Tag

venture capital

Leadership

Stop focusing on your startup valuation!

June 17, 2020

It never ceases to amaze me how hung up entrepreneurs get on the valuation of their startup as they raise money. It came up in a coaching session again yesterday.

In the abstract yes, valuation matters. It tells you how much of your company you are going to sell in order to raise money. It sets a baseline for you which you will (hopefully) exceed on your next raise. It’s a validation that your work has value.

But it is NOT a measure of pride, or ego, or size.

Your valuation, like a stock price, is a reflection of the perceived value of your company at the moment in time when you are raising money. There will be times when the startup market is hot and you can command more, there will be times when it has cooled because of an economic downturn, or a global pandemic, and your valuation will be lower. Or the market your idea is in is hot, or not.

What matters more than valuation is: Are you getting the right amount of money to give your idea life? Think about the next one, or two, major milestones you need to achieve to prove your idea will work and is scalable. Then figure out how much money you need to raise to get 90-120 days past the critical proof point. Add to that number to allow for the unexpected and that is how much you must raise. Once you have that you are looking for an investing partner who shares you vision and will be with you on the journey.

The other consideration is what value opportunity are you creating for your employees? The higher the valuation on funding the higher their option strike price and so the less money they will make when you finally reach liquidity. Now, if your company is a rocket ship, the difference between an option price of 50 cents or a dollar doesn’t matter, but at a later stage the difference can matter and when there is a preference stack on your company getting greedy can wipe out your employees’ opportunity. We’ve seen this happen with unicorns who achieved huge valuations only to have them come down dramatically on sale or IPO. So don’t lose sight of the need to make your employees money as well as yourself.

I have written before that all venture capital firms are not equal. Some are good, some are awful. The same applies to angels btw. I have seen short-sighted angels do more damage to young companies and entrepreneurs than I would have thought possible by focusing on their cut and not the long term health of the company.

It is more important to a) raise the money you need and b) find a long term investing partner than finding the best possible valuation. If you own 40% of your company but it is worth $20M at the end you have short changed yourself and the impact your idea can have if, instead, you own 15% and it is worth $1B.

Photo: Stone canon balls Jordan © 2017 Penny Herscher

Career Advice

So you want to raise money – chose your investor carefully

October 27, 2018

At least once a week I take a call, or a coffee, with an entrepreneur who wants advice on how to raise money. We talk about her product and market, the stage of her business, how good is her story and what her vision is. And then we talk about the tactics of raising money. How to get a warm intro to reputable investors, how to think about angel vs. seed vs. venture, how much to raise, what a strong pitch looks like – the usual tactical coaching.

Yesterday I was delighted that the entrepreneur I was coaching also brought up how to assess the quality of the investors. The quality of the firm and the individual. She’d had a bad experience in the past and simply did not want to have a poor quality individual in her deal.

Many entrepreneurs never realize how important this question is: all money is green but it is not all equally valuable. Investors, like human beings, come in all styles and since building a company is a marathon not a sprint you want to be running with someone who is enjoyable to be with and who will help you win the race.

First, pick someone who has the same vision and values as you. You are (hopefully) in your venture because you believe you can change the world (if you are doing it to get rich stop now because you don’t get rich in the startup world by trying to get rich, you get rich by building something) and it’s very important that your investors want you to change the world too. There are many, many tough moments of truth when building a company, and none more so than when you get an offer for your company before you think you are ready – before you have built the strategy and value that you believe is possible. That moment is when you find out whether your investor truly shared your vision on how to change the world or was just telling you he did.

It’s also important to pick a partner who can do heavy lifting for you when you need it. Great venture firms have a rich, deep network to help you recruit, develop partnerships, manage sticky HR issues and even find office space.

Avoid the money based VC (often a former investment banker) who’s motivated by running a portfolio, who wants to tell you what to do but has never done it himself. Find someone who walks the talk and builds great companies. Find a former entrepreneur who has really done it him or herself. If you can, find a VC who has been doing it for more than 10 years and has a great track record – and talk to their CEOs – or find one who’s been a CEO, built a good company and taken it public. All this is visible on their web bios.

And pick someone you enjoy being with. Most companies take many years to mature and if you are going to meet with your board a couple of times a quarter for 5 years it certainly makes the journey more fun if you enjoy interacting with them.

