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Tag: Venture Capital

  • Gartner: AI Will Replace ‘Gut Feel’ in Venture Capitalist Decisions by 2025

    Gartner: AI Will Replace ‘Gut Feel’ in Venture Capitalist Decisions by 2025

    Gartner predicts that artificial intelligence (AI) will replace “gut feel” in influencing investment decisions by venture capitalists and early-stage investors.

    Venture capitalists have long relied on a mysterious combination of data, KPIs and gut feeling to select which companies to invest in. According to Gartner, however, AI is poised to replace the ever-elusive gut feeling some 75% of investors.

    “Successful investors are purported to have a good ‘gut feel’ — the ability to make sound financial decisions from mostly qualitative information alongside the quantitative data provided by the technology company,” said Patrick Stakenas, senior research director at Gartner. “However, this ‘impossible to quantify inner voice’ grown from personal experience is decreasingly playing a role in investment decision making. The traditional pitch experience will significantly shift by 2025 and tech CEOs will need to face investors with AI-enabled models and simulations as traditional pitch decks and financials will be insufficient.”

    By 2025, AI will help investors transition to a quantitative process based on advanced analytics. Information will be gathered from a variety of sources, including Crunchbase, LinkedIn, Owler, PitchBook and others. This data can then be used by AI to assess a company’s viability.

    “This data is increasingly being used to build sophisticated models that can better determine the viability, strategy and potential outcome of an investment in a short amount of time. Questions such as when to invest, where to invest and how much to invest are becoming almost automated,” said Mr. Stakenas.

  • Andreessen Horowitz Hires Maggie Leung As It Doubles Down On Media Strategy

    Andreessen Horowitz Hires Maggie Leung As It Doubles Down On Media Strategy

    Andreessen Horowitz (a16z) has hired Maggie Leung, a well-known journalist, as executive editor as the company doubles down on its media efforts.

    Venture capitalists are increasingly looking to handle more of their own media, rather than relying on the press. Andreessen Horowitz has been on the leading edge of that, with a strong focus on speaking directly to its audience from day one. Blog posts, thought pieces, podcasts, op-eds, videos and more have all been an important part of a16z.

    The company is expanding its efforts with the hiring of Maggie Leung. Leung previously spent some 20 years as a journalist with The Washington Post, The Wall Street Journal and CNN. Most recently, she built NerdWallet’s content operation from the ground up.

    “Simply put, when you find someone like Maggie, you have to work with them,” writes Margit Wennmachers.

    “And of course Maggie is joining our outstanding editorial team, led by our wonderful managing editor Amelia Salyers, who hired many of the editors, and of course, the super-talented and incomparable Sonal Chokshi, who continues to guide our voice and editorial vision as our editor in chief. Every piece of content you see or hear has been shaped and edited by the editorial team.”

  • Waves of Job Losses For 2.2 Million Startup Employees, Says VC Group

    Waves of Job Losses For 2.2 Million Startup Employees, Says VC Group

    According to a report on CNBC, startups may not get government money from the coronavirus relief bill if they have already taken venture capital or private equity money.

    “So-called affiliation rules from the Small Business Administration could prevent startups from getting loans as part of that stimulus package,” says CNBC report Kate Rooney. “According to SBA rules, a startup should be affiliated with their investors. For example, if a VC backed company has 30 employees, it is grouped in with thousands of other employees at fellow portfolio companies.

    “The head of the National Venture Capital Association tells me that startups don’t have access to emergency capital in the meantime and there could be waves of job losses for the countries 2.2 million startup employees,” says Rooney.

  • The Next Silicon Valley? Try Ohio—Columbus-Based Venture Capital Firm Raises $350 Million

    The Next Silicon Valley? Try Ohio—Columbus-Based Venture Capital Firm Raises $350 Million

    Business Insider is reporting that two ex-Sequoia investors have raised $350 million to invest in Midwestern startups.

    Mark Kvamme left Sequoia nearly a decade ago and, after a brief stint in Ohio Governor John Kasich’s cabinet, invited Chris Olsen—another Sequoia alumni—to join him in Columbus. The two created Drive Capital, with a focus on investing in early-stage, Midwestern startups.

