Blog Post

How Startups Can Win Big With VCs

[qi:012] Startups looking for VC funding need to make two things crystal clear when pitching to investors: One, how your company plans to distribute your product or services to the masses; and two, why it’s going to shake up the tech industry. That’s the advice offered up by the panels of venture capitalists and tech executives to startups that presented at the TechCrunch 50 conference this week.

While during a demo, startups have to explain what their offering is and how it works, that’s only one part of a successful pitch. “There’s been a lack of focus on distribution,” said Marc Andreessen, founder of Netscape and now the head of a $300 million venture fund. “The typical path a lot of startups take is they launch their product and no one finds out about it.” They also need to do a better job explaining how they’re going to catalyze the industry. As Zappos CEO Tony Hsieh’s put it after viewing demos, “I didn’t see anything where I thought ‘Oh wow, I think this will change the world.'”

When it comes to social networking, Facebook may have already done that, noting this week that it now has 300 million users worldwide. Robert Scoble, a known enthusiast of the space, said social media-focused companies should be looking to integrate Facebook Connect or OAuth into their services. But one startup, Stribe, is trying to reinvent the wheel by developing a technology that lets publishers build social networks around their web sites. While Stribe’s technology is impressive, it provides a service we could happily live without.

As for those that are looking to build their business around the likes of Facebook, Twitter and other social networks, they need to offer something unique and something that adds value to those companies’ existing features. For example, Radiusly has developed a web-based service that lets companies create authorized profiles for Twitter and manage their accounts. A company profile would offer, say, links to its employees’ profiles. But Twitter already offers verified accounts for well-known executives and there’s a host of startups, such as CoTweet and HootSuite, that are focused on helping companies manage their Twitter accounts.

RedBeacon, a web site that connects people to local services and apparently hit all the right notes with its pitch, was crowned the winner of the event. On RedBeacon, people can post jobs they need done, such as house cleaning or gardening, and local service providers can bid on how much they’ll charge to do the job and when they’ll complete it. The San Mateo, Calif.-based company, founded by three ex-Googlers, is the startup to keep on your radar this year.

8 Responses to “How Startups Can Win Big With VCs”

  1. As Zappos CEO Tony Hsieh’s put it after viewing demos, “I didn’t see anything where I thought ‘Oh wow, I think this will change the world.’” … ok, selling shoes online may have lined his pkt, but hasn’t changed a bit of the world ……

    • Well said. Exactly what I was thinking. Selling shoes online does NOTHING to change this world. In fact, most people still buy shoes online. Not every idea has to be earth shattering. This is the ridiculousness of “silicone Valley”. A simple idea that solves a problem and at the same time can lead to profit is a great idea. Amazing Tony can be so snooty! Please… zappos has done nothing to change the world. It’s a great business and that is all you need to know about it. Watch this video. So typical of VCs and so called ‘experts:

  2. I agree with your viewpoint about honing the pitch. However I have different take on some of the start-ups. It’s one thing not to know what the value proposition is but it is other thing to believe in a BHAG. Many start-ups had huge success when people initially thought that they could live without that. Twitter is one of those examples. Also, there is nothing wrong in duplicating what someone else is doing. Presence of similar companies signal that there is a market. It is now up to the new entrant to beat the competition by solving the problem well. When Google announced Gmail it was one of the last (as of now) web-based email that was introduced. Google would not have released Gmail or even the search engine if they would have thought that other people are already solving this problem.

    I welcome the entrepreneurial spirit of the Silicon Valley. This innovation engine is amazing. I was watching the panelists beat up at Techcrunch 50 suggesting that the content deals are hard to come by. I liked the answer: “No one thought that we would have a black president one day”. The company acknowledges that it is an astronomic task but the reward is very high if they can pull that one off. We all know the story about Steve Jobs, iTunes, and the music industry. Let’s not forget that we can repeat the history only if we believe into these start-ups and give them an opportunity to succeed.

  3. tarrysingh

    I don’t agree with this. Facebook is a bloated piece of software which has taken more investments that any start-up I’ve known.

    What’s this obsession with the numbers? 300 M people = how many dollars?
    I’d want to run a business where I cn hve multiple-financial schemes to make/rake billions out of a few million consumers. Facebook is a mere shadow of what a true cloud marketplace ought to be. Twitter seems to have a lot more potential because it has captured the minds of folks on two very simple basics: immediacy and brevity

    Facebook is taking people away from work and is essentially a waste of time. I disagree. I am not convinced.

    When you go to run a start-up you go from day one to not only change the world but also make a lot of money: that is the true aphrodisiacal soup that any entrepreneur should have drunk before getting there.



  4. I think that if the product is interesting enough, distribution comes second. The only reason why the panel were asking those questions is because they’re fairly standard questions with fairly standard answers.

    The distribution channel for the types of products that were displayed at TC50 were fairly standard. they were either internet companies, B2B or retail products.

    As some of these seasoned VCs, they should know better that there is no “magic bullet” to distribution. They just have to try hard to SEO (if web company), pay money for advertising, hire a sales staff or try to become distributed in a large national retail chain.

    I’m fairly disappointed and quite jaded at these “experts” that gave vanilla questions and even more vanilla critiques. They couldn’t see the broader picture that some of these products could have.

    • Stacey Higginbotham

      Jeffrey, she points out that the Stribe product is late to the game in terms of trying to make the web social and that Facebook already won that battle. That’s why she dismissed it.

      • Stacey, we’ll definitely integrate with Facebook Connect, Twitter and Google accounts. We did not made it clear enough at TC50.

        The value proposition of Stribe is a fully branded and customized social network, like Ning for instance, but on an existing website. It’s a B2B solution that allows companies to create and manage their own community, with community management and analytics tools, while providing a fun end-user experience.

        To provide this value, we build on top of protocols like FB Connect.