Housing sales remain weak, unemployment is still high, and a double-dip recession seems ever more likely. While these macro trends are causing employers to cut back and employees to stay put, there are still entrepreneurs who are finding the funding to forge ahead as they attempt to turn innovative ideas into leading edge technology businesses.
According to business intelligence software company Quid, 2,942 start-ups have raised Series A/Seed Funding so far in 2011, up 25 percent from the same period last year.
Some of the angel investors and venture capital firms funding these start-ups could be found at start-up venture firm 500StartUps’ Smash Summit, held in late September in New York City. The event, for entrepreneurs and investors in the social media, ecommerce, and gaming spaces, offered advice connections in order to grow in a challenging economic environment.
“Silicon Valley has seen a trend with start-ups focusing on the intersection of social, consumer, and mobile technologies,” said Sumaya Kazi, founder of Sumazi.com, a web service that connects users to the people they don't know, but should. Sumazi is currently building on top of social ecosystems such as Facebook and Twitter to help a user discover their hidden network. "Start-ups are trying to figure out how to make use of all the rich social data that exists to help facilitate smarter decisions about new connections and purchases," Kazi said.
"Investors are hungry to find the next mobile application that has the stickiness of an Instagram or Angry Birds."
Investors are looking for the next big thing, said Aamir Virani, founder of video monitoring platform Dropcam. His team raised $5.8 million for his product, which includes an online software-as-a-service that allows users to set up a camera on their network and view it from anywhere with an Internet connection. “The timing is perfect,” Virani said in an interview. “Investors are making lots of deals with companies merging consumers and the cloud.”
In an interview, Nitin Chitkara, founder of social network Fav.tv, said his company’s focus on using iPhone and Android technology have opened doors to some prominent venture capital firms in Silicon Valley. “Investors are hungry to find the next mobile application that has the stickiness of an Instagram or Angry Birds,” he said.
Investors say it’s imperative to invest in the early stages of a company’s development. That way, they get the opportunity to groom their relationship with the founders, as well as nurture the development of the start-up.
Shaherose Charania, who, as CEO of FounderLabs and founder of Women 2.0, finds funding for start-ups, works with new entrepreneurs and matches them with VCs, said, “we have a lot of founders in the community who have raised money in the past three months. Social and mobile commerce are definitely hot right now, as are tools to enable mobile development and distribution.”