Investing in Web 2.0 Start-ups

I had the pleasure of being part of a VC panel discussion this week on the topic of “Seeding Your Web 2.0 Company, hosted by the Massachusetts Innovation & Technology Exchange (MITX), and K&L Gates.

Joining me on the panel were two VC partners, Austin Westerling from Charles River Ventures and Sim Simeonov from Polaris Ventures, and also Christian Heidelberger, CEO, Nexaweb, whose company also recently went through the VC fundraising process like we here at VT did last year.

The main topic of interest and questions from the audience of about 75 entrepreneurs was how to attract angel and VC funding in this Web 2.0 environment, and if it helps or hurts to be labeled a Web 2.0 company in this new era of Internet hype. Good luck trying to get anyone to agree on what Web 2.0 even means. The advice from the panel was simple, direct and on target:

• focus on your product or service and the market problem you’re trying to solve and don’t get hung up on the money or if your idea is considered Web 2.0;
• there isn’t a big difference on whether to start with an angel investor or a VC firm as long as there is a commitment from the investor to add value to the business;
• if you want to approach a VC firm you better know someone for an introduction because you aren’t getting in the door;
• get used to rejection because it comes with the process, but don’t be discouraged if you really believe your idea is a winner;
• once you get to present to a VC firm you have about 10 minutes and 10 slides to impress the partners or they’ll lose interest;
• you don’t need a detailed business plan to seek early investment funding, but you do need to articulate when your business will be cash positive.

The good news is there is plenty of VC money still being raised for funding new companies. In fact, Charles River has launched a “Quick Start Seed Loan” program that can deliver funding for hot ideas in a matter of a day or two.

If you’re in the Greater Boston area, the MITX events are definitely worth a look. There is also another good one this week called, “Social Media: the Opportunities and Implications for Marketers.”

Mike Spataro