Equity crowdfunding vs venture capital fundraising

NEW YORK–This was not Batman v Superman where emotions flare and somebody is flung out of the New York skyline. At the NYC Incubator last June 9, the Equity Crowdfunding vs. Venture Capital Fundraising talk was just a convivial talk about the differences between the two funding methods.


Allen Jebsen seemed to have channeled Clark Kent as he took the side of equity crowdfunding at Start Engine with earnestness. Sumeet Shah of Brand Foundry Ventures, made light of the event, making fun of the fake fight.

“We see VCs as collaborator,” Jebsen said.

“We consider (equity crowdfunding) a competitor,” Shah said, then playfully moving his chair away as he said that in front of Jebsen.

If you don’t know the difference, here’s one thing that should settle it for you.

An accredited investor in the US must have a minimum annual of $200,000, a joint income of $300,000 or a net worth of $1 million. Without this moolah, you cannot be an accredited investor, according to the Securities and Exchange Commission.

But in June 2015, the SEC enacted “Regulation A+” which resulted in a brand new fundraising category for use by smaller companies also called equity-based crowdfunding.  This is different from the reward system used by Kickstarter or Indiegogo. Equity crowdfunding actually affords investors (read: anyone) shares in the company with some type of ownership in the business. It levels the playing field.  Non-accredited investors or anyone can invest in Regulation A+ offerings. There’s more information on investopedia.com

Venture capital is money provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets.

Recently, the SEC adopted rules to permit companies to offer and sell securities through crowdfunding, including to individuals that are not accredited investors, which is anyone out there.

Some differences are obvious. Crowdfunding in general requires a lot of time and effort. When raising money from people you have never met, you better have a good product to show – that means, you’ll need great content and video – to make it easy for people to decide if you’re a good investment.

Jebsen breaks it down: You can set the term. If you hit your goal, you can write an amendment. You can get a few hundred thousand possibly between 1 and 3 months; for $50 million, 4 to 6 months. If you don’t hit your goals, your money goes to escrow. You can choose to do equity or debt (convertible debt), if you don’t want equity crowdfunding.

You could say there is some overlap here, especially when it comes to the reason you want to get funded. Like VC money, you have to know why you have to take the money but Jebsen said it’s important to know your product more than conveying a message. But that’s about it.

When you approach Sumeet for funding, you’ll need to recognize how much funding you need, because you’ll need to know how to scale up to 18 months. Once you figure out the amount of capital you need, and then you’re good.  “I wished there were so many more whiteboards in the world, so you can put all your ideas (that will help make you a decision),” he said.

As for the other side of funding, Sumeet said it would be hard to get anything done with 6,000 investors.

Why would you invest your money in a startup, as a non-accredited investor?  Jebsen said it could simply because you are a “believer or consumer of potential products.”  In advertising, it’s what’s called brand ambassadors.

StartEngine launched with two partners, Elio Motors and game publisher XREAL. Elio Motors is an alternative transportation startup as it has an “ultra high mileage car (84 MPG) and costs only $6800, perfect for first time drivers and college students.

“It’s less about product, but the democratization of investment,” Jebsen said. “You need to have a strong vision and message in equity crowdfunding.”

On the other hand, VCs can help startups do much bigger rounds if they see a billion-dollar opportunity while also giving you connections and instant legitimacy. It’s only important to know if you can meet your targets. Can you actually rely on crowds for your fundraising efforts?

You’ll have to think both options thoroughly to find out what you really want. But if you don’t have money and you want to invest, your only option is to try equity crowdfunding.

Allen Jebsen focuses on educating entrepreneurs everywhere of the new fundraising options available under the JOBS Act. Initially created in Los Angeles as an accelerator by Howard Marks, co-founder of Activision and Acclaim Games, StartEngine has grown to become the leading equity crowdfunding platform. Since June of 2015, when Regulation A+ was enacted, StartEngine has helped companies raise 17 million dollars from over 6,000 non accredited investors. StartEngine has continued to help companies raise capital under Regulation Crowdfunding, the newest rules to be enacted by the SEC on May 16th, 2016.

