A startup called Appgyver (conveniently rhymes with “MacGyver“) has developed a set of app prototyping tools for developers and product managers. To build out its product suite, the company today raised an additional $325,000 in seed funding. This brings the funding total to $1,325,000.

Appgyver’s well-known Prototyper product is targeted at those who need a better way to test out current versions of their apps on potential customers, and rapidly alter the design in minutes. It’s designed to mimic the actual feeling of what using the app would be like.

But the Palo Alto, Calif.-based startup announced today that it is going beyond prototypes.

For one thing, Appgyver isn’t the only product on the market to help you build gorgeous visuals, no coding required. Justinmind, Fluid UI, and Appcooker offer similar services.

To differentiate themselves from the competition, the founders spent months interviewing app developers and designers about their biggest sources of frustration. Issues with Adobe-owned PhoneGap (the open source framework that lets developers build apps using HTML and Javascript) repeatedly came up. So the company is releasing today its beta of Toolbelt, the first offering from the Steroids platform, which is designed to bolster the performance of hybrid apps.

Toolbelt acts as a “patch” to Adobe’s PhoneGap toolset, augmenting performance and making it easier to test ideas. “We are fixing what is broken, nearly point-by-point,” added Appgyver CEO Lehtimaki (pictured, right).

With Toolbelt, developers with a basic understanding of HTML5 and Javascript can deploy fully-fledged hybrid apps in the cloud. Appgyver’s team has figured out a way to sidestep the tedious app testing and provisioning process; potential customers just need to scan a QR Code to download and use the app.

The additional boost in seed funding comes from the Finnish Funding Agency for Technology and Innovation, dubbed “TEKES.”

Check out the video to learn more.

AppGyver Steroids from AppGyver on Vimeo.

July 9-10, 2013
San Francisco, CA

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This is a guest post by Getaround cofounder Jessica Scorpio

When my co-founders and I founded Getaround at Singularity University back in 2009, we believed we were on to something big. People we knew experienced that clear “a-ha moment” when we explained how sharing cars with people nearby could help fight the problem of car overpopulation.

What concerned us, however, was that we kept hearing reasons why it wouldn’t work. People were concerned with the risks — insurance, fears around sharing a car with a stranger — they asked, how would we ever convince investors to share the risk with us?

We spent the next year working to build our technology. During that time we also addressed the primary risks by passing car sharing legislation in the State of California, and securing a primary insurance policy through Berkshire- Hathaway. With all the pieces in place, it was time to seek funding.

By August 2012, we had a raised a $3.4 million seed round, and announced a $13.9 million first round led by Menlo Ventures and other amazing investors like Marissa Mayer, Ashton Kutcher and Innovation Endeavors.

We have been fortunate to have raised great rounds, from amazing investors — but fundraising was one of the most stressful events of my life. Despite having seasoned entrepreneurs on our team, none of us had ever raised funds before.

I recently spoke about early stage funding at Startup Grind in Mountain View. Here are the funding tips I shared with the audience:

Pick your launch pad

Today, there are countless platforms to launch your business. Before you choose a conference, hackathon or accelerator program, consider this time and space as a launch pad for your business and an important step in your funding endeavors.

Given the connection, many of our first investors were also from Singularity. That initial investment allowed us to found the company and turn our big idea into something real. From there, we spent the next bootstrapping with angel funds, solving major problems that stood in our way, and building our product to get ready for our official launch.

Raise on a high point

After our year of bootstrapping, we made our big debut on stage at TechCrunch Disrupt in 2011. At that time, we had already closed over 80 percent of our seed round and our Tech Crunch win definitely helped secure a few key investors to close out the round.

Raising funds on a high note, like a product launch or major award or recognition, can help you capitalize on your momentum in a real way and helps to create a sense of urgency among potential investors, which is never a bad thing.

Choose the best cheerleaders

Late in 2011, we started raising our first round. We already knew who we wanted to meet with with, and headed straight into coffee meetings and official pitches. And we did that all day, everyday, for three months. Those months of hard work ended with our team, sitting around a table, surrounded by term sheets — and totally stressed.

Choosing your investors is like choosing a life partner — it’s a huge commitment and it’s fine to be very picky. In the end, we chose investors who were passionate about the same goals we are. We also looked for investors who could bring experience, patience, and are supportive of the founders.

At the end of the day, raising funds is a stressful, but necessary part of being an entrepreneur. You and your co-founders are going kill yourself trying to make it happen, you’re not going to sleep, and you’re definitely not going to get any other work done.

Plant your seeds properly, strike while the iron’s hot, surround yourself by great people, and you’ll get it done.

Jessica Scorpio is a founder and Director of Marketing at Getaround, a peer-to-peer carsharing company.

Scorpio previously founded IDEAL, a not-for-profit network for entrepreneurs and young leaders.

photo credit: Jonno Witts via photopin cc

July 9-10, 2013
San Francisco, CA

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MessageMe has been busy since its launch a week and a half ago. The messaging application has been cut off from Facebook’s Open Graph, raised $1.9 million in seed funding, and attracted more than 1 million users.

MessageMe offers iOS and Android apps that send rich messages over Wi-Fi and mobile data to friends, family, or groups. The app also lets you share YouTube videos, iTunes songs, voice recordings, emoticons, and other things you might not share over traditional text messaging.

MessageMe had been tapping into Facebook’s Open Graph to help users find their friends on the service. But similar to what happened with Voxer, Facebook blocked MessageMe’s access to Open Graph data over concerns the app was too similar to the functions of the Facebook Messenger app.

Still, people are clearly digging MessageMe — the service said it is sending 500 notifications per second worldwide; and in the U.S. alone, more than 10 million doodles and more than 4 million iTunes songs have been shared.

“We launched MessageMe a little over a week ago on the App Store, and we’re excited about the feedback we’ve received so far — many people have made MessageMe their primary messaging platform, and that’s awesome,” the company said in a blog post today. “We spent the last year building MessageMe with the goal to deliver a fun, rich, and engaging experience by adding expression to messaging. We believe a core communication service like messaging can, and should, do more to keep up with the technological advances in the smartphone market.”

The new seed funding came from a collection of top-tier investors, including Google Ventures, Andreessen Horowitz, Greylock Partners, True Ventures, First Round Capital, SVAngel, Resolut.vc, and Social+Capital Partnership.

Top photo via MessageMe

July 9-10, 2013
San Francisco, CA

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MOUNTAIN VIEW, Calif.– A day before 500 Startups’ demo day, Dave McClure is spouting doom, gloom, and profanity.

“Most things fail,” the influential and opinionated angel investor said on stage.

“The primary reason most startups fail is lack of customer acquisition at reasonable economics,” McClure continued. “There are a lot of other reasons. You might be stupid or foolish or might be unable to lead or hire or not wake up early enough, but it is likely if you are not an idiot, you will be able to get a product out the door.

“For most of the startups in the room, you are going to fucking fail.”

McClure said these words of profane wisdom in a presentation titled “Why Incubators Hate Your Startup” during Startup Grind, a conference for entrepreneurs. The word “hate” should have signaled that the talk wouldn’t be all sunshine and roses, but McClure drove home his oft-repeated point that it’s a far better thing to groom ugly ducklings than farm black swans.

McClure is known for being an iconoclastic figure even in a community filled with iconoclasts. His investment strategy is to make a large number of small investments, both inside and outside of his incubator program. He is also “bullish” on developing markets in Asia and Latin America, and today the 10 startups participating in the Mexico City accelerator program are presenting in Mountain View.

These are rather unusual words from a mentor figure, but perhaps it is a needed dose of reality. The fact is that many startups do fail, some yield small returns, and a few succeed. For 500 Startups, McClure cites these as Wildfire, which Google acquired for $350M in 2012, and TaskRabbit, which is valued at more than $100 million. Despite these odds, the wins are big wins, and McClure said that the Wildfire exit provided a 15X return that essentially paid for an entire 500 Startups class.

