Ideation on social media, venture capital and startups 
Leveraging Ideas
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Venture Capital
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07.09.08What’s Up with the False Advertising?
Brands and Marketing, Venture CapitalUpdate 1: I was contacted by the CEO of WrapMail who gave me a demo of his product. WrapMail's choice of wording may be poor but it is not false advertising. I offered to write a post summarizing the service and will link to it once it's ready to ship. I ran into two falsely advertised products today. While I was initially excited about both, now that I understand that I cannot use the services in the manner they claimed they have lost me as a potential customer. I wonder how many potential customers were also lost by this messaging stupidity? No ...
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06.24.08Hybrid VC: The Preemptive Buyout Model Revisited
Venture CapitalLast February I suggested a possible hybrid-model for venture capital firms: locating pre-VC backed technology plays, buying them on the cheap, then augmenting the companies with a pre-assembled all-star team of managers. Looks like Austin Ventures was listening: Today, Austin Ventures announced its second $50 million investment to back a seasoned entrepreneur to head this very model. Austin Ventures entered into a partnership with Sherman Atkinson to form ATCOR Holdings, Inc. The new company will focus on acquiring and operating businesses in high-growth sectors of online advertising, marketing and digital media. AV has committed $50 Million of equity capital to support management’s ...
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06.23.08How to Validate a Startup for Investment
Venture CapitalThe early life-cycle of a startup is all about validation. Especially for first-time founders, the struggle is often to figure out what's missing or what can be done to convince an investor to take a chance and invest. Whether looking for funding, or convincing a prospect to become a customer, startups must provide outsiders with 'reasons to believe'. Unfortunately there are only a handful of ways this can be achieved. In this case I have made an attempt to highlight a hierarchy of validation points for startups during the fundraising process based on my own personal experience. It's my belief that ...
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06.19.08Social Media Deal Flow Continues
Social Media, Venture CapitalPaidContent has released its second installment of the Social Media Deals Report. The team analyzed deal flow a 15-month period starting in January 2007. Some highlights... Venture Investment in Social Media: Total number of investments: 400 Total number of disclosed investments: 341 valued at $2,763,715,000 Average investment size: $8,104,736 Best estimated value of overall investment in the space (disclosed and undisclosed): $3,074,215,000 total invested Acquisitions in the Social Media Space: Total number of acquisitions: 131 Total number of disclosed acquisitions: 41 disclosed valued at $13,422,310,000 Average acquisition size: $327,313,415 Click here to download a free executive summary
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06.18.08Personal Relationships Drive Investment
Venture CapitalThe old adage for raising money is that investors invest in the team first and the product or service second. Therefore, if investors primarily invest in people, then what they are really investing in are relationships built on trust. This is why entrepreneurs tend to raise money from friends and family first – they know you best and trust you most. Though it's not easy, trust can be created from scratch. That said, if you've quickly burned through all your immediate prospects with whom you have significant pre-existing trust and relationships, you need to must be prepared for the consequences: fundraising ...
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06.01.08Don’t Be Fooled By Venture Capital Brokers
Venture CapitalOn Friday night I published an inappropriate post. A reader pointed out my mistake in the comments and I subsequently pulled the post. I owe an apology for making accusations without proper due diligence. For that I apologize. While my methods were unfair, the point I was making is 100% valid. If you are raising capital for a startup, you will run across no shortage of people who *claim* they can help you get funded. It might be in the form of someone asking for equity in exchange for serving as a company advisor. Or, it could be a company like ...
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05.27.08PitchMonster: Prepare for Venture Capital and Angel Pitches
Venture CapitalI wanted to try something new. I am making available a few pages of advice I put together from leading venture capitalists and angel investors on how entrepreneurs should prepare for an investment pitch. In the spirit of Seth Godin, I am calling this PitchMonster. Hopefully I'll create some additional e-bookish resources also under the PitchMonster name when I have time. Download Pitch Monster Here. These are notes that combine my own personal thoughts and experiences, along with those of the best minds in the early-stage investing business. I hope this helps a few people out there. Also, if folks come across sections ...
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05.20.08Entrepreneurs and Venture Capitalists Outsourcing to Product Development Firms
Venture CapitalThis post was originally written while waiting at the airport in Delhi, India. Recently a number of memes have circulated the blogosphere discussing the impending challenges to the traditional venture capital model. I have been living this new reality and actively commenting on it. Let’s start with a few assumptions: Venture capitalists look to minimize risk in their investments, while maximizing portfolio return Entrepreneurs look to spend as little money out of pocket as possible while maximizing the equity they retain in a new venture Due to low barriers-to-entry for entrepreneurs, the traditional VC model (investing larger sums of money for controlling rights) ...
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05.18.08The Trouble With Convertible Note Deals
Venture CapitalA couple weeks ago I wrote a post explaining how many startups are playing dangerous games, banking on small convertible note seed rounds to bridge the gap until they can raise their valuation and then close a Series A without giving up as much of the company. A VC friend recently shared an additional insight that he finds troubling with these types of convertible note deals. It seems that several VC firms have “loaned” $250-$400,000 for which they have given the receiving startup little to no additional support. Of course the same level of human capital investment can’t be expected from ...
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05.15.08The Art of The Delayed Venture Capital Investment
Venture CapitalMost venture capitalists never say “no” outright. However, none ever say “yes" outright either. The reason for this is that the longer a venture capitalist can delay having to invest, the less risky is their investment. In fact, every day that they can delay cutting a check is another day that you the entrepreneur are building, acquiring customers and refining your business model. So what can an entrepreneur do? Unfortunately, entrepreneurs do not have much leverage with venture folk, except for the threat of a missed opportunity. Therefore once you can get one group to commit, the fun begins. As soon as ...
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