Yesterday at The 2012 NY Venture Summit, the largest NY venture conference organized by youngStartup Ventures, some interesting trends in technology were revealed, including the one that startups don’t need much money. As hundreds of VCs, angels, bankers, incubators and startups gathered at the Digital Sandbox Network office downtown, Stephen Davis, the conference chair and a partner at Goodwin Procter, revealed that while there are lots of investors and lots of money to go around, startups don’t need as much as they think they do.
He cited the report by University of New Hampshire Center for Venture Research, which follows angel investing and has reported that in the U.S. last year over three hundred thousand angels invested over $22B into 66K thousand companies. “That is an incredible statistic when you think that institutional investors did some more money – about $28B, about 3,600 companies,” said Davis. “And if you are a startup like Winito Athletics, one of our clients who built their company on $40K, then you don’t need all that much money. You don’t need institutional money to develop your product, to launch it and to get revenues.”
He talked about the other trends he sees in VC and angel investing including social local. One of the big questions at the summit was about the Facebook IPO decline, the second worst market debut of a billion-dollar company in history and Davis wondered if that means whether social consumerism is over. “It has reached a high point with social consumer, but now social business is going to be the next big thing. Yammer just sold to Microsoft for $ 1.2B. Chatter has been doing great; it’s bringing social collaborative tools into the business.” Yammer is a private social company network and Chatter is Salesforce.com’s social networking app.
“Business social networking is going to be a hot area,” he added. “Everything is online and where co-workers can collaborate online on various projects. Businesses have used technology in the past, but now they can use it increase their own productivity.”
He also saw education as a huge trend in investing. “Education has been an untapped area when it comes to technology. With the tablet and the availability of technology, how can you democratize education as opposed to the teacher-pupil-all-25-students learning at the same time, the same thing, and on different learning curves? Can you use technology to enhance the experience and improve education?”
But Davis emphasized that the key to profitability is productivity of people. “Think back to 30 years ago when we didn’t have computers and calculators – there were enormous numbers of people that were just in the back office of an operation. Now with computers and technology taking over functions, technology has not really been used for is collaboration of ideas.
“Capital efficiency is being able to get to profitability with as little fundraising as possible. You go back to the first Dotcom era – it took companies tens of millions of dollars to develop technology to even begin to sell a product. Today you can have a startup like Winito Athletics, social networking for athletic teams for so much less. Schools are now signing up for the service for their softball, basketball and baseball teams – and this was all built on a $40,000 grant that the founders received for winning a business plan competition. Customer revenues – this could never have happened ten years ago because it would have cost much more money.”
Davis continued, “Technology has become democratized; young people grow up on technology: they understand it, there is open sourcing and outsourcing and you have an economy where really smart kids coming out of college can’t find jobs. So now they form their own company. It’s phenomenal.”
Joe Benjamin, founder & CEO of youngStartup Ventures, wanted entrepreneurs to leave the summit with a positive take on investors and investing in NY. “There is funding out there, and if they are hearing any negative comments about whether VCs are investing or not, they are investing. They are just being cautious — they are looking for great deals and doing their homework before they are investing. But there are definitely great companies out there, and VCs are definitely investing.”