Which brings us to tomorrow’s demo day.

Just down the road in Mountain View, the 33 companies that participated in this fifth incubator batch will present to a room filled with investors (and a few journalists). The class is diverse, with over 57 percent based outside of the U.S. and around one-fifth containing a female founder. McClure anticipates that one-third of these companies will raise a million or more, one-third will raise $500,000 or more, and one-third will raise 250,000 or less. He said one company has already quit, and a couple “probably won’t raise enough capital to stay open much longer.”

The valuations will mostly price around $5 or $6 million, and the startups will have enough runway to operate for the next six to 18 months until the next milestone. McClure advises his portfolio companies to raise 50 percent more capital than they need and advises against raising as much money as possible as a “badge of honor.”

When pitching McClure, the first step is prove that you aren’t “fucking stupid or crazy.” From there, entrepreneurs need to display a functional product that was built with the consumer in mind.

“A lot of venture capital filtering is risk reduction through network,” he said. “A lot of people will start to pitch me and ask why they need to go through a network? I can’t identify in 30 seconds if you are fucking crazy or an idiot or something else, not that I am not.”

On Jan. 31, the incubator began accepting applications for its 2013 spring batch, requiring companies to apply via AngelList. McClure told the audience at Startup Grind that he is “materially involved in AngelList” and that all entrepreneurs, whether they are raising money or not, should have a profile in the network. 500 Startups first experimented with AngelList applications for its last batch of companies, and the partners were so impressed with the results that they made it the new standard.

500 Startups has invested in about 400 startups in the past three years, and McClure anticipates reaching the “500″ goal in the next year or two. Stay tuned tomorrow for live coverage from the demo day in Mountain View.

July 9-10, 2013
San Francisco, CA

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Over the holidays, friends and family with a bit of extra cash might choose to invest their money in risky, albiet exciting, startups.

Given the meteoric success of Instagram, why not give in and fund that crazy brother-in-law with an idea for an iPhone app that just might work. All he’s asking for is $25,000 from a handful of investors to outsource the cost of a developer in India or Russia to build a prototype.

The barriers to entry when starting a tech company these days are low. It’s easier and cheaper than ever to get an idea off the ground, and you need little or no programming expertise. As a result, the number of startup ideas that receive seed funding from angel investors has exploded.

It’s all rosy until the entrepreneur decides it’s time to raise a first round in institutional funding, say $1.5 million or above. With increasing competition for a steady amount of available dollars, we’re hearing plenty of resounding “no’s” from Sand Hill Road. The press have labelled it a “Series A Crunch,” which sounds looming and suggests it’s only going to get worse.

To shed light on the reality of this trend, investment firm CBInsights produced a report analyzing 4,056 seed investments. The research indicates that 1,000 recently-funded seed companies will be orphaned, meaning they are unable to raise follow-on financing. The author refers to this as the “process of natural selection.” They also make the case that the eventual death of these startups is a good thing for the tech ecosystem — it will mean there is more available talent for startups that have raised venture capital rounds.

The explosion in seed funding will result in over $1 billion of investment into these companies being incinerated. However, this is to be expected, as seed investments are the riskiest bets an investor can make.

“With at least twice as many companies getting seed funding this year, it’s not surprising to me that there’s a crunch,” said Rob Coneybeer of Shasta Ventures, a Silicon Valley-based venture firm that views Series A as its sweet spot. In a phone interview, Coneybeer said he’s not taking more meetings than usual and inferred that many of these companies funded with dumb money aren’t solving particularly unique and challenging technology problems. “It hasn’t changed things for us because there are four times as many photo-sharing companies,” he said.

In a recent story about the big, dumb angel bubble, VentureBeat’s Jolie O’Dell argued that institutional investors are not to blame, and it’s not an indication that entrepreneurs are producing less deserving or less fundable startups. The problem is that easy “dumb” money from inexperienced investors, like friends, family, or former colleagues, often does more harm than good.

