Who needs investors! Why many startups should bootstrap instead

Who needs investors! Why many startups should bootstrap instead By Andrew Gazdecki, Guest Contributor May. 25, 2013 Summary: Many of today’s startups are obsessed with figuring out the best way to score investors. But for many companies bootstrapping it might result in a better product and a healthier business in the long run. With 500 Startups Accelerator’s new class introduction video and its notorious chant, you can’t help but wonder if the current system for funding startups is really the best route to building lasting companies. Some even believe that the funding-centric mindset of startups in Silicon Valley is toxic. I couldn’t agree more. Which is why, other than some modest help, we opted to not pursue investors for our company and go it alone instead. I’m convinced that for a lot of startups (though certainly not all) choosing to bootstrap instead of searching out VC money is the better strategy for a number of reasons. A focus on pleasing customers, not investors When you don’t have a lot of money, you’re forced to turn to the funding source that rarely tolerates mistakes: customers. Specifically, focusing on the product results in the creation of a “minimal viable product,” a pared-down, core offering that delivers a clear value to customers. And if all of your efforts are focused on designing a product that customers want, enjoy, or find useful, you’ve got a much better chance at success than someone who’s focused instead on convincing investors that the business will be viable one day. Skeptical? Companies like SquareSpace, WuFoo, Braintree, Lynda.com, 37 Signals, Campaign Monitor, Github, and many more were able to become successful without relying on traditional rounds of funding. And we built our company, Bizness Apps, from the ground up, without any significant outside funding (and we not only turned out just fine, we’re also profitable). Now, that’s not to say that a business can’t chase both customers and investors at the same time, as clearly many successful companies have done just that. But in our opinion, it can be harmful to worry about what investors think when you should be worried about customers, a much more sustainable and important funding source. Limits set useful boundaries Being broke is a wonderful system for cutting through the options and setting limits. It forces you to think creatively about how to get things done. So where many established or funded companies would tend to throw money at a problem and explore all the avenues possible, a bootstrapped company will have to find the best way, fast. This leads to a culture of problem solving that almost every successful company has, to some extent. At Bizness Apps we learned this while working on our mobile food ordering system. We couldn’t afford to develop both a native and mobile web version at the time, and so we made the conscious decision to develop an HTML5 version initially that would work across all mobile devices. The decision saved months of time and thousands of dollars in development costs. Doing so not only got us to market faster and cheaper, but allowed us to get user feedback sooner and improve the product. Urgency inspires efficiency When you’ve got money in the bank and know the bills will be paid for months to come, it’s easy to spend late nights debating the company’s choice of colors for the logo while more important matters tend to get left for tomorrow. The bootstrapped company, on the other hand, is grinding it out to produce a product that sells. A lack of funding has a way of making prioritizing tasks easier. A core sense of urgency usually leads to the most critical tasks being handled first, while less important matters are saved for later (as they should be anyway). The result is that spending is more prudent, the product is designed in a focused manner, team members and resources are employed more wisely, and the business as a whole enjoys a great return on each dollar and hour spent. Without a huge runway at Bizness Apps we went above and beyond for our first paying clients. Even though our service was “do-it-yourself,” we bent over backwards to help new customers set up their mobile apps for them – knowing that we wouldn’t have a second chance. The extra effort paid off. Not only did this help improve our product and convert users to paying customers faster, but we gained invaluable feedback along the way. Enforcing discipline and accountability There’s no room to be loose with resources, with design, or with responsibilities in a bootstrapped company. As a result, a culture of discipline in many areas of the business tends to arise organically (otherwise, the company falls apart pretty quickly). So deadlines can’t be allowed to slide far, if at all, and every member of the team is held accountable for delivering their share. It’s the discipline of a well-run acrobatic family: Everyone has a job to do, and a mark to hit at a particular time and place, or everything else comes crashing down. In any industry, maximizing returns from time and money spent is often the most basic central goal. In a bootstrapped company, it’s woven into the fabric of the enterprise. At the end of the day, all entrepreneurs who hope to build something more than just a salable idea should ask themselves one fundamental question: Do I really need funding? Andrew Gazdecki is the founder and CEO of Bizness Apps, a do-it-yourself mobile app and mobile website platform for small businesses, and Bizness CRM, a CRM for selling to small businesses.

