Vulture Capitalists To Gather In Boston

Hide the women and children, and any stock you hold dear in your Internet start-up.

The Venture Summit East is starting up on Tuesday, which will be graced by such luminaries of the Sand Hill Road Gang as Tim Draper of Draper Fisher Jurvetson, Alan Patricof of Greycroft Partners, Michael Skok of North Bridge Venture Partners, Sunil Dhaliwal of Battery Ventures and Ham Lord of Launchpad Venture Group.

The Summit is a place for entrepreneurs to meet and, possibly, snag new partners and the liquidity that comes with it. But visionary leaders had better be prepared to give up a seat or two at the board room table, in addition to a significant portion of their interest in the company, all for a little scratch.

According to Robert Hendershott, a professor of private equity and entrepreneurship at the Leavey School of Business at Santa Clara University, that kind of financing may not be necessary for the right kind of start-up these days. As Claire Cain Miller concludes:

As the cost of starting a Web company decreases, thanks to cloud computing services and technology that entrepreneurs can rent instead of buy, many founders can finance a new company without the help of venture capitalists.

That backs up what Giles McNamee, founder of investment bank McNamee, Lawrence & Co., told me earlier this month, while we were talking about a dearth of venture money in the market. According to McNamee, VCs typically need to invest more money that the start-ups really need. “People are waking up to the fact that smaller amounts make more sense — there’s less dilution — and that they don’t need to spend $10 million on marketing,” McNamee told me.

Just last week Streamezzo, a promising company in the mobile application space, raised a modest $5.1 million, most of it from so-called angels — a term used for wealthy individuals who invest anywhere from several hundred thousand to a few million dollars — and strategic investors — corporations who have an interest in funding innovation in their field (in this case, mobile technology vendor Qualcomm).

Having $35 million in the bank might seem like a comforting notion, but that has to be balanced against the idea of having a board member or two who are more interested in an exit strategy than in your company’s success.

[Image courtesy of Wikimedia creative commons]