“Finding the right investor at the seed stage is critical,” said Jenn Wei of Blumberg Capital, a firm that specializes in early-stage startups. Untrained investors often lack connections and influence and haven’t done their homework. “We have seen an increase in the number of angel investors who do not do proper diligence, and oftentimes, those companies are under-funded,” said Wei.

Wei explained that most seed-funded startups receive about $200,000 or $500,000 from angels, which is not sufficient to carry the company to a complete functional product and obtain customers, the “milestones” that she typically looks for.

To avoid hitting a wall, entrepreneurs need to get smarter about fundraising. Entrepreneur Sameh Elamawy is currently in the process of fundraising for his Series A. He advises raising a larger seed round than expected. To get to a stage where you’re ready for a Series A investment, you may need to fund your developers and ramen-habit for well over a year. He also advises raising tiny consecutive seed rounds — $25,000 here and $50,000 there — rather than betting on a huge chunk of first-round financing.

As the power shifts to investors, CBInsights’ analysts predict that it will take longer for entrepreneurs to raise follow-on financing. Currently, it’s about 13 months, according to the report.

Above all, avoid taking “dumb” money; ideally, your angel investor is a prominent figure in Silicon Valley and is connected to a venture capital firm. “You want your seed investors working for you to make the next round happen,” said Elamawy. The report also found that seed deals in which VCs participate have a historically higher rate of getting follow-on financing compared to seed deals in which VCs are not participating.

The Series A Crunch is very real, but there’s nothing and no one to blame but simple economics. “The category is doing well, and this is the natural course of capitalism,” said Coneybeer.

Sept. 9 - 10, 2013 San Francisco, CA

Early Bird Tickets on Sale

For scrappy enterprise-focused startups that are taking on legacy vendors, getting the mobile experience right is key.

Tylr Mobile is a startup in stealth mode that’s building a better way for business users to work on a smartphone or tablet device. Two accelerators have selected it, and it has received investments from individuals at companies such as SAP, Salesforce.com, and Oracle.

In just over a month since the founders began working on the product full time, Tylr has pulled in $500,000 in seed funding. It is set to launch its first product in the first quarter of 2013.

The Silicon Valley-based startup has also been selected to participate in Alchemist Accelerator and Citrix Startup Accelerator. Both accelerators provide a funding and mentorship to early-stage business-to-business (B2B) startups. Alchemist is a recently-launched accelerator that is underwritten by Cisco, Khosla Ventures, and Draper Fisher Jurvetson. Citrix provided half of the overall funding.

Founder Ryan Nichols (pictured far left with the founding team), a serial entrepreneur with four years at SAP under his belt, told me the problem they are trying to solve is that “the way we work on the go is broken.”

To explain how the product works — without giving too much away — he uses the example of switching your phone on after a business trip. Imagine that you work in sales at a Fortune 500 company. Your inbox is likely full of calendar invites, junk mail, and air-conditioning reminders, which is jumbled together with critical email from business prospects. You may not see that one of your prospects has five open support tickets — even if you catch it, there isn’t much you can do until you arrive at your hotel and check-in.

Tylr Mobile scans your inbox to filter business data and makes you more effective on the go. “Think Google’s priority inbox, but hooked up to your enterprise systems,” said Nichols. It’s primarily focused on improving the mobile experience for salespeople within a large corporation.

“Tylr Mobile represents a new breed of enterprise startup that’s mobile-first, connected to the cloud, and laser focused on the end user experience,” said John McIntyre, the managing director of the Citrix Startup Accelerator.

July 9-10, 2013
San Francisco, CA

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Freshplum, a startup that provides revenue analytics for e-commerce companies, announced it raised $1.4 million in seed funding today.

The round was led by New Enterprise Associates with participation Greylock Partners, Google Ventures, and Charles River Ventures.

The information Freshplum provides is intended to drive the sales decisions of e-commerce companies that live in the digital world. By looking at relevant statistics, digital commerce providers can more accurately evaluate how to price their products.