BetaBeat: The LowDown on High Tech

Betabeat Pitch Series The topography of New York’s tech scene has changed since 2011, when we first peeked behind closed doors to document the fundraising process for season one of The Pitch. According to the latest reports, venture capitalists are investing more money in more local tech startups, luring expats from fashion and Wall Street to pursue their dreams and launch their own company. But success is far from guaranteed, especially with the spectre of the Series A crunch and difficulty in getting users to download and engage–never mind pay for–your product or service. That’s why, for our second season of The Pitch, we’re letting you decide which startups get a chance to sell their concept on camera to investors from top notch firms like Softbank Capital and Lerer Ventures. Because, hey, if the founders can’t convince you to vote, how will they ever convince VCs to invest? Will it be the team gamifying college admissions? The platform for managing finances and responsibilities with your roommate? The matchmaking service for your closet? Or, perhaps, the site that lets users crowdfund meals for the homeless? Readers are welcome to vote as many times as they would like. The 10 startups with the most votes by midnight Thursday, March 28th will have their pitch vetted on camera by Nikhil Kalghatgi from SoftBank Capital and Steve Schlafman from Lerer Ventures, and vy for the chance of taking home $10,000 in funding. Here they are, in their own words. Check out the above slideshow and click “like” to vote for your favorite startups.

