Crossposted from Unblakeable.com…
2010 marksÂ a new direction for StartupLounge.Â We are shifting our conversation away from funding businesses to building businesses.Â This doesnâ€™t mean that we think that funding businesses is unimportant.Â However, other grassroots organizations are picking up that banner and our voice, frankly, is no longer needed in that particular discussion.Â For any organization to remain relevant, it must evolve.
So, to get to the point:Â We believe that the â€ścapital availabilityâ€ť discussion has fundamentally changed.Â There is capital available, even now.Â Deals are getting funded, even now.Â And, it is, as always and as it should be, tough to get funded.Â Atlanta does not generally fund science projects; we fund businesses that we understand and where we have a natural advantage, such as information security, mobile technology, business informatics, paymentsÂ andÂ transaction processing and media content.Â We are showing increasing comfort with cleantech deals and medical devices.Â We generally donâ€™t fund consumer products (although four such deals have been funded through connections made atÂ StartupLounge so far), social networking deals, and pharmaceutically-based biotechnology.
We know that capital is available because weÂ see deals getting funded.Â We see the investors come to StartupLounge Atlanta (formerly known as CapitalLounge) and AngelLounge.Â They are engaging as mentors in PitchCamp.Â And itâ€™s not just us.Â StartupRiot has become a must-attend event and the investors turn out in force there.Â StartupChicks is seeing investor interest.Â I saw a few investors at Startup Atlantaâ€™s inagural event.Â The Atlanta Technology Angels have gotten â€śback on the lineâ€ť.Â Welcome back, guys.Â We missed you.
Hereâ€™s the problem.Â The deal flow here is just not good enough.Â Just so thereâ€™s no mistake â€“ there are not enough good companies worthy of investment in Atlanta.Â There are good entrepreneurs, andÂ some really good ideas, but the companies themselves are half-baked.Â Not ready for prime time.Â So, rather than simply complaining about the weather, weâ€™re going to do something about it.Â Putting half-baked companies in front of investors is not all that productive.Â Oh sure it feels good and everyone loves the sweet and sour meatballs.Â But, as Lance so eloquently articulated, there are lots of organizations out there trying to help.Â We need to make sure we are really helping in order to remain relevant, or we can just shut it down and I can play more Star Trek Online (an astonishingly good game, BTW.Â I am terrified it will one day assimilate my life.)
Atlanta has lots of marketing professionals, accountants, lawyers, strategic consultants, coders, engineers,Â and outsourced CFOs.Â And business appraisers.Â WeÂ donâ€™t see a great many crack salesmen and operators.Â They may be out there, but because they know how to sell and operate, they either donâ€™tÂ need to raise money or they already have.Â Â Â Which means they donâ€™t need us.
If companies donâ€™t sell well and/or operate well, that in itself is a big hurdle to overcome.Â So, at StartupLounge, we are going to focus our attention on companies that either a) already have strong operating and sales potential/talent, or b) have other pieces in place and we can help them build more complete companies.Â Hereâ€™s what that means in more practical terms.
First, StartupLounge Atlanta is going to be smaller.Â Itâ€™s cool to fill up a room and itâ€™s a great boost to the ego.Â Itâ€™s also not as effective as it could be so we are focusing on qualityÂ over quantity. Â It is going to be harder for companies to get in.Â This is an absolute necessity for the following reasons -
- We donâ€™t want to encourage mediocrity.Â Entrepreneurship is about excellence.Â Only companies that investors perceive to be excellent are going to be funded.Â And, we want to encourage entrpereneurs to keep improving their companies to improve their chances at being issued an invitation the following quarter.
- We need to keep investors interested by showing better deal flow.Â When investors spend 3 hours talking to people and at most run into a deal or two thatâ€™s even interesting, they think twice about continuing to show up.
- We need to keep entrepreneurs interested by improving the investor/entrpreneur ratio.
- With finite resources, we need to focus our effort on those companies we are in the best position to help.
So what does it mean that it will be â€śharder to get inâ€ť?Â Well, to be blunt, just because youâ€™ve gotten in before, it doesnâ€™t mean that you will next time.Â Our criteria for admission will be (roughly) will boil down to this:Â If we heard your pitch and you were a complete stranger, would we beÂ inclined toÂ introduce you to our personal contacts in the venture (note we didnâ€™t say â€śinvestorâ€ť) community in Atlanta?Â Things that will help you get in will be:
- We can make sense of your business.Â StartupLounge is allowed to have a rambling manifesto.Â Youâ€™re not if you want to come to our events.