Sadly there are many entitled, think-their-shit-doesn’t-stink VCs in Silicon Valley. I could fill a book of stories of men who think they are rich because they are smart and that they don’t have to be courteous or helpful. Who are openly rude, dismissive and condescending. For comic relief – one of my most bizarre meetings was with a young VC whose firm had been in early at Google and he spent the whole meeting behind his desk checking the Google stock price and telling me how much money he had made. He was not the partner in the deal, just in the partnership, and yet he still thought it was all about him and I should be impressed!

But at the same time there are plenty of men, and women, who truly love working with entrepreneurs and have a very healthy respect for how hard building a company is. The challenge is you may have to kiss a lot of frogs to find your investing prince or princess. So manage your time and do your research up front.

Of course, in the end, you do need to get funded and you may need to take what you can get, but if you have the chance to be selective, the right investor is more important than the highest valuation because you’ll build a better company, have a stronger chance to change the world and make more money in the long run with the right partner.

Photo: Valetta, Malta © 2018 Penny Herscher

Career Advice

How does your investor make money?

August 2, 2018

So you want someone to give you $100,000? $1,000,000? How does that person or firm make money?

Too often I review business plans which have a great idea, a huge market, but no viable business plan that explains how the investor makes a return. I saw two this week like this (one in the US, one in Israel). Terrific technology ideas, potentially large markets, enthusiastic smart young teams but no P&L, no future financial plan and no discussion of current valuation, or even readiness to discuss it.

Before someone other than your friends and family will give you a useful amount of money they are going to want to know how much return they are going to make, and over what period of time. Unless you are a former founder with an amazing track record, or flat out lucky (and you can’t plan for luck) you will need to be able to explain the following:

  • what the size of the market is for your idea – who buys what/when/why
  • how you bring your idea to that market and how much money you make over time (your best stab at your P&L over the next 3-5 years)
  • what your idea/prototype/beta is worth now (i.e. if you want to raise $1M and you only want to give away 10% of your company then you have to justify why your current company is worth $10M today)
  • how the value of your company grows over time and possible exits – why is it IPOable at some future date or who might buy it?

You don’t necessarily have to have slides for all of this because the first thing you need to do is hook an investor on your idea but if they bite and start to ask how you see your revenue and value developing you’d better have enough of an answer to get into a good discussion. Don’t be intimidated. Remember the investor does not know more than you do about your idea (even if they act as if they do), and whatever you say will not be what happens (reality has a way of messing with even the very best of plans) but you need to have thought about how you’ll make money and be able to engage the potential investor in a discussion.

Eventually you’ll need to be able to make the argument for how revenue grows, how much cash you need to get to cash flow breakeven (i.e. self sustainable) and what the company will be worth in the future when you do. And the great VCs, if they are intrigued, will then dig in and help you figure out your first business plan and how to value your initial round.

Photo: Dante’s tomb, Ravenna Italy © 2018 Penny Herscher

Equality, Leadership

It’s time for economic equality for women: WE2

January 4, 2018

Sometimes it’s just time. I am more deeply convinced now in 2018, than ever before, that the long-term path to a more sane, peaceful world is equality for women in society. The research is conclusive. Investing in girls and women transforms economies, and healthy, growing economies are more peaceful. But I am not a politician, I am not a Sociologist, I am a tech executive and so I need to practice what I know in order to do my part.

Women, and men, need to invest in women. Invest in education, opportunity, and advice. Put the time, focus and effort in to help women build businesses and careers that give them independence and equality so they can themselves invest in their society. And no more so than in the places where peace and hope and dignity are a daily challenge. Even in Israel, second only to Silicon Valley in startup funding, the statistics for women entrepreneurs are crushingly low.

I held a Salon at our home in the heart of Silicon Valley last Summer on Women Led Startups in Israel and Palestine (I choose different topics of interest to my  network of  SV women 3-4 times a year). The evening was a panel of four women in our garden: two entrepreneurs from Israel, one from Gaza and a Mercy Corps board member who has been focused on Palestine – followed by a discussion and Q&A. It was dramatic, inspiring and very thought provoking. The challenges of building a business as a woman in Silicon Valley have nothing on doing it in the Near East!

WE2 – Women for Economic Equality – was born from that evening. In a moment of passion I asked for volunteers to come with me to mentor women in Palestine and Israel and as a result we now have a delegation of Silicon Valley executive women visiting Tel Aviv, Gaza, Jerusalem and Ramallah in January.