The end of Indian IT staffing as we know it

The end of Indian IT staffing as we know it Harichandan Arakali and Tony Munroe BANGALORE/MUMBAI (Reuters) - India's IT outsourcers are promoting "mini CEOs" capable of running businesses on their own, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staff. The shift by Infosys Ltd (INFY.NS) and others is symptomatic of a maturing industry that wants more revenue from its own intellectual property instead of providing only labour-intensive, lower-margin information technology and back-office services. For young graduates who see the $108 billion IT industry as a sure pathway to modern India's growing middle class, the transformation is unsettling. Dozens of industry aspirants who were recruited on campus by No. 4 player HCL Technologies (HCLT.NS) recently protested outside its offices in several cities. They were offered jobs in 2011 before graduating last year but have not yet been given joining dates - or paychecks. "Dear H.R. You were also a fresher... once," read a sign carried by two protesters in a photo in The Hindu newspaper. GRAPHIC on India's IT sector growth: http://link.reuters.com/ruc86t For slideshow -- Peek into Indian BPOs, click http://in.reuters.com/news/pictures/slideshow?articleId=INRTXXWL0 HCL's December quarter profits and revenues rose while staff numbers shrank - a rare trick in an industry that has long aspired to break the linear relationship between headcount and revenue growth. Just 20 percent of the 5,000-6,000 campus recruits offered HCL jobs in 2011 have been taken on board since graduation last summer, and HCL said it made no offers in 2012 to students who would graduate in June 2013. Slower growth, fewer people leaving, greater demand by customers for experienced staff, and increased productivity through automation and software have put pressure on all recruits, according to HCL, which said it expects to accelerate bringing entry-level staff on board from August. "It's not that the demand doesn't exist. It exists for different skills," said Ajay Davessar, HCL's head of external communications. "Typical roles which a student thinks, 'I'll just go there and start coding, and have a good life,' are being tested to reality... Any applicant, be it fresher or senior, will have to have flexibility in applying the skills elsewhere." FEWER 'CODING COOLIES' Tech Mahindra Ltd (TEML.NS), the No.5 player, is naming 100 of what it calls mini-CEOs who will be given broad latitude to run their parts of the business. "We're moving towards a situation like the developed economies, where we're asking the people to be more deep," said Sujitha Karnad, who heads human resources at Tech Mahindra. "We want more solution architects to be here. We don't want the coding coolies anymore, that's clear," Karnad said, employing a term commonly used in India in association with menial labourers. While plenty of Indian back office work such as technical support, processing insurance claims or staffing call centres will remain labour-intensive, software services firms are looking to move up the value chain, which means relying less on the time and toil of staff. Growth in revenue per employee across the industry could expand to 5 percent a year in the next two years from about 3 percent over the past five, said Forrester Research principal analyst Frederic Giron. The growth rate is likely to accelerate from around 2015 as intellectual property-based work accounts for a growing share of the total, he said. India's IT services industry grew in large part because of the availability of cheap skilled labour, an advantage that is eroding as wages and other costs in India rise. In years past, it was cost-effective for IT companies to hire new graduates by the thousands and keep a portion on the "bench" awaiting deployment on a client project. But budget-constrained clients now demand shorter lead times. IT vendors that might have hired people six months in advance of an expected contract are now working with a one- or two-month window, said Surabhi Mathur Gandhi, senior vice president at TeamLease, a staffing consultancy. Traditionally, about 30 percent of Indian IT services industry staff are on the bench at any given time, often in training, as they await deployment to client work. In the December quarter, about 70 percent of Infosys staff and less than 65 percent at No. 3 provider Wipro (WIPR.NS) were deployed on billable projects. At Tata Consultancy Services (TCS.NS), the largest Indian IT services company, the figure was 72 percent, within what Ajoyendra Mukherjee, its human resources head, calls the comfort range of 70 to 74 percent utilisation. "I think we can push it up to 75, 76," he said. Another IT services company, iGate Corp (IGTE.O), envisions a future where just 10 percent of staff sit on the bench, said Srinivas Kandula, its human resources head, who predicts that the size of its bench will shrink by 2 or 3 percentage points a year over the next five years. BACK-UP PLAN Shorter benches mean a smaller share of hiring is direct from campuses, as seasoned professionals moving from a competitor would be less willing to wait to be deployed and firms are reluctant to pay them to do so. Companies are also binding hires, especially experienced ones, with three-month notice periods and no-buy-out clauses, compared with one-month notice periods previously. Among top-tier companies that are most actively trying to push non-linear growth where revenues are not constrained by the size of the work force, about 70 percent of employees are experienced staff, up from 60 percent in 2008, said Rajiv Srinivas, an associate director at Tech Mahindra, who expects that to rise to about 90 percent in the next two or three years. At Infosys, while the net quarterly addition of employees fell from 4,906 people in the March quarter last year to 977 in the December quarter (excluding an acquisition), lateral recruitment held steady at an average of about 4,300 staff per quarter through December, meaning the percentage of campus hires was much lower. "Earlier, the focus was more on career ... You get into a job, you start learning, and slowly acquire knowledge over a period of time," said Sunil Gupta, who joined Infosys as vice president of quality about six months ago from the Indian unit of CGI Group's (GIBa.TO) Logica Plc. "Today the value of a professional is judged by how quickly you're learning, how quickly you're adapting yourself and changing along with the environment," he said. For young Indians who saw IT as a ticket into the middle class, the change means that career path is becoming less clear. Those who do break in and build valuable skills will remain in demand, but the days of young IT staffers brandishing five or more competing offers are over. Yet that hasn't necessarily translated into slower wage growth. Mercer LLC expects industry salaries to grow 12 percent this year, the same as in 2012. As India's economy diversifies, graduates have more attractive career options, including at multinationals with a growing India presence, such as Google Inc (GOOG.O), which means IT vendors must fight to stay attractive. "We see IT companies as a back-up," said S. S. Jayaram, a final-year engineering student in Bangalore who says he chose a job in India with Mu Sigma Inc, a fast-growing U.S.-based data analytics company, over offers from IBM and TCS. (Editing by Emily Kaiser)

Venture Hacks

Launch: AngelList, a curated list of angel investors by Nivi on February 2nd, 2010

