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Posts Tagged ‘Portfolio Companies’

Facebook-Like News Feed Headlines First Round Capital’s Redesigned Homepage

A visit to the typical homepage for a venture capital firm most likely provides a well designed landing page that spells out the firm’s mission with links to its portfolio companies and VC bios. Secondary to this general information is a page dedicated to press releases from the firm, or in many cases, a company blog with relevant posts. First Round Capital, however, recently redesigned its homepage to place a much heavier emphasis on real-time information from news sources and its VCs, and portfolio companies.

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The feed works in a similar fashion to Facebook’s news feed in that information is presented in a reverse chronological order. It includes news from its portfolio companies, third party news articles, as well as blogs, tweets and even Foursquare checkins from its team of VCs and entrepreneurs – all of which can be subscribed to using RSS. Also included in the feed and on its own dedicated section of the site are job postings from First Round’s portfolio.

“One of the most helpful things a VC can do for a portfolio company is to help them find key hires,” writes First Round Managing Director Josh Kopelman. “And the jobs section of our site contains well over 125 current job openings within our portfolio.”

The job postings complement First Round’s Key Hire Wire, a weekly newsletter released a few weeks ago containing job openings with its companies. First Round also helps its portfolio out by placing these openings on a Twitter account dedicated to blasting these openings out to the Twittersphere.

The revamped site also contains a new portfolio section with some interesting ways to navigate through the firms numerous companies. A standard list of current and former companies is supplemented by options for viewing a tag cloud of industries and other keywords, a map of company locations, or a feed of company tweets.

First Round, which recently snagged the top position (by a wide margin) on Larry Cheng’s list of the top VC firm websites based on average monthly traffic, is leading the way for VC firms with its innovative approach to its homepage. What better way to show potential companies that you not only invest in innovation but that you participate in it yourselves?

And venture firms aren’t the only group that can learn from First Round’s redesign. A news feed of aggregated content from various networks can be a unique approach to the homepage of any company. In startup culture, most entrepreneurs and employees have their own blogs, Twitter accounts, Foursquare accounts, as well as of a number of other social network accounts. Rather than linking out to individual employees and making visitors click out to a slew of different sites, why not provide a handy news feed of relevant information from your employees?

The new site is an excellent one-stop location for startups and entrepreneurs to find pertinent blogs and news, especially for those looking to Foursquare-stalk their favorite VC at the local coffee shop. First Round has created a definitive resource for anyone looking for information relative to the firm, its employees or its companies – a model any company could easily replicate. Let’s just knock-on-wood that Facebook doesn’t go waving its shiny new patent in anyone’s face too soon.

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Think Your Start-up Is Venture Worthy? Think Again.

Pepperdine has a new study out that attempts to shed some light on the clubby, shadowy world of private finance. Researchers polled experts in lending, mezzanine capital, private equity, venture capital and private businesses themselves. Not a big shock, but things don’t look pretty, especially in the venture capital world.

A lot of the stats weren’t surprising. According to VCs, there’s been a 65% decrease in up-rounds (where a company gets a bigger valuation) in the last six months and more than 60% of those polled expect a longer wait for an exit. Similarly, the bulk of the companies getting funding are still California-based.

There does seem to be some shifts on where the money is going. After Northern California and Southern California the biggest area of investment geographically was in international companies. And investors said they intend to invest more in cleantech than software going forward. This is a big reversal, as software has long been the dominant category for venture deals, but it’s unknown whether software has lost favor, or whether it’s just become so pervasive that it doesn’t really hold together as a category anymore.

But it’s when you look between the survey of VCs and the survey of private businesses that things start to get ugly. The businesses, it seems, vastly over-estimate their ability to raise funds. 41% of them feel that they qualify for venture capital funding. Meanwhile, the VCs surveyed indicated that they’re only doing a few deals every six months and go through one hundred business plans to close one deal. Clearly, the rate of acceptance isn’t anything like 41%, says researcher John K. Paglia, Pepperdiine’s Denney Academic Chair and Associate Professor of Finance.

A few more stats make that picture look worse. Researchers divided the portfolio companies into six stages and the startup is still operating a loss in each of the first four. Those categories represent roughly 84% of all portfolio companies. That means the vast majority of privately held companies are still very dependent on venture money to stay in business. And investors aren’t necessarily keen on their prospects. Respondents deemed between 12%-16% of companies generating revenues to be essentially “worthless” and deemed 20%-26% of their pre-revenue investments to be “worthless.”

Add to this that 72.7% of VCs said they had a decreased appetite for risk and that more than half of those polled expect to do between zero and three deals in the next year and you start to get the feeling things are going to get a lot worse for private companies, in aggregate, before they get better.

Of course life isn’t that much better for the VCs: Sixty percent of them say their own prospects for raising new funds have declined over the last six months and 41% said they aren’t planning on even attempting it in 2010.

