This week is the O’Reilly Web 2.0 Expo in San Francisco. At the last minute I got a deal on a pass, and really wanted to come out here to listen to a few of the sessions. There is nothing like getting out to the San Francisco Bay Area to learn and mingle with the web world. I came in today to attend the Workshops they were offering … there were a couple that caught my eye.

I got to wake up at 4:30am to get out of the house by 5:00am … it’s an hour drive from Heber to the Airport … to catch my 7:00am flight to SFO. I like a conference like this because upon arriving at SFO it was a short walk to the AirTrain to ride to the Bart station … then a quick ride on Bart to the Powell Station just blocks from my hotel and the Moscone convention center. I dropped my bags at the hotel, and heading over to the first session on Starting Up: Strategies for Financing & Growing Your Web 2.0 Startup … presented by Rob Hayes & Jeff Clavier. I got in an hour late … so missed some of the initial slides … but got some good points from them:

Picking your source of funding
They spent a great deal of time talking about how to pick your source of funding carefully. They really stressed to not waste YOUR time. There is no use going to a angel or VC if their investment profile, and current investments, don’t align with your type of start-up. Do your own research into who is out there, and what types of investments they make … what dollar levels, and what risk levels. Do they invest pre-revenue, and how big is their fund. All of this will ensure that if you can get in the door … there can be some synergy between the investor and your organization.

Introductions
The presenters then spent a good bit of time talking about the value of introductions. They both stressed that although it is not the absolute rule, if they hear about you and your company through one of their current investments, or someone that they know, it can really assist in getting you more attention. C’mon … this is obvious thinking, and so they said to again look at where and how you can do some networking, and meet the people who know people with money. They talked about the numerous Bay Area tech parties and meet-ups (which Jesse and I both agree we want to see more of in Utah!!) where tech people hang out to talk about what they are up to … and share knowledge and ideas. These events are happening on a weekly and nightly basis! They both commented about the

The Process
They had a slide with too many bullets for me to jot down … and joked about what to be prepared for in the process of funding. From experience, I can say they are right …

1. Pitch
2. More pitches
3. Due diligence
4. More pitches
5. Partner’s meeting
6. Termsheet issued
7. Terms negotiation
8. More due diligence
9. Legal docs
10. Get funding
11. Begin work!

They really wanted to stress that the process takes time … and is a lot of work. And to be prepared, and patient, with the process.

The Pitch
They spent some time talking about your pitch … don’t waste time … don’t talking about big flowery stories … don’t waste your time with them setting the stage for how you are going to save the world, and create world peace. The keys to a successful pitch are:

• Goals – clearly state yours!
• Audience – consider who you are talking to
• Presentation – keep it short and sweet … 10 slides!
• Energy – if you are passionate, they will know!
• Attendance – choose carefully who is going to be there
• Follow up – make sure to follow-up quickly and thoroughly

They then introduced some CEOs of small Web 2.0 start-ups. The first was the CEO and founder of Dogster & Catster, Ted Rheingold. He created vertical portals for pet lovers. As of March 2008: 750k unique visitors, 25 million page serves. He explained how they made a lot of mistakes … thinking they could make revenue through ad networks, affiliate programs, locally targeted ads, outside sales of ad inventory, and even over spending on marketing when they weren’t sure what they were marketing!

What he then explained worked … selling their ad inventory directly, integrated brand campaigns, sponsor-level brand advertisers (Important!), subscription service, leveraging customer base for QA/Market Research, and creating REAL content with viral fun!

There was a second CEO, and then open floor Q&A. There were a lot of interesting questions and comments.

• If you are working on your start-up on the side, make sure it is not in any conflict with your full time employer. Do not use their equipment or resources!
• Once funded, you must fully commit your time and efforts to the start-up. Period.
• You are much more likely to get money from your local area. This relates to the investor being able to meet/see their investment. There are also possible tax issues, board meetings, etc. Local *can* be within a region … western USA, eastern USA. It’s simple logistics. How far does the investor want to travel for you? The investors time *is* money.
• What do the VCs look for? An idea? A prototype? One answer was: Who you are, who is on your team, what is the market, how do they (the investor) perceive the market.
• Investors want to see *some* level of experienced team members.  They *might* invest in a new “just out of school” team, but they feel much more comfortable with a team that has at least one experienced member.  Never say never … but it’s worth finding an experienced entrepreneur with a track record of some kind.
• Do everything that you can to keep your “burn rate” down … low expenses … careful spending … until you actually get a “tick up” – a real rise in users and usage – which proves adoption.  That is when the Series A funding becomes possible.

Overall … a fun presentation!  Off to lunch …