“Selling goods and services online continues to be more art than science,” said founder and serial entrepreneur Sam Odio. “Eighty-two percent of the companies we talk to price their products on a ‘hunch’ because they lack the tools necessary to dive deep into the data. Freshplum solves this problem by providing those tools that eliminate the guesswork behind pricing and other sales decisions.”

Freshplum participated in Y Combinator in the summer of 2011. It was Odio’s second time in YC; in 2009, he came to the incubator with his photo-sharing startup Divvyshot, which was later acquired by Facebook. Odio and co-founders Nick Alexander and Michael Yuan (also a Divvyshot employee) left their positions to build Freshplum.

Freshplum is currently developing its alpha product and has started to accept early customers. A wider release will be available later this year. The company is based in Palo Alto and already serving more than ten million API requests a day.

July 9-10, 2013
San Francisco, CA

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SMS messages sent for practical, group communication rather than just LOLs is serious enough business that investors have handed SendHub a $2 million check.

Recent Y Combinator graduate SendHub, which bills itself as SMS for organizations, is in the business of replacing the email blast with an SMS message and aims to solve a myriad of real-world consumer, business, and enterprise one-to-many communication challenges.

SendHub has just closed a $2 million seed round led by Kapor Capital, the company exclusively told VentureBeat. Howard Lindzon’s Social Leverage fund, 500 Startups, Bronze Investments, Menlo Ventures, and angels including Eric Ries, Paul Buchheit, and Jawed Karim all participated in the round.

Why such a sizable seed raise for an SMS service? The young company and its new investors believe that SendHub is tackling a massive problem.

“How do you send a message and make sure you get a response?” said SendHub co-founder Ash Rust. “Email is not really that medium anymore, it’s just such an overburdened channel. Social media is even worse. It’s often impractical to call people. So that leaves SMS. And nobody has really made SMS serious — and that’s what we do.”

Teachers, group leaders, soccer coaches, business owners, company managers, and so forth can sign up for the service to get a number and access to a simple-to-use dashboard for sending messages (from the web or a cell phone) to a group of contacts. A teacher, for instance, could use SendHub to send a message to kids’ parents about a looming test or homework assignment, or a CrossFit box (a.k.a. gym) owner could have his members text the SendHub number to receive an auto-responder with the WOD (workout of the day in CrossFit speak).

If the idea sounds familiar, that’s because it’s very much a hybrid of consumer group messaging services such as GroupMe or Beluga and SMS marketing services. But the group messaging apps can’t realistically replace email, Rust said, and SendHub wasn’t really intended for marketing purposes. “We’re basically making SMS a BCC email,” he said.

The young company got its start specifically hoping to solve a pain point for teachers. This time last year, co-founder and CEO Garrett Johnson observed that teachers at his nephew’s charter school in Tampa had a really hard time getting in touch with parents and connecting with their students. So Johnson and Rust, then a director at Klout, set about creating a cost-effective and simple solution to facilitate this type of communication, but they quickly found that their serious SMS product had more universal appeal.

With the new funding, SendHub will hire more aggressively and round out the product with more enterprise-friendly features. “Our goal is to create a sustainable business around the fact that enterprises need to communicate in real time,” Rust said. “You should be able to use efficient communication systems like SMS from anywhere. We want to invest the money in making sure we can be everywhere our customers are.”

SendHub, which runs its service off of telecommunications startup Twilio’s voice and text platform, offers customers both free and paid plans and will work with enterprises on custom arrangements.

Founded in 2011, SendHub previously raised $300,000 from Howard Lindzon, Tom McInerney, and Y Combinator. The company currently employs a team of five and operates out of Mountain View, Calif. but is in the midst of relocating to Palo Alto. SendHub has thousands of users and sends hundreds of thousands SMS messages each month, Rust said.

Photo credit: Shutterstock

July 9-10, 2013
San Francisco, CA

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Seed funding, the backbone of startups looking to get off the ground, grew last year according to the 2011 Internet/Digital Media and Software Industries Seed Financing Survey from Silicon Valley law firm Fenwick & West.