Sumeet Shah handles sourcing and managing new opportunities as a Senior Associate at Brand Foundry Ventures, an early-stage consumer product and device venture capital firm. He has 6 years of experience across the startup and private equity industries, formerly running new business strategies at Gist Digital and handling business development and project work at Gotham Consulting Partners.

Angel investors and startups meet in exclusive event

NEW YORK–iBreakfast/iEvening held its first 2016 Startupalooza event last January 27 at Microsoft following its mini-trade show format. It’s how angel investors go around to talk to each entrepreneur at their own pace.


Most of the startups at the meetup were clearly in their very early stages. Vidpal is an online video auctioning platform where people anywhere in the world can request videos while giving anyone an option make money by accepting video assignments.  

Toby Dattolo of Chaptertheapp has come up with an app that encourages people to share their passion with like-minded people in that hope they can ignite positive action together. 

Nothing stands out more than an actual functioning apps, which Shrinktheapp.com demonstrated on its phone. Because each brand runs its own loyalty program, the app offers rewards as one taps into one brand after another to claim in stores.

Another finished product from a young Brazilian-American is what he called “Flipboard for lists” called Listbeam.


Other presenters include Tech Trader, which reportedly works as a fully autonomous system capable of trading thousands of stocks simultaneously with no human intervention. Instead of relying on the points of view of an academy, mathematician or scientist, it leverages what the best traders do at scale.  

Another company, USBsports, is looking into providing a platform that houses all the information athletes and coaches need to reach their goals.

For Skin OS, it’s all about how it offers an applicable skin treatment technology for use at home.

CommonSensibly assists people and businesses in using simple common sense processes for their growth.

Vognition has been around for sometime, but if you haven’t heard about it, it offer natural language voice controls for home automation systems.  

Vognition offers a voice control solution that lets users choose any mobile device or smart home controller to give a voice command.

Other exhibitors included Groom Dinkneh for Anchor Your Bike, Helena Merwe of A-Plus Consulting, Trevor Crest of Crest Wealth Planning, Ohad Tov of ISM Wearable Electronics and Syed Shah of 12 Tech LLC, a web development company.  

Any takers? Microsoft Ventures Accelerator dangles no-equity 500K funding

NEW YORK–What is the real reason why Microsoft Ventures Accelerator can choose to fund your startup for $500,000 without equity? Not only that, you get work in its Seattle office and have what graduates say are great meals as you work on your startup there.


Microsoft’s goal is to help startups foster exciting new ideas by providing mentorship, $500,000 of Azure Credit, access to the Microsoft distribution channel, without taking equity. About 80 percent of the startups that have graduated from its accelerators have received an average funding of $1.9M (USD) within a year from graduation. About 16 startups have reportedly also had exits with some of the top companies in the industry.

At the meetup last October 21 at the NYU Stern Building, host Tim Enger was circumspect and about the intentions of Microsoft—and it just made sense. “What do we get out of it?  You use Azure. Then it becomes a business for us,” he said.

Microsoft is hoping that the startups they fund will use Azure, its open, flexible, enterprise-grade cloud computing platform, but in no way, he stressed, is Microsoft forcing people to use any of its software. It’s an investment the company thinks is worth the money they fund companies.

At what stage should your startup be to apply for funding? It turns out you must gained some traction already. However, Enger preferred the guests talked to him personally after the meetup to discuss their startup. There were also several decision makers from the Microsoft Ventures team at the meetup as well as the Microsoft Azure Machine Learning Product Group.

It was a night where information was not presented, even basic information like deadlines, if you didn’t ask the Microsoft team. Deadline for applications is November 20. Most of the questions asked revolved around the requirement for startups seeking funding. You must be in the machine learning and big data space. Enger said on Jury Selection Day, there could be 20 to 30 external investors, 5 senior level execs, and 14 companies involved.

