Paul Graham is a well-known character in the startup world for his past successes and most recently, the launch of Y Combinator. In 1995, Graham and Robert Morris founded Viaweb, the first application service provider. Viaweb’s software, originally written mostly in Common Lisp, allowed users to make their own Internet stores. In 1998, Viaweb was sold to Yahoo! for 455,000 shares of Yahoo! stock, valued at $49.6 million. Later Viaweb became Yahoo! Store. BusinessWeek included Paul Graham in 2008 edition of its annual feature, The 25 Most Influential People on the Web.

Graham’s Y Combinator, founded in 2005, is an early-stage investment firm and boot camp for entrepreneurs. It seeks to find the country’s most promising startups. Twice a year, Graham and his five partners invite several dozen entrepreneurs to move to Silicon Valley for three months.

Y Combinator has a reasonably good reputation for producing “interesting” companies. As such, for those startups that need funding beyond what YC puts in, the fact that they’ve been one of the chosen few likely gives them an edge over a random startup looking for angel/VC money. Paul’s network is also pretty strong and he can “draw in” outside investors. Famous investors Yuri Milner and Ron Conway have started to offer every single seed-stage start-up firm Y Combinator  a $150,000 investment with very favorable terms: a loan in the form of a convertible note with no cap and no discount, the kind of fine print that would make most venture capitalists wince.

Let’s look at the numbers: As Paul Graham shared on his website; in 6 years, YCombinator has invested in 316 startups including this summer. YCombinator has only invested about $5 million, around $15,000 each. They’ve now had 25 companies acquired, 5 of them for over $10 million. As to valuation, the combined value of the top 21 companies that YC has funded is $4.7 billion! The data used for calculation is derived from the most recent funding rounds.

As Paul Graham says, “the numbers look encouraging so far”. I think It’s proved that Paul Graham’s YCombinator has become an absolute success. Congratulations.

Many people who want to start their own businesses and many people who want to invest in others’ ideas search answer of this question: “Which is more important the idea or the entrepreneur?” .

In academic journals, this is referred to as the horse (idea) and jockey (entrepreneur) debate. The horse and jockey analogy reflects two different financing philosophies: Either you believe the idea is the key and bet on the horse, or you believe management is the key and bet on the jockey. “Another way to phrase it is to say that you either bet on an A-team with a B-idea or on a B-team with an A-idea.

People have different thoughts on this topic. Generally, thoughts on this topic may be  grouped into 3.

1. The Idea: Some think that a good-idea will turn into a successful business in any manner whatsoever. They think business world has an evolutionary side which only good ideas can survive in time. Their motto is “Having the right idea is what counts.” .
2. The Entrepreneur: Many venture capitalists operate on the assumption that even if an idea isn’t perfect, it could be made so by the right management. So they think entrepreneur is more important than the idea.
3. Both The Idea&Entrepreneur: Some people believe that a successful business starts with a good idea. But firstly, an idea must be generated  and turned into a successful business by an entrepreneur. A good idea is a requirement but it’s not sufficient to succeed, it needs a good entrepreneur too.

I also think both the idea and the entrepreneur are important at the same time. A good idea is a start point. But don’t forget, most startups fail. A startup can begin with a revolutionary idea but execute dismally. Another startup can begin with a mediocre idea but execute spectacularly. The startup which executes dismally will fail and the one which executes spectacularly may succeed. But a startup which begins with a revolutionary idea and execute spectacularly will succeed. You may have the best idea but if you cannot reach your customers or you cannot pay your bills, you will fail. On the other hand, you may have the best management team but without a unique idea, growing your business and attracting investors will be very though job.

When you have a great idea, the questions to ask yourself is

1. Now that I have this great idea, do I have the right configuration to execute and make this dream a reality?”

2. Can I convince the marketplace that I can make this happen?

Consequently, I think the entrepreneur is 55% and the idea is %45 important to achieve success in business. What do you think about it? Would you bet on the Jockey or the Horse? Please comment…

Google finally launched its venture capital fund. Google Ventures welcomes startups from a broad range of industries; including consumer Internet, software, hardware, clean-tech, bio-tech and health care.

The FAQ of Google Ventures tells all the vision and targets of the fund. Google says that they are looking for entrepreneurs who have solutions for problems in creative and innovative ways. They also say that they are also able to invest amounts ranging from seed funding to tens of millions of dollars, depending on the stage of the opportunity and the company’s need for capital and they welcome the opportunity to co-invest along with outstanding venture or strategic partners. I think they don’t want to seem as a competitor only, also a potential partner for other investors.

TechCrunch’s Michael Arrington  sums up Google Ventures as:

Is this a good investor for your startup? The cachet of having Google behind you is great for marketing. But if you think you have the next new Google-killer search idea, you may want to bake it a while before showing the technology to these guys.