    While Silicon Valley may be the hub of the tech industry, more and more companies are beginning to look outside the Valley in recent years. Real estate costs, both for companies and their employers, have become increasingly prohibitive. Cost of living has made it difficult for even well-paid employees to make a success of it. With so many companies in such close proximity, there’s a much greater chance of seeing top talent poached by a rival across the street.

    Ohio, and the Midwest in general, offers a welcome change of pace for many tech companies. Lower real estate prices, reasonable cost of living, central location, plentiful colleges and universities, as well as cities eager to bring in more businesses make the Midwest an appealing home base.

    The venture capital firm has already invested in some winners, including the Duolingo language app, Root Insurance and Nowait, a restaurant-reservation app acquired by Yelp to the tune of $40 million.

    With Drive Capital’s third fund totaling $350 million, it’s a safe bet the Midwest will take on a bigger role in the tech industry.

  • What’s the #1 Thing Founders Should Avoid Doing in a Pitch?

    What’s the #1 Thing Founders Should Avoid Doing in a Pitch?

    Earlier this week LinkedIn launched 30 second videos for Influencers. One of the first questions put out there by LinkedIn was about what not to do in a pitch meeting. There were some very interesting and helpful answers for any entrepreneur facing a pitch to venture capitalist companies.

    What’s the #1 Thing Founders Should Avoid Doing in a Pitch?

    “I see hundreds and hundreds of pitches literally, being a Shark on Australia’s Shark Tank,” says Naomi Simson, Founding Director RedBalloon and popular author, blogger and speaker. “The most important thing is that people quickly and effectively bring us into their world, talk about the problem but also somehow relate it to us. We want to feel connected and we want to feel empathy. Business is about numbers, but it’s also a people game.”

    “Founders must understand that passion is everything,” says Tony Elumelu, who is Chairman at Heirs Holdings based in Nigeria. “If you speak to me and show me no passion I will kick you out of the room.”

    “What do I really hate in pitch meetings, when founders start talking about potential exits, especially at the seed stage where I mostly invest,” noted Hunter Walk, who is a Partner at Homebrew VC and formerly with YouTube, Google, and Second Life. “I don’t want to hear about how you are going to exit out of the company, I want to hear how you are going to build it.”

    “Founders should never assume the customer or investor has as much industry or product knowledge as they do,” says Creel Price, Founder & Director of Investible. “You might have come up with your product over the course of a year and you understand your industry intimately. The investor or customer doesn’t. Rather than take that salesman (approach), come in there with more of an education mindset. Leave the techno speak, the jag, the assumptions and the blind faith at the door and start to educate them on why this is such an amazing opportunity and what you would like for them to do about it.”

    “The number one thing founders should avoid in their pitch is trying to prove that they have a world class team,” commented Guy Kawasaki, who is a marketing and advertising world class speaker and evangelist for Canva. “They don’t have a world class team, that’s why they’re pitching for money. So get to your product, get to your service and explain what the hell you do. Just get to that really quickly. Think F18, not 747.”

    “Please, please… eliminate the word “meet” from any one of your presentations,” added Christopher Schroeder, internet/media CEO and venture investor. You know what I’m talking about. Our idea of Snapchat meets Dropbox meets Pokemon Go, on and on. Don’t overdrive by analogy in a presentation. Don’t drive by the rearview mirrors or sideview mirrors because you’re going forward and it’s about the future. I don’t think Facebook said it met anything. Can you imagine them saying that overall we are MySpace meets Lycos or what have you? I don’t think so. You are your company.”

    “I’ve invested in about 10 startup companies, my most successful being LearnVest, which had an amazing exit last year and an amazing founder Alexa von Tobel,” commented Jacki Zehner, who is CEO of Women Moving Millions based in the New York area. “One thing founders have to avoid doing is acting entitled to my money. It’s one thing to show up confident, have your story, but you should be grateful that anyone’s listening to your story. Don’t be too humble, be confident, but don’t act entitled.”

    “One of the most important things to do in a pitch meeting is to bring a deck,” says Tomasz Tunguz, Venture Capitalist at Redpoint. “A lot of founders come in just wanting to have a conversation. That becomes a challenge because it’s really hard to structure a conversation, support your points with data, and tell the story of the business in the best possible way. So, next time you pitch a VC, please bring a deck.”