Microsoft is working with startups these days because its CEO Satya Nadella believes “all growth comes because of startups.”

Enger even emphasized how on average more than one $1B-worth companies are born every month, with 90 percent of Fortune 500 companies planning on a big data initiatives in the next year. “More than 200 billionaires were created last year,” he said.

Two of its graduates presented, Outleads and Openhour.  Outleads tracks when a web visitor calls or submits a form on your site. What’s interesting about is what it claims it can make your ad work by getting your data on salesforce and/from call center activities, among others.

Both startups recounted their experience and why they chose Microsoft. “It’s the clients they bring to your door, the relationships.”

Orrick’s Mock Series A Term Sheet negotiation takes people on step-by-step process

By Dennis Clemente

NEW YORK–If you’re keeping up with the tech scene these days, you won’t hear Mock Series A Term Sheet Negotiations too often. It may be your first time to hear it, as we did, so we went to Orrick’s Total Access last August 24 at CBS to find out how it would unravel for us.


Chris Austin, partner at Orrick, presided over the mock negotiation with Liz Wessel, CEO of WayUp and Ellie Wheeler, principal of Greycroft Partners. Wessel and Wheeler wheeled and dealt their way to the mock negotiation of term sheets, talking about how allocate value, manage the company, investors’ rights and miscellaneous terms as if we were eavesdropping on two people’s conversations. It’s a good exercise for anyone curious about how a startup founder interacts with an investor.

With Austin as the moderator, the two talked their way through allocating value, covering valuation, capitalization, liquidation and dividends. Questions about board composition, protective provisions and drag along rights were also discussed.

Austin suggested 3 to 5 board members for obvious reasons—to avoid deadlocks with 4 board members. Wessel said she would have herself, a co-founder, Wheeler and someone who can serve as an “independent” seat. It’s important to point out why Wessel added Wheeler; it’s common for a VC (venture capitalist) to ask for 1 to 2 seats. The VC will ask for special provisions, preferred director consent. But at Series A, keep in mind that a VC need not be in board majority.

Austin said higher valuation is not always the best. “Look for a good fit, strategic value, understanding of the business.”

For founder vesting, standard schedule is a four-year term with a one-year cliff. For the stock option, the key issue you need to answer is what you will need to compensate your employees between this round and the next. It will depend on the current team.

As for dividends, the advice is to stay away from cumulative dividends. Current market standard is “as if and when declared.”

At liquidation/dissolution, keep in mind that a VC gets the right to receive proceeds first. Also before you can sell, you must give company and investors the right to buy. And if the investors and the company decline to buy, then the founder must give investors a right to participate in the sale.

Elaborating on drag along rights, the discussion veered toward drag-along rights. Investors, it turns out, can force Common stockholders to participate in a sale of the company while also pointing out that drag-along rights are not present in every deal, but becoming more frequent.

Recommendations in terms of managing the company included protective provisions like questioning your ability to satisfy business objectives; consider class voting; and keep standard market terms. If you don’t manage the company well, investors can ask your company to return the money to investors at a specified time. This can be in 7 years or so when the VC comes knocking on your door to ask for their money back. But try to push for exclusion of this term. If not possible, have the terms provide your company enough runaway, say, 5 to 10 years; redeeming investors only receive what they paid plus dividends, or see a higher approval threshold (but other investors must consent).

Powerfelt claims it can power portable devices like the iPhone


By Dennis Clemente

International ThermoDyne’s Powerfelt bagged the most votes at the Ultra Light Startup presentation of eight energy startups that presented last October 9 at Microsoft, as it claimed to answer the ever-increasing need for clean power, especially in portable devices.

“Powerfelt is a thin material that harvests heat and motion and converts energy into useable electricity,” Paul Solitario said. “You can use it to charge your iPhone.”

The other startup presenters were Shailendra Suman of SmartCharge, Burt Hamner of Titan Ocean Energy; Jason Force of E-Mow; Ariel Fan of Grid Symphony; Raj Lakhiani of Athena Power; Graham Smith of Open Energy Group and John Jabara of Savenia Home Ratings.

