Venture Capital funding done right for the Web 2.0 era.
You know I see on techcrunch and mashable all these stories about "xbeloit", "peebOs", Smegoooo's" or some wierd named web 2.0 site getting another 10 million funding. ANOTHER 10 MILLION? friggen Aye? how does someone get 10 mill for building yet another basecamp with a freeky name. And then what are you expected to give back for that 10 mill. Your soul, first born and the left nut of your uncles brother?
Then I came across a link which instilled in me a sense of, "now that just makes sense". It was about getting the idea out. Getting that version 1 live.
How many of you out there have had a cool idea and developed it so far but all the 3am nights later you start to loose interest because it just doesnt seem to be happening. Well if your in the US time to check out http://www.ycombinator.com.
[ VIA: Orielly.com ]
Check this from thier site:
Do we need to write a business plan?
Not for us. We make funding decisions based on our application form and personal interviews. We love demos, but we never read business plans.
How much do you usually invest?
Rarely more than $20,000. The goal is usually to give you enough money to build an impressive prototype or version 1, which you can then use to get further funding.
What does Y Combinator get out of this?
Stock, usually about 5-7% of it.
Heck, give me 6k to hold me over for the time, and ill give you 20% and the nut of my uncles brother.
Man how I wish someone in New Zealand had a clue and started something like this. Really to get that version 1 out…to get it to a really basic product…full time…. should take 3mnths. How many peolpe in that three months is just a measure of how hard it is.
When I dream that my idea could make a really usefull and cool site/idea, and I dream that I could make a really sweet product out of it, I am not looking for 10 mill of funding. heck Im looking to not go hungry and still have a home at the end of developing it.
Where are the VC's that give you 10g to push out a web 2.0 site in Ruby on rails in 2mnths that functions and can handel some users on your so so hosting plan. Thats the point that I want to reach. Where it can be evaluated as a self standing product.
Wise up guys (all you VC's out there) and youll find you get alot more for your money.
Nonsense.
It is not the website you are selling, it is the business idea. A businessman with sanity should never give away 5-7 % percent of its business to people that don’t risk financially, and 20K is not a risk for a real VC, never.
I dont know. Color me insane but Id give 5-7% of nothing for 20k to take it to the next level. Maybe your the wrong target, but when I have an idea….”When I dream that my idea could make a really usefull and cool site/idea,”….It is nothing…its not a business yet or a product…it’s nothing more than something I think could be cool. And if someone else ie the VC thinks so too all I need to get to a stage where I can evaluate it as a business is 20K. so 5-7% of what would have been nothing is fine. And that is a risk because 9/10 of these ideas will evapourate into the blue. Maybe your looking at this fom the wrong angle. these are raw startups, not begining businesses…..thats the next stage once you have gotten through the 20k.
So really nonsense doesnt come into it!
Hi Campbell,
As I work with VC’s everyday, I will stick to my point, but try to explain it more detail.
If your website will generate profit, any kind of profit, then it is a business and it has got a business model. A VC would invest in business if it has a potential to generate significant profits in return. The idea must be risky but lucrative to attract a VC, and the bigger the stakes are – the more attention you will get.
If it is just a cool idea you want to realize, then you should think about alternate ways of financing like selling advertising or partnerships for your future project.
For ex. I have a internet community for designers. It took me only several weeks to sell advertising space for future project that wasn’t even started to several companies that had interest in designers as potential clients. The funds raised for advertising were enough to cover the production costs.
The other way is to do it slow and cheap, or find enthusiastic partners, or make it open-source like.
Hi Paulius, Thanks for the reply. I guess the key point for your arguement would be the “significant profits in return” and “risky but lucrative to attract a VC”. I will be the first to admit I know nothing about the whole world of VCs so your comments have been really helpful in understanding where they stand. I still think that Y combinator isnt a bad idea (my opinion), but can see how alot of people (probably the ones who know what the are doing with businesses lol) would give them a wide birth. Definately alternatives exist as Paulius points out and best of all they dont require you to move to another location for 3mnths. Cheers again Paulis.
Man!Man!Man! Most people still dont get. It does not matter the percentage. Well, at least not as long as you have a majority stack. Any smart entrepreneur who is sure has a great product and is ready to get out there should be willing to give away 6% just to get the kind of publicity and contacts Y combinator will get you. Stingy entrepreneur always end up drinking lots of beer in their parent’s basement complaining that they thought of some big ideas before someonelese got rich off of it. If you get the call for Y combinator. Go. Offer them 1% more than they asked and work your life away. Why? Because it is bigger than money. It is about siiting down someday and knowing that your service matters or at least mattered for a few days to thousands of people.