PBS Newshour correspondent Hari Sreenivasan recently did a segment on startup accelerators featuring TechStars (disclosure: im a mentor in the Boston program), Y Combinator, AngelPad, and Blackbox Ventures.
My friend Wade Roush, chief correspondent at Xconomy, is also featured in the clip. His write up is here.
Yesterday Clovr made two big announcements. First, the company announced a change of name to Linkable Networks and second, a strategic investment from Citi Ventures. We are thrilled to welcome Citi to the investor group alongside terrific investors, Kepha Partners and Bain Capital Ventures.
Some press coverage:
· Boston Business Journal: “Card-linked startup Clovr Media announces name change, investment from Citi”
· Xconomy: “Clovr Changes Name to Linkable Networks, Nabs Investment from Citi Ventures to Push Card-Linked Offers”
· BostInnovation: “Clovr Media Gets A Strategic Investment from Citi & Changes its Name”
· AllThingsD: “Clovr Renamed Linkable Networks, Raises Capital From Citi”
The seed market for tech startups — particularly digital media, social, local, and mobile — is very active. Many companies are getting started and lots of investors are making seed investments.
Because of my involvement in the Boston and NYC ecosystem as a managing partner at CommonAngels, I’ve been asked by several entrepreneurs a very simple but loaded question: “How should I think about pulling together my seed round?”
To answer that here, it’s important to remember that every situation is unique. As I look at close to a dozen seed investments we have made in our fund, the composition varies. From angels only to micro VC with angels to multiple VCs and all the blends in between. Below are some of the things I think you need to consider if you’re raising:
Based on my experience of running a micro cap VC fund, there are several nuances in seed scenarios I can share that might be helpful to you.
Multiple VCs
This is where several (more than 2) VC firms invest in the seed round.
Pros: you get access to a broader range of contacts and advice.
Cons: you probably won’t get the full time attention of the general partner
Series A dynamics: this is the most interesting question in these type of deals. By having several firms in the deal, if one doesn’t want to participate in the A round, then hopefully you have others to support you. On the other hand, if everyone wants to invest on the A round, how is each firm going to get their ownership position they want? (Most larger VC funds have target ownership ranges in a Series A – anywhere from 15% – 25%+). The math gets problematic.
Individual general partners
A VC firm may pass on a deal or the entrepreneurs may not want to take institutional money just yet (typically from a sizeable VC fund). However, the general partner really likes the entrepreneurs and deal, and wants to invest personally. The policy on doing this varies by firm – some firms don’t allow this; others do so long as its not a deal for the partnership. Often if the firm invests later, the GP’s investment is rolled into the firm’s investment
Pros: theoretically you can get access when needed to the partners knowledge and contacts…..without dealing with a big firm partnership. The signaling risk on the next round is lower than if the firm invested
Cons: your not really going to get that much attention and help unless it’s a deal that the partner really wants to line up for the next round. Just like any other angel investor, will they follow on if there is an insider led round before the A round?
Series A dynamics: the signaling risk is low and you will have the opportunity to pitch your A round to other firms
West coast/east coast
This is where you look to have high quality investors in your seed round from both coasts, often looking for a mix between Boston, California, and NYC. This is an important consideration where the ecosystem that you are in spans these cities. For example, if you are a media startup in Boston having investors in NYC that can plug you into the media and advertising agency ecosystems in NYC can be incredibly valuable. Most tech companies I’m invested in will at some stage look to California for customers and partnerships. Well connected Californian seed stage investors can help you open up doors.
Pre negotiated rounds
This is where a VC firm (typically 2) will fund your seed round but its “stapled” to the back of a pre negotiated Series A round. For example, “we will invest $500K in the seed round, and assuming these milestones are hit, we will led a $5M A round on these terms”
Pro: Because you have locked in you’re a round, you don’t need to spend months on the road trying to raise it
Cons: could you have gotten a better A round deal in the open market?
What does this all mean? If you are in the fortunate position of having investor interest in your seed round, you need to think about the composition of the round very carefully.