The panelists who gave their critique and feedback were John Freer, manager of External Technology Initiatives at GE Global Research; Dave Kirkpatrick, managing director of SJF Ventures; William Lese, managing director of Braemar Energy Ventures and Willem Rensink – GameChanger of Shell.
ThermoDyne’s prospective customers for Powerfelt cut across various industries– mobile electronics, construction, transportation, textiles, government.

Asked if it could narrow down its intended market, Solitario said they could focus on remote sensors as it offers portable “electricity” anytime anywhere without batteries or the grid. “We have no moving parts.”

Investor’s advice to Solitario: Focus (on a specific market); find where the material can be unique; find an application where it’s available; understand how product competes in the landscape; study lifespan with a device.

Suman of SmartCharge was also one of crowd favorites. His successful Kickstarter campaign launched the world’s first LED light bulb that you can turn on or off from the same wall switch even during a power outage. It provides four hours of continued use. Battery is reportedly 300 cycles. When using the light bulb normally, it will reportedly last for three years.

The panel was impressed to hear that SmartCharge is selling already at $34.95. It started shipping 5,000 units in 32 countries last month with 100,000 units of soft orders. His gross margin is 20 percent of cost.

Suman hopes to target homes owners, small businesses, the direct online sales sector as well as wholesale to big box retailers such as Amazon.com, Duke Energy, Lowe’s and Home Depot.

Investors’ advice to Suman: Work on IP; introduce more product(s); look for other distribution channels to accelerate the business; find out where it goes on store shelves; and figure out positioning of the product.

Titan Ocean Energy’s Hanner presented the mobile platform for office offshore wind power and drinking water production already installed in Sweden. A panelist said, “You’re on the right track in Europe.”

Globally patented, the mobile jack-up platform reportedly supports 6MW + offshore wind turbines and met towers ad desalination systems.

Investors’ advice to Hanner: Make sure you’re protected; Target corporations; repurpose existing rig; keep it light; laser-focus on costs

E-Mow came next with Jason Force talking about its self-powered drone bioenergy harvester which creates renewable grass fuel pellets at low cost. It seeks revenue from pelleted agricultural products.

“It will be a significant cost reduction again existing methods,” Force said who’s looking forward to it as a build-and-operate model.

Prototype challenges for him would be the maintenance of this self-powered technology

Investors’ advice to Force: Work with a big player like John Deere so you can market faster; powering it by biogas is not the best way to go about it; look at all the pieces you want to integrate; and determine MVP, being a relatively complex engineering system.

Ariel Fan presented Grid Symphony, an intelligent brain for the electric grid to prevent utilities and priority clients from power meltdowns like Hurricane Sandy. It emerged from Columbia University’s machine learning lab.
“It’s not an emergency product. We want to create an optmization product,” she said.

Utilities are targeted customers but right now, it is looking at system integrators. The distribution strategy aimed at selling directly to enterprise smart/medium customers.

Investors’ advice to Fan: Survey how many people will use it; think how this business scales; test in some places like Hawaii to get customer exposure before scaling; work with system integrators, because they see everything; make sure you have a partner; explore idea in business model canvas.

Athena Power has developed a self-powered wireless fault sensor for underground distribution networks. It is hard to find faults, but Lakhiani is confident about its startup based on its four-year engine and his experience.
Still, he thinks it’s better if Athena works with utilities. “Underground (networks) are tricky.”

Investors’ advice to Lakhiani: Know the sensor market to make sure you get plenty of pilots; score early with Exelon as a demonstrable result; (recognize) it’s a timely product to bring to electric utility to the world; (think of it as a) unique entry point to get data

The last two presenters were Smith of Open Energy Group and Jabara of Savenia Home Ratings.
The former is an online marketplace for renewable energy investments.

“We offer accredited investors direct access to higher return, lower risk, fixed income products by directly funding the construction and operation of commercial renewable energy power projects in the States,” he said. This includes solar projects.