The firm released its second seed funding survey Thursday; the report tracked how much seed funding startups on the West Coast reported in 2010 and 2011. Data was gathered from 56 transactions in 2011 and 52 deals in 2010.

From 2010 to 2011, seeding funding transactions rose three percent, from 43 to 46 percent. However, of all companies surveyed by Fenwick and West in 2010 that received some sort of seed funding, only 45 percent went on to get venture capital funding. Only 12 percent received subsequent rounds of seed funding, while others were acquired, shut down, had no data available, or received no additional funding at all and are still up and running.

It’s great to see that funding is on the rise, but since less than half of the startups were able to secure venture capital, it shows that many startups aren’t moving forward and growing. On the flip side, the survey does point out that right now it is a “good environment for entrepreneurs” because investors are making faster decisions and startups that receive later rounds of funding are also receiving high valuations.

The survey also focused on the changes in convertible notes, the bonds that allow entrepreneurs to keep equity ownership, which grew in 2011. Startups rose a median $1 million in convertible note deals in 2011, up from $662,500 in 2010. In addition, the median valuation cap on convertible notes rose from $4.0 million in 2010 to $7.5 million in 2011.

Complete results of the survey can be found on Fenwick & West’s website.

July 9-10, 2013
San Francisco, CA

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Showing that there’s plenty of untapped potential in the Indian startup scene, Silicon Valley venture capital firm Accel Partners announced its $155 million Accel India III fund today for seed and early-stage investments in the country.

Accel, which already has 34 companies in its portfolio in India, said the fund would be focused on hot opportunities like mobile, digital media, enterprise and software-as-a-service companies, and Internet services. The firm already manages $80 million in India across two earlier funds — this latest addition brings its total funds in India to $235 million.

July 9-10, 2013
San Francisco, CA

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Customer help desk management provider Zendesk today announced that it is opening a new office in Denmark and is teaming up with nearly a dozen startup incubators around the world to give its customer support software.

The company is working with the likes of Y Combinator and Seedcamp to give those attending startups its software for free for a year. Zendesk operates a Web-based help desk service that lets companies track customer complaints across most of the web. It’s one of a number of startups trying to bring the ideas behind consumer-facing technology like Twitter and Facebook to the enterprise space.

“We were once a startup and we know how important it is to get help from those other companies whenever [you can] get it,” Zack Urlocker, the company’s chief operating officer, told VentureBeat. “Incubators weren’t around when we were getting started, and now that they are, they’re one of the best ways to get an idea off the ground, so naturally we wanted to work with them.”

Some of Zendesk’s largest customers are graduates from those same incubators. The company now has 10,000 customers, including the likes of superstar startups Groupon, Airbnb and Dropbox. Erply, another major customer, is a graduate of Europe’s Seedcamp — another incubator Zendesk is working with.

“It isn’t a play for new customers,” Urlocker said. “We just wanted to throw some help out.”

The company now has more than 100 employees, and while it’s based in San Francisco, Calif., it has strong ties to Copenhagen, Denmark. That’s where the company is born and where the company has a “fan base,” Urlocker said. There’s a lot of talent there that the company would like to tap into, and it already has a large number of connections there thanks to Zendesk chief executive Mikkel Svane’s history in the city, Urlocker said.

Zendesk is part of a number of new-age venture-backed enterprise startups that are bringing consumer tech to the enterprise. The company recently closed its third round of fundraising, worth $19 million. It also closed a $6 million fundraising round in August 2009.

July 9-10, 2013
San Francisco, CA

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Well-connected early-stage investor Christine Herron is leaving seed-stage venture-capital firm First Round Capital to join Intel Capital, the chipmaker’s corporate venture arm. The move adds another voice to the ongoing controversy over whether there is a bubble in early-stage investing that’s causing tension between angel investors and established venture capitalists.

Does Herron’s jump show that corporate venture-capital funds are no longer waiting on the sidelines when it comes to seed-stage funding?

Well, in Herron’s own opinion, yes—and with good reason.

