What I learned at SXSW

Editor’s Note: One of contributors, serial founder Aruni Gunasegaram attended SXSW Interactive for the first time this year, and she learned a lot. Aruni compiled a digest of takeaways, on funding, strategy, and using social media, on her blog entrepreMusings. She shares them with us here.

Interactive – Monday, March 10, 2008: The Care and Feeding of Your Startup

This panel was made up of some local entrepreneurs from Unwired Nation as well as a venture capitalist from Texas based DFJ Mercury and a couple of others. Some key insights:

* Someone needs to serve as the “Belief Engine” for your startup which I took to mean the “evangelist” but I thought that was a unique way of saying it.

* Make sure your product fits into your users way of life and they don’t have to drastically change what they are doing

* Understand if your concept is a feature or a business. It could be a feature that expands into a business.

* You should aim to exceed investor’s expectations.

* 9 out of 10 entrepreneurs can’t go the distance so they really should identify a strong mentor.

* Make sure the people you hire have ‘karmic velcro’ which means they have the fortitude to stick around when the going gets tough.

* There are 3 key people you need in a start-up. 1 in charge of product, 1 handling business development who can close the early deals, and 1 evangelist.

* It’s not appropriate to go to VCs in the first 2 years of a business, because in the first 2 years you are still assessing the market risk. Almost all the VC deals that occurred with Web companies in early stage have not worked out and they are struggling to get their money back.

* Keep two sets of books. [!!!] One you show your investors and one with even more aggressive numbers that you aim for internally.

SXSW Interactive – Tuesday, March 11, 2008: Insider’s Take on Angels

It wasn’t really a panel because the only speaker was David Rose, the founder of New York Angels and Angelsoft, a software application that helps angel investing groups manage plans received by entrepreneurs. He had some great info on angels and angel investing. He mentioned that he would make his slide-show presentation available and I will update this post if and when he sends the link, but here are some highlights:

* There are 600K new companies started each year. Of those 350K are self-funded, 200K are funded by friends and family, 50K by Angel investors, and a mere 1200 by venture capitalists.

* The average angle has spent 9 years investing, had done 10 investments, had 2 exits (profitable or lost their money), and 10% of their wealth is tied up in angel investments.

* Angels look for companies with Scalable Business Models, an “Unfair Advantage,” Great Entrepreneur, External Validation, Low Investment Requirement, Reasonable Valuation ($1 to $3 million pre-money range), and a 20 to 30 times return on their investment within 5 to 7 years.

* The single most important characteristic an Angel investor looks for in an entrepreneur is Integrity. Then they look for Passion, Experience, Knowledge, Skill, Leadership, Commitment, Vision, Realism, and Coachability.

This next thing is very cool, founders, Aruni continues…

[David] then went on to talk about the process of applying to an Angel network and described what the entrepreneur as well as the Angel investor sees if they are using the Angelsoft software application tool. If you are an entrepreneur, he suggested you submit your plan at www.angelsoft.net/entrepreneurs. They will soon be launching a site called Open Deals where entrepreneurs who don’t have access to a local angel group can submit their plan.

Aruni has written previously for Found|READ about fundraising for her startup, BabbleSoft, in My Funding Toolkit and A Founder’s Tale: Angels vs. VCs and on the cost of acquiring customers.