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Investing in Innovation: The Circle of Life

It’s easy to construct an “us” versus “them” mentality between startups and investors, especially when there are so many disgruntled founders who’ve had the door slammed in their face. But I’d hardly make the generalization that investors avoid innovation. While it’s true that proven returns are required in the majority of portfolio companies, it’s these revenue generating deals that tend to lift up the longer term innovation-based investments.

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Andy Singleton’s recent article for On Startups suggests that VCs avoid innovation whenever possible. Writes Singleton, “If you ask VCs what they look for, they use words like ‘traction’, ‘proven business model’, ‘reference customers’, and ‘invest in marketing’ or ’sales and marketing’… It doesn’t take a genius to understand what they are saying.  As much as possible, they want to avoid all innovation (stuff that’s not proven).  It’s risky and unprofitable.”

I know this isn’t going to be easy to hear, but the above statement isn’t entirely true. It’s not that investors want to avoid ALL innovation or even all risk. It’s that most want to avoid YOUR innovation. There’s no plot to crush the inspiration of the “animal spirit”, no interest in thwarting civil society, the issue isn’t that investors are short-sighted jerks, it’s that they need more cash cows (especially in this garbage heap of a global economy) to balance out the big audacious paradigm shifters.

VC’s don’t print money. Cash cows allow VC’s to continue raising funds and these funds are then dispersed across the portfolio to others who are pre-revenue. In other words, we can’t all be whimsical geniuses with a three year launch plan. If VC’s started doling out money to every starry-eyed pre-revenue entrepreneur and ignored those cash cows that pick up the slack, funds would implode on themselves. It should come as no surprise that you can’t pay for office space and servers with sweet dreams and pixie dust. You may not realize it, but if you’re funded and you aren’t generating revenue, someone else’s profit is likely paying for your existence.

This isn’t to discourage you from innovating or building something you believe in, it’s just a reminder that if you aren’t generating profit, there are no guaranteed rewards for hard work or good ideas. If you really are “an irrational animal spirit” then you’ll continue to take risks regardless of the outcome.

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Redpoint Ventures raises $400M fund for investments in social, mobile, and more

Redpoint Ventures, a Menlo Park, Calif. venture firm whose investments cover everything from cloud application deployment (Heroku) to document-sharing (Scribd) to solar (Solyndra), has raised a $400 million fourth fund for early-stage investments.

Despite the broader economic climate, Redpoint partner Geoff Yang said he’s still excited about the startup landscape, in part because there are so many industries worth investing in. Ten years ago, everyone was investing in “the commercialization of Web 1.0,” he said. In contrast, with the new fund, Redpoint will continue funding companies in five distinct areas — the social web, mobile, Internet advertising, cloud computing, and cleantech.

In fact, Yang said Redpoint made as many investments in 2009 as it did in 2008, and plans to make just as many or more in 2010. (I asked for a list of 2009 investments, the firm wasn’t able to send it to me before publication time.) It also had a number of successful exits in the last six months, with the acquisitions of LifeSize, WiChorus, Networks in Motion, and Kazeon. Two other portfolio companies, Calix and Solyndra, have filed for an IPO.

Yang acknowledged that the firm’s strategy has shifted due to the economy, in that it casts takes a harder look at how successful a company might be, and adjusts its investment and the valuation accordingly. But that doesn’t mean every startup needs a definite business plan.

“It really depends on the space,” Yang said. “If it’s a mature industry, the threshold is that much higher. If [the investment] doesn’t cost that much and it’s a nascent space that’s still being defined, we can live with a lot of uncertainty.”

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The Importance of Quick Decisions

In the words of legendary investor Mark Suster, “Entrepreneurs don’t noodle, they do.” While it’s important to be analytical in your decision making, it’s also important to act when opportunities arise. Yesterday over drinks with some investors and entrepreneurs, I marveled at the difference between the life of a startup founder and the life of an investor. Founders manage multiple staff and stakeholders with heavy emphasis on operational issues. Meanwhile, investors manage multiple portfolio companies across a number of industries. The common trait amongst both is decisiveness.

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Suster’s recent blog post speaks to the value of being able to make a quick decision. For investors, not only are most investment pitches met with the answer “no”, but investors recognize that some of their portfolio companies will not offer the anticipated returns. The ability to be decisive while also factoring in a margin of error is exactly what keeps both worlds running smoothly.

Says Suster, ” The best entrepreneurs have a bias for making quick decisions and accept that at best 70% of them will be right.  They acknowledge that some decisions will be bad and they’ll have to recover from them.  Building a startup might be a game of inches but you don’t get timeouts to pause and analyze all of your decisions.”

While it’s important to lay out a product plan, create a good business strategy and study your competition, don’t expect to be perfect. Leave room for a margin of error and don’t be afraid to pivot quickly if your company needs it. You can’t be a startup founder without taking any risks – if you were really that safe you’d be working for someone else.

