Know Massey of the Atlanta Technology Angels pointed me to a great article in The New York Times about angel investors and how to pitch them. Toward the end there is a simple summary. It is from an entrepreneur named Ted Ray currently going down the angel path.
- Have a product on the market.
- Do not ask other people for money until you have spent your own.
- Be concise in your investment materials.
- Seek angels in your field.
Focus on achieving one and two before taking steps three and four.
AtlantTech reported today that Twitpay has raised an undisclosed round of funding.
Twitpay, the second Startup Weekend Atlanta company to secure seed captial (Skribit being the first), is a simple way to send payments via Twitter. The service is powered on the backend by Amazon Payments. Twitpay went live two weeks ago.
Twitpay has been featured on CNN, The New York Times, and Time. Most recently Twitpay was listed as the second of 99 Essential Twitter Tools and Applications.
With all the media attention and a little money in the bank, founders Don Brown and Michael Ivey are now focused on gaining some traction.
Mr. Money Wings is happy.
Disclosure: I am Twitpay advisor and stockholder.
Busy time in the ATL. A brief roundup starting with three big happenings on Tuesday alone.
Georgia Technology Summit
Everybody that was anybody showed up for the biggest and best Georgia Technology Summit. The past two years
I have written posts about the GTS entitlled "The Good, The Bad, &
The Ugly." This year I am just going to say good. TAG listens to
constructive feedback and is always working to improve. Paul Stamatiou has a great summary. He even put on a suit to go to the show.
Shotput Ventures Open House
While the dichotomy with the Georgia Technology Summit is striking, the Shotput Ventures
open house was also a huge success. Much younger, happening crowd.
They start accepting applications on Friday. Paul again has a stellar writeup (somebody remind me to throw down some more serious Skribit objectives on him).
TwitPay Moves Money
Twitpay
went live on Tuesday. Twitpay is a simple way to send payments in 140
characters or less. The service is powered by Amazon Payments which
called the service "innovative". Michael Ivey announced this on twitter and then followed up with a longer blog post. Both Michael and Don Brown are excited. So am I and the rest of the team.
The most frequently asked question we received is "when can I use
real money." The answer is now. Twitpay is the most secure,
trustworthy, and dare I say unlike some others, regulatory compliant
social payment platform. Twitpay is an Atlanta Startup Weekend
company. I am an advisor. Good to see it out the door. It will be
interesting to see where it goes.
Meet The VC
The next version of Meet the VC takes place on March 11 and features John Glushik of Intersouth Partners. If you have any intentions of raising capital this year you need to be on hand to get John's insights. Register to attend.
Southeast Venture Conference
While Meet the VC will be a great show it is just a warm up for SEVC which cranks up a bit later in the day. Produced by TechJournal South
SEVC will
highlight the most promising emerging tech firms in the South. The
opening keynote is by Tim Draper of Draper Fisher Jurvetson. Big VC
hob nob.
StartupChicks
A bit on the other end of the spectrum is StartupChicks. A StartupChick is a female entrepreneur who is interested in creating,
building, growing an innovative business that creates value for its
customers, employees, shareholders and ideally, the world-at-large. They are having their launch party
on March 18. I am not exactly a qualified member. However, I totally
support their aim to connect and inspire entrepreneurial women.
Young Entrepreneurs Society
The Young Entrepreneurs Society is a group of Georgia Tech students focused on providing the resources and access needed to be successful entrepreneurs. I went and spoke to the group on Monday. They have great energy and are attracting some attention. You can find the founder Ajai on twitter and he recently wrote about the backstory on the group. If you are an entrepreneurial student this is a great group to find some like thinking people.
The venture capital community was very well represented at Startup Riot last week. Partners from CEO Ventures, Kinetic Ventures, Noro-Moseley Partners, TechOperators and Value Plus Ventures were all in attendance. In addition partners from seed stage investing firms Imlay Investments, Profounder, Seraph Group, and Shotput Ventures were on hand.
Nine firms. Five of which are less then a year old. Too many individual angels to list, including the Atlanta Technology Angels. Who says there is no money in Atlanta? But why are all these investors flocking to a show put on by Sanjay Parekh and a handful of volunteers?
Because companies that presented at Startup Riot last year got funded and or acquired.
Purewire launched at Startup Riot. Raised $2 million. Pre revenue, pre product. Seed stage.
Global Crypto closed a round led by Imlay and included the Atlanta Technology Angels. Pre revenue, pre product. Seed stage.
Skribit took a little money from the Edison Fund. Money that kept Pul Stamatiou from making the trek to the valley when he graduated. Pre revenue. Seed stage.
Jungle Disk was acquired by Rackspace. While the amount was undisclosed, based on this report I would venture a guess that Dave Wright is going to put something between $5 million to $10 million in his pocket. Good for him. But this is a deal that at least one of the above named venture firms would have liked to take big.
