Jeff Pulver, Earlier Stage investor in Israeli Start-ups

In reality, regardless of the state of the economy, people continue to
get inspired and technology innovation will continue to happen. This in
turn leads to the launch of new startups.

When times are great, there is usually money available to fund all
sorts of Hi-Tech startups. And when things are not so great, raising
money is much harder. The worldwide economic funk of 2008 is
responsible for an emerging trend in the Hi-Tech startup world I first
saw in Israel in 2008 which has resulted in what I can only describe as
the birth of the "NEW Entrepreneur."

The NEW Entrepreneur is someone who has a decided to "do a startup" by
partnering with one or more of their friends who understand the concept
of bootstrapping from the very beginning. The startup team are people
who watch each other's back, are aware of their individual strengths
and weaknesses and in effect are there to provide a sense of balance
for each other. These new Entrepreneurs understand that they can't rely
on outside funding to get their company started so they need to do
whatever is necessary to make their vision and dreams come true on
their own.

The NEW Entrepreneurs know how to turn pennies into dollars and a
dollar into a hundred dollars. For the record, such people exist and
have been doing just this in the Israeli Hi-Tech scene. During 2008 I
had a chance to meet up with quite a number of these NEW Entrepreneurs.

NEW Startups realize they can't start a business that will have a high
burn rate or a strong dependency on outside money. They realize that
whatever money they may be able to raise from their friends and
immediate family members might be the only money they will be able to
raise for the foreseeable future. So startups in 2009 may look a lot
different than in previous years. What I am seeing starting to emerge
are "lean and mean" startups from the very beginning. It turns out that
while the economy may not be in everyone's favor, thanks to the
continuing affects of Moore's Law and the sheer disruptive power of the
Internet, it is possible to start companies these days with just raw
talent, vision and the innate ability to deliver on the vision.

The typical kinds of startups which can thrive in this kind of setting
are those who decide to focus in the Internet / Apps / Services space.
Ideas that can leverage existing infrastructure and existing APIs. Some
leverage open source projects and others are launching their own open
platforms.

We are living in a time where so much really can be done with so little
money. This reality may prove to be disruptive for the traditional VC
investment model. As NEW Startups launch themselves in 2009 and gain
traction in their sectors, the part of the venture community which
traditionally invests in "Early Stage" startups is at risk of missing
the opportunity to invest in these next-generation companies because
the needs of capital will not be at the same levels as in past
generations. One of the by-products of the Web 2.x generation is that
these days companies can be started for Micro levels of money in 2009
as compared to similar startups of the recent past.

In mid 2007 I first discovered Israeli Hi-Tech Entrepreneur who knew
how stretch pennies into dollars I started doing what I was described
as "Micro Investing." Simply put, I provided the minimal amount of
capital needed to help a company take their concept and complete their
prototype /. proof-of-concept. I was not an Angel investor. I did not
invest in a convertible note. No, I was there in the beginning and
provided the capital to help start the business. Since then I have
become a "Technology Scout" of sorts and spend my time in Tel Aviv
meeting with young startups. This is work I am committed to continuing
in the weeks and months ahead.

In a number of cases, my Micro Investment was followed by a successful
Angel Round and/or venture round. The reason these companies were able
to survive the economic downturn of 2008 was because they spent their
year in bootstrap mode. The management team did not take any salaries
and they took odd jobs along the way to pay their own bills and to keep
their the dreams of the NEW Startup alive. (The few write-offs from my
startup portfolio of 2008 were startups which failed to live by these
rules.)

The successful startup in 2009 will be a humble startup. One where the
burn rate will be kept to a minimum and where the people involved have
a strong passion for the vision and have a "can do" attitude and for
the most part in a position to do their technology development on their
own. This approach for the NEW startup will not work in a traditional
capital intensive business but will present new opportunities for
inspired NEW Entrepreneur in the Internet / Software / Services space.

While there will continue to be people who believe startups need to
have a burn rate together with an office in the best part of town, in a
great building with a great looking office, those who survive will be
there because they choose to be humble, smart, focused and because they
understand how to bootstrap a business.

The other reality is that these startups have the added pressure that
they may not be able to raise their next round of capital until a time
frame that is much longer than they ever could have predicted. Again,
those companies that were built from a bootstrapping model will have
what it takes to survive. I'm not suggested one has to get to revenue
any faster but rather needs people who are there for each other and are
committed to being there for the long run. And if there are people who
need to take on side projects to fund their lifestyle and pay their
bills at home, such distractions are understood from the start and are
done in the open rather than in the dark.

I believe the startups who are born in 2009 and who are focused on
bootstrapping from the start and are built with the understanding that
they will have very little access to outside capital will have a much
stronger chance for success than the companies who were born in a time
where the venture money was flowing much freer.

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If you are a NEW Entrepreneur and if your startup is a NEW Startup as
described above, please feel free to take a moment and update me about
your plans. I am always interested in meeting with interesting and
smart startups.