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ReadWriteStart Weekly Wrapup

With the first week of 2010 in the books, we thought we would take a look at the most popular posts of the new year in this week’s weekly wrapup. In this edition we’ve got tips for funding advice, keeping organized and building loyal communities, but be sure to check out the newest post in our new series “Never Mind the Valley,” highlighting thriving startup communities outside of Silicon Valley.

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5 Web Apps To Keep Your Startup Organized

In a world where emails, phone calls, texts, and Tweets constantly bombard us, it is getting harder and harder to manage the firehose of data and information being thrust our way. For young companies to succeed this environment, it is imparitive they become organized and efficient lest they fall behind and quickly become overwhelmed.

While there is no shortage of online solutions, it can be hard to know which one is the right tool for the job, so here’s a list of five web applications to help kick-start your company and keep it organized without breaking the bank.

5 Great Blogs For Funding Advice

The best advice we can give you is to know your audience. You don’t try to sell booze to pregnant women, you don’t make God-jokes in Utah and you don’t get a term sheet without tailoring your pitch. Investors are already blogging about what they want from potential portfolio companies, so if you’re looking for funding you should be reading their blogs. While we know there are plenty of useful investment-related blogs, here’s a list of five to get you started.

Community First: How Wufoo Created a Captive Audience

So you’ve got a fabulous idea for a startup? That’s great, but before you get wide-eyed and start thinking about wireframes, venture capital and moving to San Francisco, get your feet wet first by beginning to build your community.

Having a strong and loyal community behind you is an important step in the startup process. After all, it will be much easier to convince a potential investor of the viability of your product if there is a thriving community eager to get their hands on it.

Never Mind the Valley: Here’s Los Angeles

Best known for its movie stars, sun and surf, Los Angeles probably isn’t the first place you’d think to breed technology. But when you consider the influence of investors like Jason Calacanis and Mark Suster, in addition to the fact that companies like Demand Media and Docstoc call Southern California home, it’s not surprising that the community is emerging as one of the country’s hottest startup hubs. ReadWriteWeb caught up with some defining characters of the LA Tech scene to find out why they’ve made their homes away from the traditional tech haunts of Silicon Valley.

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Norwest Venture Partners raises $1.2B fund

Norwest Venture Partners has has raised a new venture fund of $1.2 billion — the eleventh fund in the firm’s history, and its largest.

Managing partner Promod Haque says the new money will help the firm expand — in terms of geography, industry, and the type of deal it gets involved with. The fund is so much larger than Norwest’s $650 million tenth fund because many of the new strategies that Norwest started pursuing in the last few years are bearing fruit.

Geographically, the firm has been expanding beyond the United States, with offices in India and Israel, as well as investments in China. It’s also adding health informatics and medical devices to the already varied group of industries it invests in. And it’s looking to expand beyond its traditional early-stage focus into growth investments in later-stage companies.

In each case, Norwest has added staff to make the expansion happen, and Haque is emphatic that Norwest isn’t abandoning any of its existing investment areas. For example, growth equity investments are a natural next step as its portfolio companies mature, but Norwest also has two first-round deals in the works.

“We’re not changing emphasis, we’re adding some stuff,” he said.

Norwest has invested in 450 companies in its 48-year history. Recent successes include Rackspace, the hosting company that went public last year, and LifeSize Communications, which was recently acquired by LogiTech.

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sfCube launches to seed fledgling startups

A new early-stage startup incubator, sfCube, has launched in San Francisco to seed as many as 12 companies with between $10,000 and $25,000. Its founders, startup veteran and former engineer Dylan Rosario and patent lawyer Ben Bedi, say they are especially interested in funding web-based services, cleantech initiatives and search companies.

The incubator is in the process of raising its fund, with a target between $8 and $20 million. It says the bulk of this money will come from private individuals, including friends and angel investors. In addition to financial support, sfCube will provide its portfolio companies with product development, legal, marketing, advertising and networking help. There is also a major emphasis on tapping the social web for promotional purposes. All of the participating startups are asked to make an inexpensive viral video for the web, and encouraged to take advantage of Twitter, Facebook and other Web 2.0 tools to spread the word.

As with many incubators, office space is also part of the equation. Startups can choose whether to pay between $70 and $300 a month for desk or office space and other resources. Already several companies reside in its 5,000 square-foot complex in the Dogpatch neighborhood of San Francisco, including LaptopsAnytime, LK Designs and DonateSearch.

The incubator’s real strength lies seemingly with its founders, who have impressive experience and contacts between them. Rosario has helped found several startups, including real estate engine ReaYel.com, search tool fleeQ and ad network ExitExchange. He and Bedi also say they are familiar with government grant and stimulus programs that could give startups an important early leg-up. Otherwise, the firm sounds very familiar to recently-launched Berkeley Ventures, which is also devoted to seed-funding for young startups in the same sectors.

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