November 4, 2009

Startups and capital

Ben Holmes (of Index Ventures, follow his new blog): The social media investment conundrum. "Pinpoint timing is required. In my experience the best time to invest for a venture capital firm is post launch when the business has 100,000's or low millions in Monthly uniques (stages 3-4). Here the metrics and to an extent the business model may be proven and the valuation still gives room for venture returns. However businesses can often pass through this stage in a matter of a few months, so unless you are already very close to an investment opportunity as it moves from stage 2 into stages 3 and 4 you will likely miss the opportunity."

Both Sides of The Table: Are Business Plans Still Necessary?. "I'm talking about your financial spreadsheet. I will quote a prominent, well-known entrepreneur whom I like and respect and who told me when he was raising money, "I don't know how much I'm going to charge for my product so why should I create an artificial spreadsheet?"

Here's why. Your financial model tells a story. Let's take your revenue line. It should talk about how many customers you think you will acquire and how much you'll charge for your product. If you can't estimate the former then I would suggest you haven't done your homework before building the product. Do you really want to spent $100k building a product to discover through Customer Development that the market is too small?"

Steve Blank: Lean Startups aren't Cheap Startups. "If you confuse Lean with Cheap when you do find a repeatable and scalable sales model, you will starve your company for resources needed to scale. Customer Development (and Lean) is about continuous customer contact/iteration to find the right time for execution."

Chris Dixon: How to select your angel investors. "The most common mistake entrepreneurs make is to base their choice solely on the investors' "celebrity" value (by "celebrity" I generally mean in the TechCrunch sense, not the People magazine sense). Picking celebrity angels might help you get a little more buzz when you announce the financing and a few SUL tweets, but that's about it. A startup is a long trip — what you should care about is whether, through the ups and downs and after the buzz dies down, the investors will actually roll up their sleeves and help you."

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