    “Investors invest in businesses that are as validated as possible,” said Sramana Mitra, who is Founder at One Million by One Million (1M/1M) based in San Francisco. “Do not pitch concepts.”

  • Silicon Valley’s VC World Is Even Less Diverse Than the Non-Diverse Companies It Funds

    There’s a striking lack of diversity in the tech world, and this is a well-documented fact. The biggest names in the business – Facebook, Google, Twitter, etc. – have all put out diversity reports over the past few years that show this, and all have made pledges to do better.

    Silicon Valley is pretty white, and pretty male – especially when it comes to leadership roles.

    And not that this should come as a huge surprise, but the same goes for those taking the money and those dishing it out.

    The Information has published a study into the racial and gender makeup of some of the top Venture Capital firms, and the results aren’t promising (if diversity is something you value).

    From The Information:

    Less than one percent of senior VCs involved in investment decision are Black—four of 551 people. And only 1.3% are Hispanic…

    Ninety two percent of the senior investment teams at top-tier venture capital firms are male and 78% are white. Nearly a quarter have all-white male managers. These results are way worse than the diversity breakdown at major tech companies, where 23% of leadership teams are female and 77% male.

    Here’s a detailed chart, courtesy TechCrunch:

    Screen Shot 2015-10-07 at 9.32.13 AM

    Twitter – which just made a promise to have a workforce that is 35% women overall, 16% women in tech roles, 25% women in leadership roles, and 11% underrepresented minorities by next year – is 70% male overall, 90% male in tech roles, and 79% male in leadership roles.

    Facebook – which just built and published its own diversity training course so others can use it as a framework – is 55% white and 68% male. A year ago, when Facebook reported its first diversity data, those numbers were 57% and 69%, respectively. In terms of Facebook’s senior leadership, it’s 77% and 73%, respectively.

    Tech companies clearly have a ways to go, but it looks like those slinging out the money in the Valley have an even tougher road to true diversity.

  • Gwyneth Paltrow: ‘I Had No Idea What I Was Getting Into’

    Gwyneth Paltrow is learning the hard way what it takes to be the face of a company. She isn’t just the name and profile behind Goop. She sits in meetings with VC investors. She is involved in the running of the company.

    She recently told Bloomberg:

    “I didn’t realize that I would be taking on so much more risk. I was a fool. I had no idea what I was getting myself into. But I have to say it’s been incredibly rewarding. I learn so much everyday, and we’re at a really exciting time in the business right now. It’s amazing to be the creative force and to also understand what’s going on over on the fiscal side, with raising money and all that. It’s very challenging, you know. It’s a side to me that I didn’t necessarily know that I possessed.”

    Many people come up with an idea, plot out a startup, and head out into the world to get money from people who have money to give. Even Gwyneth Paltrow had to sit across the table from those guys.

    “[Fundraising and dealing with VC investors] has definitely been an interesting experience, out of my comfort zone. I still struggle with it ideologically a little bit, only because when those VCs come in, you’re beholden to them and the bottom line. So, I have trepidation about it, but it’s also exciting.”

    But her reasons for getting personally involved were based in trying to leverage the power that her own name and face bring to bear for other companies.

    “I started questioning being hired as a face to represent a company, and I always represented companies that I respected and that I was a customer of anyway. I started to question, as I’m doing this business on the side and building this brand, ‘What would it be like if I were to channel the power of that into my own brand? It would be sweat equity that I put into the company and also my own actual equity.’”

    But she does not want to be the sole face of the business. In fact, she wants it to outgrow her. As she begins to distance herself from the brand that is literally built on her initials, she has a vision for what it would look like without her.

    “I very much want Goop to be its own standalone brand. My dream would be that in 20 years, people would sort of recollect that I maybe had something to do with it at one point and my involvement would be less essential. I think that’s what we’re building toward, and I thin we’re doing it. It’ll be interesting to see. I never wanted to do a proprietary brand. I wanted it to be its own thing that my children could run one day if they wanted to.

  • Twitter Co-Founder Evan Williams Launches Obvious Ventures

    Evan Williams, co-founder of Twitter and Blogger, is back with his third version of Obvious, the previous versions of which spawned Twitter, Medium, and Twitter co-founder Biz Stone’s Jelly and Super.

