Chip Griffin: Pardon the Disruption

Why Twitter is Considering Venture Capital

Evan Williams of Twitter offers up a good post on why he's considering VC funding, despite the perception some have had that he would eschew such money in his startups after Odeo.  It's informative not only of his own situation, but it also is a valuable resource for anyone considering raising funds to run a startup.

He lists the possible routes he could follow:

1) Figure out how to get profitable
2) Keep funding Twitter myself
3) Get an alternative source of funding
4) Get bought
5) Raise VC

And he notes that good funders bring more to the table than cash:

VCs, if chosen well and a good fit—and a fair deal is constructed—can be a useful source of funds + smart people around the table helping you make better decisions.

Technorati tags: Evan Williams, Twitter, Obvious, venture capital, startup, angel investing

Looking for Seed Funding or Angel Investors Outside of Silicon Valley?

Scott Burkett has a great write-up with ideas for entrepreneurs seeking early stage funding.  He writes with a geographic focus on Atlanta, but much of what he writes applies regardless of where one is located.

Raising money is rarely easy. It is even harder in Atlanta. The good news is that software/IT is a sector in which Atlanta is very strong. There are a lot of people in this city that get information technology.

Whenever the “panels” and “luminaries” are asked this question, they usually throw out the two stock answers: the 3F’s and Sig Mosley. The 3F’s being friends, family, and fools, and Sig Mosley being the unwitting godfather of early-stage technology investing in Atlanta.

If you take out Atlanta and Sig Mosley, Scott could be talking about New England as well (or many other non-Silicon Valley parts of the country for that matter).  As the managing director of a small angel group (AOS Ventures)

Last year I interviewed Matt Rightmire of Borealis Ventures (formerly of Yahoo!) and he discussed VC life outside of Silicon Valley.  He had a lot of good insight for anyone looking for funding and not located in California.

On a related note, Will Price shares some thoughts on the question "Does Geography Matter?"  There's also an Atlanta nexus in his analysis:

The most important insight for me is that the modern economy competes on innovation and that operating within a cluster shortens the cycle time to identifying, resourcing, and realizing areas of need and opportunity.

The genesis for this post was a conversation I had with two founders, currently based in Atlanta, about the merits of moving to the Bay Area to start their company. Michael Porter's thoughtful analysis helps me better understand why the Bay Area "cost premium" is well worth it. Market cap is a function of innovation and growth, and innovation is a function of access to ideas, talent, and supporting resources that eliminate frictions and catalyze connections and progress.

Personally, I waver a bit on the geography question.  Maybe I'll do a more thoughtful post on this soon, but my quick take is that while Silicon Valley offers clear benefits to Internet entrepreneurs, it also makes it harder for companies to differentiate themselves.  Does one outweigh the other?  As always, it depends!

Technorati tags: entrepreneurship, startup funding, angel investing, seed funding, Matt Rightmire, Borealis Ventures, Will Price, Scott Burkett, Silicon Valley, business strategy

So You Want to Build a Big Ad-Supported Web Site? Think Again

Today the New York Times points to an excellent blog post by Jeremy Liew of Lightspeed Venture Partners who details 3 ways to get to $50M in annual revenue with an ad-supported web site.  The bottom line is that it takes a lot to achieve it.  He thinks it is hard, but doable.  Jeremy says in the comments he thinks that a niche site is most feasible, but would still need to achieve 200 million or more page views every month in order to hit the goal.  If you're building a site with more general appeal, you'd need to have in excess of 4 BILLION page views per month to hit those kind of revenue numbers, according to Jeremy's calculations.

Unless you really think you'll be one of the handful of players to achieve these numbers -- and you may well be -- then you need to either set your revenue sights lower or you need to come up with a different model.  Just about a year ago, Fred Wilson raved about his favorite business model, which includes a mix of revenue streams sitting on top of a free service. 

To me, though, it also points to the need to think through revenue models before you start your business.  I know that it is fashionable to argue that with low startup costs today, you can just start your web site up and figure out how to make money after you get traffic.  Baloney.  You should have an idea as to how you plan to make money because how you structure the site may change based on your plans.  Now, you need not stick with that model as time passes if you have a better idea -- and in fact in most cases how you make money 12 months into the adventure will not be the same as what you predicted.  That's fine and expected.  But don't subscribe to the "build it and revenue will come" school of thought.

Technorati tags: Jeremy Liew, Lightspeed Venture Partners, Fred Wilson, business model, advertising, web traffic, page views, entrepreneur, venture capital