Startups getting caught in No Man’s Land

"No Man's Land" is traditionally known as the area between two trenches.  This is a reference to World War I and the vicious trench warfare and hand-to-hand combat that characterized that war. In "No Man's Land" lay a wasteland of dead bodies and other debris and shrapnel.  Increasingly I am seeing many startups who were ably seed funded get caught in "No Man's Land" between the seed round and a true Series A round led by a venture capitalist.  

This is happening because there are way too many companies raising seed capital but not enough executing their way to a Series A.  This can happen for many reasons including not raising enough capital in the seed round to begin with and of course not getting your product out the door.  So what does an entrepreneur do when caught in this predicament?  Many try to do an additional seed round or add-on to the prior round.  While not a bad idea, this is rarely successful because many seed funded startups have way too many investors who are more apt to write off the investment then to bridge more seed money.  Secondly many angel investors would rather invest in that shiny new car or first seed round then add more capital to a used car or startup that did not "get there" on its first seed financing.  Smarter entrepreneurs are increasingly doing two things to make sure they don't caught in "No Man's Land."  First, rather than getting 20 great names as seed investors, they are making sure to get at least 3/4 or more of the round invested by a couple institutional seed folks that may have deeper pockets and more ownership in the startup to really care about what happens in the future.  Secondly, the smarter entrepreneurs are really thinking carefully about what milestones need to be hit to raise that first Series A round and work backwards to determine how much financing they need to get there.  While not an exact science, it is imperative to think like this as you don't want to be one of the many seed-funded companies that will linger in "No Man's Land."

Read full story Comments { 2 }

The New York Startup Market Rocks and is REAL

OK, I may be biased having been an early stage VC based out of New York since 1996, but I must say that the vibe, energy, and people at the Techstars NYC Demo Day event yesterday was simply awesome.  Dave Tisch and team simply did a fantastic job guiding the startups, recruiting the mentors, and […]

Read full story Comments { 4 }

Reflecting on passed investments

Every 3 months I dig through my “passed company” folder to look at what investment opportunities we passed on and why.  Inevitably, there are a few companies that are near-misses, but we end up passing on for whatever reason.  Did we pass because we didn’t think the team was great or because we didn’t believe […]

Read full story Comments { 5 }

Know When to Hold 'em, Know When to Fold 'em

I had a tough call with an entrepreneur this morning.  His company raised a fair amount of seed financing but did not hit the milestones it needed to in order to raise a real round of venture capital.  The product is nice but they took too long iterating and releasing a subsequent version while the […]

Read full story Comments { 2 }

Put your users first!

As a VC who invests in seed and first rounds, I love revenue just as much as the next guy.  However, the focus on revenue should play second fiddle to a user/customer first experience.  Over the years, how many times have we seen companies grow from next to nothing in user base and somehow forget […]

Read full story Comments { 3 }

2 horse race in mobile – iphone and android

I just caught this blog post from Seth Weintraub from Fortune on Android: Andy Rubin just Tweeted that Google (GOOG) is activating 300,000 phones a day. That passes Apple’s (AAPL) iOS, that passes Blackberry (RIMM). That even matches any figures that Symbian has ever put up. Google is closing in on an astounding 10 million […]

Read full story Comments { 5 }

Standard investor update for startups

I remember when we hired a new CEO for one of our portfolio companies and my tip to him was to overcommunicate.  We had a few large VCs on the board and a number of high-profile angels that could also help in various ways.  His job was to keep everyone up-to-date but also to know […]

Read full story Comments { 6 }

Don't build an empire overnight – lessons from FreshDirect and Webvan

The other day I received a direct mail piece from FreshDirect, the online delivery service based out of New York.  What struck me is that the service has been around for years in NYC, and it is now getting out to some of the suburbs in New Jersey.  In fact, after having done a little […]

Read full story Comments { 2 }

Scaling your management style

After meeting with a number of entrepreneurs I recently seed funded, it was clear to me that one of the major challenges founders face is how to continue to scale their management style.  My preferred seed investment is in an engineering driven/product focused team who can code and get product out the door under the […]

Read full story Comments { 4 }

The consumer Internet business is not easy

It's not easy to build a service that everyone loves and even harder to build one that gets 3000 new users a day on an installed base of 2 million users.  Once there you may think of yourself in the drivers seat as having built a successful company.  Unfortunately, this is where the need for […]

Read full story Comments { 1 }