Startable - Healy Jones’ & Prasad Thammineni’s Blog

Congratulations to Mike, Bruce, Sandro and Bill of DataXu for raising a Series B investment from Menlo Ventures, a well known Silicon Valley venture capital firm. Atlas Venture and Flybridge, the Series A investors, invested in this round as well. I got to know the DataXu team when I was with Atlas and worked on the Series A investment. Mike has a great team and some solid technology.

I think it is great that important West Coast VCs are making follow on investments in the  Boston area - another prominent investment like this is Scale Ventures investment in Hubspots most recent round. When Boston companies are doing well enough to attract capital from outside the region then you know something good is happening.

Also important - while Boston may the the number 2 venture capital pool in the world, it is nothing compared to the capital available in Silicon Valley. When venture firms from San Francisco supplement local New England funds this means that there is more early stage capital available in the region to support innovation - a really good thing! Let’s hope for some more great companies like DataXu and Hubspot. Actually - let’s try to make them ourselves!!!

Congrats to William and the great guys at AccelGolf for formally announcing their seed funding. Will did a great job leveraging his experience at TechStars into some solid angel funding, which should really help him grow the business. This is another TechStars Boston company doing really well! I hope the new class will also have a successful company forming session…

Dharmesh Shah (a longtime lurker on my blog - but he did comment once!) made a seed investment in Backupify, a provider of backup services back in June. Backupify has just received a larger angel investment of $900k from First Round Capital & General Catalyst (as well as some other really well known angel investors like Jason Calacanis).

Why am I mentioning this? Because it’s important to get the word out about Boston’s angel investment community. Dharmesh and the other initial angels invested $125k in the first round, and Dharmesh is a pillar of the Boston startup community.

I was out with a well known startup’s development group the other night, and one of their VCs from the West Coast was out with them. He and another investor (acting individually, not as part of a VC fund) invested over $500k in a young developer’s startup after just a couple of breakfast meetings. Obviously this was in Silicon Valley. There is just not a lot of this fast decision making angel investing in New England. The West Coast VC made it pretty clear that he thought that investors in Boston would never be able to make these sorts of fast, company forming investments.

He’s correct, in that we don’t have a lot of the “have breakfast, get a check to start a company” investors in NE. So I think it’s important to celebrate the investors who do make company forming investments. I don’t know how much research/effort went into Dharmesh making the initial investment in Backupfiy, but regardless, he helped get something going and we should all be proud that there are investors in Boston who do this sort of a thing.

Finally, TC mentions that Backupify is looking to move HQ…  Let’s make them feel welcome in Boston and see if they will move up here!

Xconomy has a great piece on Carbonite, a Boston based SaaS provider of online PC backup services. The company is known as a great local software company, and it’s good to hear that growth continues to be strong. Let’s hope David Friend, founder and CEO, is able to keep the company on track and doing well despite the tough economic climate.

There is a (sort-of) new fund in Boston - Volition Capital has just formed by spinning out of Fidelity as an independent growth capital fund. The old Fidelity Ventures group has a new name, but similar focus. The move was announced yesterday, January 11 2010 and is now being reported in the press.

Volition Capital’s Investment Focus

Volition’s investment focus may be changing a bit from what it was when the group was part of Fidelity Ventures.  The fund will invest in growing, founder-owned tech businesses based in the U.S. and Canada. I’m not quite sure how this compares to the old Fidelity Ventures, because I know that they invest in VC funded businesses (like SeatWave). Volition is defining “growth companies” as ones that have between $5 million and $50 million in revenue. I do not believe they require the companies to be cash flow positive, but this may have changed as well since leaving the Fidelity umbrella. Volition Capital specializes in software, Internet, information services and tech-enabled services companies.

Volition’s portfolio

Since the group will be managing the old Fidelity Ventures portfolio they will be starting out with legacy investments. The firm’s portfolio comprises 26 companies in the United States and Europe. Having this existing portfolio is probably a good thing for them, since they’ve got some solid companies in their portfolio and this will help the group establish the “track record” they’ll need to raise their first stand-alone fund. Some of these companies include Intralinks, BlackDuck Software, Flock and Seatwave. It is interesting because on their portfolio page they indicate if an investment is an early stage investment or a growth investment - and they seem to be pretty evenly split early stage and growth.

Good luck to the Volition Capital team, including Larry Cheng and Geraldine Alias!

I hope that the team is able to successfully manage out their existing portfolio, make a few new good investments out of their remaining fund and raise a new fund!

I’ve really had my head down at Pixily recently and am behind in keeping my New England SaaS company list up-to-date. If you know of any NE based SaaS companies not on this list, please leave a comment or ping me on Twitter or over email: healy (at) startabledotcom. As long as the company has launched their product and is HQ’d in the New England area I’d love to have them on the list. Thanks!

Michael Greeley, Chairman of the New England Venture Capital Association (NEVCA) and Partner at Boston-based Flybridge Capital Partners predicts that New England companies will raise $2 billion in venture capital in 2010. That’s down from $3 billion in 2009. He points to the fact that NEVCA currently has 108 members, down from 138 members in 2009.

Yikes.

