Instagram was the topic of conversation in the office yesterday.
| Date | Event | Revenues (Cumulative) |
|---|---|---|
| March 2010 |
Received $500K Seed funding and founded company. Launched 6 months later. |
0 |
| February 2011 |
Received $7M in Series A on a valuation above $20M | 0 |
| April 2012 |
Received $50M in Series B on a valuation of $500M | 0 |
One month later they were bought by Facebook for $1.01B. Based on $57.5M of funding, two years of activity, zero revenue and millions of users.
The conversation revolved around not how to create the next Instagram but around how far behind we are in terms of an investment environment. Taking Instagram as a perfect result – investors are happy, founders are happy, employees are happy and presumably the buyer is happy.
It’s obvious that the environments are completely different between San Francisco and Northern Ireland but how different are they? There’s no way you could get $500K seed money in this province and to even get $7M in Series A would mean just leaving these emerald shores. It would be maybe not too much of a stretch to declare that it would be impossible, with public or private intervention, to get the sort of result that Instagram got. But the analysis that interests me is …
…if I came with an idea and said I wanted funding to build a company that is kinda social like Instagram and I didn’t necessarily have a revenue plan, nor did I have anything more than single product on the shelf and though it’s a deliciously simple idea, it doesn’t go far beyond tapping into a market of real geeks. It’s not for photo-nerds because they’re using DSLRs. It’s not for happy snappers because they’re just going to use the default app. It’s for a demographic that takes pictures and then applies filters and then show’s them off. (like Flickr, but for people who want weird effects). I’m building this company to flip, to exit like a swan. Risky eh?
So, armed with that idea, what would I get in Northern Ireland?
You’d get laughed out of the room……
Hahaha – you’d get a load of people telling you to complete a business plan for Invest Northern Ireland…and that’s where the trouble would be likely to start…as any innovative idea you had would be cold & dead by the time you’d been round & round the financing hoops those guys would “guide” you through.
Cynic – moi?
The theory being that if I actually had a business plan WITH revenues, then I would get something?
You’d get your picture taken with a bunch of people with access to the funding but with no idea of what you are talking about or desire to understand or embrace what you are doing.
Actually, you wouldn’t even get that far because you wouldn’t get $500K seed funding without $500K in your pocket. Chicken-Egg.
A photo op would be *something* at least.
Answer-the-first: Months / Years of pain and misery ending up with enough funding to pay off operating costs incurred during the application period.
Answer-the-second: Find help from the community, of ex-islanders, develop the product to a technical level that’s presentable, move to SF.
Fact is that the VC community is scared shitless of anything but a sure thing, and appear to have little concept of ‘distributed risk’.
When I came back to NI and chatter to my Bank manager about getting a new car, probably a convertible, he said “get an Astra”. I think that sums it up pretty well.
I didn’t.
Even with revenue projections I think you wouldn’t get too far. Only thrown on to the conveyor belt of despondency (like Mary has basically pointed out).
I’m not entirely sure a London or even European startup could fund that aggressively either.
Not sure you’d get anywhere with just an idea, even in Silicon Valley. If you had just the idea and a track record, you can get $2M (e.g. nodeable.com).
What’s not clear is exactly what Instagram (or Burbn as it was then) had in terms of functionality when it got $500k. Even assuming there was a beta version of the app, it hadn’t been released, so there was no proven model.
I think it’s safe to draw the conclusion that the ecosystem in the Valley enabled the success of Instagram – without that $500k, the app probably wouldn’t have been developed, they wouldn’t have received further funding to develop the Android version, which ultimately is what led to the acquisition.
The lack of *any* proven investment eco-system in Northern Ireland condemns it to being a start-up backwater, unlikely to ever produce anything without some kind of external (divine?) intervention.
Not looking for “It can’t be done” but more of a “what can be done”?
What should the investment eco-system look like? What should the success criteria for a decade of intervention be? And why hasn’t it worked?
and even more interesting http://allthingsd.com/20120516/exclusive-japans-rakuten-wins-the-heart-of-pinterest-founder-in-funding-race/?mod=tweet
that’s $100M on a $1.5B valuation for Pinterest, yes Pinterest.
And by all accounts the FaceBook IPO party in SF this Friday is going to be wicked sick – it’ll cost more than all the available funds in NI judging by what I was told of the budget for the bar
Its not the scale, its the cajones.