Investors are going to Startup Riot because it is a source of good deal flow. And rumor is more deals are in the works.
Yesterday The New York Times published an interesting piece entitled "Angels Flee From Tech Start-ups" that profiled angels and entrepreneurs across the country. While the title nicely sums up the article, it's not exactly the story I am hearing in Tech Square.
To provide a more specific understanding of what's happening with angels in Atlanta, ATDC is putting an interesting twist on its Meet the VC series. They are bringing in three active angel investors to discuss the state of angel investing in Georgia. Mitch Free, founder of MFG.com, Sig Mosley of Imlay Investments, and Gordon Rodgers, angel investor, will sit on a panel for February's Meet the VC event. The session will
take place on Wednesday, February 11th from 7:30 to 9:30 am.
A great way to gain insight into the current state of the angel market.
Please register to attend.
With timing that escapes my marketing sense Sanjay Parekh announced on twitter last Thursday the formation of Shotput Ventures.
Shotput Ventures is following the much discussed Y-Combinator model. They intend to be a technology startup accelerator fund that focuses on capital-light web services companies and assist during the concept phase of startup development. Shotput is going to invest $5,000 per company and $5,000 per founder (a three person company would get $20k).
During all the talk about the Atlanta investor class last summer the usual suspects of entrepreneurs showed little interest in this type of investment. I think there is a need. We will see.
Shotput intends to take in its first class of up to eight startups in the summer of 2009. They are not accepting applications just yet. If you want to move to the front of the line when they do, I suggest that you apply to present at Startup Riot.
Congratulations to David Cummings and the entire Shotput team for building a much needed bridge.
You may have heard of the TAG/GRA Business Launch Competition. That little thing where the Georgia Research Alliance (GRA) and the Technology Association of Georgia
(TAG) join forces (along with the help of ATDC) to support the creation and growth of new startups
in Georgia via a competition. Where the contest winner receives a
$100,000 cash award courtesy of the GRA and a diverse array of services
valued at an additional $200,000.
It's back.
Tell ya another secret.
That little snippet on where the judging process is explained that says "preliminary judges led by ATDC and supplemented with
industry, investment and entrepreneurial representatives will complete
the first step in the judging and select a group of semi-finalists." I coordinate all that. Makes me feel real powerful. A master of the universe.
Not.
But what it does do is put me the center of things during the early stages of the contest and that is pretty fun and exciting. Last year I got a peek into about 80 startups. This year I expect to see an exciting new crop of companies. I also get to recruit those "industry, investment and entrepreneurial representatives" so if you have an interest in lending a hand I am all ears.
Things kick off this year on January 8 at 7:30 am at the TAG/ATDC Entrepreneurs Society monthly gathering. Past winners REACH Call, IVOX, and Acculynk will give brief presentations. Then we are going to do a little Q&A and explain the details of the 2009 competition. I get to moderate which should be fun as well.
If you are an entrepreneur looking to enter the competition for a shot at the $100k in cash I would show up. $100k in cash is going to be very dear to an early stage startup in 2009.
It's been way too long between blog posts for me. It's not that I don't have things to write about. I do. I have just been too busy. One of the things that I have been busy with is helping out with Skribit.
Well Georgia Tech announced today that Paul Stamatiou is going to be working on Skribit on a full-time basis when he graduates in December.
And if you read between the lines there is a bit more than a strong hint that Skribit has scored a little funding from the Edison Fund, which is headed by Stephen Fleming.
You heard it here first. Or maybe not.
The downturn sure is making for interesting times. Here at FoG it started with the gloom of the Sequoia meeting notes and presentation of doom. Followed by the more upbeat link to Paul Graham's essay on "Why to Start a Startup in a Bad Economy."
Interesting times. And I have a pretty interesting job. A job that allows me to interact with lots of investor types. Individual angels, angel groups, angel funds, venture capitalists, venture bankers. And they don't mind telling me whats on their mind because at the moment I am somewhat like Switzerland (Entrepreneurs do the same thing BTW). Last week at Venture Atlanta and Meet the VC I had a chance to talk with a lot of investors over a brief period of time. And while I hesitate to quote anyone directly I can summarize what I learned over the past week.
Angels A Mixed Bunch
Some are frozen into inaction. Some, but not many, continue business as usual. The latter are being more selective. Asset allocations are being closely watched. Which is closely tied to the broader stock market. Many angles have to allocate more money for follow on. Overall not good for early stage.
VCs Intend To Keep Investing
This message is loud and clear. VCs have lots of money. Sitting in cash. They intend to invest it. They also will be more selective. Either gravitating towards later stage deals to shorten their exit horizon or doing less deals as the need to keep funds available for follow on increases. Also not good for early stage.
Business models will drive interest. Advertising is out. Platforms, analytics, and cost savings are in.
