The Changing Game of Funding

At some point, a startup needs money. That’s pretty obvious; what’s less obvious is that the landscape of venture has changed – and not all capital is equal. While the giant VCs are still doing what they do best, a vast array of smaller players have emerged. These incubators and accelerators realize that an early-stage company needs more than just money; they need things like physical resources, design and strategy resources, camaraderie, and a creative environment. In fact, in a landscape where there are as many as 500 open recs for various “UX” talent, design talent may be the most persuasive facet an accelerator can provide.

Austin Center for Design students are four weeks from graduation. Teams have working prototypes and sound business plans; they are now looking for the next step in order to successfully move from a proof-of-concept stage to a live alpha stage. The following are some of the funding sources they are considering; note the unique qualities and competitive landscape that’s emerging in the VC world. The various data in the chart is simply aggregated from each website.

Company In more detail Differentiators Principals
500 Startups
Blowing up startups with design, data and distribution
Successful startups don’t just need great coders and designers, they require scalable and cost-effective customer acquisition. At 500 Startups we specialize in online distribution techniques for search, social, mobile, and email platforms to help our startups get eyeballs and new customers. In particular we focus on solutions for Facebook, Twitter, Google, YouTube, Android, and Apple iOS, and by day many of our super mentors work as mild-mannered reporters at these very same companies.
  • Design. Great products start with a great user experience—one that makes customers happy and brings them back for more. We help startups design functional solutions, not just pretty pictures.
  • Data. Successful startups can make informed product and marketing decisions, know how much customers are willing to pay, and what it costs to acquire them. We help startups learn how to define and measure customer-driven metrics.
  • Distribution. Startups need scalable, cost-effective customer acquisition. We specialize in distribution for search, social, and mobile platforms such as Google, Facebook, Twitter, YouTube, Apple, and Android.
Dave McClure
Christine Tsai
Enrique Allen
Capital Factory
Roll up your sleeves and get to work
Capital Factory is an early stage accelerator program for tech startups that provides a small amount of seed capital and weekly mentoring sessions by entrepreneurs who have founded successful companies. Startup companies apply to participate in our 10 week summer program intended to get a startup pointed in the right direction with a clear path to profitability and growth. In 2011 the program runs from May 25th to August 11th. On September 7th, we will host more than 250 investors and entrepreneurs for Demo Day and stream it live over the Internet.
  • Free basic IT infrastructure for email, website set up and hosted on Google Apps
  • Free office space with the other companies
  • $1,500 in free hosting from Rackspace, Slicehost, and JungleDisk
  • Free company formation and legal documents by Wilson Sonsini
  • Free brand development and logo (if needed) by Clutch Creative
  • Free help with your financial plan from vcfo and The Accounting Group
  • Free banking from Square One Bank
  • Free press support Free software from Balsamiq Studios
  • Free software from UserVoice
  • Free software from Microsoft BizSpark
Josh Baer
offering a unique fundraising model that bridges the gap between initial seed money raised from traditional “Angel” investors and the much larger investments that characterize traditional Venture Capitalists
We’ve developed a new approach to investing in world-changing ideas. Looking at the world through the eyes of the entrepreneur, we’ve filled a widening gap between Angel investors and venture capital firms. But we help companies with more than just fundraising: we help them discover, refine, evolve, and master the core elements of their businesses so they will be in the best possible position to one day “open the floodgates” to market disruption and dominance. We help start-ups accelerate their growth, supporting their efforts in the following areas:
  • Identifying key opportunities to generate profitable revenues
  • Determining what not to do, in addition to pursuing the most important opportunities
  • Attracting and hiring the most qualified people
  • Finding like-minded partners who can help you achieve your goals faster
  • Avoiding unnecessary competition by focusing on the areas that create the most value for your customers
  • Generating enthusiasm inside and outside the company
  • Linking you to the best, mostreadily available financing
Mike Maples Jr
Ann Miura-Ko
Founder Collective
A new (old) model for venture investing
As venture capital funds get increasingly large, we have created a small fund (~$40M) that is dedicated to investing in seed stage deals. Unlike big venture capital firms, we expect to generate returns almost exclusively from seed stage investments. Hence, we have the same incentives as founders to increase the value of the company in future financings. We are also comfortable with smaller exits if that’s what the founders want.   David Frankel
Eric Paley
Lowercase Capital
Venture Capital Is Broken
