Startup Chatter by Donna Bogatin

How fitting? Just yesterday, I asked the head of sales at SocialMedia, “the social advertising network,” how the startup could confidently build an entire venture capital backed business upon third-party platforms which flaunt Terms Of Service that give zero protections to application “partners.““

No problem,” Somrat Niyogi, told me. After all, SocialMedia is just a stone’s throw from Mark Zuckerberg’s Facebook, and they chat “everyday,” he said.

As an Adjunct Professor of Information Systems for the NYU Stern School of Business MBA program, my alma matter, I told the SocialMedia app advertising evangelist that I recommend against dependence upon third-party platforms offering no contractual assurances.

SEE: Zittrain to Web 2.0 Geeks: FIGHT Google, Facebook, Apple Lockdown

The “disappearance” of a purportedly overly friendly Slide Facebook application is but the latest real-world wake-up call to the real risky business of piggy-backing off of Zuckerberg’s “viral” success.

In other SocialMedia “news,“ Union Square Ventures (finally) shares a bit of information about how it interacts with portfolio company candidates during investment negotiations, but the takeaway is: Startups beware.

Last week, although managing partner Fred Wilson was booked by the WidgetWeb conference to speak about Widget-based business models for startups, he defiantly pre-announced at his blog that he “wasn’t going to talk about that.”

SEE: Microsoft Buys Navic: Tech Venture Capital Done Right

This week, it is managing partner Brad Burnham’s turn to take to the local circuit, as his cohort is on a if it’s Tuesday this must be Belgium country-hopping, four-week European tour with the Solomon-Wilson clan (creatively spun at the Wilson blog in terms of a newly-declared need to “solve our world’s problems” because “ Union Square Ventures can‘t just be about making money. “)

Burnham was recruited to speak on “Business Modeling” for social media startups at the SocialMedia Networks “Business School” yesterday, but there was no pre-post publicly dissing THAT agenda, although he also didn’t really “talk about that” as well.

The template business model for social network apps offered by the host social media ad network firm was, not surprisingly, an advertising-based one. Signature Union Square Ventures social media portfolio companies, however, convey distaste for Web services decorated with ads.

SEE: Disqus Revenues? NO COMMENT, Just Like Union Square Ventures

Despite both Disqus and Twitter publicly confirming they are indeed evaluating diverse revenue generating plans, no social media monetization alternative to an ad-supported one was offered by Burnham.

What’s more, while the two free-to-users Web services are unabashedly revenue-free now and for the foreseeable future, Burnham nevertheless claimed “cash flow” as a viable Union Square Ventures portfolio enhancing strategy in response to my question about lackluster exit by IPO or portal acquisition opportunities.

Additionally, Burnham increduoulsy, and illogically, said he “pays no attention to external environments,” as he is focused on “fundamentally transforming markets.”

How would a (theoretical) “cash flow” agenda actually enable Union Square Ventures to successfully exit its social media investments going forward? Burnham said “I can’t tell you how, or by how much” our bets will pay off.

On the early-stage valuation tactics front, Burnham was more candid, but also more distressing. Asked how Union Square Ventures values first-time Web 2.0 funding candidates, Burnham warned that startups should NOT  “come only to us,” because the valuation would NOT be “as attractive.” 

In other Union Square Ventures words, if entrepreneurs don’t want to get taken to the VC cleaners, they better be able and willing to “leverage” Vcs against one another to spur a “race” ensuring the “right” value.

All is fair in love and war AND VENTURE CAPITAL?

SEE: NYT’s Saul Hansell Calls Bloggers’ ‘Conversation’ Bluff, So Do I 

PLUS, DO YOU HAVE AN ONLINE STARTUP, OR AN IDEA FOR ONE? PITCH YOUR VENTURE HERE FREE AT THE STARTUPAPLPHA.COM FREE PITCH NETWORK!