Wall Street woes don’t stop startups

Turmoil on Wall Street may have slowed lending, but it hasn’t stalled innovation among Washington-area startups. Just days after Lehman Brothers filed for bankruptcy last month and the Federal Reserve bailed out American International Group, Reston-based BrandClik officially opened its doors.

Co-founder Lowell Perry said he was confident that the text-based online advertising network would be successful, but he acknowledged the challenge of launching amid volatile economic times.

“Unfortunately, we didn’t know this all was coming down the pike,” said Mr. Perry, vice president of the 12-member firm.

BrandClik teams up with Web publishers and advertisers to make money from click-throughs of brand names.

The system tags a participating advertiser’s key words and creates links to Web sites of their choice. Content providers are then paid when readers click on the text.

The company, currently self-funded, is in talks with venture capital firms in hopes of securing between $2 million and $3 million in an initial round of financing.

Mr. Perry cited the benefits of BrandClik’s advertising system - in which advertisers can take advantage of their own trademarks, in contrast to other models such as Google Inc. that allow anyone to bid on a word - and continued growth in the sector, said he doesn’t foresee any problems getting funded.

“Online advertising been growing every quarter, every year, and this is really a way for advertisers to control their costs but also generate higher traffic to their Web site,” he said. Still, he noted that investors are being more cautious.

“Everyone right now is kind of counting their pennies and making sure things add up, whereas the dot-com boom of the 1990s it was, ‘You want to do e-mail? Great, here’s $20 million, go do it,’ ” he said.

Another Reston technology startup, Mpowerplayer, secured $2.5 million in Series A venture funding on Sept. 10, the week before the collapse of Lehman and AIG. Chief Executive Officer Michael Powers said the mobile gaming company is “in good shape” for the time being, though the credit crunch could impact future fundraising.

“If things go really bad, we may have trouble raising our B round, so I would really like to see what I could do to make the money last a bit,” he said.

Mr. Powers said the company, which makes merchandising software for mobile games, would not be as adversely impacted as other businesses during a downturn when consumers have less money in their pockets.

“If there’s some kind of recession or depression, people are still going to go to the movies, they’re still going to play games on their phones, so it may not hurt us,” he said.

Likewise, Heather Stouffer said her organic foods company, Mom Made Foods, has continued to grow “dramatically” in recent months, underscoring how certain markets are insulated from the downturn.

“I always tell other entrepreneurs, if there are areas that people are very committed to, it’s in children, pets, weddings, organics and green,” she said. “Our consumer is very committed to both nutrition and organics regardless of what’s happening to their family budgets.”

Story Continues →