I came across a great post by Stacey Higginbotham over at Giga-Om this week that highlights the struggles of the Venture Capital industry over the past decade and questions whether we need a new, smaller definition of success for a start-up that doesn’t include $100m in VC funding and an IPO.
I think our experience with Jellyfish.com, and now Alice.com demonstrate that Stacey is right, and maybe wrong at the same time.
The Jellyfish experience is exactly what Stacey is talking about. We founded and sold the company to Microsoft in 18 months, without Venture Capital and with a sizeable investor return (the sale was widely reported to be for $50 million). As Stacey writes “Maybe the ideal technology startup isn’t really about making it big through an initial public offering. Maybe it’s about selling a compelling feature to a larger company and setting the agenda at a Google or a Microsoft or a Cisco.” Exactly.
In contrast, Alice.com, our current start-up, presents a counter Stacey’s new start-up animal. To date, we’ve avoided VC (raising around $10m in common stock thus far), but we’re going after an enormous market (Consumer Packaged Goods) and building a platform that isn’t easy to start from scratch. The potential rewards are huge, but this isn’t a quick hitter. We are taking a big swing that is going to take a big investment, even with the decreasing costs of starting a company. Raising a quick angel round just isn’t going to cut it if we are going to realize the potential opportunity Alice presents.
My take: the start-up funding environment is certainly changing, but there are still plenty of opportunities for both small scale and large scale investments in the market.