Recently in Startups and Funding Category

I have seen a lot of material on how to prepare a VC pitch, and based on VC meetings I have been to I can tell you that in general this article covers a lot of good points.  Notice that it's B2B, so a consumer play pitch would be a little bit different (specially more on marketing and go to market strategy is needed).  Also in general the article tends to assume it's not a seed round:

"When it comes to presentation, it goes without saying that the best pitches:

• Tell your audience what you're doing, why the market will be big, and why you will win.
• Provide an imperative and a sense of urgency - they answer the questions "Why now?" and "What's changed?"
• Provide real insight - into the market, customer pain, or a unique approach.
• Hook the investor - with compelling customers or user numbers (unless it's a seed stage deal - even then, potential numbers or customers are helpful).
• Are delivered with knowledge, passion, and conviction by the entrepreneur."

Read the full article at Tech, Startups, Capital, Ideas. » Perfecting Your Pitch.
 

Biggest news today was the new funding for LinkedIn, well, not the funding itself, but the valuation.  LinkedIn is now officially worth more than $1 Billion - yes, that's with a B.

Also the folks at Reddit released the reddit,com source code as open source.  Aside from some spam control code that they have kept proprietary the rest can be used by anybody to create a post-news-and-let-people-vote service.  Thanks guys!

Seattle based wiki/social networks startup Wetpaint has raised their third round of financing of $25M, bringing the total amount of capital raised to nearly $40 million: Why WetPaint & Other UGC Sites Get Big Money - GigaOM

I can tell you from experience that most of what you see in this article is good advice, so it's a good quick read.  I would also add two things:  Most of VCs look at the team very closely - even when you present and how you interact with each other - and also they want a go to market strategy.  See my other post on the subject.

I have followed Jingle's Free411 service (1-800-FREE-411) since they are a voice service like Frucall's initial voice based comparison shopping.  They have done an amzing job, specially given the competition from Google (1-800-GOOG-411).  At this point they have about 6-7% of the US directory assistance market, and they are processing about 20M calls per month.

The company had raised two series of financing before and the valuation was around $150M in 2006.  They just announced a series C round of about $13M with existing investors.

The amount is low compared to the valuation and their series B, so I'm not sure what exactly is going on.  The company has just reached profitability, and their market share and call volume is great.  I would expect a larger amount for aggressive growth and capturing more market share.  I hope this is not a down round for them for unknown reasons.  Most probably their estimates about their expenditure have been off, and they are running out of money sooner than they think so they are doing an internal round.

Starting a company has many challenges including funding.  Even for web start ups where you don't need a whole lot of money typically a seed of $200K-$300K is needed to build a first release and get to the point that you can get your first round of users to do a beta test.

One common questions for entrepreneurs is whether to get a loan or go to a VC.  VC money is "smart" money (assuming you go to the right VC and you can actually convince them to give you the money), but even if we set aside all the known and unknown issues of dealing with VCs there is one huge issue when you want to get your company off the ground:  Valuation.  If you go to a VC to seed your company without a product and/or some sort of user traction there is no way of getting a good valuation.  You have to let go of a big chunk of your company.

The Y Combinator model is interesting and is worth looking at for new companies, because they have good connections, they do not take half of your company, and they do not ask for outrageous rights VCs typically want.  But the amount they invest is very limited and might not be enough for what you are trying to do.

So a common approach is to take a "bridge loan", which delays determining the valuation.  Basically you take the money, you build your product (or part of it), if you're lucky you can even get some traction, then you go for your series A, and at that time you are in a better position to negotiate a meaningful valuation.  The loan amount will now be converted into series A preferred shares, just like the VCs financing the round, usually with some discount to recognize the risk lenders took to give you money earlier.  That's why this is also called a "convertible note".

You can find some good details about the process and what you should consider here.

TechCrunch has a nice list of the VC deals in the US Web 2.0 companies:



The table shows the last round of financing.  Some more data about total money raised can be searched on Private Equity Data Center

San Diego based Montgomery & Co. (I've been there once) is hired to raise the next round of financing for Meebo at a $250M valuation.  They seem to be getting close to where Allen & Co. Is...

Update:  While we're at investment bankers, Qatalyst Group is just founded by a veteran.

This interview with Matt Murphy, the partner at Kleiner  Perkins responsible for iFund, is pretty interesting.  It feels like the real deal to me - pretty different from the Facebook fund.  They are looking for the next big ideas, not zombie bite applications:

http://www.news.com/8301-10784_3-9888320-7.html

Esty, the online craft bazaar, has raised $27M in series C.  And ThisNext, the social shopping site, has signed a series B deal for $5M.