Investors’ advice to Smith: Make loans that banks don’t give; look for a partner when it’s time to add deep pockets, focus on residential (market)

Savenia Home Ratings helps home sellers unlock the value of home efficiency upgrades to differentiate, sell faster and capture more value.

“Energy auditors focus on the negative. We focus on the positive,” Jabara said. “We’re CARFAX for home efficiency.”
Asked if it has a method, he said the company validates the rating through documentation. “Customers do most of the work; we check (the work).”

Investors’ advice to Jabara: The platform can be bigger, think of other groups doing the rating; and get accurate data from third-party source.

This time, Graham Lawlor of Ultra Light Startup hosted the meetup with Tim Hoffman of Cleantech Open.

Startups in mobility: charters, electric charging and smart automation present mobility concepts to BMW


By Dennis Clemente

You know the brand behind the ultimate driving machine? BMW is also investing in startups under BMW I Ventures. And since it’s in the automobile business, you’ll have to be in the area of mobility services like the startups that presented last September 23—Buster, EverCharge, SmartCar and TransitScreen.

Founded in 2012 to help groups and charter operators find each other, Buster might as well be the Uber for group traveling. “It’s a marketplace where customers can discover, compare and book group transportation online,” said founder Matthew Kochman who also offered a similar service to fellow students back at Cornell University.

Reportedly an $11.4-billion market, Buster is for everyone who wants to book private group charters, whether for a school trip, company excursion or fun weekend getaway. Average price per booking is 1,000

With over 20,000 charter industry operators, Buster is reportedly aggregating bus companies and aims to offer centralized fleet services as well as discounts on insurance, maintenance and financing.
Next presenter, EverCharge is an electric vehicle charger from your parking space or for apartments and condos. You just tap your access card and plug in for EverCharge to automatically authenticate your vehicle and log your usage for billing purposes.

Minimum charge for EverCharge’s membership is about $40 for 500 miles.

From California, SmartCar is automation for connected vehicles. It is a web service that connects to internet-connected cars wirelessly over a cellular network. You should be able to configure and monitor your vehicle’s automation settings from your smartphone, tablet or laptop.

Founder Sahas Katta talked about the many features of its app. If you want to have the perfect temperature in your, for instance, you can set a schedule and Smartcar will automatically begin cooling or heating your vehicle. It is also reportedly energy efficient.

It can also reportedly learn your driving patterns and automatically create a schedule to charge your car at the right time.

Smartcar is designed for the Tesla but it is working to have connected vehicles from other manufacturers in the near future.

A different startup from all the rest was TransitScreen. Matt Caywood recognizes the growth of smart cities, so he’s concentrating on real-time display of all transportation options at a specific location. This includes digital display ads.

The last presenter, Valet Anywhere, hopes to offer on-demand parking valet service for cities. Right now, it is only offering its service in New York City, the $25 billion parking market. “We hope to solve parking,” said founder Robert Kao.
How does it work? It assigns a uniformed vetted valet who greets you and parks your car for you. Valet also returns the car to you…wherever you may be in the city. Actual parking is said to be included in the price.

“How do you scale?” That was the frequently asked question by the guest panelists Matt Turck, managing director at First Mark Capital; Chris Thomas, founder and partner at Fontinalis; and Ulrich Quay, managing director at BMW i Ventures.

Global Innovator presents foreign startups in transit, mobile marketing, marketplace and health

WIN's Global Innovator meetup
WIN’s Global Innovator meetup

By Dennis Clemente

Where most tech startup events lump all startups without geographic distinction, Global Innovator makes it entirely clear that foreign startups has an American audience and more importantly, a panel of guests from New York’s VC world to give them feedback and possibly, funding.

The bi-monthly series is powered by the Worldwide Investor Network (WIN), a New York-based platform focused on helping early stage global tech startups shorten the path to funding and acceleration in the US market.

