Capital Chaos

 Widgetbox (San Francisco, CA) added another $8M through the efforts of Northgate Capital, Hummer Winblad Venture Partners, Sequoia Capital and private investor Michael Dearing to the list of returning investors into the company (The company had done a Series A back in February of 2007 for an undisclosed amount). 

Widgetbox operates the largest distributed community of widget developers and consumers and has some pretty intense claims to fame:

• 26,000 widget developers
• 33,000 widgets in their gallery
• 12 million daily widget-views
• Distribution across 210,000 domains
• 15 % of Facebook applications and 60% of Bebo applications

As we have profiled before, more and more app and widget makers for companies like Facebook are growing increasingly interesting to investors who are not afraid to pour money into them with the hopes that the attachment to Facebook will only increase the value of their investment.

Widgetbox expressed that the new funding will be used to build products and services for its large and growing community of developers and consumers including the expansion of DevShare, the company’s revenue sharing program with developers.

The company is run by an interim CEO in Michael Dearing (an investor) which is a bit interesting.  Raising money with an interim CEO is not standard practice but Michael is a Consulting Associate Professor at Stanford University and was previously Senior Vice President & General Merchandise Manager for eBay. 

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 Hummer Winblad Venture Partners (San Francisco, CA) is an early stage VC that really focuses on software (was the first VC fund to invest exclusively in software companies).  These guys are all about software and have been around since 1989 so they have seen a lot.  They are eager to invest in the entrepreneurial start up that have a passion for their business, a large and growing market opportunity, a hard to duplicate technology, and a business model that works for both the target customers and the enterprise.  While the technology is critical, equally as important are the people behind the technology so make sure you drink your Kool Aid if you expect anyone else to.

Since these guys know software, be prepared to go through some significant diligence to test the viability of your product.  They do like to find new opportunities through introductions but that doesnt mean you cant introduce yourself either.  If these guys fit what you are looking for in an investor, some things to be prepared for:

1. Business plans are not graded by weight - keep them simple and to the point.
2. Describe the opportunity - be specific about the unmet market need, and how you fill it. Is there an open upside potential to your venture?
3. Define your market clearly and definitively - Tell them who your customers are, what their problems are, how you are going to reach them…efficiently…, and how you plan to solve those problems. They’ve seen enough “upper right hand quadrant” PowerPoint stacks.
4. What is your secret sauce? What do you have that is so compelling that customers will pay for your solution
5. How much investment is needed? Successful software companies are capital efficient. Remember, customers are better sources of cash than the venture industry.
6. Realism - have a thoughtful operating plan. Research operation margins of existing competitors. Are yours in line?
7. Honesty, integrity, and a total commitment to the success of the venture.

The firm has gotten some mixed reviews in terms of their process although they are known to be quick to respond.  Like all firms, there are some quirks to be found (like John Hummer often bringing his dog to meetings) or they have been rumored to show up late to some meetings (typical in VC world).  As is usual with most of the original VC firms in the area, these guys have a certain brash about them because they know what they are looking for and want you to be prepared.  The standout in the firm seems to be Will Price who is really well versed on both the technology side and investing side. 

Contact:
One Lombard Street
Suite 300
San Francisco, CA 94111
Telephone: (415) 979-9600