At Lowercase Capital, we invest in startups, acquire later stage companies, and advise businesses and funds of all sizes on strategy and execution. We take you seriously, and ourselves not so seriously. We wear our hearts on our oft-wrinkled sleeves. We are grateful for the companies who have chosen us, feel lucky for the chance to collaborate with such brilliant and happy people, and we are proud of how hard they work to bring smiles to their users and customers. Our approach isn’t exactly customary, and our founder doesn’t act like a traditional VC/private equity guy.   Chris Sacca
Tech Stars
Do more faster by joining forces with the #1 startup accelerator in the world
TechStars fills the experience gap by bringing together the best and the brightest in one place and surrounding you with incredible proven mentors for the three months. With this much talent in one place you’ll get great advice on your product and strategy, thereby ensuring the best possible start for your new business. We provide working and meeting spaces, as well as a nice lounge all with super fast and reliable wireless Internet access. Media Temple is a sponsor of TechStars, and they provide our companies with free top-notch hosting during the program. Cooley Godward Kronish and Kendall, Koenig, and Oelsner are two outstanding legal firms who provide free legal council and services for our companies. Metzger and Associates is a premier new media public relations agency who is also a sponsor providing free services. Basically, we’ll help you get everything covered with minimal expense. We just want you to focus on creating a great product while you’re here, and not have to worry about all this other stuff. David Cohen
Brad Feld
David Brow
Jared Polis
Thinktiventures invests expert human capital in the best venture acceleration opportunities
In early-stage investing, expertise is the new currency. In competitive marketsmoving at warp speed, investment capital alone isn’t enough to win. Your investors need to be actively removing the obstacles to your success, or they are simply slowing you down. This trend is evident in the rise of value-added incubators and “super angel” investment funds, whose investment dollars are often far less valuable than the mentorship and exposure they provide. Expert human capital creates leverage for startups – the ability to acquire and grow tremendous equity positions without paying full price up front. When a startup invests $100,000 of capital to forcefully apply the right kind of expertise at the optimal time, that $100,000 can create $1 million or more in asset value. That’s what we call “venture acceleration” – focused investments in expert human capital that create non-linear outcomes. For startups, it makes the best things happen faster, reduces overall capital requirements, and maximizes equity upside potential for management teams and early investors. That is the essence of Thinktiventures. Jonathan Berkowitz
Steve Waters
Union Square Ventures
We invest in information technology
Union Square Ventures is a venture capital firm based in New York City. We are a small collegial partnership that manages $450,000,000 across three funds. Our portfolio companies create services that have the potential to fundamentally transform important markets. We can work with you whether you need $250,000 to test an idea, or $25,000,000 to buy an undervalued asset. We can invest in New York, San Francisco, London, or Berlin and most places in between. We evolve our investment thesis in an ongoing and open dialogue with the market. For entrepreneurs, this means that if you are leveraging the economics of Internet-based networks to transform some aspect of the global economy, Union Square Ventures can be a partner, whether you are just launching your service, funding rapid growth, or spinning your business out of a larger entity. We can work with you if you need $250,000 or $25,000,000. We can invest in New York, San Francisco, London, or Berlin, and most places in between. We hope you’ll think of USV as stage-agnostic, highly-focused investors who can add value to your company. That’s how we see ourselves. With the Opportunity Fund, we are better equipped to deliver that offering to you. Brad Burnham
Fred Wilson
Albert Wenger
John Buttrick
Y Combinator
Y Combinator does seed funding for startups.
In 2005, Y Combinator developed a new model of startup funding. Twice a year we invest a small amount of money (average $18k) in a large number of startups (currently 43). The startups move to Silicon Valley for 3 months, during which we work intensively with them to get the company into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present to a large audience of investors. But YC doesn’t end on Demo Day. We and the YC alumni network continue to help founders for the life of their company, and beyond. We think hackers are most productive when they can spend most of their time hacking. Our goal is to create an environment where you can focus exclusively on getting an initial version built. In any startup, the first couple months tend to be the most productive of all. Those first months define the company. So anything you can do to maximize their effects is probably a good idea. We seem to have succeeded in creating a good environment, because many founders have told us that the first ten weeks of Y Combinator were the most productive period of their lives. Trevor Blackwell
Paul Buchheit
Paul Graham
Jessica Livingston
Robert Morris
Harj Taggar


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