The movement toward established corporate venture arms putting serious money into early-stage deals is definitely gaining momentum, Herron told VentureBeat, though they will continue to invest in startups of all sizes and levels of development.

Herron was a principal with First Round Capital, a firm widely regarded as innovative in its approach to seed investing. Still based in the Bay Area, she will seek out early-stage consumer and Internet deals for Intel Capital starting next month.

She said it is clear that larger companies have begun to realize that they need to get involved as soon as possible if they want a piece of any major startup action, and need to move faster in general.

“It is definitely happening, it’s not just a one-off,” said Herron. She was impressed with Intel’s rapid turnaround in an investment she was involved in this summer that she began to change her opinion about working for a massive corporate operation.

“They were fully aware of wanting to be in this space, they put in the same amount we did, and they did it even more quickly because it was strategic for them to be there,” said Herron.

That’s a trend happening across almost all corporate venture arms she’s worked with recently, added Herron, as they add early-stage funding to a much broader strategic playbook.

“Whether you look over at Google or Samsung, they have the same pressure to get in early as any of the other players at different levels. And corporates get that, definitely,” Herron told VentureBeat.

“If there’s a company or space that you know you like, getting in early is the best way to make sure that you are going to be involved in the future,” she said. “If you want a seat at the table, you have to show up on time for dinner.”

Herron would know about showing up on time.

Before joining First Round, she was a director at Omidyar Network, after holding operational roles with Mission Research, NetObjects and Microsoft. Prior to that, Herron was the founder and CEO of software-as-a-service developer of international trade logistics systems Mercury2.

[Photo of Herron at DEMO Fall 2009 by Brian Solis/Bub.blicio.us]

The report saw both deal size and overall number of seed investments drop to levels not seen since the beginning of the decade.

So has the seed bubble finally burst? The new data suggests it may be well on its way to doing so.

Although a handful of closely watched deals have reaped major seed-round rewards — overshadowing more anemic growth elsewhere and giving rise to national news coverage of events like Angelgate – those few instances don’t tell the whole story, Jeffrey Sohl, director of the UNH Center for Venture Research at the Whittemore School of Business and Economics and an author of the report, told VentureBeat.

“Valuations for seed have certainly been falling according to our data, which make sense because everyone’s net worth is dropping and the economy has certainly grabbed a lot of net worth from angels’ portfolios,” said Sohl.

He added that while a number of “super angels” may have been in the spotlight for deal size and type over the last year, the vast majority of angels have been sitting on the sidelines as they wait for the overall economic climate to recover.

In the first half of 2010, 65 percent of membership in angel groups were “latent” angels, or individuals who have the necessary net worth but have not made an investment — an increase of non-participation from 2009 of 54 percent and 36 percent from 2008.

The study, “The Angel Investor Market in Q1Q2 2010: Where Have All the Seed Investors Gone?”, concluded that total investments in the first half of 2010 were $8.5 billion, a decrease of 6.5 percent during the first two quarters of 2009.

That lead to a 9 percent decline in total dollars as investors “lost their appetite” for seed funding.

“These data indicate that while angels remain committed to this investment class, they do so with a cautious approach to investing. Angels are committing fewer dollars in more deals, a result of the lower valuations,” said Sohl.

“Without a reversal of this trend in the near future, the dearth of seed and start-up capital may approach a critical stage, deepening the capital gap and impeding both new venture formation and job creation,” he said.

July 9-10, 2013
San Francisco, CA

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Reid Hoffman (pictured left), a founder of LinkedIn, prominent angel investor, and partner with venture capital firm Greylock Partners, announced a new $20 million seed fund affiliated with Greylock for small-scale investments into startups.

The seed project, announced by Hoffman at the TechCrunch Disrupt conference in San Francisco today, comes from the $575 million fund Greylock partners launched last year, and each partner can invest small portions of it as they see fit without committee approval.

“We’ve been blown away by how some of the most successful, if not the most successful, companies have started with smaller funds,” Hoffman said. “A fund like this, it allows, for example, me to continue the kind of investing I was doing before and still keep track of potential great startups.”

