Entrepreneurs Learn How to Survive Without Funding at FailChat

A startup entrepreneur should only raise money if they have a really good reason to and they have plans to use the cash.

That was one of the takeaways from last night’s FailChat, a gathering of entrepreneurs and investors, held at the pariSoma loft in San Francisco.

The idea behind the event is that many companies today don’t get funded. Considering that, how does a small startup survive tough competition, company growth, and unpredictable markets with virtually zero capital? So says Cass Phillipps, executive produce of Webwallflower Events, which has organized four FailChat meetings this year and also is putting together FailCon in October.

Among those speaking on the panel last night (pictured here) were Lyn Williams, founder of Mysoiree.net; Pat Diven, founder of AddtoAny; Christine Herron, principal at First Round Capital; and Gregarious Narain, currently at Klout.com and co-founder of LilGrams.com.

The panelists mostly swapped stories about what they learned from launching startups and answered questions from the audience about alternative sources of funding and other tips they should know. Herron, for example, advised burgeoning entrepreneurs to not use a gmail account for business-related communications. “Buy a domain for your company,” she said. “Be serious about your startup.”

One of the funniest exchanges, though, was when an entrepreneur mentioned how he didn’t want to give up control to a VC. Herron, who’s been with First Round since 2008, following a stint at Omidyar Network, spoke up and asked, in defense of VCs: “Why are founders worried about losing control? What do you think people will make you do?”

To be fair, the event wasn’t entirely anti-VC. Among those who I met last night was Brian Zisk, strategic advisor for Collecta, which monitors Twitter and the update streams from blogs and social networking sites. The company recently raised $4.7 million in capital from True Ventures and Dace Ventures. Zisk was complimentary of his VC partners–his board of directors includes Dave Andonian of Dace and Jon Callaghan from True, while Jon Chait of Dace is a board advisor. Zisk said he was thankful for their advice and the growth their funding has helped sustained.

Also at the FailChat event was MogoTix, a two-person startup that handled the ticketing logistics for the event. The San Francisco-based company offers paperless ticketing over mobile phones. CEO and co-founder Scott Thorpe said the company has raised $115,000 in seed funding from angels, including, among others, DaveMcClure and his 500 Startups fund. MogoTix is one of the first startups, in fact, to raise money from McClure, who is in the midst of raising $30 million for what he calls “a micro-venture fund.”

“Startups like us don’t need a lot of funding,” Thorpe said. “We are able to do so much with that little amount of cash, since it’s just the two co-founders.”