I’m happy to announce that HyLo (and the Community Magazine Network) has advanced (again) to the Top-20 of NWENs First Look Forum. Sometime over the next three weeks we’ll be meeting with a few advisers and based on those conversations they narrow the field to 12… the final 12 pitch to investors in October.
Given our progress and some of the new things we’re working on I’m hopeful about our odds of advancing. That said, things have been very busy for us and it’s likely we won’t get to put quite as much time into the deck to give it all of the trimmings we’d like but hopefully traction speaks louder than PPT.
I was excited to learn today that we (Hyper Local Media) have been selected as finalists for TechStars Seattle 2010. As you can see from Andy’s explanation of what it means to be a finalist, we haven’t been selected but we’ve made it through to the more detailed review round.
TechStars is a great program that has been proven in just a few years to give startups a leg up. HyLo is off to a good start but we’d definitely stand to benefit from the insights and introductions that comes from being a TechStars company plus there’s something special about being a part of the first class of startups to go through the program in Seattle – from the way the community has already started to rally to the friendly competition that the selected companies will have that pushes all of them forward.
Well, I better start working on the stuff they requested. Hopefully in a couple weeks I’ll have another positive update.
Let me start by saying I fully appreciate the “would you rather own an entire grape or part of a watermelon” argument for pursuing angel and VC funding. That said, my hope has been that we’d be able to bootstrap and wouldn’t need to raise external dollars. (I started writing this post a few weeks ago and for a variety of reasons things may be-a-changin).
Our team is mostly MBA’s, that means we’re in the glorious position of having guaranteed income (in the form of student loans). As individuals that’s fine but as a company we’re poor. We’re not interested in raising significant money at this point, see my post “How are you funded?”, but we could use a little more cash in the ‘ol bank account.
I’ve spent a lot of time trying to recruit people who are willing and able to work without cash compensation but it’s been tricky. Since returning to school after the holiday break I’ve been asked a number of times, “hey, how is the startup going?” My response has become, “The BizDev and Strategy is going great but development is seriously lagging.” We’re building the first feature of our prototype web application in India and they are working for free (great) but it’s been sporadic (boo). I can’t blame them, they have bills to pay and they engaged us because they’re a new small firm looking to build its brand and get a US reference customer but that doesn’t cover payroll.
I used to talk about our company as a sales and service organization built to be scalable on a web platform but, lets face it, we’re a tech company and we need a tech lead and developers – if you know people… Anyway, I’m not naïve, I know that good devs with experience are hard to come by but despite the tough environment finding an entrepreneur incentivized by equity hasn’t proven as attractive as I’d hoped.
So, if you were and enterprising MBA student looking for find a talented and passionate Rails guy or gal to join the world-changing company as a technical cofounder but couldn’t offer immediate cash compensation what would you do? The business is reaching the point where fundraising is plausible but definitely not a given, particularly in light of our full-time MBA status, and the valuation still would be quite low. Are tech folks more interested in the cash today than equity tomorrow? If so, perhaps raising cash would just act to shift most of the allotted the equity from the “founder” to the investor while finally accelerating development in the direction of a revenue-producing product? Startups are fun.
If you’re looking for a loaded question this is it. I’ve heard it from a bunch of people, some that I’ve been courting to join the team, classmates that I’m just looking to bounce ideas off of, and experienced folks I’m tapping for advice.
Here’s my read of this question: it’s 20% curiosity about the potential capital structure of the organization and 80% delegated diligence. Venture Capital is meant to accelerate high-potential startups and is clearly needed in situations where you need to reach mass for network-effect reasons or you need a long runway to become cash flow positive but it seems to have become the defacto standard for determining if a startup is going to be acquired for big bucks or do something particularly exciting.
Heuristics are great, they let us build quick models to shuffle the crap off our plate to make room for the good stuff but this is a risky one. Look, we’ve got a take-over-the-world strategy just like most startups and if we wanted to go after it right now money would definitely be required but that doesn’t feel very pragmatic. Our initial “product” will solve a real need with real companies in a niche that hasn’t drawn too much attention yet and we *could* generate real money but not quite that $100M in annual revenue that VCs tend to look at. But the great thing is, this initial business is Phase-1 not the end game. Sure, it will take time to build and the landscape will shift as we go potentially impacting our long-term strategy but hey if we reach year 4 with $50M in revenue we’ll still have plenty of options – plus I like to think that my team and I will be smart enough to sniff out new opportunities along the way.
Of course, maybe I’m way off the mark and the 80% is really just people wondering where their salary would come from.
P.S. if you or someone you know is interested in investing in a startup whose principals are full-time MBA students, let me know.