From Northwest Innovation:

The Washington Technology Industry Association (WTIA) has released its latest venture capital survey for first quarter 2010, showing that local venture capitalists are expecting to see moderately higher deal flow this quarter, with a significant amount believing their portfolio companies will see moderately better revenue growth this year.

Full story at http://www.nwinnovation.com/fullstory/0026441.html

Interestingly, I don’t see the report on the WTIA site – I hate it when web and PR aren’t coordinated like that.  Convergence, people!  Synchronization!  Real-time news!  Information at your fingertips! (Wasn’t that a Bill Gates phrase?).  My attitude is: if you’re a high-tech company, your press releases should be up on your website the minute you send them out via other means.  Oh well.

Overall, I get a sort of tepid feeling from the survey numbers – it’s better than last year, for sure, but I still don’t get any sense that the reins have been loosed and deals are going to start dropping on anybody with a napkin, a pen, and a bright idea.

Great post this morning from Hank Williams, in which he says:

In today’s “free” world, in most online business categories, it is inherently impossible to start a small self-sustaining business and to grow it. This is because in the digital world, advertising, the only real revenue stream, cannot support a small digital business. If businesses were based on the idea that people paid for services then small companies could succeed at a small scale and grow. But it is very hard to charge when your competition is free.

He’s got a great point. I’ve been thinking about startups solely within the context of “how can I provide something immediately profitable” for this very reason – I’m not interested in taking on $MM of VC money solely to get an exit. I’d like to start and grow a sustainable business, which means attracting paying customers from Day 1.

I’ve been working in professional services for a long time, which attacks this problem using the equation (labor = money), but, as Joel Spolsky points out, (labor = money) doesn’t scale. Software as a product or SaaS offering does. But there’s little revenue in small-scale advertising. It’s like we’re all chasing our economic tails:

• Consulting doesn’t scale
• So, move to product
• Product isn’t profitable, because of the “free” mindset
• So, move to consulting to bring in revenue
• etc.

The bottom line (for me, at least this morning)? Relentless focus on adding value that people will pay for. If you can’t get there, you’re essentially competing in the VC lottery with other people who have a lot more money they’re willing to lose.

In this morning’s Seattle P-I is a new venture article from John Cook in which he reports that Jeff Schrock, former Real Networks / Yahoo executive, is joining local venture firm Monster Venture Partners.

Cook writes:

Monster Venture Partners is taking a different approach than the big venture firms of Silicon Valley, investing personal funds and doing so in small increments of $300,000 to $1 million. That concept appealed to Schrock, an angel investor who believes there’s a “huge gap” between early-stage seed investments and traditional venture capital.

This is the second time in less than 24 hours I’ve heard mention of the “financing gap” between traditional angels and traditional VC firms. What’s needed, I’ve heard argued, is what might be called the “Third Way” of startup financing, one that combines the smaller dollar amounts of angel investors with the support, rigor, and broad reach that traditional VCs provide.

Michael Rice reported from the recent NWEN Early Stage Investment Forum that “The funding gap is a painful reality here in the Northwest”, but in context it’s clear he’s talking about process and engagement issues, not dollar amounts.

What do you think?

John Cook has a great blog at the Seattle P-I and has posted an item about last week’s Seattle Startup Weekend.

I thought that Seattle had the most attendees of any SW, but John writes:

Of the 13 Startup Weekends held around the globe, only the San Francisco Bay Area attracted more people.

Hm. *shakes fist southwards*

(h/t Zach Hale)