What also makes Global Innovator different from other tech meetups is how the whole affair has an air of formality about it, quite different from other meetups where the standard garb is T-shirt and jeans and the setup is freewheeling. Here, attendees wear suits, wine keeps flowing, press kits (even without the press in attendance, except this blogger) are provided, and just for added glamour, all the kibitzing continue to the rooftop—for VIP ticket holders. Like I said, it has an air of formality. And it helps that they have sponsors to pull this off.

Last June 25, the four foreign startups followed Global Innovator’s theme-Mobile Apps. The presenters were TransitApp, YouAppi, Gone! And Nutrino. Following the format, they presented for five minutes with no apparent time limit for VCs to give their feedback. Tanya Prive, founder of RockThePost moderated the event with WIN’s Eyal Bino opening the affair. They may consider introducing where each startup comes from.

Sam Vermette, co-founder of TransitApp, spoke about its app—how its finds your next departure instantly. Free. What makes it different from any other transit app? Instead of giving you just a schedule or map, it tells you when your public transport is nearby.

“People only want one thing: When is my ride coming?” he said.

He’s confident that in the future, people will be using more public transport, citing how China moves 2.5 billion in public transport. He’s eyeing the world. With $17 billion in fares in US and Canada, the numbers out there for his other 70 markets must be huge. His biggest market is New York.

He looks forward to the day when you can just beam your phone on any public transport system. “Our friction-less payment (method) is in prototype.”

But what makes it different from Google? “We think public transport deserves its own app where Google is the Swiss knife of apps,” he said, as he looks forward to the day also when every city has Wi-Fi.

Moshe Vaknin, founder of YouAppi, presented YouAppi, a mobile apps recommendation platform that has reportedly raise $2.2 million.

Using the YouAppi system, publishers of mobile apps, reportedly gain a simple and reliable way to target their acquisition and retention resources for the highest valued and most loyal consumers.

“YouAppi is for mobile publishers struggling to monetize their inventory using traditional banner ads,” Vaknin said.

Nico Bayerque of Gone! showed how his app works as an algorithm-powered concierge service that sells your items, pick them up, package them appropriately and fulfills them.

Addressing what he calls the 350 billion market, he is answering what’s foremost in our minds: What do we do with our junk? And suggesting why not sell them through Gone! Electronics is a best-seller.

He demonstrated how he mines pricing data using ebay, for example, to gauge how much you can sell your products lying in waste at home.

Highest worth of products Gone! has picked up and the windfall the person received for using their app: $1,600. “Once we remove anything from your house, you get paid,” he said.

Why them? He said they know the marketplace. “If you want to sell wine, for example, we know the marketplace for it.”

The last presenter was Nutrino. Using your personal and medical profile, goals and food preferences, Nutrino’s patent pending technology helps create a healthy dietary plan for you.

Nutrino adapts to you in real time, continuously improving its recommendations. It’s supposed to be the first data-driven personalized food recommendation engine in the market.

The VCs at the presentations were Danny Schultz, managing director, Gotham Ventures; Jalak Jobanputra, managing partner, FuturePerfect Ventures; Hadley Harris, founding general partner, Eniac Ventures; and Nic Poulos, principal, Bowery Capital.

The other speaker of the night was Dave Kerpen, founder and CEO of Likeable Local and best-selling author, likened fundraising to dating.

Based on his experience, here are his fundraising tips:

• Transparency is good but not o too much

• Don’t waste your time once you know it’s not a good fit

• They’re going through the same thing you are

• Persistence is vital in any relationship worth having

• In the end it’s worth it

How ripe are you for Seed A investment—and other VC insights

By Dennis Clemente

What makes a startup ripe for Seed A investment? There’s the most obvious answer: “You have demonstrable revenue growth.” There’s the hopeful response: “You’re selling more metrics and data than just sizzle.” And the standard throwaway response: “…If you’ve become a revenue-focused brand.” You’ll do better with the first reaction; keep your hopes up for the second; plan long for the third.”

