Today’s Los Angeles Times carries an article that predicts that 2008 will be even tougher for start-ups seeking cash. There are a few themes in this article that we often talk about:

Venture investors will be very picky and, specifically, they will be looking for “the complete package”:  great technology, a big market, a strong team and, most important, evidence that the company has already started to get traction. This is a bit self-serving, but we think that groups such as Momentum can help bridge the funding gap by providing bridge funds and  management that is willing to go at risk to get traction.

There is also an interesting anecdote on a theme we often talk about: high valuations in early rounds are often a BAD thing. A company featured in the article was unable to raise additional capital during the current economic slowdown because they had been so successful at achieving a high valuation in an earlier round (it is always difficult to do a “flat” or “down” round).  So, the company went out of business.

If there is any news is in this article it is “more of the same”. You should not expect to fund a great idea or a great product but should be working to build a solid company one step at a time.  As you take capital along the way, don’t always focus on valuation but instead focus on getting the right amount of capital from the right partners.

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