Wednesday, October 29, 2008

Business Development should start with your VC

We keep reading about the upcoming crisis for startups, and how funding will be more difficult to come by. I wrote a post, How to run Lean and Mean, here. Fred Wilson, a prominent VC wrote about it on his blog, here. I can only help if you hire me, but people like Fred are in an even better position to help.

Though Fred does not work for the companies he has funded, he is on the board of directors for many. Of the investments where he does not maintain a board seat, he at least has a relationship - and likely a direct line in to the CEO.

Now I am not writing this post to pick on Fred Wilson, I am only using him as an example because I am familiar with some of his investments, and some of their issues. Let's take a quick look at just a few of Fred's investments, and show how Fred could be a catalyst to business development initiatives that would benefit all.

Fred Wilson is an investor in Meetup makes it easy for people to locate, create or schedule (off line) meetings using their platform. Meetup appears to be doing well. They are a leader in their space, they have 5M members, and help facilitate over 100,000 meetups a month. They charge $19 a month for someone who wants to create a Meetup. Seems like a good company, and a sound business model.

Fred Wilson is also an investor in Twitter. Twitter monthly unique users are currently over 1M. They likely have around 4 Million users in total, and are the fastest growing social network. As recently as this week, the Wall St. Journal proclaimed that "Twitter has gone mainstream". Unlike Meetup, Twitter has yet to divulge any business model, nor any form of monetization for their service.

This is where Fred Wilson as an investor in both Twitter and Meetup can help out his investments. Fred should be the catalyst in introducing them to each other, and should plant the seed for a business development relationship as well.

Meetup should port their service to run on top of the Twitter network. The benefit is that there is likely little overlap between their similar (in size) user base. So Meetup immediately gets access to an additional 4 Million users. More importantly it is a user base that is growing much faster then their own.

Twitter will be able to receive a revenue share of what will now be known as "Tweetups", and can leverage a Meetup platform that has taken years to build out. WIN WIN.

Fred Wilson need not stop there. Let's look at an even easier partnership he could introduce. Fred Wilson owns a stake in Zemanta, and he also owns a stake in Disqus. Both tools target the exact same customer base, bloggers. Both services are non-competing. Disqus is a "best of breed" commenting system for bloggers. It is also a syndication system of sorts. Zemanta helps bloggers by automatically finding other articles, and "tags" that are consistent with a blog post.

Fred Wilson could read an earlier blog post I wrote that describes a very subtle method to offer a second product after an initial installation. You can read about it here. The general idea though is that Zemanta and Disqus have many commonalities. They are both seed funded, and fledgling (small user bases). They both serve the same end user. Their products compliment each other. This allows for a very easy "you scratch my back, and i'll scratch yours" relationship. Fred Wilson should propose that they offer each others products (Opt In) at the end of each others installations.

VCs - What investments do you have in YOUR portfolio, where you could make an introduction? Entrepreneurs, what other startups do you know of that might COMPLIMENT what you have to offer?

I would like to get your take, please leave a comment here. Do you think other VC's or entrepreneurs might benefit from this post, then please consider Digging it here.

If you want to discuss this or other ideas in real time, you can find me on Twitter here.
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css said...

I agree with your fundamental premise that VCs should be involved in business development, but I think you picked the wrong VC to make an example of. Fred Wilson is about as actively involved as any VC out there, and there are numerous examples of where he HAS gotten involved to help his companies. Just look at how many of his past investments have been acquired by Yahoo.

I've personally had good success getting VCs involved in BD initiatives, but only when that involvement is tied to a specific strategy and set of business goals. Needs to be (a lot) more than 'you guys should meet and work something out'.

Andrew Finkle said...

Chris I could not agree with you more. As I mentioned, I wasn't picking on Fred Wilson. I used Fred because I am familiar with his investments.

I stated to very specific ways two of his investments could benefit from a partnership. I agree it needs to be more then "You two should meet".

Ryan said...

Andy I agree...however the "honus*" is one the entrepreneur!

I think Fred already does these things to a great degree but the idea that VCs need to helping their portfolio companies, especially during this time is right on!

Good work