    This one is called Obvious Ventures, and running the show with Williams are investors James Joaquin and Vishal Vasishth. The firm is what it sounds like – a venture capital fund, but it focuses on what they refer to as “wold positive” startups. A message on the Obvious Ventures website says:

    We’re entrepreneurs. We’ve helped a lot of companies launch, grow, and generate great financial returns. A few of these companies also deliver positive social and environmental benefits with every dollar of revenue they earn. We want to fund and build more of those. That’s what we call #worldpositive venture capital.

    Why should these companies work with us? We’re experienced investors, with several IPOs under our collective belt. But we’re product designers and company builders first, and we are on a mission to help fuel startups that combine profit and purpose. Startups that create new solutions to big world problems in a profitable and scalable way.

    Obivous Ventures has invested in eleven companies so far, but has only revealed nine of them. These are: Olly, which makes nutritional supplements; Beyond Meat, which makes meatless protein foods; Breezeworks, a business operations app; Flux, which makes architectural design tools; Loup, a ride service; Magic Leap, a screen interface developer; Miyoko’s Kitchen, which makes plant-based cheeses; Workpop, a work marketplace; and ZenPayroll, which makes payroll software.

    Image via Obvious Ventures

  • Twitch Raises $15 Million in VC Funding

    Twitch Raises $15 Million in VC Funding

    Twitch, the leading online platform for streaming games and eSports events, announced this week that it has received a $15 million investment from venture capital firms during its latest funding round. Venture capital firm Bessemer Venture Partners provided the bulk of the funding, with Alsop Louie Partners and Draper Associates also participating the the round. Twitch stated that the investment will “accelerate the growth of Twitch’s engineering department.”

    “We launched Twitch a little over a year ago, and already we have more than 20 million unique viewers per month,” said Emmett Shear, CEO of Twitch. “We have also partnered with more than 2,000 incredible broadcasters and have integrated our product with leading game publishers. “I’m very proud of our accomplishments, but there’s so much more to do. Our current team has put us at the forefront of the live video game streaming movement, and we can now invest aggressively to support our growing community with new ways to stream, watch, and chat.”

    The growth of Twitch parallels the growth of the eSports market in general. Back in April Twitch partnered with CBS Interactive and Major League Gaming to provide eSports coverage. Over the past two years, games such as StarCraft II and League of Legends have garnered a large community of gamers willing to watch professionals play them. Riot Games, the developer behind League of Legends, announced last month that it will establish a professional eSports league for its game.

    “Twitch is exactly the kind of company that we seek for investment,” said Ethan Kurzweil, vice president at Bessemer Venture Partners. “Twitch is not just a game changer: they created the game and are creating new experiences for their community. We’re looking forward to them accelerating their lead, and continuing to change the rules as they go.”

  • Bitly Raises $20 Million

    URL shortening platform bitly has just raised $20 million in a round of funding, roughly double it garnered last time around. Bitly had been the default URL shortener on Twitter since 2009, replacing TinyURL, until Twitter introduced its own shortener called t.co in 2010.

    Investor Joshua Stylman mentioned to the Verge, “The link shortening has always been a bit of a Trojan Horse. Bitly is really an analytics tool for tracking content across the open, distributed web, and doing it at a massive, real-time scale.” The analytics functionality is what the company has been able to bank on, and recently moved into a larger office from the Chelsea-based innovation lab Betaworks. Bitly’s enterprise dashboard allows users to better tack brand reputation, social proofing data, and can help predict what sort of content might go viral – and data is gathered in real-time, before Google can index the item in its page rank.

    According to the company, “bitly shortens 80 million URLs every day, give or take a few – Now, with our new search technology, we’re crawling and classifying every URL we shorten to create an index of the most ‘viral’ content on the web – content that’s broadly distributed, frequently-clicked, and trending at a high velocity.” With the the relevance of social media advertising rapidly growing, bitly can expect to see growth as well, and with the new funding, users should expect to see a host of new functionality.

