Friday, July 18, 2008

From First Timer to Funded -- Valuing Validation

Raising money if you're an entrepreneur is tough at the best of times, but if you're a first time entrepreneur its incredibly difficult because the reassurance investors look for more than anything else when they look to fund is validation.

There were lots of interesting conversational threads at dinner last night with Fred Wilson and 15 first-timers from the TAG and Seedcamp networks but this theme of building validation and how important it is for entrepreneurs really stuck with me.

Validation comes in many forms: previous successes, persuading a killer person to join your team or even be an advisor, signing a paying customer, acquiring lots of users, getting positive press or blog reviews. The list goes on. But without some form of validation, however good your idea might sound - if you have no track-record its just so hard to get off the ground.

First timers have no start-up track record - they have to build one.

So how do you do that and how do places like Seedcamp or YCombinator help?

Its hard to get to achieve most of the list above at the very early stages, so probably the biggest thing that Seedcamp and YCombinator do is that they force teams to ship - and ship quickly.

We both want teams that can code, not just think, and the added forcing function of limited time and limited capital makes getting something out the door imperative. There's nothing like a deadline to keep focus.

Its not important to have a finished product, even less a finished plan - what's important is to show that you can create a prototype that you can share with other people: a verbal and visual representation (to paraphrase Fred's great point) of what's going on inside the collective heads of your team.

To be both an accomplished hacker and a painter in just three months with virtually no money is an endurance test - you need to have great co-founders and you need to have great support. Paul Graham and his team have created an excellent model and its a model for our times.

There is nothing more validating at an early stage than a team that shows how they can bootstrap with limited resources to produce something which solves a real problem and that people want.

First timers who have come through YCombinator or Seedcamp have real validation. They have been filtered in the application process, they have had feedback from smart, experienced entrepreneurs and investors and they have plugged into the collective wisdom of their peers.

This is powerful stuff. So its not surprising that for many investors, teams who have been through these programs have a real mark of validation that makes it a lot easier to take an investment risk on a first timer.

In today's environment, if you are in your 20s and you put [society's] [your parent's] economic fears aside, there has never been a better time to be a first-timer.

Sttart-up costs are incredibly low (read Josh Kopelman's post on the "Price of Failure") and there is no technical excuse not to bootstrap.

Today's startup has access to:
  • incredibly mature open source technologies;
  • a globally networked talent-pool through services like LinkedIn and Xing;
  • incredible platforms for scaleable infrastructure and viral distribution that simply didn't exist - in most cases even 12 months ago.
We went round the table at dinner last night and 12 out of 15 companies were actively using AWS or trying out Google's new AppEngine. Everyone was using LAMP, Python; Django or Ruby. Everyone was using (or had a plan) for f8 and OpenSocial -- and of course with the new iPhone SDK people were salivating at the prospect of a mobile web that wasn't just a new channel but a new context for their applications.

There is no better or cheaper time to start a company in this space -- for little to no cost you can access on-demand infrastructure, social distribution and even monetization through AdWords or OpenX. In fact I'd argue with all the new platform innovation from Facebook, Apple and the cloud computing folks in the last year, now is even a better time than 2007.

So if you have a great idea and you've never started a business before go for it.

If you're a hacker, there's never been a better time and if you're a painter, find a hacker to work with and apply to Seedcamp (or YCombinator or Brad Feld and Dave Cohen's excellent TechStars -- they're all great and offer slightly different things).

At Seedcamp you know that if you apply and get through to the main week in London from Sept 15-19th just some of the folks you'll get to hang out with and get feedback from include:
  • the founders behind some of Europe's biggest recent exits like Niklas Zennstrom and Michael Birch plus the key folks behind MySQL, Lastminute,,, Plazes, Kelkoo and Zyb
  • the founders of some of Europe's most promising next generation businesses like Seatwave, WAYN, Moo, Spreadshirt, Lovefilm, Huddle and GlassesDirect
  • some of Europe and Israel's best seed and venture investors; including Atlas, Balderton, Amadeus, Index, Atomico, Northzone, Eden, DJF Esprit
  • experts in product, marketing and technology from Google, MySpace, Facebook, Skype, Yahoo!, Microsoft, Cisco, IBM, Sun and Oracle
  • folks from Techcrunch, LeWeb, FOWA, O'Reilly and the FT
  • plus we'll even throw in some specialists in startup legals and recruiting ;)
It's pretty intense - check out some of the content from last year. But its a lot of fun and pretty useful to the winners.

It's worth applying anyway though - lots of last year's teams who didn't make it told us how useful the application was in helping them to focus and articulate what they were trying to build.

So, if your a first-timer - especially those based in Europe, Middle East or Africa - what better way to get validated?

You have three weeks left to apply, yes apply -- we really look forward to seeing you and if not you than your friends, so spread the word.

Zemanta Pixie

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At 7/18/2008 01:23:00 pm, Blogger Michael Acton Smith said...

I totally agree. Any entrepreneur that has the commitment and dedication to make it through Seedcamp or Y Combinator will be taken very seriously by investors. It's a big badge of approval.

At 7/18/2008 01:51:00 pm, Blogger Unknown said...


Great post. And great work with both OpenCoffee in London and SeedCamp. I thnk we meet at OpenCoffee at 5th view a few times.

A Serial entrepreneur since some time back, and even with a number of exits and helped a number of investors to make money through the years. Funding gets easier, but it is still tuff at the best. I am more and more turning to funding early stages for my new startups myself.

I agree with the timing for starting new ventures, there have never been a better time, and it's quite cost effective.

I am setting up a business lab/incubator in San Francisco (bootstrapLabs) beginning of next year to incubate a number of startups and build a local network there for exits and licensing of products/services and technology.

I think 2009 will be a very interesting year for Internet and information technology entrepreneurs.

Nicolai Wadstrom -

At 7/18/2008 09:16:00 pm, Blogger Techwizard said...


Great post. Fresh entrepreneurs will also meet Seedcamp winners and get to hear all about their experience and how instrumental it was to their business.

At 7/18/2008 09:19:00 pm, Blogger Techwizard said...


Great post. At Seedcamp, entrepreneurs will get to speak to last year's Seedcamp winners. They'll learn how instrumental Seedcamp was and get validation on the model.

At 7/19/2008 02:45:00 am, Blogger Pete said...

Unless I misunderstand how Y-Combinator and SeedCamp work, I find it interesting that the funding is for 'ideas'.
So often you hear that ideas don't get funded, so as a painter/hacker, I go out and build/launch/repeat.

As a painter/hacker, I just go and build/launch/revise - which strangely means that I'm either a) unable to qualify for small funding like these camps offer or b) (and more importantly) don't have access to some of the amazing learning opportunities.

Is there anything like this for bootstrappers with little experience but who have actually built and launched already?

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At 11/21/2009 09:54:00 am, Anonymous iƧ giyim said...

Great post. At Seedcamp, entrepreneurs will get to speak to last year's Seedcamp winners. They'll learn how instrumental Seedcamp was and get validation on the model

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