Background Rant on Why We Need an AU_Seedcubator*

It may be a broken record but by the time Web 4.0 rolls around and the Implicit Web is old news, then maybe we’ll have a seedcubator along the YComb, Techstars, Betaworks, Seedcamp or MorpheusVP model. The fact that most of the models seem to have a remote location that isolates the entrepreneurs at the same time as your fellow management team and a concentrated advisorial brains trust in close geographic proximity - would seem to suit Australia; Techstars has worked from Colorado; Y-Combinator started in Boston; Seedcamp in Europe and Morpheus in India.

Could connecting the dots be any more obvious. Seems Kev07 and OzEmailMalc are happy to twitter and youtube it, ITwise2 reach those pesky media savvy voters, but really they’d prefer we had overpriced monopolistic internet provision, no funding, and a censored internet akin to or worse than China. So we shouldn’t be surprised Tel Aviv and Paris are getting seedcubation before Melbourne or Sydney. (from what I remember of Clay Cook his blog’ere (kickn big goals with ineedhits, minti + mig33) mentioned there was a 1-1 government matched $20m private/public early stage fund in Perth, which may then be the only location in Australia with what is close to the below, although the portfolio focus and lifecycle of investment would be later and broader, also typical Australia. Ditto the NetUS model, that could have built some building blocks in the new world downunder, but rather took stakes in more traditional online businesses.

Entrepreneurship is an Illness not a Choice.

5 Seedcubators that Matter in order of MyFaves

1. Betaworks

“an internet media company accelerating businesses from a to d. and e.”

Betaworks corporate website is a blog, literally, their mission statement is a non-clickable graphic icon in the top header. They tweet that entrepreneurship is an addiction not a choice, yeah sing it, now where’s my Entrepreneurs Anonymous 12 steps program, coz Im jonesing for dollars, stability, engineers and a budget Check the Crunchbase on’em. Their founder John Borthwick’s blog is ere btw + twitter. He likes to rant too which I always trust : “You have heard me rant about this before, but you have to know what’s going on, know your data really really well. Financial data, your burn, your cash flow, revenues, runway and site usage data. You cant “follow the money” if you dont know where things stand. There are a lot of things you can do to improve everything from burn to traffic. But first you need to know where you stand. So every week you have a picture of your position — make this a habit. I used to hate to do this, but once you make it a habit it becomes a tool.”

This is probably one of my favourite in terms of their model (3 layered thesis) and what they have achieved on the East Coast in a farely under the radar way. Execution will always be king, in investment as much as entrepreneurship. (Via Silicon Alleyinsider on raising new 8 figure$ of dough “The new cash will allow them to make slightly bigger investments - John says average deal size will jump from $75,000 to $150,000.”) (Thankfully) Havent seen many Paul Graham essays ere, but there is a good tumblr news feed of entrepreneurial hyperlinks. I guess all u need to mention is “Twitter”. But also “Lookery”. “Stocktwits”. “Outside.in”. “iminlikewithyou”. “Tweetdeck”. “Covestor” and many others of possibly tomorrow’s brands… TheDeal have a good summary : “Rather than sharing business services, the companies Betaworks invests in and the products it develops share common features. Its portfolio consists of three “buckets.”

The first contains companies that build communications platforms for distributing user-generated Web content. New York’s Tumblr, for example, lets people publish short, mixed-media blogs.

The second consists of startups such as Outside.in that extract and add value to information in user-generated content, such as blogs. The New York company — a provider of “hyperlocal” Web services that has raised $2.4 million from Union Square Ventures, Milestone Ventures Partners, Village Ventures and individual investors such as Esther Dyson — structures blog content around zip codes, enabling users to, say, get bloggers’ recommendations for a neighborhood coffee house.

The third bucket consists of social media companies, such as online ad firms focused on behavioral targeting. One of these, Lotame Solutions Inc. of Elkridge, Md., analyzes how Internet users interact with, among other things, online video sites, noting whether the person posts, comments on or simply watches videos, key data for advertisers. In February Lotame closed a $10 million Series A round, led by Battery Ventures, bringing total funding to $13 million.”

