The cash-happy investor days appear to have ended with the close of 2012, so tech startups of every stripe are currently pressing the flesh and locking down lunches with people of means before funds dry up. And Tongal and Convertro have already cracked the cash code.
Tongal, which utilizes crowd-sourcing to make video ads for brands like McDonald's, Procter & Gamble and Benjamin Moore, revealed today it has raised $15 million from Insight Venture Partners, an investment firm known for funding start-ups like Twitter and Tumblr. The five-year-old company allows brands to post video advertising projects and then lets creative-minded professionals or consumers post work. The winning work gets a paycheck from Tongal, which says its revenue grew by 400 percent last year.
Also today, Convertro announced $5 million in funding from Bessemer Venture Partners and DAG Ventures. The Santa Monica, Calif.-based startup offers a cross-marketing and media-attribution service that's designed to gauge the success rates of advertising campaigns by employing a proprietary tag system via clients' websites.
And while it's been a good week so far for Tongal and Convertro, at the same time many say investor cash is going to be much harder to come by in 2013 when compared to the prior two years. In short, due to the recent Wall Street woes of Facebook, Groupon and Zynga, the money people have grown skittish on tech.
So what to make of the funding rounds by Tongal and Convertro? Brian Wieser, senior research analyst for New York-based Pivotal Research Group, advised to take them with a grain of salt.
"There are a few issues impacting the venture world presently," he said via email. "First, many funds have been challenged to post solid returns to their limited partnerships [LPs]. Second, new funds have been challenged to raise money as LPs have been rebalancing their portfolios. The two issues together means that fewer companies get funded and those who are doing the funding are being very selective."
Kelsey Falter is CEO of Poptip, a 2012 start-up that received $1 million in angel funding right out of the gate. While Falter has paid close attention to the industry speculation that cash might be harder to find this year, her take on this year's market can be summed up as such: startups that measure results and deliver on their promises would likely be fine.
"The good companies will live," Falter predicted, "and the bad companies will die."