I’m psyched to announce AngelList, a curated list of super high-quality angel investors. And how to reach them. Investors like Jeff Clavier, Dave McClure, Rob Hayes, Aaron Patzer, Brad Feld, and 50 other investors have already joined. I want to thank all of the angels for taking the time to fill out these extensive profiles. And it’s not fair for me to list just a few of the investors here — they’re all awesome. You should click and browse the entire AngelList. Together, they represent $80M that will be invested in early-stage startups this year. Angels: How to join AngelList If you’re an angel investor, apply to join AngelList here. At a minimum, you should have made two $25K angel investments in 2009 and plan to make two more $25K investments in 2010. Startups: How to contact the angels Read an angel’s profile before you try to get in touch with him. All the angels have listed how many investments they expect to make this year, their typical investment amount, the markets they invest in, how to get intros, and lots more information you can’t find anywhere else. Some of the investors let you contact them directly. But, before you do, build a minimum viable product and learn something about your customers by putting it in front of them. If you can’t get that far on your own, go find some idea investors instead. Then send the angels an amazing 150-word elevator pitch. Don’t send them nonsense. Angels talk to each other and they talk to me. Your reputation is all you’ve got — so please follow our suggestions in the previous paragraph. And — stay tuned — we’re announcing a sweet new way to reach AngelList soon. Get AngelList updates Get notified about new angels on AngelList via RSS or Twitter. And here’s a Twitter list of the angels on AngelList: Anatomy of an (un)fundable startup by Nivi on June 22nd, 2011 Naval and Mark Suster recently gave the keynotes at the 7th Founder Showcase. Andrew Chen did a better job of describing Naval’s keynote than I ever will: “People spend a surprising amount of time on things that will contribute little or no value to getting them to a seed round, and this talk is the best I’ve seen in terms of presenting the issues in its entirety. “Naval broke down the 5 main qualities of an ‘exceptional startup,’ in the following order: 1. Traction 2. Team 3. Product 4. Social Proof 5. Pitch/Presentation “And while all these qualities are important, Naval explained, the most important thing is to understand that: ‘Investors are trying to find the exceptional outcomes, so they are looking for something exceptional about the company. Instead of trying to do everything well (traction, team, product, social proof, pitch, etc.), do one thing exceptionally. As a startup you have to be exceptional in at least one regard.’”

Anatomy of a (un)fundable startup from Venture Hacks

Chris Dixon is not only joining Andreessen Horowitz; he’s leaving New York By Sarah Lacy On November 19, 2012 Chris Dixon has long been one of the most vocal advocates of the New York tech scene. He’s heavily involved with HackNY a program that promises to “keep kids off the street” — Wall Street that is. When he sold his latest company, Hunch, to eBay one of the big plusses was that eBay was going to build out a huge campus in New York complete with hot-desking options for local entrepreneurs and an auditorium for a speaker series. And when I once suggested to Fred Wilson over lunch that he was the godfather of New York. He replied, “Well, if I’m the Godfather, Chris Dixon is clearly my number two.” Not anymore. Dixon is moving to Menlo Park as a condition of his new– enviable– job as the newest general partner at Andreessen Horowitz. It’s not that Andreessen Horowitz doesn’t believe in New York– three of its biggest deals are there in FourSquare, Fab and Quirky. But Andreessen Horowitz and Benchmark Capital are perhaps two of the only mega firms left who avowedly refuse to expand beyond Sand Hill Road. “We are a single office firm,” Marc Andreessen says. “We take teamwork really seriously, and it’s a big deal to have everyone in the same place.” Dixon is clearly conflicted about it. “You could think of it two ways,” he says, trying to avoid just the kind of story I’m writing. “You can think of it as I’m abandoning New York or I’m beginning the process of bringing the best venture firm in the country back to New York. I like to think of it as the latter.”

