Over the holidays I had a chance to spend lots of time with my two oldest daughters. They’re in that awkward phase of life where they’re not really little kids anymore, but they aren’t adults, or even teenagers yet either. It’s a phase marketers have come to call “tweens”.
Wedged between these two developmental phases, tweens flit around, trying to figure out who they are. They run through different styles of clothes, music, foods, gadgets, looking for the ones that will help define them as they shed the old and put on the new them.
The real challenge for tweens is they just haven’t found their place in the world yet, but they can’t go back to where they once were. So they’e stuck in between trying to figure themselves out.
We’re less than one week into 2012 and I’m finding myself surrounded by tweens again.
But this time it’s not my kids.
These tweens are the startups that raised between $500k and $2M last year. They’ve made some progress, but not enough to be be burning up servers. They’ve raised enough capital to prove or disprove some of their original theses, but are still uncertain about what the results from the tests are telling them. They’ve taken on the dilution and expectations that go along with the seed round of funding, but they can’t convince VCs they’ve achieved enough to warrant the $5-$10M round they really want.
It’s an awkward phase.
Not a brand new idea anymore, but not a household name either these startups are struggling to find their place in the world too. Some have investors who are willing to continue supporting them as they figure out who they are. Some don’t. Many of them should go out of business or get bought for scraps, but some of them shouldn’t.
Often these aren’t bad companies. Many of them are run by founders who have learned a tremendous amount suffering through that awkward discovery phase. They’ve validated their market, they’re energized to build and ready to tackle the world of opportunity they’ve discovered. problem is, they’re broke and burdened with an already heavy cap table and an overly optimistic valuation.
Some will give up. Some will hold out. And some will recognize the early mistakes they made around their execution and cap table then take this window of time to make the needed corrections to build their little kid of a business into a full grown adult.
I’d like to see more do the latter. And if the emails in my inbox are any indication, I think this will be one of the more exciting phases of investment opportunities in 2012.