News / USA

Startups Jostle for Funding, Attention at SXSW

Bruce Springsteen delivers a keynote address at the South by Southwest (SXSW) Music Festival at the Austin Convention Center, Texas, March 15, 2012.
Bruce Springsteen delivers a keynote address at the South by Southwest (SXSW) Music Festival at the Austin Convention Center, Texas, March 15, 2012.
Reuters
Entrepreneur P.K. Fields was delighted when she won a contest and a chance to pitch her Los Angeles-based startup to a venture capitalist. So delighted, she dropped everything and flew 1,400 miles (2,250 km) on her own dime to the South by Southwest Interactive conference in Austin, Texas, for just 20 minutes alone with
angel investor Dave McClure as he was driven around town in a tiny red-and-black electric BMW i3.

Fields is emblematic of the thousands of entrepreneurs who converge on Austin each year, hoping to rub shoulders with venture capitalists and win funding for their companies amid the current startup boom.

Despite long odds, many hope to replicate the success of past "South-by" standouts such as Twitter Inc in 2007.

It's rare to find so many would-be startup investors in one place at the same time; rarer still to catch them in a casual setting removed from the pressures of Sand Hill Road, the California locale known for its cluster of venture capital firms.

But that convenience comes with a price: The growing volume of startups today at South by Southwest, or SXSW as many call it, engulfs both the startups and their audience.

Since Twitter, "South-by" success stories have been hard to come by. Many entrepreneurs and venture capitalists say that going to Austin and trying to clinch funding after meeting a potential investor for the first time just doesn't work.

"It's kind of like the great white whale of Austin," said Ethan Kurzweil, a partner at Bessemer Ventures, likening finding an investment-worthy company at the conference to Ahab's elusive prey in Herman Melville's novel "Moby Dick." "Everyone goes thinking they'll see it, but no one does."

An estimated 32,000 people swarm through Austin for the Interactive conference, which began on Friday and ends on Tuesday, and a parallel SXSW film conference (About 16,000 attend the famed SXSW Music and Media Conference beginning on
Tuesday and ending on Sunday.)

The entrepreneurs don't lack opportunity to pitch venture capitalists. SXSW Interactive typically puts on multiple events where entrepreneurs can showcase their talents. This year's Accelerator contest gave entrants the chance to pitch their
companies and were judged by a panel that included venture capitalists like Kurzweil.

The "Pitch a VC" ride-along that Fields took part in was sponsored by startup Life360, a social network for families. But even Chris Hulls, Life360's CEO, doesn't recommend startups swing by South-By with the sole intent of meeting a VC backer.

"You have to be somewhere where the ratio is right," he said. To the venture capitalists dealing with approaches by hordes of entrepreneurs at the conference, "you're just noise."

Chasing the dream

Yet many still flock to the conference for opportunities to pitch, at considerable cost or inconvenience.

More startups are springing up than ever before, spurred on by the success of the likes of photo sharing services SnapChat and Instagram - which are often little more than great ideas and well-executed mobile apps that have drawn millions of dollars in
funding.

As inspiring as those success stories are, they represent just a tiny sliver of startups. Most fail.

Still, money continues to pour into startups. Last year, venture capitalists invested $29.4 billion, an increase of 7 percent over 2012, into almost 4,000 young companies, according to the National Venture Capital Association.

Entrepreneurs are often willing to go the extra mile to try to get a slice of that.

Fields, for example, cashed in frequent flyer miles, both her own and an adviser's, for her last-minute plane ticket. With hotels in Austin sold out, she took a red-eye flight that got her to the city early Sunday morning, a few hours before her ride-along pitch meeting, and left a few hours afterwards.

It's too soon to know how successful this year's attendees will be in raising money. But contestants from past years say the events didn't always go the way they hoped.

"The advice was very high-level and the investors didn't even remember my pitch 10 minutes later when I went up to speak with them after the event," recalled Javid Jamae, who pitched a startup idea two years ago.

"I'm not personally aware of anybody who got funding with SXSW as a starting point," said Jamae, who now works full time as an engineer at someone else's start-up.

What does work? Using the trip to cement a relationship forged before the conference, investors and entrepreneurs say.

Ryan Swagar of Venture 51 said that at a past SXSW he was able to hammer out funding terms over tequila at an Austin bar for a company whose people he'd met previously. John Arrow, chief executive of Mutual Mobile, said he clinched a deal to
build an Apple iPad app for Garrett Camp, founder of Internet recommendation service StumbleUpon and an existing client, after running into Camp at a bar.

But with a little luck, lightning sometimes strikes. Bryan Stolle, a partner at venture firm Mohr Davidow, recalls hosting a party at SXSW a few years ago and spotting
some unfamiliar guests lurking nearby. Toward the end, they approached and pitched alternative-lending service Kabbage.

"At the right moment, they sort of pounced on me," he said. "They wanted to make sure we'd done the rounds already, so when they cornered me, that we could actually have some quality time."

It worked. Stolle led Atlanta-based Kabbage's next funding round. Kabbage co-founder Rob Frohwein said he and his co-founder had wrangled the invitation through one of the party's co-hosts and turned up specifically to meet Stolle.

As for Fields, her ride with McClure didn't lead to an offer for a term sheet, the document that accompanies funding. But she got valuable advice, such as what revenue levels she needed to achieve for her startup, care-provider Eldersense,
before approaching venture capitalists.

Perhaps the biggest coup: McClure "favorited" her tweet and photo about the ride.
"With a startup, it's every little step along the way," she
said.

You May Like

Obama: I Will Do 'Everything I Can' to Close Guantanamo

US president says prison continues 'to inspire jihadists and extremists around the world' More

Sierra Leone Educates on Safe Ebola Burials

Also, country is improving at rapid response to isolated outbreaks, but health workers need to be even faster, officials say More

Religion Aside, Christmas Gains Popularity in Communist Vietnam

Increasingly wealthy Vietnamese embrace holiday due to its non-religious glamor, commercial appeal More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid