Wednesday, June 11, 2008

The CEO Roundtable of Web 2.0 Companies Talk about the Current State of Angel and VC Funding

A recent Roundtable of Web 2.0 companies including highlights the participating companies including, Babblesoft, Edioma, iTaggit, KeyIngredient, Mindbites, Moximity, MusicGorilla, NaturallyCurly, OtherInbox, VolunteerSpot, and Wowio posted this summary which captured best practices for CEOs. The group offered their views on the funding situation with what angels and VCs fund these days:

“Angels: A working product, a scalable model, revenue, and a willingness to exit. It also really helps to have a serial entrepreneur as a founder. Your raise should be between $250k and $1M.

Some smaller funds like G51 have been active B2C funders, as have a few out-of-town VC’s like True Ventures, Benchmark Capital, and DAG Ventures. Here’s my take on the profile of successful VC raises:

VC’s: A working product, a scalable model, a compelling, innovative, and defensible take on an emerging market, and the potential for a billion dollar exit in 5-7 years. Your raise should be $1M or more, although there was some talk that $1-$3M is no man’s land right now. If the founders are first time entrepreneurs, it also doesn’t hurt to have some ivy on their resumes.”

I think they are right about the angel investor’s view of the fundable startup especially the point about a working product. I would add that the management team needs someone with experience and a permanent CEO is a must.

A clear go-to-market strategy is also key. Sometimes I see entrepreneurs try to paint a picture of a market full of opportunities but instead leave the investor wondering which of the twenty segments highlighted will actually be pursued.

Best regards,
Hall T.

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