It’s a mentoring delegation. We have a broad set of experiences between us as entrepreneurs, leaders, engineers, lawyers, recruiters and product designers and plenty of experiences, good and bad, to share. Together we believe women achieving economic equality is essential for sustainable peace. We’ll be meeting with female entrepreneurs, executives, VCs, board directors and business leaders, and supported by partners on the ground in each location. We’ll hold panels and small group mentoring sessions, one-on-one coaching and business plan reviews; we’ll share our career learnings and listen to the experiences and resource needs of the women we meet. And we’ll do it in the three, very different, regions of Israel, the West Bank and Gaza. We are not political, we just want to invest in women.

Hopefully this is the first of many to different parts of the world where women want to build economic independence (so ping me if you want to participate in the future). And if you want to follow us you’ll find updates on this blog, and on my social media.

Equality

Why, what and really? Yet another surreal week of sexual harassment in Silicon Valley

June 27, 2017 2 Comments

Yet another scandal of sexual harassment is unfolding in Silicon Valley this week, and after several nights lying awake, angry, thinking about the last 30 years, and expressing my ongoing frustration to a group of friends over dinner I was asked by a friend to answer 3 questions:

1. Why this still happens?
2. Are we really surprised that it does?
3. What does speaking up accomplish any more?

First to the news. As has happened thousands of times before a venture capitalist, Justin Calbeck of Binary Capital, sexually harassed women entrepreneurs attempting to raise money from him. But in an extraordinarily brave move 6 women spoke out, and 3 spoke out by name. The allegations were specific enough that despite an initial denial Justin Calbeck has now resigned and the firm no longer has strong support from its LPs. Its days are numbered.

Given that even the most egregious sexual predators don’t want to be publicly outed by the women they hit on, and we live in such a public online world, why does this still happen?

The reason is the incredible imbalance of power that exists in the venture fundraising world. Most VCs are clean cut white men. Most have been very successful financially…. and they think it is because they are smart. Some truly are. Company founders, old school VCs who have bankrolled winner after winner, VCs who are true company builders, but with the huge increase in capital coming into the venture market there are many VCs who got where they are by being in the right place at the right time. They were just lucky to be at a company that did well, they know the right people, they talk a good game and next thing you know they are raising a small fund from LPs who are desperate to find enough places to put their money and share in the phenomenon.

Venture partners get paid a lot of money to administer a fund, and entrepreneurs beat a path to their door to try to impress them. The entrepreneurs struggle to get their deck looked at, struggle to get a meeting, work hard to make an impact and as a result many VCs develop a sense of hubris and superiority. Rude, abrasive… and blend that sense of superiority with sex and you get some men who think it’s OK to proposition young women who are raising money.

The extraordinary generation of wealth going on in Silicon Valley now (and over the last 20+ years) will lead some people to behave badly. Behave badly to get access to that wealth (Uber being today’s poster child) and behave badly abusing their positions of power. Twas ever so when money is being made.

So why are we surprised? I am not. In fact I think in some ways the issue is worse and more pervasive now than it was 20 years ago. The objectification of women in media (see Miss Representation or https://seejane.org if you want to gather statistics on this) continues unabated and so some people forget that the young woman in front of them is not to be sexually objectified.

The prevalence of the bias against funding women should lead to a huge competitive advantage to the partners and firms that DO fund women and ARE gender blind. I get asked so often for a list of VCs who would be truly unbiased I think I need to create the list! If you have a fund that is actively looking for women founders, or have had a great experience with one, send me an email!

But the really tough question here is does speaking out accomplish anything?

I chose not to speak out in the 80s and 90s (and if that makes you angry stop reading here). I became very practiced at simply ignoring the sexual actions – the hand on my knee all through a coffee meeting – the hand on the back of my neck under my hair while talking with me – the stroking of my shoulder – all while I was clearly married. In my head I was made of stone, the action did not touch me, I believed if I simply ignored it and pretended it was not happening it would stop. Most of the time it did. Sometimes I would have to lift the hand off my body. And then sometimes the action would be so aggressive I would get upset and not be able to turn off my anger and I would need to remove myself from the situation before I blew up.

I did not believe speaking up would change anything, and was sure to backfire. Unwanted male attention was my responsibility, and shameful (perchance the influence of the nuns in my middle school). So I was not surprised when the one time I did go to HR for help with the unwanted attention of an executive I was told that if I made a fuss and sued I could get a settlement but my career would be over. Instead they gave me the words to say to get him to back off – turns out he had been warned before (but he was a valuable guy) and they were confident the right language would get the message across. I did, and it worked, but their words “you’ll never work in this business again” stuck with me.

