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  • New Rules of Raising Cash

    Today, many entrepreneurs can raise money to finance their ventures going. But entrepreneurs and VCs who were around during the dot-com mania say now fund-raising requires meeting a higher bar than it did in the late 90s.

    Upstart: Startup/Entrepreneur

    Raising money for start-ups is relatively easy in Silicon Valley these days. But longtime entrepreneurs and venture capitalists say it is still

    Courtesy: Surge Andrey Kiselev/PhotoXpress Free Images

    nowhere near as simple as it was in 1999 and 2000, when a cash flood fueled the dot-com bubble.

    Today, many entrepreneurs can quickly raise small amounts of money—several hundred thousand dollars or less—to get their ventures going, with plenty of individual “angel” investors and others willing to plunk down the cash.

    But entrepreneurs and venture capitalists who were around more than a decade ago during the dot-com mania say fund-raising today requires meeting a higher bar—namely, a working product and some marketplace traction—than it did in the late 1990s. Then, a clever idea often was enough to attract investors.

    Take Jeff Tangney, an entrepreneur who co-founded Epocrates Inc., a maker of mobile medical software, in 1999. That year, he said, he raised $5.5 million from venture capitalists—all without a product to show them.

    “We had some slides and maybe a little bit of a demo,” said Mr. Tangney, who was finishing up his M.B.A. at Stanford University at the time. “It was about staking your claim more than it was about what you’d built.”

    This year, Mr. Tangney began raising money for a new company, Doximity Inc., a San Mateo-based maker of a networking tool for medical professionals. While he brought in more money out of the gate this time—$10.8 million—Mr. Tangney had a working product available for three months and had signed up 10,000 doctors to use the app. Few venture capitalists would have paid attention if he had shown just a bunch of slides, he said.

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    Filed Under: Startup/Entrepreneur


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