the only risk--and not even the most important one for startups. Competitive risk is way, way down. People risk is much improved. Market risk depends on what you are selling (I wouldn't want to be pushing luxury cars now, but in high tech, we often are selling productivity and cost-cutting tools...seems like those would be in vogue more now). A lot of startups don't need as much capital as in years past. See my presentation to Boston Web Innovators for more color, particularly on matching startup strategy to investors'. http://www.slideshare.net/dbeisel/angel-venture-capital-finance-where-is-the-money-moving-presentation?type=powerpoint I really wish we’d get over all this hand wringing. Yes, financial risk is up, but that is not the only risk–and not even the most important one for startups. Competitive risk is way, way down. People risk is much improved. Market risk depends on what you are selling (I wouldn’t want to be pushing luxury cars now, but in high tech, we often are selling productivity and cost-cutting tools…seems like those would be in vogue more now). A lot of startups don’t need as much capital as in years past. See my presentation to Boston Web Innovators for more color, particularly on matching startup strategy to investors’. http://www.slideshare.net/dbeisel/angel-venture-capital-finance-where-is-the-money-moving-presentation?type=powerpoint

]]> By: Matt Perez http://www.xconomy.com/san-diego/2009/01/14/vcs-to-entrepreneurs-outlook-for-software-startups-is-as-good-or-bad-as-ever/comment-page-1/#comment-44460 Matt Perez Wed, 14 Jan 2009 19:54:56 +0000 http://www.xconomy.com/?p=8736#comment-44460 I heard pretty much the same story at an Angel's panel on Monday night (1/12). One thing HAS changed: valuations are much lower now. They said to expect to give up 30% for $1-2M from Angels and 50% for $5M from VCs. What that tells me is that now more than ever you should try do as much as possible with your own sweat capital and go for the big boost only when you have a position to negotiate the valuation. We work with really small start ups, and several of our clients are doing just that. The other possibility is to look at Y Combinator and others like it that do pre-Angel funding. They seem to be a better fit if all you and your team needs is enough cash to survive for a few months and good advice from people who've "been there, done that." (I don't have anything to do with YC, I just think it is a good option.) cheers -- matt I heard pretty much the same story at an Angel’s panel on Monday night (1/12).

One thing HAS changed: valuations are much lower now. They said to expect to give up 30% for $1-2M from Angels and 50% for $5M from VCs. What that tells me is that now more than ever you should try do as much as possible with your own sweat capital and go for the big boost only when you have a position to negotiate the valuation. We work with really small start ups, and several of our clients are doing just that.

The other possibility is to look at Y Combinator and others like it that do pre-Angel funding. They seem to be a better fit if all you and your team needs is enough cash to survive for a few months and good advice from people who’ve “been there, done that.” (I don’t have anything to do with YC, I just think it is a good option.)

cheers — matt

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