  • Pinterest Raises $100 Million at $1.5 Billion Valuation

    Pinterest Raises $100 Million at $1.5 Billion Valuation

    Regardless of varying reports of Pinterest’s growth as of late, the social photo-sharing site was still able to raise $100 million in venture capital, with a valuation of $1.5 billion. Tokyo-based Rakuten, Inc., one of the world’s largest internet companies, contributed $50 million to the latest investment round. Since its inception in 2008, Pinterest was only able to garner about $40 million, and more investors beyond Rakuten and the others who signed on should be announced tonight by CEO Ben Silbermann.

    According to All Things D, while looking for a global strategic investor, Silbermann spoke with many companies in Asia, and went with Rakuten, and according to an insider, “He just really liked them.” Other Pinterest investors include Andreessen Horowitz, Bessemer Venture Partners and FirstMark Capital, and other well-known angel investors. Rakuten is one of the largest e-commerce companies in the world, with revenues of $4.7 billion last year, and will help Pinterest to better monetize its pinboards.

    It was recently reported that Pinterest was losing Facebook-connected users, as well as regular users in general. Though other reports document the site’s growth, putting it on par with Facebook in average user time spent on the platform, at 405 minutes per month. Either way, Pinterest is still a relatively new platfrom. Ups and downs can be attributed to mere growing pains.

  • Berlin-based EarlyBird Raises $100 Million

    Berlin-based EarlyBird Raises $100 Million

    Berlin investment firm EarlyBird recently raised $100 million in its fourth round. EarlyBird was founded in 1997, and has since invested in more than 70 companies, and is presently focusing on European startups, especially those in Germany. Incidentally, LinkedIn co-founder Konstantin Geurike is also an EarlyBird partner.

    Geurike, who is German, though educated at Stanford and based in Palo Alto, sees a talent pool in Europe that is a bit scarce in Silicon Valley. He told VentureBeat, “I think given the amount of money available, the shortage in Silicon Valley is in technical talent. I have no doubt that some European startups with strong talent and the right startup know-how will be able to out-execute Silicon Valley companies.”

    Geurike adds that he plans to focus on helping EarlyBird-funded startups expand to the U.S. market – “My goal is to help portfolio companies to become a success on a global scale – I will probably end up working most closely with one or two founders who decide their best opportunities for global impact come from leading their business from Silicon Valley, while keeping most of the staff in Germany, where it is easier to attract and retain technical talent.” When comparing the European startup climate to that of the U.S., Geurike states, “European founders tend to think more about revenue early on. That can be an asset, but also somewhat limiting. However, given the greater impact you can have these days with modest or no funding, I think European entrepreneurs can break free of these constraints, and smart money will find them.”

    In related news, LinkedIn doubled its revenue in 2011 with $522 million, though likewise became less profitable – This is due to the company nearly tripling its costs in regards to sales and marketing. The social network hired 531 sales and marketing people in 2011, a roughly 270% increase. Though, the expansion effort is working – the platform presently has about 161 million users.

  • SEOmoz Raises $18 Million in VC Funding

    SEOmoz Raises $18 Million in VC Funding

    SEOmoz, a startup that develops Search Engine Optimization (SEO) software, today announced that the company has raised $18 million in venture capital funding. The announcement came on the company’s Daily SEO blog in a Google+Reader”>post by SEOmoz CEO Rand Fishkin. The $18 million in series B funding was provided by The Foundry Group and Ignition Partners. The company’s only other round of funding was in 2007, when it raised $1.1 million from Ignition Partners and Curious Office. This round of funding brings Foundry up to a 17% share in the company, with Ignition having a 15% share. A recent WebProNews interview with Fishkin about a past failure to raise funds for SEOmoz can be viewed here.

    “SEOmoz is one of those companies that you just know is going to do big things, “ said Brad Feld, Managing Director of The Foundry Group. “I tend to judge the organizations I invest in based on character, culture and leadership. I believe Moz has exceptional depth in all these areas and the financial growth trajectory to back them up. The relationship is a great fit from all angles and I’m positive we have a very successful future ahead of us.”

    The software that SEOmoz creates crawls websites to find errors or missed opportunities for SEO and then makes recommendations based on SEO best practices. The startup also helps websites battle negative SEO. SEOmoz has 15,000 current paying subscribers and predicts it will take in $18-20 million in 2012.

