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[·ÖÏí]ÓïÒåÍø¿ªÊ¼¡°ËÑÇ®¡± Semantic Web Startups In Search of Money(Part 1) http://www.semanticweb.com//article.php/3836056 August 25, 2009 By Jennifer Zaino     The entrepreneurial spirit is alive and well among the semantic web community. But how does that translate into getting venture capital funding for potential startups?     Semanticweb.com turned to some leaders who are building businesses based on providing services that leverage semantic technologies ¨C and who themselves are veterans of their companies¡¯ funding cycles ¨C to get their take on what hopeful up-and-comers in the space need to know when it comes to the VC community. In the first of this two-part series, they reflect on the overall climate and whether semantic-driven businesses have any advantage in gaining funding during these challenging times. Surprise: The poor economy is taking its toll.     In the musical chairs world of venture capital funding, the music has momentarily stopped and it¡¯s better if you¡¯re already seated, says Nova Spivack, CEO and founder of Radar Networks, which developed Twine; its VC funders include Leapfrog Ventures and Vulcan Capital. Venture funding generally is in a downswing stage, and if you didn¡¯t get funded during the upswing you¡¯re going to find it harder than it once was to secure funding now.     And many of those startups that did get funding can¡¯t necessarily expect it to continue, either. Further, the lucky ones will find that the amount of money they can raise and the terms under which they can raise it are likely to be much worse. But, Spivack says, ¡°the economy helps if you really have a good idea. It weeds out the noise.¡±     Alex Iskold, CEO and founder of AdaptiveBlue ¨C whose VC funders include Union Square Ventures and Biltmore Ventures ¨C agrees that funding is generally off because of the economic downturn. But he also cautions that the abstractness of the Semantic Web ideas behind some entrepreneurs¡¯ plans means their visions may take a long time to realize, and so add to the difficulty when it comes to fund-raising. No one cares if it¡¯s a semantic web startup.     In a healthier economy, the fact that there¡¯s a better understanding of the Semantic Web by the market at large ¨C driven by the fact that there are businesses out there proving that semantic technologies work and are past the R&D stage ¨C would be a good thing for startups in terms of receptivity by the venture community, Spivack thinks. ¡°That said, they don¡¯t care if it¡¯s semantic or not semantic,¡± he says. At the beginning of the hype cycle that might have attracted interest from VCs, but the question now is not if the service is driven by semantic technology, but whether anyone will use it. ¡°There¡¯s little interest now in land grab opportunities,¡± Spivack says.     Others agree. ¡°Securing funding dollars was always hard. Some technologies have a short time window when they are hyped and hot and a certain number of fresh startups get funded because they label themselves with certain technology. Semantic web's days of being the phrase to increase fundability are over,¡± says Andraz Tori, CTO and co-founder of Zemanta Ltd., which has had seed investments from T.A.G. and Eden Ventures ¨C one of the first-of-its-kind deals in the Slovenian high-tech sector. Right now, he says, the torch is with cloud computing and real-time data.     ¡°Nowadays semantic web is just a part of technology that a startup might be using. It's only slightly different [from] saying LAMP or Rails startup,¡± Tori says. In fact, notes Ranjit Padmanabhan, co-founder and vice president of products at MashLogic ¨C which raised $500,000 in an angel round from Bessemer Venture Partners and others (including About.com founder Scott Kurnit and Wikia CEO Gil Penchina) ¨C you might be better off playing down the term. (Padmanabhan is speaking primarily of lower-case semantic web companies ¨C those that use algorithmic, heuristic, and tag-driven approaches to infer function and content from web pages, aka Implicit Web companies.)     ¡°In the past couple of years the term semantic web has been overused and has lost some luster,¡± he says. ¡°Most VCs are aware of this, so it's better to de-emphasize the term from the cornerstone of your Mission Statement to a bullet point in your Features/Technology slide. As a result, VCs are more likely to focus (and rightly so) on the specific problem being solved and evaluate the business plan based on its merits.¡± Here¡¯s where VC money appears to be headed.     In keeping with the idea that VCs care less about the semantic web per se than what you can do with it, Tori says he sees these funders as being interested in visions that don't need semantic web as a prerequisite, but have semantic web as a side product alongside of the main value preposition.     Businesses that address areas such as content discovery, vertical search, sentiment analysis, and real-time search, says Padmanabhan, are more likely to get interest from VCs.     ¡°Applications that use semantic techniques to add value to popular services like social networking, real-time conversations, search, etc. will have a better chance of getting VC attention,¡± he says. ¡°Evolutionary products are easier to comprehend and evaluate, since they are based on a familiar frame of reference. Obviously revolutionary ideas promise greater impact over time, but in practice it is more challenging to raise funding for such endeavors. In other words, it is better to pitch ideas that are solve current problems but have the scope and scale to evolve over time into truly innovative solutions.¡±    Êղؠ  ·ÖÏí   ¶¥(0)

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Semantic Web Startups In Search of Money (Part 2) http://www.semanticweb.com/article.php/12160_3836531_1/Semantic-Web-Startups-In-Search-of-Money-Part-2 August 27, 2009 By Jennifer Zaino Get to the top of VCs' investment interest list.     Following up on the idea that most of the VCs he knows don't invest in the Semantic Web, per se, but in ideas and companies that aim to solve problems, AdaptiveBlue CEO and founder Alex Iskold advises that you be ready to show them just how your start-up goes about doing that. The first thing you need to tell is that your idea has been implemented and show them the real demo,¡± he says. ¡°Without the demo there won't be any conversations. But even with that it¡¯s going to be tough. Ideally you need to show them customers or users if it¡¯s a consumer app.¡±     The "Back to Basics" approach ¨C with a demo as part of it ¨C is the route to take, says Ranjit Padmanabhan, co-founder and VP of products at MashLogic. That means: Clear articulation of the value proposition and its differentiation from existing solutions; a well-reasoned financial model; a distribution strategy (traffic, usage, retention, monetization); competitive analysis; and have the product as far along as possible, but ideally a demo.     ¡°The product should do something non-obvious, demonstrably better than the incumbent, without requiring behavior changes on the part of the user,¡± he says. On the point about citing the competition, entrepreneurs who know they have the right stuff shouldn¡¯t be nervous. ¡°A bit of competition seems to provide market validation, especially if the space has also received funding,¡± says Padmanabhan. ¡°For that reason it is beneficial to list competitors in your presentation, accompanied by a clear analysis of why you are more likely to succeed.¡±   Importantly, Padmanabhan says you¡¯d better have a compelling response to the questions, "Why is this a product and not a feature?" and "What if Google decided to build this?"     He notes that you can use the semantic label¡ªbut with care¡ªto help VCs quickly categorize the nature of the product. Andraz Tori, CTO and co-founder of Zemanta Ltd., says that if you need to, you can play the semantic web card as a cost-savings factor ¨C i.e. getting the well-organized data on the cheap). ¡°If you are in specific industry where data exchange or integration is a painful issue, semantic web might play a role in commoditizing the space,¡± he says. ¡°Overall my advice would be to concentrate on other strong points of your startup and mention words "semantic web" only on the technology slide.¡±     Everyone agrees, of course, that VCs want to see a clear monetization model and growth path. How clear? Radar Networks founder and CEO Nova Spivack puts the figure at bringing in $100 million in revenue in four to five years. Having a technology that is not easy to replicate¡ªand patents or trade secrets in support of that¡ªis helpful to your cause, he says, but better is to show a proven business model and demonstrate, using conservative assumptions, that you¡¯ll be bringing in money to break even in a set period of time, say 18 to 24 months.     Also on the money side of things, ¡°the most important thing to every VC right now is that you have a low burn rate,¡± he says ¨C on the order of $100,000 or $200,000 a month for a completely new, pure startup, or about double that for a somewhat bigger player. Here¡¯s insight into typical investment parameters.     Generally a VC wants at least 20 percent of your company when they invest, according to Spivack ¨C and they are likely not to want your enterprise to be headed up by a first-time CEO. They¡¯re looking for someone at the helm who¡¯s been successful shepherding startups before, or at least someone who¡¯s been in a business leadership role in the technology space.     And, says Padmanabhan, be advised that the prevailing mood is that the availability of open source and cheap infrastructure requires lower levels of investment, so entrepreneurs should be prepared for tighter valuations. ¡°This gives some VCs the capacity to spread their money among more investments, which in turn can benefit a larger number of entrepreneurs, especially at the seed stage,¡± he says. Make sure it¡¯s a good match for your company.     This is not a "take the money and run" situation. This is a partnership. The CEO (whether that¡¯s you or someone else) and the investors who will comprise most of the board of directors need to have similar goals for the company.     ¡°There are different kinds of investors and entrepreneurs,¡± says Spivack ¨C the adventurous and the risk-averse, the optimistic and the skeptical ¨C and problems occur when there are mismatches in philosophy and approach between them. While it can be good to have people with different views as a company matures, in early stage start-ups you don¡¯t want a lot of polarity. Have the same goals now and later on you can bring in diversity, he notes.     Spivack recommends looking for VCs who really understand aspects of the technology, and who themselves have been operators of one or more ventures so they understand what it¡¯s like to be a CEO. Ideally, they will have operated a consumer company if that¡¯s the space you¡¯re in, or an enterprise company if that¡¯s your area. Also, you¡¯ll want a VC who¡¯s not so busy with so many other ventures that they can¡¯t give yours the attention it needs. ¡°You want to know when they did their last investment and how many boards they are on to make sure they can help you,¡± he says.     ¡°VC firms will tell you they all have different value-adds, but the truth is they are all basically equal,¡± he says. ¡°Money is money. The difference is the personality of the people, it¡¯s what the people are like and you must get to know them and make sure you are productive as a team, because that¡¯s really the management team of the company. It¡¯s a hard but important decision.¡± Here¡¯s when not to go the VC route.     Most VCs are looking for an investment that will make them 10 times their money, though they expect just one in five to do that and the others to fail, Spivack says. ¡°Can you be that company? Nichey, weird little pipedream ideas that are academic and small are just not of interest in this market. They may be great ideas for a family business, for a lifestyle business that can support a few employees. But if you want venture capital you need to be thinking about scaling the business.¡± And even if you are the kind of business that gives it the potential to qualify for VC funding, there may be reason to wait. In the current climate for raising institutional capital, especially for seed-stage startups, VCs are pickier about their investments and seem to prefer companies that have market traction, while demanding more aggressive valuations, says Padmanabhan. ¡°I would definitely recommend that software startups go as far as possible (e.g. product launch, guerilla marketing, creative PR, etc.) without seeking VC investment,¡± he says.     ¡°If you can bootstrap you should,¡± agrees Tori. ¡°Among other benefits, that's the best way to raise VC's interest.¡± If you fall into that niche category, Tori thinks the possibilities are open. ¡°As for the niche solutions, it depends,¡± he says. ¡°In Europe there are big research grants that enable semweb companies to stay alive while looking for their killer app. However, this can become a trap of never getting out of 'academic incubation period.' You should get in front of the customers as early as possible and then tune your product so it fits to more and more customers.¡± The best way to proceed, Iskold also believes, is to ¡±build the product, get it out there. Do it with limited resources, self-financed, nights and weekends. VCs are not going to be writing checks for ideas and [Powerpoint presentations] anymore.¡±

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