Photo by Flickr user Texas to MexicoI’m posting a few takeaways today from Friday’s CEOs Best Practices Meeting.  David Altounian from iTaggit organized and hosted 12 companies at River Place Country Club with the goal of sharing “what’s working” and “what’s not” in B2C web companies.  The scene was a mix of pre-fundraising, bootstrapped, angel-backed, vc-backed, pre-revenue, and profitable companies.  Companies included ApartmentRatings.com, Babblesoft, Edioma, iTaggit, KeyIngredient, Mindbites, Moximity, MusicGorilla, NaturallyCurly, OtherInbox, VolunteerSpot, and Wowio.  Here are my takeaways in no particular order:

  • Interesting business models are emerging in mobile apps, but app integration is a costly problem for startups ($60k per platform port).
  • Selling display advertising to CPG advertisers requires going direct to the brand, skipping the agency.
  • Link exchanges aren’t working but “strategic partnerships” are — you need a highly relationship-based approach for this path.
  • Several companies have tried multiple PR firms without success – The pirate perspective: start building your media list early, do you own PR in-house, and hire a firm once you’re comfortable with it having 50/50 (and maybe a little less) odds of success.
  • Videos posted on YouTube are driving traffic – there’s a new trend in people turning to YouTube searches first for information on how to do things; these don’t have to be so-called “viral video” a simple ‘How To’ instruction video will suffice.
  • Recruiting – Finding Ruby and Java developers in Austin is a serious problem.
  • The fundraising environment is very difficult – some attribute it to a disconnect between consumers and investors.

 

The last point is one that’s probably most debated.  Here’s my perspective over the last year of attending CTAN screenings and presentations: people like to invest in what they know and/or enjoy.  The number of folks in Austin who have earned their money from consumer web offerings AND who are active angels is quite small compared to angels who came from service businesses, enterprise software, systems management software, semiconductors, and Dell. 

That said, I’ve seen a number of non-B2C angels step up to consumer startups.  But when they do, they tend to be fairly cautious.  For early-stage (seed and/or Series A) Austin consumer web companies, here’s my take on the profile of successful angel raises:

Angels: A working product, a scalable model, revenue, and a willingness to exit.  It also really helps to have a serial entrepreneur as a founder.  Your raise should be between $250k and $1M.

Some smaller funds like G51 have been active B2C funders, as have a few out-of-town VC’s like True Ventures, Benchmark Capital, and DAG Ventures.  Here’s my take on the profile of successful VC raises:

VC’s: A working product, a scalable model, a compelling, innovative, and defensible take on an emerging market, and the potential for a billion dollar exit in 5-7 years.  Your raise should be $1M or more, although there was some talk that $1-$3M is no man’s land right now.  If the founders are first time entrepreneurs, it also doesn’t hurt to have some ivy on their resumes.

Agree or disagree, feel free to comment.

Jeremy Bencken

Jeremy Bencken co-founded BuzzStream and served as Chairman in our first few years. Before that, he co-founded ApartmentRatings.com, which he grew into the leading global source for ratings and reviews of apartments before selling it to Internet Brands. Currently, Jeremy runs Wordloop, a performance-based content marketing company in Austin, Texas. Jeremy also serves as an advisor to Sparefoot and inHabi, and is a mentor with Capital Factory. You can find Jeremy on Twitter or Google Plus.

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