That may be how he likes to think of it, but if I were the New York ecosystem, I wouldn’t be holding my breath for a local AH office anytime soon. But no doubt Dixon will be an advocate for New York startups, particularly the ones he’s already invested in that may be soon seeking a series A. He has about 50 active companies in his portfolio, and some thirty were new investments made in the last year, he says. Dixon, personally, will still be spending a good deal of time in New York, and hopes to live there again one day. He emphasizes that he’s keeping his apartment in New York and will be back and forth a lot. That said, he also says that he knew he wanted to focus the next phase of his career on investing, not starting another company. And he’s long admired Andreessen Horowitz’s model of investing. “I’d be nuts not to take this job,” he says. And, he adds, like it or not, the bulk of the activity is still in the Valley. Cheerleading aside, roughly two-thirds of his angel portfolio was already in California. This move will effectively bring him closer to even his existing portfolio. “The reality is New York is doing well and growing but is still significantly smaller than California,” he says. “If I was going to start another company, I’d argue I could be anywhere as long as I can hire developers. But if you are going to do venture capital at scale, it’s clear to me that California is where you want to be based.” I should disclose that both Andreessen and Dixon are personal investors in PandoDaily, and two of the first calls I make when I need advice. I know from experience that they’re remarkably similar in how they approach the business of investing. Both have experience in enterprise and consumer, and both think about deals in terms of big trends playing out in the industry– not simply getting lathered up about a cool feature or app. I’ve seen both be vociferous advocates of entrepreneurs even when it puts them at odds with fellow investors. But similarities aside, Dixon will bring a decidedly new energy, brand and background to Andreessen Horowitz. All of the GPs are operators, but they are currently heavy on sales and public company experience. Sure Ben Horowitz has his edgy blog posts, but there is nary a regular Tweeter among them. None represent the voice of the edgy super angel class or the young entrepreneur. Dixon does both, but has the operational chops and experience so that he’s not just that. “I think he’s the best of that new breed of angels,” Andreessen says. “We already have a number of people who have run big companies employing thousands of people– we have that covered. If anything Chris has just avoided that emotional scarring.” Case in point: Dixon asked if Andreessen Horowitz had some laptop stickers so he could #humblebrag about his new gig by putting one on his laptop. “Stickers?” Andreessen literally didn’t know what he was talking about. “Entrepreneurs put them on laptops, and it’s great because it looks like they think you’re cool,” Dixon explains. “That’s an East Coast thing. No one would dare sully Jony Ives’ design out here,” Andreessen says. The deal represents another milestone for the firm too: Once-wunderkind Andreessen is no longer the youngest general partner at the firm. Sarah Lacy is the founder and editor-in-chief of PandoDaily. She is an award winning journalist and author of two critically acclaimed books, "Once You're Lucky, Twice You're Good: The Rebirth of Silicon Valley and the Rise of Web 2.0" (Gotham Books, May 2008) and "Brilliant, Crazy, Cocky: How the Top 1% of Entrepreneurs Profit from Global Chaos" (Wiley, February 2011). She has been covering technology news for over 15 years, most recently as a senior editor for TechCrunch.

Joel Spolsky Great Advice Tips on Starting a Company

WSJ - 2011/2012 Top 50 Start-ups

By COLLEEN DEBAISE And SCOTT AUSTIN Venture capitalists are betting that the next Google Inc. GOOG -0.20%or Facebook Inc. will have a name like Xactly, Chegg or Zoosk.

