Startable - Healy Jones’ & Prasad Thammineni’s Blog

Julien Wallen, CFO at a startup called pearltrees, has pulled together some interesting data on VCs who fund internet startups. He used Crunchbase as his source, so the data isn’t perfect, but there are some pretty interesting data points. While this data isn’t a perfect source for info on venture capital equity investments, there are some very cool tidbits in it.

There is no surprise that Venrock, GC and Spark are the Boston players near the top of the list. 

Pre-money valuation (average) go from $5 to $22 to $45 (millions) for the A, B and C rounds, respectively.

Note that this is from Crunchbase, and so the data isn’t perfect. In fact, my fund, Atlas, would rank much more highly if some of our companies were included, such as Songbird, Zoopla, OwnerIQ, Moo, etc. Some of this is because Crunchbase has a strong US bias, some is because not all of our companies are in Crunchbase or are not properly categorized in Crunchbase, etc. 

However, I hope that Julien continues to update this list, as it is quite interesting.

Little overwhelmed right now, but thought I would share two links I’ve recently come across that I’ve found quite interesting. One is on the freemium business model for startups and the other is data on recent Series A venture capital financings in New England.

Freemium is Not a Business Model, by Mark Evans. Mark is a Canadian writer/entrepreneur. The comments section here is really interesting; worth scrolling through. I agree that many startups underestimate the difficulties of making a real business via a freemium. However, enough startups have succeeded with this model that it has to be taken seriously. To prove that you’ve got a startup capable of really creating huge revenues via a freemium model you’ve got to have a serious marketing and conversion engine (that’s my two cents…)

Quarterly Review of Series A Financings in New England, by Foley Hoag. (download the pdf for the report) Foley Hoag is a respected corporate law firm. Their attorney’s provide the following commentary: “Series A rounds are getting done despite the general economic climate; and yes, they are getting done at a more modest level because of it.” “The first two quarters in 2008 saw a general decline nationally in Series A transactions (down 8% from the same period in 2007), with a more marked downturn felt in New England (down almost 30% from 2007).” Keep in mind they are using a small sample set for their analysis, but it’s still an interesting read.

Ah, angel investors. With a name like that, you’d think angel investors would be everything venture capitalists are not - warm, forgiving, easy going, free flowing with their cash… I’m sure there are some angel investors who have those qualities. However, most of the angels I’ve interacted with have been smart business people looking to generate significant returns - not so different from venture capitalists. As your startup searches for funding you will likely be introduced to angel investors. Here are a few things you ought to think about while you interact with angels:

• Friends and family can be angels… but you’d better treat them right. Make sure your f&f realize that the investment is risky; clearly tell them they could easily lose their entire investment. It’s probably a bad idea to let them invest their entire life savings. Make it clear that the investment will not be liquid, so they will not be able to ask for the return of their money at a specific time. Make sure they know that their investment could be diluted to no value by future financing rounds. Don’t make the mistake of relying on a handshake or legal investment documents downloaded off the internet. Hire an experienced lawyer and make sure everything is clearly explained to your f&f.
• Don’t confuse smart business person with experienced investor. Read the rest of this entry »
  

You probably read quite a few articles on how to answer this question. You have heard extreme things like, “your idea is not worth anything unless you implement it” and “this is how you calculate the true value of your idea”. Well, I am not going to spend anytime addressing this question from that perspective. Instead, I want to share my thoughts on what I think an idea is worth during a firm’s lifetime. I believe the value of an idea diminishes as time passes and instead, is replaced by the value of its execution.

Day 1: Firm’s value = The idea’s value

On day one, all of you have is the idea. You do not have a product, customers, revenues and of course profits. Most likely, you don’t have a team either. The firm’s value is same as the value of your idea. It could be $0, $1000, or a $1,000,000. Whatever that number is, your firm’s entire value is the number.

Read the rest of this entry »