The ABC of raising your seed round

After failing miserably to raise 18 months ago, digging deep and bootstrapping our way to profitability, we made another attempt earlier this year and got a huge break by getting into 500startups.

We are now in the middle of raising our seed round and are doing a much better job at it than previously. I wanted to share some of what we've learned that helped made the current attempt a successful one.
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The awkward relationship of tech bloggers and startups

Today Robert Scoble came to visit our batch at the 500startups offices. He did some 1-on-1 sessions and later gave a free-form talk, mostly about Google Glass (not surprisingly), but also about reaching out to tech media. Here are a few bullet points from the talk -

  • Know what every tech blogger likes to write about and approach them with stuff they care about. Robert is infatuated with Google Glass right now, so even if you have the shittiest Google Glass app (his own words) he would be interested, but if you have the most amazing WinXP app he will probably not.
  • Get tons of traction and people will write about you (a given). Get everyone in your batch to say you're the "hot" company of the lot.
  • Get intros from insiders and trusted people in the blogger's network. If Dave McClure gives a personal guarantee about your startup, Robert will likely write about it.
  • Build something in a hot market. Everybody loves mobile and mobile is the future. Nobody cares about desktop. So build mobile - you'll get more love from bloggers.

This looks an awful lot like advice for fund raising. Robert has put himself and other prominent bloggers / tech blogs on the same level as investors as far as getting their attention is concerned. Is this a reasonable positioning for tech media?

IMHO, no.

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Recapping Week #1 at 500startups accelerator program

The first week of the 500startups accelerator program is in the books, and I definitely feel accelerated. Keeping with the current Star Trek theme at the 500s offices, I'd say we're about Warp 7 right now after previously being at sublight speed for an extended duration. Lets go over what we managed in 1 week:
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Solving the wrong problems

As a power user and an entrepreneur (not to mention a developer), I often look at a software product or service and think how I would've done it differently. If the concept is interesting enough, I might dive into some initial research to understand the market and the needs of the target audience.

Most often the process stops at that point as I realize that -

  • The product is not as simple as it seems on the surface,
  • There are reasons it is built the way it is, which were not immediately apparent,
  • There is already strong competition in that space

I went through a similar progression when I came up with the idea for my startup, Binpress. I had just finished yet another client project rather quickly, thanks for the most part to the mature code-base I've been building for several projects up to that point. I was thinking to myself - instead of continuing to provide custom development for one project at a time, wouldn't it be more efficient to just license the code stack I've been using as reusable components?

That was the initial idea, anyway. From there it grew to an idea of building a marketplace for developers to do the same, with the major competition at the time being codecanyon. The reason I felt codecanyon were "doing it wrong", is that they focused on low-end, low-cost components mainly for designers and beginning developers, without any kind of quality control. They did seem to be making significant revenue (I scraped all their sales data and I can say with confidence it is significant).

Understand first, build later

Alright, so why am I bringing this up now, and how does it relate to the title of the post?

The research process I went through when I decided to build Binpress took close to a month. I used codecanyon for a while as a publisher and sought out additional similar services. I talked with freelance developers and codecanyon sellers, gathering as much insight as I could. The goal was to understand why codecanyon was built the way it is, and if my take on it is valid.

Not everyone shares the same process - I just read a blog post on a new service called Gitiosk, which is termed "Building a Binpress challenger in 48 hours". In it, the team explains why they think it is better than Binpress -

  • It is not a marketplace
  • They don't do any marketing for you
  • No review process or quality control
  • You basically sell your code yourself

Basically, they looked at all the main value points of  Binpress and decided they are expendable. As someone noted in a HN thread on the blog post, the value offered by such services is everything but the actual sale. There is marketing and reach, which is difficult for everyone and developers especially suck at it, there is licensing which is difficult and confusing and you better have some legal authority, there are conversion and trust issues with prospective clients, if your code component costs something significant (we have components on Binpress that sell up to 1500$), or even if it costs at all - don't underestimate the barrier of getting someone to hand over his credit-card details online.

We solved all of those problems (through a long, iterative process), and despite the opinion of the commentator on HN, we did take off - since the value of quality, ready-to-use code is not zero as he suggests (a surprising viewpoint). Gitiosk looked at the same market and decided to solve a very different problem. In my opinion, as someone with close to 2 years of experience with this market, they solved the wrong problems - and it's probably only because they didn't understand it enough.

On the bright side, it did take only 48 hours for a team of 4, so no major time loss there. Time will tell if their approach is better than ours (though I feel we already made our point, with many developers making a living from being Binpress publishers).

 

Developers vs. Bigcorp

With all the rage recently on Twitter's changes to their API and how it affects developers and their apps who rely on it, it's easy to forget that Twitter is hardly the first major tech company to take such an approach to lifeblood of its ecosystem.

Yes, most of the large tech companies today are taking a hardline approach when dealing with developers who use their platform, treating them with entitlement as they hand down "our-way-or-the-highway" rules and regulations that leave little recourse when things go wrong.

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