    In addition to the highly detailed blog announcement that tells the entire story of the funding, SEOmoz has put out an official press release that is littered with internet memes. One example can be seen below, and represents the tenuous explanation for their less-than-serious release. The rest of the memes, which, I must warn you, are not all winners, can be seen here.

    SEOmoz meme press release

    Despite the silly press release, SEOmoz is sincerely hoping this investment will allow their startup to grow and flourish. “In that first phone call with Brad, I knew we’d found someone special,” said Fishkin. “I was, honestly, scared of starting another fundraising process after our previous two attempts, but the chemistry between Foundry and Moz was instant – we couldn’t ask for a better fit. This new partnership coupled with the continued support of our original investors, Ignition Partners, gives us the ability to achieve some remarkable milestones in the years to come.”

    How do you feel about companies that cast their SEO magic on websites? Should all companies be less serious about their press releases? Leave a comment below and let us know.

  • Viddy Seeks to Raise $30 Million

    Viddy Seeks to Raise $30 Million

    Viddy, a sort of Instagram for video, has just revealed that it’s going for $30 million in venture capitol during its series B funding, with a valuation of $370 million – while likely banking on its 10 million users. This comes directly after similar video-sharing platform and likely soon-to-be direct competitor Socialcam reportedly added 4 million new subscribers over last weekend. With Instagram recently being acquired by Facebook in a quick $1 billion transaction, developers are scrambling to optimize a sort of video version of the cash cow, as mobile networks advance to better host tricky moving-picture content.

    Viddy was able to raise a $6 million Series A in February, and is likely banking on some of the Instagram intrigue, or better, the investor ethos possibly generated by countless mentions of one billion dollars that have been flying around the industry as of late. It was recently reported that Viddy was the top app for iPhone for a time, beating out Instagram itself and OMGPOP’s ‘Draw Something.’

    Here is a video review of the Viddy platform:

    Viddy was launched last April, and allows users to shoot 15-second videos on their devices, edit the clips and then share them.

  • Ark People-Search Engine Raises $4.2 Million

    Liz Gannes over at All Things D is reporting that “people-search” engine Ark has just raised $4.2 million during its recent seed round. Ark is a website that promises to help searchers find old acquaintances and new friends based on search parameters. The site can currently only be joined by requesting an invitation from Ark. A Gmail-type invitation system is being used, though, so anyone who already has an Ark account can invite others. Gannes reported that more than 250,000 people have requested invites already.

    Ark is a recent start-up that is part of Y Combinator investment funding. Y Combinator is an interesting investment group, which twice a year gives small amounts of money to start-ups so that they can get their company into shape for an investment pitch. Y Combinator then holds a “demo day” for all of the start-ups to pitch to investors. According to Gannes, Ark’s pitch got the company $2 million in a single day.

    Ark bills itself as a search engine for finding people, but it has limited functionality so far. The only people Ark can sort are those whose information is public on a social network. To find those people, users must use search filters such as location, employer, schools, and interests. The site seems tailor-made to be bought by Facebook to enhance their site search.

    I should also mention Ark’s strange obsession with penguins. Their site is covered in cute penguins, and their Facebook page includes a photo gallery packed with groan-worthy penguin comics.

    What do you think? Are the search engine wars heating up again? Will the search landscape fracture into a series of specialized search engines good at only niche searches? Or are investors jumping onto the bandwagon, hoping for a Facebook payday? Leave your comments below and let me know.

  • What Will the JOBS Act Do for Startups & the Tech Industry?

    Last week, President Obama signed into law the Jumpstart Our Business Startups Act, more commonly known as the JOBS Act. The White House administration is hoping that small businesses and startups will drive recovery and create new jobs.

    In a press release the White House released, the President said:

    “America’s high-growth entrepreneurs and small businesses play a vital role in creating jobs and growing the economy. I’m pleased Congress took bipartisan action to pass this bill.  These proposals will help entrepreneurs raise the capital they need to put Americans back to work and create an economy that’s built to last.”

    What do you think the JOBS Act will do for small businesses and startups? Please share.

    The bill covers several provisions, but the most prominent one is “crowdfunding.” Under this element, startups and small businesses can solicit the general public for investment, which democratizes funding efforts.

