Resonate Networks Rasies $5 Million in Series A
Resonate Networks, the Reston, VA based online advertising startup, has just raised $5 million in their Series A funding round. The round was lead by Greycroft Partners and iNovia Capital. Resonate plans to use the funds to expand their sales and marketing efforts. The company’s focus is around targeted advertising that is based on psychographics.
Being A Startup Founder Is A Tall Order
This is going to be an action packed summer for entrepreneurs and investors. As entrepreneurs start figuring out how to get ahead of the mobile game before the new iPhone arrives and others cook up ways to set themselves apart from generation Web 3.0 applications, investors have their ears to the tracks hoping to hear about the next big thing. As the next chapter of the Washington, DC startup community reveals itself there are a few things that everyone should keep in mind.
The first is that amateur aspirations are not the same thing as well researched plans. I hear from a lot of startup founders who have great ideas, teams, and even working prototypes of what they think investors will pour money into. Not long after the pitch I hear humbled thoughts and even complaints about this, that or something else. As an entrepreneur it is really important to humble yourself early on. You think you know what you need to know until you talk to someone who knows more. Rather than act all offended when someone knows more than you do about a particular thing you sometimes need to open your ears and close your mouth. I say this from personal experience. If you don’t know something then say you don’t know it. Don’t be afraid to admit that you don’t know something. The reality is that preparing to launch a startup is a lot like training to compete in a Triathalon. If you are a really smart software engineer you have to learn marketing, if you are a really good sales person you have to learn project management, if you are a really good finance person you have to learn to be a really good sales person. It isn’t quite that bad, but I think you get the picture. You have to become fairly well versed in a lot of different areas that you know little or nothing about. All of this usually has to happen while you are preparing, but don’t worry too much because your learning curve will only get steeper after you get funded.
My favorite example founder to founder wisdom that I hear over and over again, but really don’t like to hear, is that “everything will take at least twice as long as you think it will.” Truth be told, if you have an idea and social skills you can probably find someone in your network or extended network to put money into whatever startup idea you can come up with. How someone handles this harsh reality really reveals their true entrepreneurial character. I know a couple of liberal arts guys who started learning programming after their developers took longer than the project plan called for. I know a lot of developers who learned how to use Photoshop and studied up on CSS and HTML after their designers and UI folks didn’t live up to their expectations. Many people will tell you to focus on getting something simple and ugly out there, then to iterate from there.
A highly relevant Rolodex will definitely increase your odds of finding the investor who will bring something more than their checkbook to the table. But if everything revolved around contacts then you could sign up for a service like LinkedIn, spend a few hours searching and messaging, and have a check accompanied by an amazing advisory board member within a short while. Much like finding your ideal life partner, finding your ideal investor(s) is more involved than using an online dating board.
Personally, I have never raised a seed round much less a Series A. But with that in mind I would also like to point out that I talk to a ton of people who have and who are in the process of doing so. Trust me – if you are looking to raise money the first thing that you should be doing is talking to as many people who have done it as possible. There are plenty of books and websites out there offering advice but not none of them will convey what the experience is about as much as a health series of coffee and lunch conversations with people who have done deals themselves. You will be amazed at how much you can learn by simply surrounding yourself with people who know the rules of the game.
Another consideration is the pitch. Pitching to investors is thought of as a one time event. I hear from people who pitched an idea to an investor and then thought their idea was dead to the investors. I often wonder whether their idea lacked merit or if they just lacked chemistry with the investor. In talking to both entrepreneurs and investors I hear a lot of stories about how people got their pitch right or wrong on the second round. It is a much better idea to get it right the first time though.
The thing that everyone who is making progress against their goals will tell you is that being a startup founder is hard work that usually involves long term rewards so you have to make doing it fun. That means that you have to find people who are not only interested in what you are doing, capable of doing it, and interested in some of the same things that you are. In the case of many of the teams I know well, there is a common video game that they all play (usually more than one). For others it is a common interest in beer. The Foosball table usually enters the picture much later.