No question the very brave women who have spoken up recently, including Susan Fowler who wrote the blog post Reflecting on one very, very strange year at Uber, will make local change happen. The situations they call out will change for the better in the short term. I do believe the tactic of brushing the complaint under the rug won’t work now so that is good.

But to get to systemic change in the long run we need to get away from the boys club, to get away from situation after situation being dominated by men, often with no peer-level women in the room. For most of my career I have been the only woman in the room, and often treated as an honorary male. I’ve heard my share of locker room talk, even now, and every time I choose my reaction – usually a blend of humor and outrage – just enough to get the message across without damaging my relationship with the speaker.

I frequently raise the need to have more women on management teams and in the board room, although it often falls on deaf ears, and I have to be careful not to be “difficult” (and I am sure some think I am). But I know for certain that once there are 2 or 3 women in a partnership, or in a management team, or on a board not only do the decisions improve (lots of research coming out about this now) but also the locker room talk and unconscious bias decreases.

I have great confidence that most of the men I have worked with are not sexual harassers, and do not wish to be biased. But we all have unconscious bias and gender bias is one that we are only now really starting to grapple with in the technology industry. The industry is big enough and the bro culture prevalent enough, particularly with many of the new economy companies, that we must deal with it. To do that we need to attract women into tech, help them stay in tech, coach them, promote them and get them into leadership positions in venture partnerships and companies so we can build a better culture in the industry.

So does speaking up accomplish anything? The answer is maybe. Depending on your role sometimes you can make more difference working from the inside. But huge credit to the women that do, and to the men that are outspoken about the need for change.

My Personal Journey

How 2016 rocked my world as I talked with women entrepreneurs

January 4, 2017 Leave a comment
 I am more convinced than ever that there is a bright future for women entrepreneurs and 2016 proved it to me!

I stepped back from being a full time CEO a little more than a year ago. It was time, for family reasons, and I set out to change my life. I still work (I serve on two public company boards) but I decided to spend a great deal more time with my father and my family than I have ever been able to do before, and to prioritize my time to giving back. But I had no idea what that really meant for me – what could I do that was meaningful other than work as a CEO?

I decided that I would just say “yes” to every request for help from entrepreneurs, especially, but not exclusively, women. Not that I would be a pushover and do anything I was asked, but I would say yes to any request for a meeting from an entrepreneur who wanted advice. A first meeting at least and if I thought I could make a difference I’d keep saying yes. I wish I could say I was inspired by Shonda Rhimes’ TED talk but I did not see it until I was well into the year. Instead I was thinking of it as following breadcrumbs without knowing where they were going to lead.

It’s been an extraordinary year, it’s taken me in directions I never would have expected, and it’s changing me.

I’ve met with many amazing female entrepreneurs. Aged twenties to sixties. A psychiatrist who has figured out how to use technology to dramatically reduce the cost of cognitive testing for veterans with PTSD or the elderly with dementia, a media executive with a passion for travel who’s changing how people explore the world, a technologist who’s figured out how to measure skin tone so you can buy the right makeup for your skin, a CEO with an IoT product that can tell you all about the water leakage risks in your commercial property assets (something I did not know was a big problem), a woman revolutionizing the sex tech industry, a woman with breakthrough security technology to protect your phone, a visionary who set up the first and only incubator in Gaza… a new calendaring app, a better travel itinerary planning app, a next generation geospatial model, better on-chip failsafe technology, the artistic director of a ballet, networking technology, machine learning technology … the whole gamut! I have found I love talking with entrepreneurs and CEOs. I love listening to their stories about their businesses, what’s working, what’s scaring them, how they are getting funded.

I ask questions, ad nausea, and then focus in on one of two challenges they face and discuss with them how to overcome them. It’s fun for both of us, and I realize I can help many of them. No judgement, just the experience of being there myself more than once before. And I now believe, more than ever, it is much harder for women to get venture funding than men. I have far too many data points now!

I’ve met with women hedge fund managers who only invest in women led companies, recruiters whose only business is placing women on boards, bankers who want to do deals for women CEOs. The movement is happening. Women are, more than ever, proactively helping women. I threw a book party for Joann Lublin’s new book Earning It – the party was 3 days after our horrific election – and I saw ~60 women (eating my husband’s terrific food and drinking good wine) talking to each other about how this cannot be our future and becoming even more committed to make a different future for women.

