1Mby1M Udemy Courses with Sramana Mitra: Financing

Raising money to build a startup is a huge challenge. To be able to raise any money at all, you must first understand how investors think. We have developed the following courses catering to entrepreneurs in different stages of their entrepreneurial journey.

287th Roundtable Recording On Dec. 17, 2015: With Engineering Capital Founder Ashmeet Sidana

In case you missed it, you can listen to the recording here:

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Roundtable Recap: December 17 – Focus on Proteins and Whole Wheat Bread, Skip Candies

During this week’s roundtable, we had as our guest, Ashmeet Sidana, Founder of Engineering Capital, a seed-stage venture fund focusing on infrastructure technology. Ashmeet had a lot of insights to offer, and delivered one particular piece of wisdom that is close to my heart. He says, funding is like candy. Don’t eat too much candy. Whole wheat bread and proteins are customers and revenues. That’s what you should focus on. Brilliant analogy, don’t you think?

Schedule101
As for the pitches, first up, Martin Kossman from Montreal, Canada, pitched Schedule101, a SaaS solution for restaurants to manage their workforces. Martin has a particular expertise in doing partnerships, which is all very well, but Ashmeet and I agreed that we’d like to see more focus on revenues.
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Is Y Combinator Asking for Too Much Equity for 120k Worth of Funding?

I don’t think it’s a bad deal. $120k is decent seed funding, 7% is reasonable equity for that amount. Their previous deal, I thought, sucked (6-10% equity for $15k-20k). This one is reasonable.

Recently, Sam Altman released some statistics … they’ve funded about 900 companies of which about 7 unicorns have emerged. That part of the story is great.
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Incubators and Accelerators FAQs

This post answers some commonly asked questions about incubators and accelerators. I have answered these questions on Quora as well.

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Why Do I Keep Getting NO From Investors?

If you want funding, you need to start with a business that is fundable.  Ask any serious advisor or investor and you will get an absolute truth: 99% of the ideas as they come are NOT fundable.

From here you have only three choices. One is not so smart. The other two are just fine.

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When Should You Move To Silicon Valley?

The question continues to come up often in our work with global entrepreneurs, so further to my earlier Harvard Business Review piece, I will add more color to it. First, here’s a recap from the HBR piece:

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Looking Forward to the Real Silicon Valley

I am one of those people who doesn’t like bubbles. Right now, we’re experiencing a bubble in Silicon Valley with funny money driving weird, unproductive behavior.

Some people want this party to go on.

I don’t.

Francisco Dao has written a poorly analyzed post on VentureBeat titled What will happen to Silicon Valley when demographics strangle the global economy:

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May 10,000 Cloud Startups Bloom

The cloud services market has fueled a boom of immensely successful startups, most of which have raised millions in venture funding. Take analytics platform company Birst, which started off in the high-end financial sector, raised $64 million in venture capital, and is now growing fast as a regular Silicon Valley-style pre-IPO company. Technology Business Management solutions provider Apptio raised a $7 million series A to get started and within the year got to $6 million in annual recurring revenue. Its customers include 29 of the Fortune 100 companies and has to date raised a whopping $136 million.

Business analytics provider Adaptive Insights raised $100 million in funding and has over 2000 customers. Huddle, enterprise collaboration service provider, raised $38.2 million in funding and now has close to 80 percent of the Fortune 500 as clients. Email marketing company iContact bootstrapped for three years to $1 million using services and then raised $53.4 million in three rounds. They eventually got acquired for $169 million. Mobile website maker DudaMobile bootstrapped using a paycheck and then went on to raise $18.6 million.

However, not all cloud startups have gone the heavy funding route. There are many under-the-radar cloud/SaaS startups that are also developing as bootstrapped businesses. Analytics company DataSong has bootstrapped all the way—for 11 years—and expects to do $6.5 million in revenue in 2014. Another such company in our 1M/1M premium program is Happy Grasshopper, which has chosen to bootstrap so far, and is approaching a $3 million run rate in 2014.

