"Big media" goes to a page where it explains that it's a career total (from opensecrets.org). I initially just added this, but then the Paul Ryan issue came up and the Atlantic Monthly article criticized the lack of data around this issue.
So I put in data from maplight.org - just funds raised specific to this issue.
I worked on a project like this a while back. The heavy regulations eventually broke the whole concept. We had built a system for startups to pitch their businesses, and the investors would have been limited to accredited investors (those with > $1M or who make > $200K/year for two years). They would have bid for startups in a Dutch auction format, like the way Google went public.
However, to do this you need to be not just a startup, but an NASD certified "broker dealer." This imposes a couple things that software startups aren't good at:
1. You need $500K in the bank, just because of regulations. This means you need to raise much more than usual.
2. Several founders/early employees need to study for and pass Series 7 exams, which is what you need if you're a stockbroker. At least one person also needs to study for a similar test for brokerage management. Coding + learning to be a stock brokerage was not easy!
3. The associated legal costs were extremely high.
Kickstarter of course avoids all this by not dealing with any transfer of ownership so they don't need to worry about the government. They just sell access to creative folks, which is a good idea.
PS - Angel investors and VCs hate this concept, which makes it much harder to raise money. We brought it in front of all the biggies and were well connected, and each one argued about the personal value of their involvement, which may or may not be true.
Awesome analysis. Honest to god, I get pitched this idea of a "social network for startups to get funded by accredited investors" at least once a month. A friend wanted me to develop this application for her, and was convinced every investor would be all over this. I wasn't able to show her the light, but I agree: Angels would hate this.
This is the key, and the argument that grandmotherly Italian women will make: it's essential to bring the water back to boiling as soon possible after you put the pasta in. Therefore you need a lot of water so the overall temperature doesn't drop (more important for fresh pasta than dry), and you need to cover the pot too so less heat will escape.
Italian grandmothers who make the best pasta would hate this article.
I'm working on a similar business plan right now, and am having the same difficulty. Our software solves a problem and I believe we can get a lot of users, but despite adding in ad revenue and a vague "enterprise edition," the numbers just don't add up into something attractive.
Is it best to be honest about this, or beef up the numbers?
Start with the assumption that you can get lots of users. If you can then listen to those customers very, very carefully. You will discover some additional value that you can bring by adding specific features; charge extra for those features. It's OK to have lots of free users, it's also OK to say that you are not sure about the revenue, but I'd be on the lookout for an opportunity to charge a customer to extra value that your product is bringing.
Is it really okay to say you're not sure about revenue? I keep reading that that's one thing you really need to nail down. (Then again, I see these companies like Twitter with no realistic business model get funding...)
I used to sit through presentation after presentation every day and they all had revenue estimates.
No one in the room believed those estimates, not the entrepreneur and certainly not the VC. It's important to have them because they indicate that you've tried to think about how you are going to make money. Also, no one manages to actually make those estimates either because there's always something that goes wrong, or better, or sideways.
So, think about how you are going to make money, make a revenue plan (and an expense plan). Present the plan you have, but don't be ashamed if you don't make it.
It's worth asking yourself about Twitter. Why would you fund Twitter? Well, you might look at the enormous traction they have, and if you think the team is smart then you'd say to yourself "Here's a team with lots of 'customers' and the smarts to figure out how to monetize them".
JGC, personally I'd love it if you blogged/wrote somewhere about being/becoming an independent consultant, especially in a righteous/sexy domain like anti-spam/text learning. :)
1. I had no other choice. After years of working for people I just needed a break.
2. It's harder than it looks... my income is totally variable.
3. It's the best thing I ever did. I get to choose what I work on (to a certain extent).
I'm actually thinking of going back full time, but that's only because a start up is enticing me with an interesting combination of good team, interesting problem, and stock.