    Michael McGeary, Strategist at Hattery Labs Michael McGeary, who is a strategist with venture capital firm Hattery Labs, worked with lawmakers on this bill and told us that crowdfunding was the “#1 way for direct benefits as the bill rolls out.”

    “It’s gonna make it available for people all over the country to give what they can to a startup they believe in and get equity in return, which will help on both sides,” he said.

    Crowdfunding will specifically help those startups that don’t need millions of dollars but that still need some to get their feet of the ground. McGeary said it would help startups become companies more quickly and also give them more growth potential. He also told us that he expects to see more companies such as Kickstarter and IndieGoGo as the JOBS Act is rolled out.

    While some people have questioned the impact of crowdfunding on traditional funding methods, McGeary doesn’t believe they will be harmed in any way. In fact, he believes they will be enhanced by crowdfunding.

    “Crowdfunding is not going to utterly change that system,” he said. “All it’s gonna do is make it better for more people to get more ideas to the marketplace faster.”

    He went on to say that it would draw in a wider community to what’s happening in the Silicon Valley because more people will be involved. This will furthermore help to create a more transparent startup economy since the community will be bigger and more diverse.

    The JOBS Act will also lighten the regulatory hurdles that small businesses must go through in the expansion of “mini public offerings” and the creation of an “IPO On-Ramp.” These provisions will not only eliminate forced IPOs, but it will also speed up the process for businesses to grow at a faster rate.

    Despite the strong bipartisan support, there has been some opposition to the bill. In a post in Rolling Stone entitled “Why Obama’s JOBS Act Couldn’t Suck Worse,” Matt Taibbi discusses the fraud and scams that could take place in the stock market as a result of the law:

    “In fact, one could say this law is not just a sweeping piece of deregulation that will have an increase in securities fraud as an accidental, ancillary consequence. No, this law actually appears to have been specifically written to encourage fraud in the stock markets.”

    The Huffington Post also pointed to the dissatisfaction of the labor parties suggesting that the White House chose the tech community to alleviate concerns raised over the SOPA outbreak in January. Others have indicated that the law could open the door for weak IPOs.

    McGeary, however, told us that he does not believe the negatives outweigh the positives. According to him, the people who are advocating the law are adamant on its success and, therefore, are determined to keep fraud away.

    “There’s no investment without risk,” McGeary said.

    “If bad actors do enter the system and fraud does start to proliferate through the crowdfunding system, there’s gonna be a movement afoot in Washington very quickly to make sure that any regulations that have to be changed or augmented in that way, will happen swiftly,” he added.

    While McGeary believes the JOBS Act is a “great first step,” he believes that more needs to be done in terms of the startup community, especially in the areas of long term STEM education and spectrum and broadband patents.

    The SEC is currently requesting feedback on the law, as it contemplates potential regulatory measures.

    Do you see more concerns or benefits with the JOBS Act? Let us know in the comments.

  • Latest Instagram Valuation Round led by Sequoia

    Any developer of an internet app that people are actually using is likely raising venture capital at present, and Instagram is set to receive $50 million at a $500 million valuation after wrapping up a Series B round led by Sequoia Capital, according to sources close to the dealings. The maker of the growing photo-sharing application, which recently found its way to Android, may also get an assist from DST Global.

    Without any revenue coming in, some have been skeptical of Instagram’s $500 million valuation, but this has not seemed to have had any affect regarding people wanting to get in on the deal. A year ago, Instagram first received Series A funding of $7 million from Benchmark Capital, when it had roughly 1.75 million registered users. Last week, the company had 30 million iPhone users just before it launched on Android, quickly adding another million in 12 hours.

    Instagram CEO Kevin Systrom hasn’t commented on the fundraising. The company had 13 employees in its San Francisco office at last count.

    In related news, a recent study has shown that the over posting Instagram pics on Facebook might get a user defriended by their peers.

  • Andreessen Horowitz Raises $1.5 Billion For Fund III

    VC firm Andreessen Horowitz announced that it has raised $1.5 billion for its Fund III.

    Co-founder and general partner Ben Horowitz explains, “Fund III is all about extending our capabilities to more disruptors and pioneers. We’re remaking the modern venture capital firm, and entrepreneurs are responding to our unique approach.”

