1. What are the key success factors for raising money given the difficult economic climate?
2. What are the biggest challenges?
3. Is there any specific advice you'd offer to those trying to raise money these days?

While there were some common themes in their answers (many of which echoed the usual fundraising maxims), there was plenty of variety and a few outliers. Space constraints don't allow for me to share all of their specific answers, so I've tried my best to summarize the common themes and highlight key nuggets of wisdom below. If you have any questions, drop me an email.

The seven CEOs who graciously took time out of their busy days to contribute their thoughts (along with the recent rounds they've raised) are:

• Amir Ashkenazi, Adap.tv ($13M Series B, 9/23/08)
• Frank Barbieri, Transpera ($8.25M Series B, 11/13/08)
• Alex Blum, KickApps ($14M Series C, 11/25/08)
• Dean Denhart, BlackArrow ($20M Series B, 10/6/08)
• Keith Kocho, ExtendMedia ($10M Series C, 12/2/08)
• Steve Rosenbaum, Magnify.net ($750K Series A1, 11/21/08)
• Ben Weinberger, Digitalsmiths ($12M Series B, 11/13/08)

1. What are the key success factors for raising money given the difficult economic climate?

The answers that dominated were all around revenue, profitability and cash flow. All the CEOs mentioned, in one way or another, that being able to demonstrate real revenue growth and momentum is essential. Some noted that in the past traffic or usage may have been sufficient, but now the "premium is on paying customers," and how get to profitability and cash flow breakeven using reasonable assumptions. Several mentioned that investors are as risk averse as ever, which of course comes as no surprise. They want to see concrete, well thought-out plans.

Investors have also become more sophisticated about the whole broadband video sector and expect entrepreneurs to be able to explain where they fit into the ecosystem and what their points of differentiation are. Importantly, they are looking for proven models (unfortunately an oxymoron for a pure startup), or at least some minimal history of success that goes "beyond PPT slideware."

A couple of CEOs noted that investors have shifted from asking "how fast can you scale?" to "how will you get through this crisis?" They no longer expect a quick exit. They are looking for a real plan which includes contingency tactics if for example, competitors do something desperate like cut their prices in half.

2. What are the biggest challenges?

The prevailing theme here was uncertainty, starting with investors' own business models. They're focused on how much of their funds to hold in reserve to shore up existing portfolio companies. They're trying to gauge their own limited partners' appetite for venture investing given the credit squeeze. Then of course they're trying to understand the impact of broadband market drivers like ad spending and user adoption. One CEO lamented the difficulty of persuading people to put new money to work on the very day the stock market's dropping by 500 points. Still another noted that all of this can lead to a "self-fulfilling prophecy" where everything freezes and missed opportunities abound.

With respect to the broadband market specifically, one CEO said the key challenge is showing how "you monetize video for your clients." Absent that, "it will not only be hard to raise money, but harder still for your client to spend money with you."

Another said that the level of scrutiny has gotten so high that it's not even worth talking to any investor which doesn't have its own track record of investing in the broadband video sector. It's just too hard to educated people in this environment. Another CEO added that your model needs to be "brilliant and bulletproof, with an A-level management team already in place." Boy, there's a steep hurdle to clear.

3. Is there any specific advice you'd offer to those trying to raise money these days?

Many of the answers to this question reflected fundraising basics: understand your business thoroughly, put a balanced team in place, seek out investors you know first, have a solid plan, and bootstrap as much as possible first.

With respect to the raising money in the current lousy market, there was a broad range of sentiment. One CEO said "Don't...the terms are going to suck..." while another said to be "incredibly realistic about how much to raise, your burn rate and valuation." On the more optimistic end of the spectrum, one said "The market's poor performance means that investors are looking for new opportunities. Ignore all the negative energy and naysayers." And another remarked that "Even during the tech disaster of 2001-2003, angel investors, VCs and tech behemoths were still putting money to work in promising sectors." Another heavily emphasized the value of loyal and supportive existing investors (if there are any) in helping making the case to new investors.

More tactically, one CEO said that the more you "minimize uncertainty that surrounds your business specifically, the better off you'll be." Another said to make the transaction as simple as possible, and to "get the big items off the table first." Still another said to demonstrate "you're indispensable to customers, helping them weather the downturn." Finally one cautioned to be ready to take a lot more meetings than usual and expect a lot deeper follow up..."it may require you to go well beyond investors in your backyard to find the right fit."

Hopefully some of this is helpful to those of you trying to raise money right now, or thinking about doing so in the near future. Broadband video remains one of the hottest sectors out there; even still, if you're not getting a lot of love right now, you're not alone...

What do you think? Post a comment now.