TheFunded.com Open Letter
Posted by MikeGlanz on 2007-09-02
I'm stuck. Not stuck like a truck in the mud, with wheels spinning and no hope of ever going anywhere. But stuck like I would envision being stuck in a pool of pudding. I picture myself swimming as hard as I can, but making no noticeable progress. I might be making headway in raising capital, however, if I have moved forward, the progress isn't very distinguishable.
That's the best way I can describe trying to get VC with no prior experience raising capital. Pudding. I read everything, forums (like startupping), blogs (avc.com, venturehacks.com etc), articles (wikipedia), how-to's (howstuffworks, business2.0, Inc) and write letters and emails to anyone I can think of to help me make a connection, offer advice, or even (dare I say it) make an introduction.
Where am I at" Almost the same place I started. I'm pitching in a week to a group of angels, however its only "practice" to me, I'd take the money if I were desperate, but right now, we're looking for VC.
Look at my comparison (I'm sure there are plenty out there who appreciate this):
It's 2007 and the social networking scene is completely dominated, yet some yahoo who's been there done that (maybe with Yahoo.com for instance) goes to some VC's and pitches this:
"I want to build a social networking site for grandparents!" or "I want to build a social networking site that connects people who eat Peanut Butter".
Immediately followed is the business plan:
"Well I'm going to launch the site, its going to spread "virally", and when we have 1/10 of all the people who eat peanut butter, we'll have 300 million users and we'll sell the company for what MySpace did, then Fox, or Yahoo or Google can figure out how to start generating revenue off it!"
Results: $10m with a $10m pre-money.
It's 2007 and they have a new and interesting idea (www.HireAHelper.com ignore the "snapshots" - the site is live)... they know that VC's are skeptical and its going to be a pain proving that this could be the new wave of the future... so they raise $150k from F&F(&F").
They launch the site, and hit revenue within 5 days. First months sales are $4000. Second Months sales are $7000. Third Month Sales are $14000. Their customers love it, the word is spreading. The startups highly talented SEO whiz gets them on the first page of the Search Engine Results pages within a month. Within 3 months they are listed higher than the closest thing they have to a competitor.
They pitch to the only group of angels they can get a hold of â€" the results: "We'll give you $300,000 at a $300,000 valuation". WHAT THE *#$#"!"! $300,000 valuation... We have a team who is awesome, an adviser who has built a $20m company in 3 years, we are post revenue, AND WE HAVE $100,000 in the bank still from our initial round from F&F"
Company A had an executive from RealMedia. That's right, pre-revenue they raises $10m and only gave up 50% because they had a guy who worked for a big company.
Company B" 2 small business owners and couple whiz kids with high ambitions.
So what are your thoughts" Am I stuck" I've spent 4 months trying to get intros to VC's. I've sent off the packet even got great positive feedback on it, but here's the bottom line. If I don't know someone, then someone better know me. Since neither are the case, we're stuck dealing with apathetic Angels, while Mr. Yahoo gets all the big money for his next big flop.
~mike (at) hireahelper (dot) com