    The firm has raised $2.7 billion since its founding in June 2009. Its portfolio consists of 90 tech companies. These include Facebook, Twitter, Foursquare, Groupon, Digg, Instagram, Skype, Zynga, Pinterest, and Airbnb, to name a few.

    The new funding should help aid some more future household names.

    “Software is the catalyst that will remake entire industries during the next decade,” says co-founder and general partner Marc Andreessen. “We are single-mindedly focused on partnering with the best innovators pursuing the biggest markets.”

    Horowitz wrote a lengthy blog post about not only the funding, but really history of the firm and an essay about its philosophies. For example, he writes:

    Marc and I share a simple belief that became the basis for our new venture capital firm: in general, founding CEOs perform better than professional CEOs over the long term, and a venture capital firm that enables founding CEOs to succeed would help build the best companies and yield superior investment returns.

    The firm says Fund III is available to be deployed immediately.

  • Challenges with Raising Venture Capital & Being Transparent about It

    It hurts to get close to something that you want and then not get it, doesn’t it? When we’re talking about money and business, this situation is even more painful. Furthermore, talking about the situation does nothing but add more grief to an already complicated situation.

    Unfortunately, this is exactly the scenario that our friend Rand Fishkin, the CEO and co-founder of SEOmoz, found himself in not long ago. In 2007, the company received venture capital funding from investment firm Ignition, and earlier this year, was approached by a number of firms interested in investing further.

    Fishkin told us that the company had not planned on raising funding but that it began to get excited about the potential opportunity. During the bidding process, there was clearly one firm that stood out. Fishkin said it made them a good offer and the companies signed a term sheet.

    As he explained, this is “usually a done deal unless the investment firm finds fraud of some kind.” However, three weeks after the signing, the investment firm pulled out. Aside from the fact that SEOmoz did not receive the funding, he said it was also hard to understand why it happened since the firm did not give a clear reason for its action.

    “That experience was new for us,” said Fishkin. “I think folks tend not to write about the fact that even after a term sheet is signed, the investor can still pull out.”

    Because he has always been very open about all things SEOmoz, Fishkin wrote a very detailed post, within legal bounds of course, about the entire experience. WebProNews asked Fishkin about why he felt so compelled to be open since most companies would not go to the extreme to find out what they could actually disclose.

    He told us that transparency has always been a core value of SEOmoz and always would be. He believes that this includes both the good times and the bad times.

    “There’s nothing up my sleeve,” said Fishkin. “It’s all out there.”

    Is it possible for a business to be too transparent? What do you think?

    Fishkin and SEOmoz take transparency very seriously and believe in being upfront about all matters, even when they involve finances and legalities that aren’t flattering.

    “It’s one of the qualities that consumers and business customers appreciate so tremendously much these days,” pointed out Fishkin. “We’re getting a culture, it’s particularly in the technology world, that anticipates, loves, and rewards transparency.”

    With this transparency, there is also a risk since investors may avoid SEOmoz in the future out of fear of being the subject of a blog post. Fishkin admits that this is a very real concern but said it was one that he was willing to take.

    “It’s a risk that we feel comfortable with,” he said. “I would rather say I’m going to commit to our core values, we’re going to do it 100%, we will be transparent no matter the costs, rather than say… we’re transparent but only when it’s convenient for us.”

    Even though SEOmoz didn’t receive the funding, no one can say that the company doesn’t stick by its values. The experience, however, has made the company hesitant about raising capital in the future.

    “We’re going to go back to our original mission of not raising capital,” said Fishkin. “Maybe we’ll think about it again next year, but I sort of hope we don’t.”

    “I’d prefer not to go through that process,” he added. “It takes a lot of time and energy away from running the business.”

    If the opportunity were to come up again, Fishkin told us that he would like his company to be in a position in which it doesn’t need the funding, so that it could walk away if it wanted. Since most startups that are covered by the Silicon Valley media receive funding, he also said that he would try to create buzz around his company before he attempted another VC round.

    Although the experience was difficult, Fishkin and SEOmoz have received a lot of praise and support for being transparent. Fishkin told us the praise is a “good consolation prize” but that it was a little “bittersweet.”

    Going forward, he hopes that startups will be more aware of potential issues and that investors will be more cautious.