VC's do Make Mistakes

Many a times first time entrepreneurs and those startups in need o fund make VC's look like they are demi gods. There is lot of talk about what kind of companies VC's fund and how much money they make. Isn't it ridiculous? Can there be a clan of people who are infallible, can there me a clan of people who are so foresighted that they know the future? Think about it. VC's do make mistakes, and a that to a lot. It's a common knowledge that only one in ten startups survive. This is something we all know. How about those VC's who are well known and have squandered the opportunity to invest in those companies, which went on to make a splash. Not all VC's are brave enough to speak of there failures. However, we have one Bessemer Venture Partners who speak of those opportunities which presented themselves, but did not grab it. Their list includes the likes of Apple, Intel, Google, eBay (Wow, they really botched up!). The following are excerpts from the page which gives you more details. "Bessemer Venture Partners is perhaps the nation's oldest venture capital firm, carrying on an unbroken practice of venture capital investing that stretches back to 1911. This long and storied history has afforded our firm an unparalleled number of opportunities to completely screw up." .............. "Our reasons for passing on these investments varied. In some cases, we were making a conscious act of generosity to another, younger venture firm, down on their luck, whom we felt could really use a billion dollars in gains. In other cases,.........." Now comes the sexy part......

"Apple Computer BVP had the opportunity to invest in pre-IPO secondary stock in Apple at a $60M valuation. BVP's Neill Brownstein called it "outrageously expensive." Federal Express Incredibly, BVP passed on Federal Express seven times.

Google
Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?” "

What do you say?

Decoding VC Speak

In an earlier post I wrote on various "Tips to ptich before vc". Today let me point you to some very useful insights on decoding the what VC's speak. In very much a similar way, VC's are as difficult as a girl to understand. However, the advantage with VC's is some of them give you insights into their working.

"I will partially reproduce here a post titled "Translating VC Speak" by Sanjay Anandaram. All too often hopeful entrepreneurs approach venture capitalists (VCs) and then keep approaching them with the same set of slides. After a while, disappointment sets in. ‘VCs in India are risk averse’, ‘They do not understand my business plan’, ‘None of them have operating backgrounds so they cannot appreciate the position’ are some of the common refrains. It is, therefore, worth understanding the language used by VCs during the meetings. “Interesting but…..” The word ‘interesting’ has many meanings but almost certainly never means that the VC is excited. The meaning of the word varies from ‘OK, nice’ to ‘intriguing’. It is also used as a place-holder or a punctuation mark. The ‘but’ that follows is dangerous. Means the VC is not positively inclined. “Who else have you talked to?” This is not a general innocent question. This is a way for the VC to know who else is looking at the deal and therefore, how he or she should pace the decision-making process. If a lot of VCs have been approached without much progress, the red flag goes up since VCs do compare notes about the deal among themselves. Usually, VCs work in syndicates and want to know if the other VCs being approached are people they would like to work with on the deal in question. In some cases, it can mean that the deal is getting hot and therefore, they need to move fast."

Please go to the post for more such tips.

[pErson pRofile]
Sanjay has over two decades of experience and belongs to the been there, seen that and done that breed of Indian techies. Some of his achievements as below.

• A Corp exec at Wipro he was involved in setting up various new businesses.
• Co-founded a VC backed startup in Silicon Valley, which got acquired.
• Started India's 1st e-zine for entrepreneurs in 1999-00.
• Co-founded JumpStartUp pioneering early stage VC fund focused on deals across the Indo-US corridor.
• An active mentor/advisor/angel to startups.
• An advisor to funds.
• Regular speaker and writer on startups and entrepreneurship
• His current engagements include, writing on startups at the blog "Startup Journey"and Financial Express (every other Friday), teaching a biz plan workshop elective at INSEAD (S'pore) campus and at IIMB, work with TiE and Nasscom to drive entrepreneurship.

[cRedits]

Tips to Ptich before a VC

Not very often do VC's, especially VC firms give an insight into how to deal with them. Whether you get money or not depends a lot on the how you make a pitch to the VC.

Sequoia Capital(Google!!) has the following list on its web site. A very good list. It is a solid example of KISS(Keep It Short and Simple) in my opinion.

Under the Elements of Sustainable Companies, I like the one "Clarity of Purpose". What are your favorites?