The New York Times is glowing over Fred Wilson and Union Square Ventures right now. I must say the piece is interesting to read, I bet very inspirational for many of the doe-eyed entrepreneurs out there.
Personally, I have mixed feelings on taking a start up through venture funding. Call me a purist, but I think your product should pay its own way. HotorNot is a perfect example of this. I do however like Union Square’s approach of making small investments early for only a 5% stake. This helps the company get off the ground without having to completely sell its soul. Duncan goes on to make a pretty solid point on that, their small investment helps to secure the option for larger rounds in the future, typically when the start up needs it most. Is this a sneaky or smart approach? Probably a little of both. All is fair in love and business as they say (or at least I do), so I can’t really fault them for that. If their model can take small but great ideas like Delicious and Feedburner to a huge sale, one would be pressed to say it doesn’t work.