These series of guest posts are written by the teams attending the Tetuan Valley Startup School 2011 Fall edition. This post is written by the Toorisk team, formed by Tomás Carbonell, Francisco de Ángel Gimeno and Jesús González.
As an entrepreneur one of the most challenging activities you may have to face in the early stage is raising funds for your startup. Basically, what you do is trying to get resources for your project to grow and create value and profit for your stakeholders. And if you have not realised yet, you will have to invest a lot of time and efforts, probably much more than you could ever imagine, to this end.
Our personal experience, raising funds to grow Toorisk, is being tough and amazing at the same time; we are learning a lot, and sometimes it looks like we will get married to the devil. And devils in this case, are hiding behind the friendly name of business angels. They set the rules, deal done!!
When you deal with social network/community industry, many doubts arise. It is a new sector, competing strategies are not as established as other sectors, and even Porter model is been adapted to this new environment. Nor talking about monetizing strategies or revenue streams, considered as the endemic doubt of this sector. All this uncertainty arises in the investors side of the table as well. And based on our experience, we have seen two approaches, the one of “the valley” and the european one.
The valley model is built on the claim “If you build it, will they come?” In other words, they take investing decisions based on the number of users that your startup has, the traction and the virality of it. And when you are looking for seed capital, having contracts in place with customers is not seen so necesary in that early stage.
On the other side, when facing european investors, we are always asked about revenue, about contracts in place, because they are the main criteria for investments. It is not so relevant the number of users, subscribers, etc. We just have to show a significant revenue figures to get them onboard.
But, what is the right approach? Is there a right approach? The valley model can be seen as a bubble incubator, but the european one may be too heavy a burden for a startup, killing disruptive innovation. When facing a global marketplace you have to think big, and find the right investors who also think that something big is going on. Have a look out there, and see where those big social companies are coming from…
