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The great funding challenge

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Wednesday, March 16, 2011

By Corey Paul

Portland lacks the framework it needs to help its web startups grow, said Darius Monsef, the CEO of the website COLOURlovers, to a crowd of fellow web developers Tuesday. Portland needs more investors who know the business, he argues, and more who can inject tens or hundreds of thousands of dollars into budding companies, instead of the millions provided by big venture capitalists. The city also needs a stronger web community, where people with complimentary skill sets or roles can meet easily and often.

tech babyMonsef (pictured at left with a local web developer) built COLOURlovers here. The site provides palettes for color schemes to a variety of designers, working on a web site or a magazine or a living room. It was a novel idea, recently rewarded with an undisclosed amount of venture and angel money — but from California, not Portland. Because just a few years ago, Portland proved too difficult an environment for Monsef, and the draw of  San Francisco investment money (and of the lady who's now his wife) proved strong. There he found a "mystical land of Startups" where he could discuss the nuances of running a web company with founders just like him.

Now, however, the 29-year-old Monsef plans to grow his company in his hometown of Portland again.

And there's plenty of incentive to do so, he says. Top web developers saturate the Bay's job market. Those seeking to run a company can usually find the money, while those seeking to work for one are often lured by fat pay and benefits of the Googles and Facebooks out there. Portland's cheaper, Mosef says, and it still has the talent.

COLOURlovers, thrice nominated for Best Community Website of the Year by the Webby Awards, has clients including Groupon, Martha Stewart and Hearst Magazines. It remains small — with five full-time employees and several contractors — much smaller than the organization Monsef founded before getting $50,000 funding from a retired Tektronix board member to develop COLOURlovers. That company was the non-profit All Hands Volunteers, which provided thousands of volunteers for relief during Hurricane Katrina and the 2004 tsunami in Thailand.

About 20 Portland web developers came to hear Monsef speak for an hour, then chatted with him for nearly that long. The informal session, at the Portland Incubator Experiment (PIE) under the Wieden + Kennedy building, was billed as a Portland developer's return to Portland on the blog Silicon Florist, run by PIE's director Rick Turoczy.

That characterization is a little misleading. Monsef will still work mostly in the San Francisco, close to the funding. Co-founder Aaron Epstein will remain in New York, which is close to a lot of clientele. That leaves only one co-founder in Portland, CTO Chris Williams. But all three were in town Tuesday celebrating the hire a new engineer in Portland. And if their company grows as signs suggest, they plan to hire more.

Monsef has pledged to work more toward building up a support system for Portland developers, and to provide the critical voice that he says is also lacking. Actually, the event at PIE came on the heels of a blunt article  Monsef wrote about his decision to leave Portland, published in Silicon Florist.

In it, Mosef argues that development organizations such as the Oregon TechLaunch Bootcamp, Portland SCORE and the Oregon Entrepeneurs Network, aren't much help to WEB startups, although they may benefit companies selling physical products. He says the same goes for advisors that demand payment and for investors that have little experience with web development.

"A lot of investors you have here now are more Intel, real estate, stock, financial — more traditional — and they don't necessarily understand what it is we are doing here," Mosef says. "The less familiar they are with the startup world, the more coaxing, convincing and handholding they are going to need to make an investment."

For example, a web startup doesn't need a business plan, just a solid idea and the will to execute it, Monsef says. Plans and projections, even of the most successful web startups, can change.

Several of the questions from developers at PIE focused on COLOURlovers' experience with Y Combinator, an innovative model of startup funding created in 2005 and operating out of Mountain View, Calif. In that program, companies receive a small amount funding — a seed like Monsef champions — and move to Silicon Valley for three months to refine their company with a group of experts.

Paul Graham, one of the Y Combinator's founders and legend among computer programmers as a creator of the first application service provider, will often accept companies with underdeveloped ideas but a promising team, Monsef said. He offered Flickr as an example, saying it began as an idea to share screen captures from video games before Graham helped it grow into the popular photo-sharing site that it is now.

The expertise in Portland must look to make similar investments in each other, Monsef argues.

"We have to be willing to bleed a little bit more, meaning not have all the added funding luxuries of San Francisco and slog through this together," Monsef says.

Corey Paul is an associate writer for Oregon Business.

 

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