But I also visited Israel for the first time and I was hooked. I found Israel fascinating and a historical goldmine but then I spent time in the West Bank with family who are orthodox settlers, and at the same time joined a small group trying to help Palestine with Silicon Valley technology. Wow, that is a complex area. I am reading like crazy trying to understand, but it’s also an area where young women are starting businesses and where I can help.

2016 wasn’t all about female entrepreneurs. I’ve spent 25% of the year in Europe. Driving with my Dad through France, quiet days with him in England helping him write his life story, Italy with my daughter, with my husband, with my sister. Enough time that I know I was truly present for my family, for the first time in a long time.

I am not unaware that it is a privilege for me to be able to do this, but I also now recognize that it is not only money that holds us in our jobs. It is also social status, recognition, a sense of being important. One of my new friends, now in her seventies, and who had a very big, high profile CEO job, told me one of the things she found most difficult about retiring was not being important any more. We are all, in our own ways, driven by ego and giving up the identity that defined me for most of my adult life has had it’s hard moments, like when a man asked me at a fundraiser what I do for a living and when I said I am retired he said “oh” and walked away. I’ve had plenty of “invisible” moments this year and it takes some getting used to.

We may feel it’s hard for women entrepreneurs in 2017, but the groundswell is growing. The number of smart women building businesses inspires me. The number of powerful female CEOs inspires me. And in 2017 I am open for business to help them in any way I can!

Equality

The oldest profession in the world is alive and well in Silicon Valley

April 1, 2015 2 Comments

Of course we’ve all been agog at the Ellen Pao trial. Silicon Valley loves nothing more than to talk about itself. The self-obsession goes hand in hand with ego, intellect and ambition.

But an unexpected side effect of the discussion of the blow-by-blow of the trial is now, for a while, everyone will be looking for covert sexism. And nowhere better to find it than cougar night at the Rosewood hotel in Menlo Park.

This is not a new phenomenon. I blogged about it in 2011 after spending an amused Thursday evening there people watching. Even back then the VC, wanna-be, hooker dynamic was in full force.

Now, it’s out in the mainstream press. New York Magazine no less, reported on “Where Silicon Valley Looks for Love in the Era of Ellen Pao”. The crowd in question at the Madera bar, sitting outside in the fading sun and rising moon, is a mix of older (white and Asian) men, older women, younger women, and, just sometimes, ordinary people wanting a cocktail with a friend.

And this latter case is how I usually observe “Cougar Night”. The Rosewood is on my way home. It’s the only high quality bar on the 280 corridor (indicating a market opportunity I suspect). It has very good bartenders who can make a mean Basil Grey Goose Martini (except on Thursdays when they take it off the menu because it takes too long to make – so you have to know to ask for it). And by Thursday I am often in the mood to relax, meet a friend and have a martini on my way home.

It was one such Thursday a few months ago that I saw just how efficient the scene is at the Rosewood. Three middle aged men (one white, two Asian) sitting in one of the large outside booths. The waiter comes up and introduces them to three women who were about 30. Each had long hair, each had a skirt that would not have made it past the nuns at my middle school (i.e. only an inch or two below the crotch) and two had plenty of back skin showing. Initially they sit together, but within 5 minutes they had moved around so they were each paired with one of the men. It was like a dance. The toss of the hair, the hand on the thigh, the eye contact.

I watched in admiration. The oldest profession is alive and well preying on the equity-rich customers who are hoping to not only benefit from the greatest wealth creation of our time, but also find some love at the same time.

My friend chastised me when I said I wanted to take photos to document the dance. She was sure we’d get thrown out and not be allowed back, and the location is just too convenient for us to blot our copy book with the management. So I behaved (unlike the time she and I were asked to leave a restaurant in Rome for being too noisy) but watched in fascination and amusement. The girls were good!

Rest assured, dear reader, Silicon Valley may seem like a dry, stuffy place filled with male nerds, but it’s not. There are actually plenty of interesting, professional tech women hanging out in the Rosewood on Thursday nights (because, after all, the drinks are good), but they’re the ones smiling, watching the dance.

Leadership

Venture Capital Is Not All Equal

December 16, 2014 Leave a comment

Like people, VCs come in all styles, so here are 5 characteristics to consider as you interview potential investors.If you want to raise venture capital to fund your new company and your great idea, plan out your vetting process first, because all VCs are not the same. Some are really helpful, but some are horrible and damaging to your company.

