In this part I will share with you some of the interesting insights and comments from Levitt on this experiences in raising funding in the Valley. The trigger for the interview series was Tripbase securing $2 million in series A funding.
Tripbase is not the first time the Levitt has raised money for start-ups. In his last venture he raised $12 million through the "usual" VC routes. I asked him what advice he would have for other start-ups looking for cash. Here are his top three tips:
- Build a prototype before you do anything else: To attract the two key elements to success (people and money) a start-up needs to build a proof of concept as quickly as possible. The fastest way to do that is to use open source technologies. It is very important to get "30%-50% of the way" to a product before looking for money. Levitt says that a lot of start ups hold back on doing a fast build of a prototype for fear that they will be copied. Levitt's view is that copying is not the area to worry about. He says there is more of a risk in going slow and hidden rather than fast and a little more open.
- Bootstrapping is critical: Levitt could not over emphasise the importance of being tight with money as a start-up. The phrase he used regularly was "focus on spend". Putting this another way "Start ups do not tcome out of luxury. Investors need to see hunger."; and
- Start-ups often look for funding in the wrong places: Levitt believes that "private people with deep pockets" are the best places to look for funding, rather than VCs. On location, there is "no comparison to being in the Valley" because "by sheer numbers you will meet people". The only draw back of the Valley is that "it is very competitive...lots of people competing for money...lots of options on where to invest".