Hey startups… time to get really friendly with those angel investors who still have cash money!

Last summer I was lucky enough to be an advisor to Boston TechStars. It was an awesome experience, and I highly recommend the upcoming Spring session. Applications are due January 11th; you can apply on the TechStars web site.

I’m not affiliated with TechStars at this moment, and I want to make it very clear that I have absolutely no involvement with the application screening process. However, I do have some opinions on what made some of the Boston companies successful, and I have a strong suspicion that the screening process is designed to bring in a certain type of entrepreneur(s). By a “certain type” I mean someone who will get a ton out of the program, engage with the mentors and create something really cool. I also happened to have been around Shawn, David and Brad when they were talking to the Boston mentors about what they look for when picking entrepreneurs. So, I’m no expert, but…

Here are my opinions on some of the characteristics TechStars is looking for:

Tech rockstars

You need one, preferably two plus rockstar developers. You are going to be creating something from scratch over the course of a few months. Whatever you are going to make would likely take a big corporation’s tech department a year or more to build. But you are going to have a working demo and hopefully customers in just a month or two. So you better be pretty awesome in the technical department.

How you prove it: Have real, working demos or alphas that blow their socks off. Really impress them. Do something totally new with a piece of technology, even if it is not related to what you want your company to do. Check out what Brad Feld says about why he liked the founders of RedLaser.

Ability to accept criticism

If you are accepted to the program you are going to be exposed to some of the most successful technology executives in the Boston area. These are people who have walked the walk and who are involved with the program because they want to provide mentorship. Being provided mentorship means you can accept criticism and be flexible in shaping your vision.

How you prove it: This may be one of the hardest things to prove in the application. But other entrepreneurs have done it, so I know it’s possible.

Have a business model

Understand how your idea will make money. This means you understand how customers currently solve the itch you are going to scratch. Is the way you want to make money consistent with their willingness to pay? Check out David’s post on the business models from previous TechStars companies.

How you prove this: Make it clear you understand what customers already pay to solve the problem; who the competition is and how much money they make selling a solution. Look for similar business ideas and see how those companies are monetizing. The way your company actually makes money in the future can be different, but you need to prove that you are thoughtful and that you are more than just an awesome developer - you are an awesome developer with some business savvy.

Have goals

When you raise venture capital, you try to raise enough so that you can hit critical value creation milestones. In TechStars, you’ve got three months of reasonable funding, free office space and dry humor provided by Shawn. What the heck are you going to accomplish with that? You had better be able to achieve some real milestones by the middle, end and a few months post program. Know what the metrics are that show you’ve created value. I don’t know what your business is, but if it’s anything like the other TechStars companies I saw perform well then you will want to have 1) a working product (even if it’s a minimally viable one) and 2) highly visible customer traction.

How you prove this: Have an aggressive developmental timeline that you can actually hit. And, see my next point:

Hit goals during the application process

I remember Shawn saying “we admitted these guys because look what they did during the application process.” The company he was referring to launched product, on the schedule the proposed, in between the time they applied and were accepted. Set goals on development (or marketing) milestones that will occur between January 11 and Feb 1 when acceptees are notified.

How you prove this: You do it! You say, we are going to launch our iPhone app in three weeks and you do it. You say we are going to have the private alpha ready on January 20th and you get it out.

There are some very cool new startup and innovation blogs on the scene in Boston, and they are definitely worth checking out!

ForEntrepreneurs.com - One of the best venture capitalists on the East Coast is David Skok. David is a partner at Matrix Partners, and previously founded several companies. David was on the board of a startup where I was a board observer - and I learned a ton from watching him. (A few of my older posts were inspired from comments he made on the board.) I am still working my way through all of his posts on forentrepreneurs.com. So far I really like the Building a Sales and Marketing Machine series.

startupblender.com - Adam Berrey is an experienced startup/technology marketing professional in Boston. I’ve had the pleasure of meeting him a few times, and he really knows a lot about getting startups focused on their right target customers. His new blog compiles his experiences as a startup marketing professional. Check out his post on how SaaS businesses changed the software marketing world.

bostinnovation.com - A new site devoted to covering technology innovation in Boston. Their stated goal is to help bring together the startup community in Boston. Since the whole New England region is constantly trying to find its innovation center of gravity I welcome their efforts and wish them luck! Check out the posts by my marketing intern, Matt Fellows.

Vivek Wadhwa will be speaking at Babson Monday night, December 7th 2009 at 6:30 pm. The topic will be “Babson, Boston, And Beyond: Globalization Facts And Myths.” For those of you who do not know of Vivek, he is not only a strong researcher of entrepreneurship at Duke and Harvard - he’s also a successful technology entrepreneur. I really respect some of the opinions he’s expressed recently on TechCrunch, even though he takes a purposefully controversial tone. One of his great posts ripped the venture capital lobby for claiming aggressive figures on how many jobs had been created by venture funds and the level of innovation that had come from venture investors. (My post in response got some good traction too.) I’m very curious to hear his take on globalization in light of his recent comments on how much better SF is than Boston for technology innovation these days.

Afterwards I may try to roll over the Webinno - and the famous after-party.