[This is a continuation of the posts in my Starting Findory series describing my experiences building my first company, Findory.]
I had the wrong strategy with trying to get funding for Findory. I pursued VCs instead of angels.
I should have realized, VCs would never fund Findory. From their point of view, there was just too much risk.
Findory was lead by a first time entrepreneur and was missing critical expertise in building a company. Findory lacked a full team; in particular, there was no finance, marketing, or business development talent. And, Findory had an unproven technology -- a specific technique for personalizing news, search, and advertising -- that is difficult for a VC firm to evaluate.
Had any one of these three been different, there might have been a better chance. A proven founder may be able to get funding with nothing more than an idea on a napkin. A strong team ready to go is an attractive investment for a VC. A proven technology that just needs the wind of capital behind it is an easy bet. But, with all three missing, there was never much of a chance.
Perhaps in the frothier SF Bay Area, this might have been different. Perhaps someone might have taken a gamble. In Seattle, there are only a half a dozen VCs doing substantial internet investing; most firms out of Seattle will not fund without a local firm joining in the round.
I did pitch dozens of venture capitalists in and outside of Seattle on Findory. It was a fascinating experience, educational, exciting, and often humbling. But, ultimately, I have to say it was a wasteful distraction from building things to help Findory readers.
I should have focused on angels. Not only would angels have brought the right amount of cash for short-term needs, but also the addition of experienced angels to the board would have provided valuable advice and connections. It would have been just what Findory needed.
I had thought that, with how far I had bootstrapped Findory, that I could skip a step and jump directly to VCs. That was foolish. Findory remained a long way from the point where the momentum would be so obvious that it would overwhelm the other concerns.
Instead of looking to VCs, I should have looked for an experienced angel, someone passionate about personalizing information, who would have given the startup the advice it needed while enjoying the experience of joining with us to grow the company.
Please see also Paul Graham's article, "A Hacker's Guide to Investors".
Please see also Paul Graham's article, "Why There Aren't More Googles", especially his discussion of VCs as tending to be surprisingly "conservative" and "driven by consensus".
Please also see the other posts in the Starting Findory series.
Update: Anand Rajamaran mentions this post and offers some good advice in his Inc Technology article, "Angel, Venture Capital, or Bootstrap?".