2. TechStars

From the beautifully landscaped hub of RSS and Implicit Web Gurus, Entrepreneurs and Investors; “Get up to $18,000 in seed funding for your new company, plus the chance to pitch to angel investors and venture capitalists at the end of the summer.” With multiple seed programs now offering the same amounts of capital for equity using  established benchmarks, the money taken by the entrepreneur and equity by the mentor (who invests) is the commodity part of the transaction - with the differentiator being  the location (and what its competitive advantage is sectorwise eg if u want to be the next feedburner/lijit go to techstars) and how that manifests in the mentorship opportunities. Their blog is’ere. Their most recent example is the excellent etsy for the organic food market; Foodzie, which got 7 figure funding after Techstars seedcubation.

3. Y-Combinator

When applied to a function, returns its fixed point; Y = lambda f. (lambda x. f(xx))(lambda x. f(xx))

“Y Combinator is not an incubator.” Raison d’etre : “We help startups through what is for many the hardest step, from idea to company.”

The Process : “We usually invest $5000 + $5000n, where n is the number of participating founders (i.e. 2 founders get $15,000, 3 get $20,000), in return for between 2% and 10% of the company. The median is 6%.. If you accept our offer, we’ll write you a check immediately for as much as you need to cover your initial expenses.. If we invest in you, your group is expected to move to the Bay Area for January through March 2009.. After you’re accepted, we’ll set up all your company paperwork for you, including getting you incorporated.. ”

Paul Graham : “Launching companies isn’t identical with launching products. Though we do spend a lot of time on launch strategies for products, there are some things that take too long to build for a startup to launch them before raising their next round of funding. Several of the most promising startups we’ve funded haven’t launched their products yet, but are definitely launched as companies.”

4. Seedcamp (Europe)

The Pitch : “At Seedcamp, we believe Europe has the talent, the role models, and the capital founders need to succeed. We want to provide a catalyst for the next generation of great entrepreneurs and help you take risks, think big, and succeed.” Follow their blog + twitter. They run kewl seedcamps too, in Tel Aviv and Paris for starters. (then Warsaw, London etc)

Zemanta.com is one of Seedcamp’s investments that has gone onto bigger and better things such as Union Square funding as it cracks the world market.. is a typical early stage investment where it would be very hard/near impossible to get institutional funding as u would spend 5 meetings explaining what a browser plugin to a blog platform is. Nor would they understand that once u r inserting content into someone’s blog and making it easier to blog, with higher quality of posts and traffic - it is only one click to start offering monetization options to the content creator.. Australia investors dont understand these things. Your best hope is/was ex or current internet executives who’ve had an exit before and so understand operationally the space. And then u need to share the load amongst these people as their time is worth money and if they invest $25K-$100k total.. it is hard for them to justify much time given a small investment. But when the mentoring and advice is spread over a network of advisors.. then the numbers start adding up on both sides; Entrepreneur and Investor.

5. Morpheus Venture Partners - India.

“We engage with startups in the most crucial phase of thier life-times, the first twelve months, the phase that is also known as valley of death .”

MVP’s blog gives a behind the scenes feel of what is going on. Mashable detail their typical $15K-$25k investments and their first 7 investments; “In case of the MVP portfolio companies so far, most of them have existed for about 6-9 months with team sizes of 5-7. Therefore, relocation is not the best operating model. We work closely, yet remotely with these companies and spend a minimum of 5 working days in a month face-to-face with companies located outside Bangalore.”

* The DFW Footnote

* I still hold out hope that the 10 parties I have heard first or second hand say that a Y-Combinator with a twist for Australia was going to launch, will. MBA modelling of Australian internet businesses will put a 18-24 month discount/delay/lag based on global adoption of trends. The reality often I’ve found is more 4 years. (Consumers will download minutes after a TV show is put online.. which shows u this isnt a consumer problem but a business one) Anyway the lag is often more like 4 years.. so maybe we will have a Seedcamp/Betaworks/Techstars launch here - Even if 10 companies got funding to create the illusion of early stage funding would make a difference.. and based on Techstars/YCombinator numbers, that would be the price of an apartment in Australia well less at around $250K. The irony may be the government will spend $50m-$100m on creating an Internet filter that consumers and companies will have to innovate to get around… while if  that amount of money went into creating companies.. and funding something in the order of 100 new leading edge companies… well u get my drift…  now I’ve gotta take this offline and into excel and model this to see if I can pitch it to some Venture Capitalists and network of angels who are feeling a bit out of date with their daughter on facebook and twitter etc… there was a full page article on twitter in the herald sun todays, melbourne’s everyday newspaper, there_ya_go : mainstream in the house! Maybe some VC will contact me and we can go thru the modelling assumptions.