b5media Looks for Venture Capital
After a buccaneering but bootstrapping beginning, it seems b5media has decided to go down the venture capital route after all, with a round of VC funding. But you have to read between the lines of a Toronto conference agenda to find the reference. Thanks to Matt of BlogNetworkWatch for digging it out:
“Keynote: Venture Capital & Web 2.0: b5media is about to announce weâ€™re going after funding. This is a great session, with a fantastically knowledgeable pair of guys.
Panel: Does Web 2.0 Need VCâ€™s?: Again, weâ€™re about to announce our funding run, so this is huge. Plus, Iâ€™ve tried to stay actively involved in this conversation from an entrepreneurâ€™s standpoint.”
It’s not perhaps Jeremy’s usual style to be so reticent in an announcement of this magnitude. Still, it shows the harsh reality of a hell-for-leather expansion in any business field. These guys are in a hurry. These guys need help.
So what does it mean for the network? Greg Gianforte, CEO of RightNow Technologies and writer of a Thought Leader column over at SiliconValleyWatcher, is quite clear about it. The sheer effort involved in raising money, he says, and the complexity of contractual arrangements, deplete your time and energy which should be concentrated on selling value to customers. That income is the only thing that counts in any business, large or small.
But there’s more: â€œRaising VC money determines your exit strategy. You will either sell the business or take it public. What if you end up with a very profitable, modest sized business that you want to just run? That is no longer an option once you raise VC money.â€
Of course, if that was the exit strategy from the beginning it doesn’t matter except that maybe 40 percent of the sale value is lost to the VCs, who will expect a 40 percent annual return on capital invested. With both income and final payout so massively cut, and with so many people to be paid, one senses that a sheet of rice paper has just moved in between b5’s potential and the exuberant expectations of its founders.
Updates: See tech.memeorandum for links to this conversation.
The Alarm Clock questions whether the focus of b5media is right for attracting VC funding. Maybe bootstrapping was the right way forward for this business, after all. See my suggestion on how it could be turned around in the comments.
Jeremy Wright comments on b5 funding: “So, yes, in the last few weeks 2 key opportunities have come our way. Opportunities that weâ€™ve decided to open the door to, to see whatâ€™ll happen. Weâ€™re not going to put the business on hold. We are not going to chat the way we do business day to day. Yes, weâ€™re looking at the funding options available to us (including early stage, obviously) in order to see what makes sense for our bloggers, readers, partners and the future of the industry.”