Online Education Is Heating Up
Over the last few years the online education space has been quietly heating up as online enrollment has trended upward. The trend is hard to miss locally – whether it is early stage local startups in the online education space like Social Matchbox presenter alumni Starfish Retention Solutions or Campus Direct, or major players like Blackboard, Laureate, Moodle (an open source course management system), Stanford University’s Online High School (not local, but a good example of how things are going trendwise) and Washington Post subsidiary Kaplan (and Kaplan University). Apparently even Google has jumped in the game. Kaplan has even gone so far as to launch a new subsidiary, Kaplan VC, an operation that will focus on US and European investments in new learning technologies and online business models in the K12, higher ed, test prep, and other areas. Kaplan VC also plans to invest in international education opportunities particularly in Latin America, the Middle East and India. The company is looking to pick up stakes in about a half-dozen companies over the next 12 months. Kaplan VC’s announcement arrived on the last day of this week’s Venture Capital in Education Summit hosted at Scholastic’s headquarters by investment bank Berkery Noyes. There is even an incubator (Startl) dedicated to the space. If you bump into someone from the online education space you will notice something very distinctive right away: these are not your local teacher’s union card carrying types. These are companies run and staffed (at least at the top) by highly educated (think top engineering schools and top Ivy League schools) and seasoned business people. This is apparently the hot place to be right now.
The Art Of Getting Noticed
Whether you are trying to get a job interview or get the attention of a busy prospective customer, there is more than one way to get noticed. This example was so good that we had to share it.
Square, An Innovative iPhone Device For Merchants
We are always looking for interesting startup companies and products that are on the cutting edge and today we would like to introduce you to Square, a small credit card reader that plugs into your mobile device. Square allows a user to accept payment cards on any device with an audio input jack, including your mobile phone. The company also provides an added layer of buyer authentication by showing the merchant a photo of the buyer. In the spirit of ecommerce, Squarealso allows the merchant to set up a visual, clickable, store on an iPad and a tip jar. The company provides the credit card reader free of charge and monetizes the product by charging between 2.75% and 3.5% plus 15 cents per transaction. The next time you show up for Social Matchbox you may just find us accepting payment with one of these devices.
Will Social Media Survive The Test of Time
I still remember the first time I was introduced to Facebook, Twitter and many other products. In the case of Twitter it was three years ago. I thought of it as silly at first, then a great way to communicate with friends, and then as a good way to promote things. I can recall myself being a huge advocate of Twitter to people who I encountered. But lately I have had so little communication with friends on Twitter that I don’t use it very often. To make matters worse, when I do there is so much irrelevance that I am bombarded with that I feel like it may be time to pull the plug. This is a familiar feeling. I went through the same range of emotions with Friendster and MySpace. It started with spammy user profiles. Over time the number of spammy user profiles added up to a level of noise that was deafening. As I write this I have more than 100 follow requests in my inbox from Twitter. Many of these are from people who I know, but the vast majority of them are from completely random people who I have no connection to and no interest in engaging. A few of the lastest ones have included @MyCareerCoachOnline, @monkey42, @justjobs, @travel agents, and other random profiles. If I go look at these profiles many of them put in city and state combinations as well as names that are fake. I end up blocking far more profiles that I follow – in part because I don’t want my Tweets to show up in a splog or stweet (splog = spam blog with posts ripped without permission form someone else’s blog trying to make money off of ads, stweet – splog bait using someone else’s tweets). There are tons of blogs out there to help measure authority, buzz, etc., but at some point this all becomes a measure of noise not relevance.
