Forbes published an article yesterday by Maureen Farrell stating that there’s a “signaling problem” for TechStars Boulder companies who don’t raise money from Foundry Group. “… one byproduct of [Foundry Group’s] generosity for any young Boulder company is that, if it hasn’t been funded by The Foundry Group, it must explain why. Otherwise it has a signaling problem, something that happens when a VC invests in an early round but doesn’t show up for later rounds.” And while I’m going to argue (forcefully) here that neither my partners nor I either believe this to be true or even wish for that kind of market power, I should acknowledge that I’ve heard this before. And not just in relation to TechStars…
A few days ago I received an email asking me if I had a “rule of thumb for determining when a start-up can no longer be considered a start-up”. The sender proposed a few potential answers but I thought this one might be a good one to put out there for feedback from readers. His suggestions were: *Two consecutive quarters of positive free cash flow?*Drop pooled benefits company like Administaff for in-house benefits administration?*Anything > C round, seeking to lever w/ mezz debt or file S-1?*Name of company becomes a verb in our lexicon?*Receive gov’t stimulus funding?*Oprah uses your product? For a long time I’ve asked entrepreneurs at what point their company no longer felt like it was a start-up….