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Building a New Online Fashion Brand: Combatant Gentlemen CEO Vishaal Melwani (Part 1)

I am a big believer in new, highly focused online fashion brands that can be built with a purely digital strategy. Combatant Gentlemen is a case in point. The company bootstrapped to $700K in revenue, followed it up with a $2.2 million financing round, and is on track to deliver $15 million in revenue this year. The market is large, and hence the opportunity to scale exists.

Sramana Mitra: Vishaal, let’s start at the beginning of your story. Where are you from? Where did you grow up and in what kind of background?

Vishaal Melwani: I am a third-generation tailor. I grew up in Las Vegas, Nevada, believe it or not. My dad was a second-generation tailor. My parents came to America in 1976 from Hong Kong. The goal was to basically have the American dream and focus in on what they knew. >>>

YCombinator’s Further Evolution Into A Seed Fund

YCombinator has just announced that it will replace its $17k for 7% pre-seed equity investment with a $120k for 7% seed investment deal. From the WSJ:

Previously Y Combinator’s standard deal was about $17,000 for 7% of the company, plus an $80,000 note from a group of venture investors and firms eventually known as YCVC, which most recently included Andreessen Horowitz, General Catalyst, Maverick Capital and Khosla Ventures.

So, startups will now get $120,000 from Y Combinator, instead of $97,000 from a combination of Y Combinator and select venture firms. That means the implicit valuation for YC startups rises to about $1.7 million from the previous $1.4 million (YC might deviate from the standard deal “in exceptional cases,” presumably for an ultra-hot startup that merited a higher valuation).

The $120,000 will come directly from YC and a fund it manages that has limited partners, though the accelerator itself has no limited partners, Altman said.

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The Funding of Avaz: Some Reflections

Harvard Business Review Series on the Seed Capital Gap

Crowdfunding Startups: Opportunities and Bottlenecks

There has been a bit of action for a while now in the crowdfunding world, and certain startups have been able to get themselves off the ground using the Kickstarter / Indiegogo style sites. By and large, these types of financings have gone to companies that are building physical products, digital games, etc. Fundings have also happened for some causes, films, books and art projects that are typically not businesses. Equity crowdfunding has been signed into law in the US through the JOBS Act, but it awaits the SECs directives on the precise rules governing the system. In Europe, it is legal and already in practice. Hopefully, other parts of the world will also start seeing the infrastructure develop shortly.

For our domain of focus, the primary concern is financing digital startups: technology and technology-enabled services. Typically, these are difficult to assess, high-risk companies, and amateur investors from the “crowd” are unlikely to be able to perform adequate due diligence to have a sophisticated investment thesis.

However, there is one category of investors who will have an excellent vantage point from which to assess new ventures.
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Buliding a Venture Scale Analytics Platform Company: Birst CEO, Brad Peters (Part 1)

If you haven’t already, please study our Bootstrapping Course and Investor Introductions page. 

Birst’s beginnings had many of the same principles that we espouse in 1M/1M, engaging customers in paying relationships early on being the foremost. Today, the company has raised four rounds of venture capital, and is growing fast as a regular Silicon Valley-style pre-IPO company.

Sramana Mitra: Brad, let’s do your back story first. Where are you from? Where were you born and raised? >>>

Are We in an Accelerator Bubble?

In a recent special issue on digital startups, The Economist writes:

The exact number [of accelerators] is unknown, but f6s.com, a website that provides services to accelerators and similar startup programmes, lists more than 2,000 worldwide. Some have already become big brands, such as Y Combinator, the first accelerator, founded in 2005. Others have set up international networks, such as TechStars and Startupbootcamp. Yet others are sponsored by governments (Startup Chile, Startup Wise Guys in Estonia and Oasis500 in Jordan) or big companies. Telefónica, a telecoms giant, operates a chain of 14 “academies” worldwide. Microsoft, too, is building a chain.

Predictably, many observers talk about an “accelerator bubble”. Yet if it is a bubble, it is unlikely ever to deflate completely. Accelerators are too useful for that. Not only do they bring startups up to speed, provide access to a network of contacts and give them a stamp of approval. They also perform a crucial function in the startup supply chain: picking the teams and ideas that are most likely to succeed and serving them up to investors.

In this post, we will discuss are we or are we not, and what is the prognosis for the trend?

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