Tag: Funding

Let’s start finding the right VCs for Portland and the Silicon Forest

Talk to enough startups and the conversation eventually turns to that of funding. And the search for that seemingly elusive operating capital.

Ultimately, this discussion devolves into a lament about the frustrations of the VC dance, the cross-purposes, the potential loss of control of which entrepreneurs live in fear, and, ultimately, some inherent evil in the whole process.

We live with this folklore. And we continually repeat it. And reinforce it.

A series of horror stories about what could happen. Stories that we continue to spin, time and time again, until we begin to see them as universal truths.

And then we begin to believe that the concept of VC investment and the culture of the Silicon Forest are at odds with one another.

That we can’t get there from here.

And that’s why I’m glad to see posts like this one from early stage investor Jeff Pulver.

Because these types of stories counteract the folklore. Because the kinds of things he’s seeking don’t seem to be cold-blooded or mercenary. Because Pulver seems to be the type of investor who is right in line with Portland’s startup culture.

When meeting with an early-stage startup looking for funding, if I am interested in the company, I look to connect with the founders and find out the inspiration behind the company they are creating. I try to understand the problem they are solving and the opportunity they are seeing. I also look to see how as a team they get along, work off each other and I try to get a feel of their creative energies. I look for teams where each member is watching each other’s back and a core team whom I feel will be together for the long term. I look for people who are both smart and creative who can be focused when necessary and whose personality allow themselves to be open to change directions and re-map themselves when needed.

If there’s one thing of which we have loads in Portland, it’s creativity. Whether that creativity manifests itself in traditional ways like art and music, or in less traditional ways like crafts, cooking, brewing, vintner-ing, designing… or coding interesting Web apps.

We tend to wield technology like a brush or a pen. Using it as an outlet for our creativity. And then, we tend to relish partaking in others’ creativity, be it culinary or brewery.

And there are VCs out there who get that. Who aren’t big scary monsters. Who are interested in the same types of things you are interested in doing.

We need to remember that. We need to start wooing the right kind of VCs. For you. And for the Silicon Forest.

Investors who, like Jeff Pulver, “invest in people first and ideas second.”

Let’s get started with that, shall we?

iovation secures $15 million

Portland-based iovation, the company with whom I hate to start sentences, has announced the closing of its latest round of funding. The round contains an additional $5 million follow-on from SAP Ventures and the brothers Samwer’s European Founders. The round is, well, rounded out by a promised $10 million from Intel Capital that was announced last November.

Mike Rogoway at The Oregonian‘s Silicon Forest blog reports:

SAP and European Founders both have good ties abroad, which Iovation [sic] is counting on to help the Portland Web security firm expand overseas.

iovation (argh!) says they “pioneered the use of device reputation for managing online fraud, abusive behavior and multi-factor authentication.” I say, they have stuff that helps online companies prove you are who you say you are and not some bot. But, easily the best description? “iovation exposes known fraudsters and abusers.”

One of Portland’s new breed of startup success stories, iovation been especially successful in areas where high traffic and small amounts of cash are in play, like online gaming and ecommerce, areas where spoofing and bots can result in millions of dollars of lost revenues.

Or, as I like to think of it: with iovation, the plots of Hackers and Office Space become completely implausible. (Please note: I refuse to listen to any comments that claim the plots of those movies were implausible prior to iovation.)

For more information, visit iovation.

(Hat tip Lisa MacKenzie)

Understanding the venture capitalist

One of the most enigmatic components of any startup’s life is “funding.” Do I need capital? Should I pursue capital? How do I approach venture capitalists? Should I avoid venture capitalists? What are the benefits? What are the drawbacks? Necessary evil or rite of passage?

There are a ton of questions.

And unless you’ve been fortunate enough to learn the funding mating dance as part of another company, it’s a completely foreign—and intimidating—proposition.

Well, have heart Web-app-mogul-to-be. CenterNetworks is running a series on venture capitalists that may help inform your understanding of this strange and elusive beast.

The topic? How VCs get their money:

NYC Venture Capitalist Mark Davis is authoring a four-part series on how a VC is funded. Davis notes the four methods are: diverse limited partners, family office, government or public capital. Today, Davis looks at diverse limited partners. The other three methods will follow throughout the week.

I highly recommend you follow the series. Not only will this provide a great vantage point for helping you understand the motivations for the venture capitalist, it may just help demystify the whole venture capital question for you and your startup.

SplashCast “social advertising” tees up $4 million

Man oh man. With all of these Silicon Forest startups attracting funding, it’s about time I establish a “graduating class.” And here’s one of those startups that’s definitely in the running for Salutatorian, if not Valedictorian: Portland-based SplashCast.

