Startup Bubble 2.O?

STARTUP BUBBLE 2.0? (S) THE NEW STARTUP ECOSYSTEM In many ways, the latter half of last year was an excellent time for the venture capital world. Following the recent abysmal economic dent on the industry, investment activity seemed to picked up considerably. And word around town says that 2011 seems to be shaping up even better, thanks to major financings of giants such as LinkedIn and Facebook. Here, we explore two questions: is there indeed another coming of the dot com bubble? And how can startups attain the proper funding-the lifeblood for any company? VENTURE CAPITAL ENTHUSIASM RETURNS TO PRE-COLLAPSE NUMBERS After a major dip in late 2008 and early 2009, the Venture Capital industry returned back to original pre-collapse numbers. The total capital invested in Q1 2011 was even higher than the pre-collapse days in early 2008; however, the number of deals was still significantly lower. This positive trend indicates that it may be a good time for startups to raise capital for their businesses. DEALS 990 1000 922 907 900 800 730 735 738 715 678 687 700 ........ ..... 603 613 612 600 483 500 400 300 200 100 01 2008 Q2 2008 03 2008 04 2008 Q1 2009 Q2 2009 Q3 2009 04 2009 Q1 2010 02 2010 03 2010 04 2010 01 2011 FUNDING $10B $9B $8B $7.5B $7.1B $7.4B $7.2B $7B $6.5B $6.1B $5.9B $5.9B $5.9B $6B $5.3B $5.5B ....... ......... ......... $5.4B $5B $3.9B $4B $3B $2B $1B 01 2008 Q2 2008 Q3 2008 04 2008 Q1 2009 Q2 2009 03 2009 04 2009 01 2010 Q2 2010 03 2010 04 2010 Q1 2011 OVERBLOWN?: REVENUE VS. VALUATION' IN TECH 2010 Revenue: $860 million 2010 Revenue: $243 million LINKEDIN SKYPE 2011 Valuation: $9 billion 2011: Sold to Microsoft for $8.5 billion GROUPON 2011 Valuation: $25 billion FACEBOOK 2011 Valuation: $100+ billion 2010 Revenue: $760 million PANDORA 2010 Revenue: $2 billion 2010 Revenue: $55.2 million 2011 Valuation: $984 million *According to highest estimates. THE BIG FIVE Although venture capital investments take place all over the country, there are a f key states that routinely see the most ars. CALIFORNIA DOMINATES IN FUNDING Funding Share Washington 2% New York 6% 10% Other 26% Massachusetts California 52% Техas 4% INTERNET VC ACTIVITY GROWS Amount of Funding 221 Number of Deals LAST YEAR (Q1 2010) $1.27B 289 THIS YEAR (Q1 2011) $2.32B DISCOUNT, MARKETING AND SOCIAL SITES RECEIVE MOST FUNDING THIS YEAR Social Commerce All Other linuminl 22% 22% Advertising, Sales & Marketing 14% eCoommerce enablement HR & Workforce Management Data Information Providers & Portals Social Storage Education & Training 7% 7% Gaming Accounting & Finance Monitoring & Securi 5% Healthcare Video Photo 3% 3% 3% 3% 3% 2% 2% 2% 2% SILICON VALLEY, NYC AND CHICAGO, BATTLE IT OUT ON THE WEB When it comes to the Internet world and the VC funding dollars that funnel into it, there is a power struggle occurring between the tech behemoth that is Silicon Valley, and east coast startups in New York City and Chicago. VC INVESTMENT IN INTERNET BY STATE (Q1 2010) VC INVESTMENT IN INTERNET BY STATE (Q1 2011) WASHINGTON DC 2% TEXAS | 2% - PENNSYLVANIA | 2% HAWAII | 1% TEXAS | 1% MARYLAND | 1% - NEW JERSEY 1% GEORGIA |2%- INDIANA |2% MARYLAND | 2%- WASHINGTON |3% - OTHER | 7% OTHER | 7% MASSACHUSETTS 5% MASSACHUSETTS 5% WASHINGTON | 7% NEW YORK | 11% CALIFORNIA | 52% CALIFORNIA | 45% NEW YORK | 17% ILLINOIS | 22% Over the course of the year, New York has lost its clout, with fewer large investments and less funding dollars. MOBILE GETS HOT: BIGGEST INTERNET DEALS (Q1 2011) 3 GROUPON Angies list box weatherbill COLOR Cloud content management and collaboration platform. Consumer review site Real-time pricing and Mobile phone app that allows dynamic photo sharing. Web site that offers daily deals and discounts. for contractors and buying of weather insurance other services. using monitoring systems. Location: Location: CHICAGO, IL Location: PALO ALTO, CA Location: Location: INDIANAPOLIS, IN SAN FRANCISCO, CA SAN FRANCISCO, CA Total Funding: $1.14B Total Funding: $77.6M Total Funding: $147ZM Total Funding: S58.9M Total Funding: $41M STARTUP SUCCESS HOW TO RAISE STARTUP CAPITAL For many, obtaining funding from venture capitalists or angel investors is the only way to get their business started. The following is a high-level overview of the 5 steps necessary to raise capital for your business. These 5 steps come from the Udemy.com course on "Raising Capital for Startups." 1 GET INITIAL TRACTION OR BUILD AN ALL-STAR TEAM 2 OBTAIN MEETINGS WITH ANGEL INVESTORS OR VENTURE CAPITALISTS 3 GET A LEAD INVESTOR WHO SETS THE DEAL TERMS 4 FIND FOLLOW-ON INVESTORS 5 RECEIVE THE WIRES AND SIGN THE DOCUMENTS! TIPS FROM PROS One thing that most fundraising experts can agree on regarding a startup formula is that there is no one clear formula. There is, however, plenty of advice to be dispensed: "Venture capitalists are living on "Pick a big market because I don't believe in picking ideas..whatever the idea is, it will change." borrowed time, no matter how you look at it there's going to be a reconciliation." "If you don't have a passion for your "Small is beautiful. There is really an customers.you won't create a ADEO RESSI Founder of TheFunded.com company-you'll create a job." opportunity on the market now for NAVAL RAVIKANT Co-founder of Venture Hacks being very capital-efficient in investing and Founder of AngelList in companies." DAN MARTELL Co-founder of Flowtown DAVE MCCLURE Founder of 500Startups Created By: udemy SOURCES: CRUNCHBASE.COM I STARTUPQUOTE.COM | INC.COM I CB INSIGHTS COLUMN FIVE