- We can do some background research online on you and your business (Facebook, LinkedIn, and a company web site).Â If youâ€™re basically a blind box, weâ€™re not likely to keep someone known out to let you in
- Your business appears to have the potential to grow to $50 MM in value in 5-7 years (youâ€™re not a â€ślifestyleâ€ť business.Â Lifestyle businesses are fine but youâ€™re not our target market)
- Your business is driven by critical intellectual property that you or your business owns (not licenses)
- You have some form of customer validation by way of beta testing, alpha testing, letters of testimonial or even *gasp* paying customers.Â Honestly, why would you spend time and money developing a business to produce something that you have no clue if someone will buy?Â Market research does not answer that question.Â Conversations with customers do.
- You make substantive progress over time.Â If youâ€™re â€śjust waiting for capitalâ€ť, you can continue waiting on someone elseâ€™s nickel
- Your business is looking for a reasonable amount of capital.Â If youâ€™re looking for $10 MM for example, just hire an investment bank
- Better yet, your business is viable with or without external capital.Â Capital would accelerate, not enable, your business
- Youâ€™re in the business more or less full-time
The refinements above should improve the overall event by making it more accessible, with more, higher-quality connections being made.Â Oh, and by the way, the color coded badges are gone.Â Done.Â We donâ€™t want investors to feel like targets anymore, and we want to impress upon everyone that there are many kinds of connections that can help build the company other than with check-writers.Â Many attendees have told us that connections made at StartupLounge helped sell product, find talent, find technology and find strategic partners.Â With a smaller event, color-coded name badges should be less important anyway.Â If we let them in the door, assume those people are worth introducing yourself to.
Second, weâ€™re not letting investors off the hook.Â You canâ€™t just say youâ€™re an angel investor and get a free ride.Â We have asked all AngelLounge participants to sign a commitment that indicates:
- They have the funds to invest if they so choose
- They will commit to attend at least one StartupLounge event per year
- They will participate in at least one PitchCamp/StartupSeminar per year
This is already working.Â One angel attended the first StartupSeminar and he said that document was the reason why.Â Others have withdrawn from AngelLounge, feeling that they do not meet our definition of an active angel investor.Â Again, weâ€™re focusing on smaller groups to make a bigger impact.Â Weâ€™d rather have 15 real angels in the room than 50 who say they are and then have to try to play a game of Clue to figure out who the actual check-writers are.
Third, we are changing our educational focus.Â Itâ€™s no longer all about PitchCamp and raising money.Â If you donâ€™t meet our admission criteria for StartupLounge Atlanta right now, we are offering free help to get you there.Â We are launching monthly StartupSeminars.Â The StartupSeminars will include PitchCamp on the months directly preceeding a StartupLounge Atlanta event, but mostly, they will cover topics that help entrepreneurs build companiesÂ Specifically, we are targeting areas of knowledge that are important, and might be too expensive for entrpreneurs to access directly.Â Our first StartupSeminar, â€śGet Retail Readyâ€ť, was a smash success.Â After PitchCamp in February, we have Kenji Kuramoto and AcuityCFO coming in to lead a workshop on building financial models for startups.Â We are working on legal workshops, sales workshops, bootstrapping workshops, hiring workshops and other toolsy content that you can take home with you and move your venture forward starting that day.Â Our podcasts will still occasionally cover funding topics, but we already have 30 or so of those podcasts online.Â Weâ€™re going to focus more on entrepreneurs who have built businesses and can share real world advice that entrepreneurs can use as tools to move their own ventures forward.
Fourth, as a personal commitment, I am re-starting my monthly office hours, without fail.Â An announcement on that will come soon.Â My job has taken me out of one of the things I like doing most, which is mentoring.Â No longer.
We are excited about this new direction.Â We are re-energized.Â Our sponsors have voiced universal approval, as have the investors, entrepreneurs and friends of StartupLounge to whom we have spoken.Â We think we are going to help more entrepreneurs be successful, whether they raise funding or not.Â Some of our community, for now, will be left behind.Â We hope you will take it as a challenge to be met for the betterment of your company.Â For most of you in the community, the result is going to be a more focused, effective StartupLounge, and we canâ€™t wait to get started.