First, the funding. Because that’s the real news here.

SplashCast announced today that it has secured $4 million dollars in Series A funding, led by Mark Bayliss, an Australian (remember the Australia trip not too long ago?) media and advertising executive veteran of some of the world’s largest advertising and media companies who runs in the same circles as fellow Aussie and media mogul Rupert Murdoch. Emergent, an emerging growth investment fund also with strong ties to advertising and consumer brands, was a follow-on to the round.

I asked Mike Berkley, SplashCast’s CEO, to put this funding—and the organizations providing it—in perspective for me.

“What does this mean for the company?” said Berkley. “The relationships that Bayliss and his partners bring to SplashCast gives the company a monumental step-up in social marketing.”

Which bring us to my second point. I’m a marketing geek. So, let’s talk about SplashCast’s newest take on their positioning. Or better yet, let’s not use some stupid buzzword. Let’s talk about how SplashCast is describing their product as of late.

If you haven’t been watching SplashCast, this probably would fly right by, unnoticed. But, I’ve been watching these guys ratchet down on the language they’re using and their efforts to make the product more attractive to a broader big-media advertising market. They continue to make definitive changes in describing what they do. And they seem to be honing in on something new.

SplashCast started in user-generated content. Then they moved to more of a “branded content” sort of play, building custom apps for big names like Justin Timberlake, Britney, and Hillary Clinton. Now, they’re directly positioning themselves as an alternative to what—as silly as it sounds for me to describe it this way—can only be referred to “traditional” online advertising models.

SplashCast calls this new focus “social advertisments.” I call it “advertisements that actually do something.” But regardless of what you call it, they’re pushing this message very strongly as of late:

[SplashCast’s] New Social Marketing Solution Viewed As Breakthrough For Advertisers Looking To Reach Users On MySpace, Facebook & Other Social Networking Sites

And:

Splashcasting represents a new form of online marketing called social advertisements – tools marketers use to reach the growing demographic of social network site users. SplashCast’s video-based social advertisements on average receive click-through-rates that are about 75 times higher than typical banner advertisements used on MySpace, Facebook or other social network sites.

This seems to be their new home: taking on traditional online advertising. And that puts them directly in the sites of some very big players.

Now, some may look at these recent changes and cast aspersions. Claiming that this belies a lack of focus.

In my opinion, these changes don’t seem to be wishy-washy or “searching for a problem to solve.” These are simply the pains that any growing company goes through as it works to figure out where its true market lies.

And there’s a very clear reason that the messages have been moving in that direction.

You build a product based on your ideas and passion. You tend to build a company based on what people will buy.

And given that SplashCast is securing funding and landing customers with this new positioning, it only makes sense—from a business perspective—that they continue pursuing this stance.

I, for one, will be continuing to watch them.

For more information on the funding and social advertising, visit SplashCast.

Confidence in Web 2.0 isn’t waning, but confidence in the Valley may be

There’s a great deal of Chicken Little reporting occurring today about how the Web 2.0 sky is falling. Why? Because apparently, according the Dow Jones, the investments in Web 2.0 technology in the Silicon Valley are down, year over year.

Silicon Valley remains the hotbed of Web 2.0 activity, but the hipness of start-ups with goofy names is starting to cool in the face of economic reality.

Not shocking news, I realize. But I think they buried the lead.

Even the venerable Wall Street Journal puts the news in the very last sentence of their piece:

“It’s clear that the real growth in the Web 2.0 sector is happening outside of the (San Francisco) Bay Area,” says Jessica Canning, director of global research for Dow Jones VentureSource.

And there’s the real story. That’s the real news. Not that the investments in the Valley are down, but rather, that the investments elsewhere are up. In some cases, way up.

In our own Pacific Northwest, for example, the number of Web 2.0 oriented deals more than doubled. And the amount of the investment? It’s up 400% from $35 million in 2006 to $140 million in 2007.

That’s about as opposite of “waning” as I can come up with.

And we’re not alone.

Investment amounts in New England doubled, Southern California nearly tripled, New York metro nearly tripled, Southeast doubled, Mountain more than quadrupled, and North Carolina, alone, tripled.

In fact, the only area besides the Valley that went down was Texas.

So has Web 2.0 peaked? I honestly don’t know.

From what I’ve seen, it’s going pretty strong here in the Silicon Forest. And it’s clearly picking up speed in other sectors.

Maybe the better question is: Has Silicon Valley peaked?

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