This picture needs no captions. Although, do you remember when Apple looked like it was going out of business?
UNH just published a piece entitled “Where Have All the Seed Investors Gone?” that purports that seed investing has dramatically decreased in the first half of 2010.
I don’t believe it.
This study contradicts my non-scientific view into the seed funding scene (for example, I ate dinner with one of the most active seed investors in Boston who said he had done way more new deals this year vs. last, despite having told his wife he was going to back off this year!) It also seems to go against the data recently released by CB Insights (which I blogged about because it showed that VC investing was going down in Massachusetts.)
I emailed Anand Sanwal of CB Insights to ask if he had an opinion on seed funding trends this year. His response:
You’re absolutely 100% right. These findings are totally inconsistent with our data. In fact, we’re seeing seed rounds in sectors that traditionally haven’t been areas for seed investment (green, healthcare). So overall, seed investments are increasing. Within tech (esp internet/mobile) which is where the seed phenomena has sprouted (apologies for the pun), the momentum is continuing and may even be accelerating.
The report seems to talk a lot about formal angel groups having a higher percentage of “latent,” i.e. non-active members of the group. I wonder if the UNH report has too strong of an emphasis on angel groups? I believe that they are playing a less important role in seed investing today. Instead, it seems that angel investing is now being driven by things like VentureHacks AngelList, which is an informal… group is too strong of a word, more like collection, of angel investors.
So, I believe that angel investing is alive and strong in the US right now.
The UNH study does have some interesting stats; the one I find most interesting is around the analysis on “Yield Rates:”
The yield (acceptance) rate is defined as the percentage of investment opportunities that are brought to the attention of investors that result in an investment. In Q1,2 2010 the yield rate was 12%, continuing a stabilization in yield rates that began in 2008 (10%) and continued in 2009 (14.5%).
While that seems a little high, in my opinion, I think it does show how difficult it is to raise capital. Raising venture capital or seed investments is hard…
As I mentioned in a previous post, my company recently did a lot of cool testing during our site redesign. Anand Rajaram, OfficeDrop’s co-founder has a series of posts on Performable’s blog that talk about tips, tricks and tools that we used during the process:
Startups vs Bubbles
I just saw a cool Tweet by Ariel Diaz, a Boston-area startup executive.
The link leads to a post entitled “The End of the College Textbook as We Know It?” There is a pretty eye-catching chart that implies there is a bubble in the textbook market:
If a chart like that doesn’t make you want to start a company you aren’t an entrepreneur!
Someone should chart various assets/commodities/services/etc against the CPI. Anywhere there is a chart where inflation of the item is outpacing the CPI by 2x or more is potentially fertile grounds for innovation. I’d like to dub this the:
Inflation Innovation Ratio
Startups can create value by “disrupting” a market – providing a better service/good through the power of technology. If a startup can offer a superior service at a lower price, then both the end consumer and the startup can capture some of the “rent*” extracted by the current players in the industry. Growing a business by shrinking a market.
One caveat I would add is that there are industries where inflation is happening for reasons that a startup may not be able to attack – such as government regulation. I’d hope that other reasons, such as problems in the distribution chain, could be overcome by the power of the internet to disrupt.
*despite having studied way too much economics the term for the lost consumer utility in a monopolistic market escapes me…
Bostoninnovation did a nice job with their Shutup & Startup event this Friday. I didn’t attend the Saturday session, but was pumped to see a number of local students at the kickoff evening on Friday. It’s good for someone to take initiative here and try to get the Boston startup community connected with the Boston student community. I’m happy they did this.
I stole this image from the Saturday session from the Bostoninnovation tweet stream:
I would love to see more of these events, in particular ones that have a large number of students studying CS/development.
Also, hopefully I didn’t freak any students out. In my attempt to try to make people feel welcome I decided to randomly approach people and say hi. I realize this isn’t the New England way, but I’m not from here so…