With that said some deals that would have been consummated fours weeks ago are not getting done today. I personally know of several. VCs are pulling back to conserve their funds for what they believe to be higher probability deals that can make it through the startup winter.
VC Advice
VCs are looking to help extend the cash runways of their deals by cutting costs. They want their companies to get more conservative. They are advising their companies to draw down their credit lines.
Startup Reaction
Startups are heeding this advice. TechCrunch offered up a layoff tracker. To date it is showing 3,689 laid off employees at 22 companies. Back out the more established eBay and Yahoo and you get 689 employees at 20 companies. Startup CEOs are acting, and acting fast.
Surveys
In an interesting side note DLA Piper released its "Technology Leaders Forecast Survey" this week. Conducted in late September and early October, the survey shows 47% of VCs believing that the financial crisis will adversely impact the tech industry while 33% of technology company executives (not just early stage) believe this is the case. Based what I have seen and heard in the past four weeks both parties are acting a bit counter to how they responded a month ago.
Some Key Quotes
"I'm getting a deal done."
"You will see a flight to quality."
"It's grim."
"I am looking for a real entrepreneurial spirit. Someone who can efficiently get to revenues and profits."
Wrap Up
Like the broader economic climate, times are not good in the technology startup world. But deals are going to get done. Good deals. With smart entrepreneurs. Helping each other to achieve a dream.
It will take longer. It will make a hard task even harder. But deals will get done. If you are an entrepreneur you need to adjust to the new realities of our times and go find yours.
Back in July Jason Calacanis said he was retiring from blogging and starting a private mailing list. Well the retirement turns out to be a bit Bret Favre style. Over the weekend he sent out an email entitled "(The) Startup Depression" which drew a great deal of attention and led to him posting the content on his blog.
It's both a rambling and greathearted article. A worthy read. And one that I can best supplement by book ending the beginning and end.
Jason started out by stating:
"It’s my believe that the economic downturn will be much worse than it
is today, and that 50-80% of the venture-backed startups currently
operating will shut down or go on life-support (i.e. 3-4 folks working
on them) within the next 18 months.
Make a list of every Web 2.0 startup to raise an A or B round and
cross 80% of them off the list, because they will not make it to their
next round of funding or profitability."
HE ended with a must read top ten list of specific things that an entrepreneur should do in trying times closing with:
"Raise money: I know I said above most folks won’t be able to raise
money in the down market, but that’s not because the money isn’t out
there–clearly it is. The issue is that the big money out there
doesn’t want to fund small ideas that are in the death spiral. Build a
plan based on revenue and taking market share and folks will consider
funding you."
I completely disagree with Jason's first assertion and agree totally with the last.
My take on the startup funding marketplace is that you are going to see the same things in this asset class that you see in all asset classes during cyclical downturns. A flight to quality.
If you are an entrepreneur running a venture backed startup you are going to have to prepare your team to weather the storm. Cut costs. Find customers. Tightly execute. Do this and do it well and your VCs will have funds in reserve to see you through the rough seas. VCs are going to batten down the hatches and start playing things more conservatively when it comes to new deals so that they have the dry powder they need to keep their current good deals going (assuming that their limited partners are willing to make their
capital calls and that may or may not be a safe assumption at this
point).
If you have yet to make it to the venture stage of life things might be a bit tougher. Individual angels are hurting.
To explain via an example let's say that angel Jill Rich had investable assets of $10 million entering 2008. Of that Jill had set aside 5% of her portfolio or $500k. Over the past four years she had invested $200k with $200k reserved for follow on and was looking to put another $50k to work this year. But Jill has a problem. That $10 million is now only worth $8 million. So Jill has gone from being under allocated in her angel investing asset class by 20% to being fully allocated in the asset class. She has no room for new investments. Repeat this over and over again with angels and all of a sudden you have them not making any new investments.
Angel funds are a bit of a different situation. They behave like VC funds. The ones that I have talked to are merely looking at a exit time horizon in the 7 - 9 year range versus the 5 - 7 year range they were thinking about in early September. Like VCs they are going to get a little more conservative too. But they will keep investing.
So things are going to get tough. New technology startups will be able to get seed. But only the those with truly superior concepts and management. Big ideas will continue to garner venture funding, there is too much money out there for that not to happen.
The next two years are going to require focus, something that I preach in both good times and bad. They are going to require the courage and honesty that Jason reflected in his post. And the resiliency that he and countless other entrepreneurs have demonstrated over the years.
Perhaps the biggest issue that I have with Jason's musings is this; there's nothing to be depressed about. I can't predict or control what is going to happen in the broader economy. To win in a down market all I can do is get up, go to work, and move things forward in a way that attracts interest. Interest from employees. Interest from customers. Interest from investors. Big interest.
For entrepreneurs there is never time to be depressed. There is always time for realistic optimism, good business thought, and execution. And that is now you win in any market be it up or down.
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