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Friday, June 16, 2006

Funding as way of life

For an entreprenuer funding is not a one time or 2-time process. Most first time entreprenuers think of funding as a one-time distruption in their dreams to their startups. It will help to think of a business as a separate entity with clear goals and funding as a resource you feed in to create more value. Then, we can see it as an ongoing process to scale the company even after you are cash-flow positive with paying customers.

I was introduced to VCs and funding first, during my corporate life at $2 billion Harcourt, the Education Publishing company where I was a Director who built out Harcourt.com in early 99 just before I started my first startup.

I had built the initial harcourt.com by integrating 27 business units, and we were brainstorming about making a new online business targeting families of kids giving them education content from Harcourts divisions and planned to make our parent company a minority stakeholder and bring in local VCs for investment. It is common for corporate entreprenuers, especially in east coast to bring in VCs for investments to spinoff a business unit.

Later, at my startup Coola, I raised Series A as a first time entrepreneur and later Series B as an existing startup.

My friend Hemang Dave a true serial entrepreneur, started several companies for CMGI, the famous incubator of early 90s. He specialized in raising capital. So, he always started a technology company, then raised venture capital money to buy a related business and put them together to scale his company to a new business. He grew by aquisitions and sold his compainies to a large buyer. He is a VC now, his last company started out as training net that become THINQ, the learning platform company, which he sold to Saba systems

This is a good strategy to scale a startup during second round funding, only when it makes business sense for YOU!

Coola was compared with Syncplicity from the company Cognitive Roots, the file scraping software company, when we launched "Right-Click" to help create Coolets of information to sync to Palm apps using Coola. We were an early stage company with 6 or 10 people and Syncplicity was two guys out of NY.

Some investors suggested that we "acquire" Syncplicity and that would make a good story to show how we would use our funding money and can raise our Series B funding.

Well, I visited Syncplicity founder, a spirited, self-funded entreprenuer and decided we were complementary businesses and we could work well together as they agreed to integrate Coola API in their next release . We did not distract ourself with any merger. I had learnt from my infospace deal and VC fundng story from my Series A.

Nate, the Cognitive Roots founder's comments when we closed Coola, echos my belief that your integrity as a person matters most, and will come around to you in this same ecosystem of startup world.

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