Startup Fundraising Watch: Week Two – An Acquistion

I did a follow-up post on my TechFlash piece on the Seattle 2.0 site that is
particularly cogent to our weekly tracking of 4 Seattle-based tech companies that are raising money.  I included a grid comparing real-world Web 1.0 and Web 2.0 example shown in the Seattle 2.0 post that is super interesting.  I included this grid because the data on this round of companies that I've been following shows that solid companies continue to have a really though time getting funding. 

The grid shows how strong companies need to be right now before they can land financing.  When looking at our set of companies that we're following, this trend continues to play out.  It has been an interesting week for these companies.  The big news is that one the Series A companies that we are tracking is in the process of an acquisition. I wont discuss the details (although it has already been leaked), but its an acquisition of equal sized startups.  This is a trend that will continue.  On the venture capital front, you'll typically see funds trying to force synergy between portfolio companies in order for their investments to survive.

Here are some outtakes from some of the other companies that we're following:

From our other Series A round company

"Very slow. Market + time of year makes it almost impossible to bring new folks into the fold. Guys we are engaged with are working and there is good dialog but everyone is slowing down, being very cautious. "

"doing anything between Nov 24 – Jan 7 is extremely hard. It’s always an excuse but this year is even worse with the economic concerns. Had one discussion with a VC who said “This is the worst I have ever seen, we may only make one or two investments in 2009.” This is from a firm who under “normal” markets would make 5-6 investments."

From our Series B company

The later stage company that we're tracking (that isn't raising money now) has been getting early feedback from investors that "SaaS businesses with $1m in projected revenue is the magic number for B round traction."

From our early stage/angel company that is raising money next month:

"Seed money and later stage monies are available but Series A is particularly challenging. (The feedback is that you) need to show revenue plan earlier … possibly earlier than is realistic … essentially pendulum has swung from lax on revenue to overly aggressive expectations on revenue
Angels are generally on hold for investments for 6 months as they count their losses."

As a reminder we are following 3 companies that are raising money now (2 Series A's, 1 angel) and 1  company that is raising money in the coming months (Series B).