In what may be a sign of a re-inflating Web bubble, The Wall Street Journal's second annual ranking of 50 venture-capital-backed companies shows investors are chasing after Internet firms, many with a consumer focus. Makers of Web-based software like Xactly Corp., e-commerce sites like Chegg Inc. and social services like Zoosk Inc. pepper the list. It also features four online publishers and two makers of social-networking tools for businesses. Bloomberg News Chegg Inc., a textbook-rental service, moved up one notch on the list to No. 31. . Even those firms in fields without a particular tech focus, such as health care or business services, have incorporated social-networking or mobile technology into their offerings or business models. To be eligible for the ranking—compiled by research firm VentureSource, a unit of Wall Street Journal owner News Corp NWS -0.25%.—companies must have received an equity round of financing in the past three years and be valued at less than $1 billion, as the aim is to identify lesser-known contenders. That excludes a number of prominent companies, including Facebook, Twitter and Groupon Inc. Some 5,743 candidates were considered. The Wall Street Journal's list of the top 50 startup companies of 2011 is just out. Colleen DeBaise takes a look at the three firms that topped the list and the reasons came out ahead of the pack. . For the second straight year, a health-care company tops the list: Castlight Health Inc., a San Francisco firm whose technology allows consumers to run side-by-side comparisons of out-of-pocket medical expenses. The three-year-old company, formerly known as Ventana Health Services Inc., was No. 14 on last year's list. It takes the top spot from Pacific Biosciences Inc., a genetic-sequencing technology firm that went public in October. Start-ups with potential for technological breakthroughs in health care, mobile communications and business software topped The Wall Street Journal's second annual Next Big Thing list. Castlight, like others on the list, is trying to modernize various aspects of health care, an area that is benefiting from federal stimulus spending. No. 18 PatientSafe Solutions Inc. has designed a patient-safety system for Apple Inc.'s AAPL -0.61%iPod Touch, while No. 32 Everyday Health Inc. runs a network of health websites. Castlight scored high marks for raising $80 million from some big-name investors, including Oak Investment Partners and U.S. Venture Partners.and Venrock Many companies on the list are in the long-established IT category that venture capitalists have traditionally put their money into. For instance, the top 10 include companies that provide wireless infrastructure or data-management services. Xirrus Inc. earned the No. 2 spot. The provider of Wi-Fi technology made the cut in part because founder Dirk Gates previously took another high-tech start-up, Xircom Inc., public and then sold it to Intel Corp. INTC +0.92% No. 3 on the list, Xactly, a software-as-a-service company that provides sales-compensation tools, has partnered with heavyweights Microsoft Corp., MSFT +1.40%Oracle Corp. ORCL -0.14%and Salesforce.com Inc., CRM +0.13%which invested in the company last June. Several consumer Internet start-ups moved up the list, or joined it for the first time, showing the surge in valuations for anything dot-com. Among those moving higher: No. 8 Glam Media Inc., a publisher of lifestyle websites; No. 12 Etsy Inc., an online crafts market; No. 29 Zoosk, a social-dating site; and No. 31 Chegg, a textbook-rental service. The Next Big Thing 2011 Revisiting Last Year's Top 50 Venture-Backed Companies Veteran Investor Defends Start-Up Boom Which VC Firms Hold Top Bragging Rights? Methodology of Top 50 List Two firms that make social-networking tools for businesses made the list. No. 26 Jive Software Inc. is backed in part by Kleiner Perkins Caufield & Byers, which invested in Facebook and Twitter. No. 46 Yammer Inc.'s investors include Founders Fund, which bet early on Facebook, and Charles River Ventures, one of Twitter's first backers. Some companies on last year's list performed well enough to make the cut again this year, but lost ground in the rankings relative to their peers, highlighting the competitive nature of the survey. Solar-cell producer Suniva Inc. received better scores than last year but fell to No. 38 from No. 15. Silver Peak Systems Inc., a maker of data-center appliances, hasn't announced new equity funding since a $21 million round in early 2008, and slid to No. 44 from No. 20 partly as a result. Another company, Fusion-io Inc., a Salt Lake City-based maker of flash-memory drives, raised $45 million in new funding shortly after ranking at No. 2 last year, but it's now at No. 20 because its valuation grew more slowly than others on the list. On Wednesday, Fusion-io filed for a $150 million IPO. —Riva Richmond contributed to this article. Write to Colleen DeBaise at colleen.debaise@wsj.com and Scott Austin at scott.austin@dowjones.com