Last May 13, Rubicon Venture Capital’s Joshua Siegel hosted a night of VC talk and startup demonstrations at Orrick at CBS building. For the first part of the night, Siegel brought in the venture capitalists to answer his prepared questions like the one above. The VCs were Marc Michel of Metamorphic Ventures; Will Peng of Red Swan Ventures; Brad Svrluga of High Peaks Venture Partners; Nikhil Kalghatgi of Vast Ventures and Matt Gorin of Contour Venture Partners.

Elaborating on their responses regarding Seed A investment, the VCs put importance to having customer acquisition metrics and a repeatable sales process. “If you’re past the idea of product/market fit thinking, then you’re ready,” Michel said.

Still, at least two VCs said it has become harder to pinpoint what Seed A means nowadays. “The nomenclature has changed. What was an A can now be B.”

Peng said strong engagement with a group of people is key, but he also attempted to simplify it, “Early stage is, ‘Do people want it’ (your startup)? Series A is, ‘Do a lot of people want it’?”

What areas or sectors are ripe for Series A funding? VCs may not always give you a straight answer, because even without them saying it, the tech space is always evolving, if not converging with some other service or technology. Michel considered marketplaces, the shared economy, even mentioning Uber as a marketplace, but to avoid pigeonholing himself, he said, “Every firm will have its own idiosyncrasies.”

Really now, why can’t they say more? Peng doesn’t want to influence mindsets, “We don’t want you to change your business model based on trends, because we look for companies that come from a genuine place. If you are building something you are passionate about and you have the conviction to make it work, then we’ll take a look at it.” For a few seconds, he buckled and said food, but stopped short of elaborating. If he is talking about Soylent, look into it if you haven’t heard about it.

Asked if they work with other investors, Michel said, “We syndicate everything we do. We look for good partners and share financial risk, because most companies take time to develop.”
VCs have the resources to add value to your startup where angel investors can only provide expertise. Kalghatgi, however, is not one to share a startup with another investor if it means he’ll be hampered by what his firm can offer.

The difference between East Coast and West Coast investors is a topic not brought too often in public, but Siegel tried to say who would respond. Without going into detail, he said, “We hear a lot of crazy stuff in San Francisco, (how) it’s easy to get money.”

Svrluga said, “It’s 10 times bigger (there). There are also better entrepreneurs out there.”
In New York as opposed to Silicon Valley, there was also a comment about how good VCs see through the hype—and fakery. They ask about hitting milestones that attract investors. They want the right team, the right technology, the right differentiation.

Peng added how he doesn’t like you buying traffic, because it’s fake growth, akin to what we’ve learned with the Emperor with No Clothes fable. “It you stop buying traffic, you will (see) that you don’t have anything. Don’t go this road of lies.”

A question that pops up every now and then is how to get noticed by VCs. The response has always been the same: (face-to-face) networking, but Svrluga went a step further. True to how technology has improved networking, he said Linkedin is the greatest referral tool. “If you can’t figure out Linkedin, then you won’t be able to get the audience.”

Naiveté permeates entrepreneur novices, according to Svrluga. He suggested you come to him with a warm lead; for Gorin, a strong reference; for Kalghatgi, a person who knows you really well and can give you an accurate portrayal.

It’s true what they say. Mondays are no-nos for VCs. Michel laid out his schedule on the table: “I have 30-meeting slots dedicated to meeting new companies. But he is also quick to say how it’s physically impossible to meet everyone. Mondays are a no-no. It’s all a day of meetings.”

After the VCs’ talk, the startup demonstrations followed. The presenters were Jeremy Kagan of Pricing Engine; Michael Ibrahim of Whisk, an Uber competitor; co-founders Merritt Baer and Brian Fenty of TodayTix; Peter Stebe of nextSociety, and Doug Chambers of Field Lens.

For those starting out in New York, nextSociety’s Stebe tells us how networking with the right people proved crucial in his life away from his home, Germany. Now he’s monetizing it with nextSociety, an iOS networking app using a relevance score, a smart indicator that tells you how well a connection aligns with your professional interests.