I think the same as Michael Arrington except the last part: Google would love to invest in the next new Google-killer search idea and then acquire it!

Google Ventures is now open and ready to fund your startups, but i think you will have to wait in a very long queue.

(This post is co-authored with Web2INC Magazine)

The most stressful phase of a business is its start-up phase. If starting a business was easy, everyone would do it! You need 5 things to create a successful business: Idea, Courage, Time, Money, People.

Idea

There are billions of creative ideas in our brains, but ideas mean nothing if you don’t follow up by taking real action. Taking an idea into real action isn’t enough; your business model must cover what customers want. If you’re going to do what everyone is doing, you can’t be successful; you must solve a problem and create additional value for your customers.

Courage

A start-up without any risk is a dream. Forget about failure and  if you think you have a great idea, step out of your comfort area and go for it. Failures breed success!

Time & Money

There is a simple rule to calculate how much time and money you need for s startup: ” If you plan to develop in a year, it’s going to take two; if you think it’s going to take $100K, it’s going to take $200K”. So be patient and spend your money carefully and don’t run out of money. Also, growing too fast sometimes means unnecessary stress of a loan.

People

To succeed, the person you hire must do his job well and be success – oriented. In the start-up phase, the best way to motivate your employees and them make them more efficient is giving them your company’s shares.

You need more people who will help you develop your business for no money. These are friends, candidates for testing your product or service, a friends’ friends at advantageous positions for you to make PR and free marketing. This is called business networking.

To read more about this topic, you should read Paul Graham’s (partner at Y-Combinator) “How to Start a Start-Up” essay on his website. This essay is a must-read resource for entrepreneurs before starting a start-up.

Also, Inc.’s “Start-Up Secrets” slide is worth looking at.

As i mentioned in an old post before, Angelsoft is a New York based company which has become an online ecosystem where investors and entrepreneurs meet to build new companies. Due to its name, Angelsoft was about Angel Investors.After they released version 3.0 , their platform became easier but more powerful. With version 3.4 release, Angelsoft is welcoming VCs into the Angelsoft Network.They’ve launched new power features that can help the venture capitalists streamline the process easier. As it happened in all releases, the interfaces are ipmroved and lots of bugs fixed.

2008 Stats

Angelsoft is an alive and transparent platform and has lots of transactions, so the stats from Angelsoft are reliable enough to represent the industry. I think the most important stat is “invested submissions rate” . As you see, very small number of companies  who apply get funded. This shows how hard being an entrepreneur is. Getting an investment doesn’t mean that you will be successful. The success rate of a startup is very low, too. Half of the startups fail within two years and then the others in the next three years. Average four year – survival rate of a startup is under 40% . There are 442 angel groups and VCs and 14,900 investors in the Angelsoft Ecosystem and Angelsoft processes over 2,100 funding applications a month. Since May 2008, 37,000 + deals made, about 2,000 events occured, 150,000 documents attached.

Doubling Investor Community Activity

One of the most important need of the entrepreneurs is promoting their plans to the investor community. Angelsoft listened to them and took steps to help them out which resulted in a doubling of the number of views that the Investors receive. The feedback form both investors and entrepreneurs have been positive as well which means a win-win situation. Investors now receive an email bi-weekly with the 5 closest and 5 highest rated deals.

Industry Valuations

As the graph at the above shows, the average amount of funds being sought differs between 25% – 35% of the pre-money valuation estimated by entrepreneurs for their companies. The graph also shows us that the valuation is decreasing but the rate of the funds sought is increasing. This means,

• The prices are getting down in the early stage investment industry,
• Entrepreneurs are aready to share more of their companies with the investors.

Conclusion

These new features are a major step forward in improving the funding process for entrepreneurs and investing process for investors. These days, you can see angel investors and VCs coinvesting on deals more often. Both the VCs and angels need each other and this relationship will be more important in the future. It’s a smart action to bring VCs on board and Angelsoft platfrom has become a better place for entrepreneurs and angel investors to be able to meet more people.

* All the data and the images used in this article are the property of Angelsoft.

Angelsoft, a New York company, founded by David S. Rose and Ryan Janssen in 2004 has become an ecosystem where investors and entrepeneurs meet to build innovative companies. Angelsoft serves both investors and entrepreneus; makes both sides ‘happy’. These statistcs show the success of Angelsoft:
410 angel groups and VCs,11,247 investors, 2,100 new company applications a month.

The four year old company continues its way with its 3.0 version, which has Digg-like interface for investors popularize a project or a startup.The Google map which shows live Angelsofy activities is very interesting.

Angelsoft seems to be serving one of the easiest way to investors and entrepreneurs to find each other.If you have a good idea, then check Angelsoft …