Nick Francis, CEO Help Scout, did a terrific write up on the team’s experience in the Boston Tech Star program. If you are thinking about the Tech Stars program, its a must read. (full post here)
Good overview by Tom and Doug explaining the Clovr platform at Finnovate:
Jonathan Mendez wrote a great post on Yieldbot’s product which is just about to come out of beta: click here . I saw the demo last week and was impressed. The team has done a terrific job in building a very complex product. As Jonathan writes:
Our mission is to empower publishers with automated understanding of the intent on their site and provide them with turnkey solutions (yes, that’s plural) to monetize it. Visitor intent is something Publishers have not understood or monetized for far too long. This is despite the fact that Search built an intent based channel from publishers and others like Demand Media built publishing channels from intent.
I’m very excited to see this product roll out!
A very nice ABC tv segment on Practically Green:
Carbonite is looking for a social media specialist who will run the day to day social media operations. See: http://bit.ly/dOLdn2
Great company and awesome job.
As 2010 comes to a close, we look back on a busy year. It’s been an exciting time in the seed and early stage market, and it’s been our privilege to be able to work with many outstanding entrepreneurs who are new to the CommonAngels family.
In Q3, we co-led a $1.5M financing in Clovr Media with Kepha Partners and participated in seed rounds for Ayeah Games and Blaze Software. So far in Q4, we have led a $750K round for Practically Green and participated in funding rounds for Offerpop, and Yieldbot.
PRACTICALLY GREEN
We recently led a $750,000 funding round for Practically Green. Launched in fall 2010, Practically Green aims to become the online destination to help consumers (typically eco aware moms) live greener and healthier lifestyles. It does this with powerful content, assessment tools, rewards, and community – with the entire service integrated into social networks.
Two fundamental macro trends are behind our investment in Practically Green. First, we are in the early stages of a sea change in consumers looking to live healthier lifestyles, however they struggle with “what to do and how to do it”. Second, the web today has become the social web, and its the social aspect of the web that is ideally suited to businesses that involve lifestyle changes. The power of friends in helping each of us adjust our behavior – in this case, to know how to live healthier lifestyles – is a powerful one.
We are delighted to be working with Susan Hunt Stevens who founded the business in early 2010 and whom we have known for several years. Susan is a digital media veteran having previously been SVP/General Manager of Boston.com. And in any consumer facing Internet company we look for top notch technical and UI talent, and we found this with Susan’s co-founder, Jason Butler. Jason is a seasoned Internet technologist having worked at Amazon, Abuzz, New York Times, and Boston.com.
If you want to know how green you are, check out the quiz!
OFFERPOP
We have been looking at the social media/marketing space for a while. There has been a proliferation of “social CRM” type tools and platforms (for example, Jive and Lithium), but few tools for marketers to run effective campaigns through social channels such as Twitter and Facebook. This is where Offerpop comes in – it provides a powerful set of apps for a marketer to run and manage campaigns across these two sites, and doing so in a way that is very much intuitive to how users interact with both services.
We have known the co-founders, Wendell Lansford and Prakash MIshra for several years, and followed them as their early ideas around a collaboration app morphed into Offerpop. Both are super smart, down to earth, and pragmatic entrepreneurs and we are grateful to have the opportunity to invest in this round. They are located in New York City.
YIELDBOT
The ad tech space has seen an incredible amount of innovation over the last few years. Just visit Ad Exchanger to get a sense of what is going on in the eco system.
Much of the innovation has occurred on the buyer or demand side of the industry and we are well placed in that space with our investment in OwnerIQ. As we look ahead over the next couple of years, we expect new innovation in the publisher side and Yieldbot is our first investment in this part of the industry. The company is building an innovative analytics solution for publishers that makes their content more valuable by segmenting visitor interest and intent, and matching it in real-time to relevant advertising.
Founder Jonathan Mendez is a well-known authority in web site optimization and multivariate testing and was previously with Offermatica. This is our second NYC investment and we are delighted to be partnering with well-known ad tech investor, Jerry Neumann, and terrific local firms Betaworks and RRE Ventures.
At last nights MTLC Gala Awards Carbonite won the Private Company of the Year award. Congratulations to the whole team at Carbonite. It been an amazing journey since the early days in 2005.
Nice summary of all the winners by BostonInnovation here