Money Counts

Due to shifts in my organisation I have been spending a lot of time on the start-ups and spin-offs created within IBBT.

Every week you are then confronted with the two main challenges facing these starters. Firstly they have to breakthrough in a small national market and find their first international customers. The second challenge is finding enough money, not only to finance the development of the products but also the development of a marketing and sales apparatus.

IBBT provides opportunities to starters to take the first steps via our own pre-seed fund. But if the starters have international ambitions extra money has to be found very quickly and that is not so obvious in our regions. Venture funds like GIMV and Big Bang provide great work but there are a lot of dossiers for a limited number of specialised funds.

I recently read the announcement that Quora, a Q&A start-up of various of the early Facebook contributors including their CTO Adam D’Angelo, raised eleven million dollars in a first financing round. You can read on TechCrunch that this brings their valuation to 86 million dollars despite the fact that the site is still in a closed beta.
The investors are not amateurs. This relates to Benchmark Capital, a veteran of many successful ICT stories. Such a phenomenon natural raises the question or whether you should even try to compete with this as a Belgian starter.

Netlog

Companies like Netlog prove that you can be successful in a software category dominated by a player like Facebook. However they made a move quickly and could take over a market position before the Facebook craze also took hold in Europe. They distinguish themselves clearly ("Facebook is for old people who meet there old friends there, Netlog is for young people who are meeting new friends") and respond to the specific wishes of their target public.

Open source and SaaS

Naturally choosing your niches well and being quick off the mark are a given. Many also aim at open source and SaaS story to limit the product development and sales organisation costs in that way.

The investments needed should not be underestimated here either. Research shows that it takes significantly longer for starters to operate at break-even in pure open source software or cloud computing than for business that also aim at services and licensing income. As an investor you consequently have to be prepared to take even greater risks and wait longer for your money.

How much invested?

Generally with start-up dossiers there is a custom of verifying whether there are already patents or other protection of intellectual property about the technology the starter wants to release on the market. I believe it is more useful to verify how much investment is being made with venture capital in starters within the same software category.