Four companies have been funded by the seed project so far, though Hoffman said the companies did not want to be named.

Greylock Partners manages around $2 billion since it was founded in 1965, funding some heavy hitters like Facebook, LinkedIn, Pandora and Digg. Hoffman, now a partner, was the founder of LinkedIn when it launched in 2003.

July 9-10, 2013
San Francisco, CA

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(Editor’s note: Will Herman is an entrepreneur who has founded or held senior roles in several tech companies.This story originally appeared on his blog.)

I often run across early stage companies in a real quandary about how much money to take in their first round of funding. That is, the round just beyond the Ramen noodle eating/avoid starvation round that is usually funded out of their own pocket (or, if you prefer, the round that really gets things going once you’ve established a team and product viability).

The advice they often get goes something like this: Build a spreadsheet outlining fixed and variable costs over the next year or more. Estimate headcount, salaries, rent, capital equipment needs, etc. and, voila, you’ll have your number.

That’s fine, of course, but the spreadsheet should be the end result of the planning process, not the process itself. In my experience, there are certain high-level guidelines that should be used to determine how much money should be taken.

Using these, you’ll ultimately have the data you need to plug into a spreadsheet and generate a cash flow estimate – one used for planning AND tracking cash flow – based on the high-level needs of the company and with an eye towards future investment rounds.

My thoughts here hold true whether you’re pricing your round or, for the most part, if you’re doing a convertible note. I should also state that this post looks at the question primarily from the entrepreneur’s point of view, although is certainly aligned with the thinking of investors as well. As always, your mileage may vary. This is my opinion and it’s worth exactly what you’re paying to read it . . .

Take enough money to securely get you to a step up in valuation -  I’m not talking about some marginal increase here, but a real increase in valuation – double, triple or maybe even more. What creates that? Usually the achievement of some significant milestone. It’s great if that’s revenue or profit, but a large number of active users or even a major product release are good milestones to increase the perceived value of your company.

It depends on what you’re doing. A web service is going to have different metrics than an enterprise software company which will have different  metrics from a hardware company, for example.

Take enough money to move quickly, but assume that you will not move as fast as you think you can - Don’t starve the company. Make sure you take enough money so that when you look back over any preceding month of operation you don’t say, “I could have done so much more with $X more.”

Additionally, take into account that things will not always go as well as you’d like and, while you’re moving fast, you need to leave some space for stumbling on your way. Map it out as you see it, then add a dash of conservatism.

Take enough money to hire the key team members you need – that’s where your leverage is – Never, ever rob yourself of great human resources. Success begins and ends with the level of people you add to the team.

Valuation is less important than you think it is – I know… This is a hard one to buy into. If your valuation sucks, make sure you’re following the previous guidelines, swallow hard and take the same amount – the amount you actually need.

If you are truly uncomfortable with how much of the company you’re trading for cash, go out and look for an investor who will give you a better valuation – but don’t try to do your startup on the skinny, it’s already going to be hard enough to succeed.

Keep in mind that your odds of succeeding are not highly correlated with the amount of stock you retain.

Leave yourself some runway to close the next round – Many young companies forget this when planning for the uses and needs for cash. It’s unlikely that you’ll have someone at your door ready to write a check the day you run out of money. You wouldn’t want to hand over such leverage to someone anyway. Make sure you have enough money to fund you through the time and effort to get the next round closed – at least 90 days; 120 to be safe.

Admittedly, it’s not a science. In the end, the most important part is to get the money you need and to get moving. Time is your biggest competition and it works tirelessly 24/7 to kick your ass.

Try not to get caught in abstract notions about valuation. Do a sensitivity analysis; it’s likely to be less important than you subjectively think it is. That’s not to say it’s unimportant, but you should think about what the valuation being offered really means in terms of what you take away from the company given various scenarios.

Ask yourself what it is you want to achieve, personally. If the valuation doesn’t seem right after that, move on and find someone else to invest. Otherwise, take the money you need and start executing. And don’t forget the spreadsheet. It really is a good tool.