Had I never spent time working in the web startup space I probably would not have given much thought to why this was. So why is it that social media is overrun with fake profiles, fake posts, and so much noise? Let’s break it down. First off, if you are in the web business you are evaluating your success based on how many users you have. If you have more than Facebook you are king of the hill. In addition to the number of users you are evaluating your success based on how much activity your users are generating. Naturally, you want more users and more activity vs. less. For a website like Twitter you naturally want to be bigger than Facebook. To get there fast you could do it organically or you could do it by cutting some corners. By allowing fake profiles, and millions of profiles that are essentially what I’ll generally identify here as “proxy” profiles (think marketers, spammers, or anyone promoting something online) you get your number up much faster. The only problem is, along the way these profiles begin to eclipse the unique users who have profiles and who are interacting with your website. This can add up to a huge problem. In fact, I would argue that these proxy profiles are critical factors in the decline of Friendster and MySpace. I know that I’m not the only person who stopped using MySpace because the the absurd amount of spam that I received there. Facebook managed to avoid this problem by instituting a no holds barred anti-spam and proxy profile policy. If you are like me you know at least a few people who had their profiles on Facebook deleted because they were flagged as a spammer, because they used a bogus name, or because they did something that otherwise prompted a reprisal from the Facebook team. You may recall that event social media celebrity Robert Scoble was kicked off of Facebook for going out of bounds. The company even took matters to court, suing spammers. Where Facebook took on Spam early and often, in part by creating an invitation only and highly restricted environment, others have been content to look the other way while their numbers climb.
I guess you could just look the other way, but what is at stake here is not the user’s inbox. Social Media exists because people like to share! People go on all of these social media websites looking to share what they are doing through photos, status updates, and other forms of personal narrative. They like to know what others are doing too. On a really basic level, Social Media is a lot different than the user’s inbox. In fact, it is a lot more like the Citizen’s Band or CB Radio and Amateur or HAM Radio, which both saw a huge rise in popularity back in the mid-70’s around the same time that personal computing began. Some even predict that Twitter will die off in much the same way that CB Radio died off.
The challenge for Social Media websites and founders out there seeking to create products around social media websites for the day is to figure out how to ensure the consistency and quality of the user experience where communications and self expression are concerned while building a user community that is full of real people. Perhaps the answer to Twitter’s problems is to create a new class of profile, one just for people. This would not be such an outlandish evolution, but it would mean that Twitter is just another social network. Would that be such a bad thing? I for one would not mind having an alternative to Facebook where I know my friends already are.
LaunchBox Digital Now Accepting Applications for 3 Month Startup Accelerator Program
Durham, NC based LaunchBox Digital has just announced that they are accepting applications to LaunchBox10, a global competition, where successful applicants receive funding and guidance to take their big ideas from concept to market. The program includes seed funding and a 12 week business building program in their Durham, NC offices. You may recall that a number of Social Matchbox presenter alumni participated in the program while it was still held in Washington, DC. If you are reading this and would like to be put in touch with someone who has been through the program drop us a note contact@socialmatchbox.com or @SocialMatchbox). Everyone we have spoken to that has been through this program and similar ones like YCombinator and TechStars talks up the fact that they were connected with advisors who they would not have met otherwise and they got a ton of help polishing their startup when the time came to launch. This sort of program is ideal for an early career entrepreneur who does not have a day job to get in the way of a the 12 week intensive program. It is also an ideal opportunity for a team that has at least some of their product finished and an existing team including design and software engineering talent. If you don’t have a developer or two and a designer in the mix then it is probably not worth your time to apply. The program culminates with demo days, where each new business presents to angel investors, venture capital firms, strategic partners, bloggers and media. So far we have not heard of a lot of startups coming out of Launchbox Digital getting a huge amount of funding, but we have seen a lot of companies exit the program and continue on as companies. If you have a success story or thoughts on the program let us know.
Several local incubators you may want to consider before taking a ride out of state include: College Park, MD based The University of Maryland’s Mtech VentureAccelerator Program, Reston, VA based INC.spire (a business incubator program run by the Greater Reston Chamber of Commerce), and the McLean, VA based Amplifier Ventures Business Accelerator Program. These are all great options for different reasons so do your homework.
Important dates related to the Launchbox program:
May 20, 2010 – LaunchBox10 Informational Webinar
May 31, 2010 – Early admission application deadline
June 9, 2010 – LaunchBox10 Ask the Alumni Webinar
June 30, 2010 – Final application deadline for LaunchBox10
