BUSINESS BLOGS
BUSINESS BLOGS
category: business
18 Apr 2009

Is VC funding down?  Of course.  Does this mean that you will need all of the help you can get to raise money?  Sure.  But it doesn’t mean that you have no shot of getting money.

Sexy is a State of Mind

Our company WatchMojo.com is in one of the traditionally least sought after space by VCs: professional video content, and yet we’ve had more VC/angel interest in the past 8 days than we did in the past 8 months.  Definitely the horrible economic news over the past 8 months hasn’t helped, but with “validation” and “client list” scratched off the checklist, trust me, the money will come knocking.

As a side note: it does help that most of the UGC funded companies have proven to be clunkers… and even the poster child for UGC, YouTube, is moving away from it and embracing professional content.  But, that is besides the point, really.  Since VC investing is a lot more about the big macro trends and riding them than the micro details of your company.

What Pain Do You Solve?

Our business is simple: we provide premium, professionally produced videos to other companies, be it social networks or media websites.  Some of our “client partners pay us via:

a) speculative revenue share deals that can be hit or miss;
b) fixed minimum guarantee licensing deals (which tip over to revenue share deals over time when the deals become more lucrative).

We always ask for b, generally our client partners want b.  What actually goes down boils down to leverage and how good of a salesman you are, I guess.

Our close rate and renewal rate suggests we have a lot of strong offering, pricing power and leverage in the marketplace.

Yes, I’m also a pretty decent salesman (but an abysmal fundraiser who shouldn’t get close to a powerpoint presentation, more on this later).

There’s a Time to Speculate

In 2007-08, when I would meet VCs, they were all in a speculative mood: “forego the minimum guarantee Ash, and go for the upside”, was the mantra I was told.

I never raised a penny in the boom, maybe because content wasn’t in vogue, or maybe because as much as I am a great salesman, I am a horrible fundraiser (think of it: a salesman is always following up, trying to close and open to all leads; yet a fundraiser is playing hard to get and creating a sense of scarcity and selectivity).

Validation

Anyway, maybe it’s that we crossed 50,000,000 streams (VCs like big numbers, after all), maybe it’s the Tech Crunch coverage (which back in the boom would mean an automatic term sheet from hot-to-trot financiers), or maybe it’s the fact - as one of our de facto advisors told me: it’s that we have actual paying clients who give us guaranteed, recurring, licensing fees.

I don’t want to take credit for that realization, but once you figure out what is in and hot, you have to put the spotlight on that.

There’s a Time to Hedge

That’s right: everything including financing is cyclical.  VCs today are in less of a speculative mood, they’re in a hedging mood.  In our case, sure the big numbers help prove the validation with regards to user consumption, but the client list of media companies and social networks that have contractual obligations to pay us minimum fees serves as validation of the business model (and the fact that we have upside deals, too, creates the potential of the “hockey stick” growth curve).

Most Startups Are on the Wrong Track

I talk to so many entrepreneurs, all smarter than me.  But this is the problem these days with most startups: absolutely no sense of monetization, let alone path to profitability.

In today’s market and economy, you need to show that people are paying you for one thing or another.  If you can do that, you will raise money.