The semantic web is one of the leading trends we track here at ReadWriteWeb, so it was big news to us earlier this month when Evri announced it was acquiring Twine creators Radar Networks. Following the announcement, Twine CEO Nova Spivack wrote an inspiring and lengthy farewell blog post detailing the acquisition, and the story behind the development and growth of Twine. Towards the end of the post, Spivack outlined some lessons for budding entrepreneurs based on what he learned through his startup experience.
The number one piece of advice he suggests is to raise as little funding as possible from venture capitalists, and to stick with revenue funds, bootstrapping or angel funding to get by. Based on Spivack’s experiences with raising VC funding, he believes the conditions and strings that are attached to it aren’t worth it if the company can get by without raising any funding, especially in the current economic situation.
“It is no easy task to get a startup funded and launched in this economy,” he writes. “The odds are not in your favor — so play defense, not offense, until conditions improve (years from now).”
Part of playing defense, he says, is to curtail spending as much as possible – a suggestion that goes hand-in-hand with the modesty of raising as little venture capital as necessary. Spivack urges startups to avoid quickly spending and expanding upon bloating their bank account with investor dollars; instead, he argues for responsible saving and planning for unexpected downturns and crashes.
“Assume the market will crash — downturns are more frequent and last longer than they used to. Expect that. Plan on it,” writes Spivack. “And make sure you keep enough capital in reserve to spend 9 to 12 months raising your next round, because that is how long it takes in this economy to get a round done.”
One of the things we hear VCs look for in potential investments is traction, but Spivack, interestingly enough, says traction is not always a sure-fire bet for funding and success. He says VCs are more concerned with finding a company that is producing revenues preferably at a break-even level – something he attributes to an evolving VC landscape.
“Venture capital investing has changed dramatically — early stage and late stage deals are the only deals that are getting real funding,” writes Spivack. “Mid-stage companies are simply left to die, unless they are profitable or will soon be profitable.”
Spivack provides a number of other lessons he learned from his time with Twine, and be sure to read his entire post for a touching story behind his company. For now, note his most important lessons regarding modest spending and modest fund raising. A lot of startups enter the scene looking to become as flush with cash as possible, but in some cases, with some entrepreneurs, having too much money can be a bad thing.