Every startup has an interesting back story. For Stebe, who is from Germany, it was always how he dreamed of living in New York. Now he has a startup here.

Field Lens’ Chambers was succinct and to the point in his short presentation. In his construction work app, he talked about how he is answering the problem of communication breakdowns typical in construction work. He has a solid team, another important ingredient in a startup.

Having been funded, he knows the drill. Determining a problem and how you can solve it is crucial to your success and VC funding.

The 3Hs All Startups Need in Their Team: Hustler, Hipster, Hacker

Shai Goldman
Shai Goldman

By Dennis Clemente

What do you need to be a successful startup these days? Venture partner Shai Goldman of 500 Startups, a global seed stage VC firm, boils it down to three types of people. You need a hustler (salesperson), hipster (creative designer), and hacker (engineer) in your startup team.

Goldman was speaking at the Friday fireside chat The Hatchery at the American Management Association building near Times Square. “A hustler must know how to acquire a customer. “More and more we’re looking for a sales/distribution/customer acquisition person. We also ask if you can make, say, $10 million in revenue.”

How do they decide on which startup to invest in? Goldman said it varies by quarter.
“For mobile apps, you should at least have 5 million downloads to get Series A funding.”

“We usually invest about $I00,000 to $150,000 syndicating with other VC firms,” he said. 500 Startups is known to invest about $250,000 in early seed stage companies with about 600 investments made on a global scale, 150 of them in New York, including the 3-D company based in New York, Makerbot.

Beyond the team, what does it take to get funding? Like Goldman and most VCs and accelerators will tell you, “You need a (good) product and traction, lots of traction.” Even if you’re from abroad, he still thinks you can get funded if your product has traction. “The founders don’t have to be in the United States,” he added.

Some things he doesn’t mind overlooking is when a market size is hard to define—and that means the share economy. In this case, he “looks at revenue opportunity than market size.”

Goldman is not too concerned about the rising number of crowdfunding sites. “It doesn’t really affect VCs because those fundraisers coming from, say, Kickstarter, will need to raise another round of funding (as they grow).”

How do you market your startup these days? Goldman is a big fan of email marketing. “Email is a great tool for (targeting) new and existing customers. You can easily find or buy email listings online. Then focus on the content, frequency, ad exchanges and call to action messages in your email.

Here are more suggestions:
• Use LiveIntent
• Buy ad placements in somebody’s email content
• Tap Pinterest, Facebook, Linkedin
• Try different channels to see what works for your customer base.
• And what not to do: “If you all do is Twitter, that’s a red flag for us.”

Goldman provided some tips for startups not to repeat common mistakes:
• Optimize for SEO on landing pages. “Lots of startups fail to drive people to the landing pages (of their websites).”
• If you’re in the fashion space, you must use Instagram. And don’t forget to add caption to those photos.
• Make use of (video social platforms) or follow example of ipsy.com with its how-to YouTube videos

One has to be careful about how to use and manage seed money. Goldman said the worst you can do is have a poor forecast. You have to manage capital well in, say, 9 to 18 months that you need while trying to gain traction. If you have capital that lasts up to 24 months while trying to gain traction, that’s the best way you reduce your failure rate.

Goldman hinted at the following trends 500 Startups and everyone else is watching:
• Online companies building brick-and-mortar shops
• Shopping trackers; technology in retail stores
• Bay Area investors exploring the New York food space
• Enterprise mobility and e-commerce
• Latin America with opportunities in the middle-class market

500 Startups’ early-stage companies with up to $250K in funding are included in their startup accelerator program, and unique events like SmashSummit, UnSexy, and GeeksOnaPlane, with hundreds of experienced startup mentors around the world, a creative work space in the heart of Silicon Valley, and a vibrant community of startup founders. Their investment team and mentor network have operational experience at companies, including PayPal, Google, YouTube, Yahoo, AOL, Zynga, LinkedIn, Twitter, Apple, and Facebook. It has 30 employees of different nationalities.

The meetup was hosted by Yao Hui Huang.