By ANGUS LOTEN How did last year's contenders in the "Next Big Thing" list fare after they were revealed in March 2011? The Full Rankings Start-ups with potential for technological breakthroughs topped The Wall Street Journal's third annual "Next Big Thing" list. The Wall Street Journal's third annual ranking of the top 50 venture-capital-backed companies shows a crop of contenders that overall are focused less on online consumers than in years' past. Emily Maltby has details on The News Hub. Photo: Cheezburger Inc. . During a period of world-wide financial instability—from the nation's downbeat economic news to the European debt crisis—most of the companies on the 2011 list have remained unscathed, if not prosperous. Six of the companies, or about 12% of the list, held initial public offerings, while another two filed papers to go public. Four companies were acquired, and the other 38 are still privately backed, including No. 1 Castlight Health Inc., a medical-software firm. At least one company didn't have such a positive fate, however—No. 50 Aprius Inc. shut its doors, underscoring the difficulties for venture capitalists in predicting which start-ups have the greatest potential to succeed. About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research. With prices for flash memory falling, Aprius struggled to find a market for its main product, a device whose selling point was bringing down the cost of flash storage for servers. Since launching in 2007, Aprius had raised $31 million in funding. Among the most high-profile IPOs from the ranking was No. 20 Fusion-io Inc., FIO +4.78%a maker of flash-memory drives for servers whose chief scientist is Apple Inc. AAPL -0.61%co-founder Steve Wozniak. The company, which made the list two years in a row, held its IPO in June 2011. The stock has since risen about 71%, pushing its market capitalization to about $2.85 billion. The Wall Street Journal reveals its third annual ranking of the top 50 start-ups in the U.S. backed by venture capitalists. More on The Next Big Thing 2012 Read more on our selected startups and how we arrived at the rankings: Looking for the 'Next Big Thing'? Ranking the Top 50 Start-Ups Internet Funding Boom Ends as Fast as It Began Picking the Winners Media Firm Specializes in Humor Web Sites Genband's Technology Makes It a Winner The Methodology Behind 'The Next Big Thing' . Outperforming Fusion-io on the stock market is No. 49 ServiceNow Inc., NOW +3.78%which held one of the first tech IPOs since Facebook Inc.'s FB +1.34%offering. The cloud-computing company's shares have nearly quadrupled since the June IPO, giving it a value of almost $5 billion. Other IPOs include No. 10 Imperva Inc., IMPV -0.80%a provider of data security and audit systems; No. 16 Active Network Inc., ACTV +1.94%which offers an online registration platform; No. 26 Jive Software Inc., JIVE -0.06%provider of social-networking software for businesses; and No. 40 ExactTarget Inc., ET +3.63%an email marketing provider. Last month, payroll software firm Workday Inc., No. 24 on last year's list, filed for a $400 million IPO after revenue more than doubled to $119.5 million for the first six months of the year. And cancer-drug developer OncoMed Pharmaceuticals Inc., ranked No. 41, filed for a $115 million IPO in May. The Top 10 Venture-Backed Companies A closer look at the companies that topped this year's Next Big Thing list. These companies weren't the only ones poised to deliver investment returns to their venture-capital investors in the past year. Four of the firms on last year's list were acquired, including Yammer Inc., Aster Data Systems Inc., TxVia Inc. and Xsigo Systems Inc. In the biggest deal, No. 46 Yammer, a maker of business social-networking software and a competitor of Jive Software, agreed in June to be acquired by Microsoft Corp. MSFT +1.40%for $1.2 billion in cash. Yammer raised about $142 million from venture-capital investors. Other deal prices were closer to earth. In March 2011, San Carlos, Calif.-based data analytics firm Aster Data Systems, ranked No. 7, was acquired by Teradata Corp. TDC +1.05%for $263 million. In April this year, TxVia, a New York-based payments technology company, which ranked No. 48, was acquired by Google to boost its mobile payment tool, dubbed Google Wallet. The terms of the sale weren't disclosed. Three months later, Oracle acquired Xsigo, ranked No. 33, a hardware and software maker for data centers, for an undisclosed price. As many as 28 of the 50 top venture-backed firms in 2011 have since raised additional equity financing, according to Dow Jones VentureSource, which, like The Wall Street Journal, is owned by News Corp. NWSA -0.15%Those funded companies include Castlight Health, which in May announced $100 million in new financing, the most raised by any of the top ranked firms in the past year. Coming in a close second, Workday Inc. closed $85 million in a funding round in October led by T. Rowe Price TROW +1.95%and Morgan Stanley Investment Management. —Scott Denne contributed to this article. Write to Angus Loten at angus.loten@wsj.com