  1. Pick someone who has the same Vision and Values as you. You are (hopefully) in your venture because you believe you can change the world (if you are doing it to get rich, stop now, because you don’t get rich in the startup world by trying to get rich, you get rich by building
    something) and it’s very important your investors want you to change the world too. There are many tough moments of truth when building a company, and none more so than when you get an offer for your company before you think you are ready–before you have built the strategy and value that you believe is possible. That moment is when you find out whether your investor truly shared your vision on how to change the world or was just telling you she did.
  2. Pick a partner who can do heavy lifting for you when you need it. Great venture partnerships have a rich, deep network to help you recruit, develop partnerships, find initial customers, manage sticky HR issues and even find office space. Andreessen Horowitz are changing the game with the amount of help they give their ventures. They have teams of people to help you: recruiters, sales people, marketing people and they’ll get you started with office space. Ben Horowitz’ book, “The Hard Thing About Hard Things,” is packed with advice on building a company and is a good example of the type of advice you can get from a great VC who’s built their own company in the past.
  3. Avoid the money-based VC who’s motivated by running a portfolio–often former investment bankers. Find someone who walks the talk and truly builds great companies. If you can, find a VC who has been doing it for more than 10 years and who has a great track record–and interview their CEOs–or find one who’s been a CEO, built a good company and taken it public. When you work with someone from a leading firm like Benchmark, Oak, Sutter Hill, Sequoia, Greylock or the new kids on the block, Andreessen Horowitz (and they’ve been a CEO or a VC for many years), you get access to a level of wisdom and advice that you simply won’t get from the a small firm with relatively inexperienced investors.
  4. Don’t get greedy. Yes, valuation and how much of your company you need to give away is important. But it is just as important that you get great advice and that your management team and employees make money too when you are successful. If you get greedy and aim for the highest valuation, a couple of bad things can happen. First, you can end up with investors who don’t have the experience you need (one of my friends has a Saudi Prince as an investor–very difficult to get alignment on strategy), but second, you can find yourself in a situation with such a high preference and threshold valuation on your company that unless you are the next Facebook, only your investors will make money when you sell (and maybe not even them). There are many hot startups in San Francisco today who will face this problem when they try to get to liquidity. A great VC will coach you through this and not be greedy either.
  5. Pick someone you enjoy being with. Building a company is an intense, emotional experience. Most companies take many years to mature and if you are going to meet with your board every month for 5 years, and at dinners and strategy discussions in between, it certainly makes the
    journey more fun if you enjoy interacting with them. Of course, in the end, you do need to get funded and you may need to take what you can get, but if you have the chance to be selective, the right investor is more important than the highest valuation because you’ll build a better company and change the world (and make more money for you, your team and your investors along the way).
Leadership

What makes a great venture capitalist

November 8, 2012 Leave a comment
The venture capital world lost a master last week. Paul Wythes of Sutter Hill died at age 79 – he was a pioneer of the industry in California and a gentleman.

Reading his obituary in Business Week I was struck by two things he said
in an earlier interview that capture key characteristics of a great VC. I have little time for the celebrity VCs who court the press and like to take attention and credit for their companies. I believe the VC who is there with advice when you need him, leaves you alone when you don’t and provides unwavering support as you ride the roller coaster is what a founder or CEO really needs.

First, I love the description of Paul’s deal flow process:

Wythes
described the early days of his industry in the San Francisco Bay area. 

“What
I’d do is get in the car and drive down to Mountain View or Sunnyvale
— not so much the East Bay in those days — and look for signs,” he
said. “The sign of the company would say, ‘Technology,’ and I stopped
the car, go in and say to the lady in the lobby, ‘I’m so-and-so from
Sutter Hill, here’s my card, and I’d like to meet the CEO.’” 

The
best chief executives “always spent the time with you,” he said,
“because they were smart to realize that someday they may need venture
capital.”

He had an unassuming way about him that would be disarming to a CEO. When I did a short stint as an EIR at Sutter Hill he didn’t have to spend any time with me, but he did, just because he loved the business of building technology companies.

And even more revealingly he said:

“Venture capitalists don’t create successful companies, entrepreneurs
do,” he said, according to Gupta’s book. “Some venture capitalists and
some venture-capital firms today think it’s exactly the reverse, but
they are the ones that have it reversed. I think if you can be
supportive of a company as a venture capitalist, and be in the
background, not up front making it look to the world like the venture
capital firm made this company successful, it’s much better.”  

Amen to that.

I’ve been lucky enough to work with two old-school style firms who take the approach Paul described. Mayfield — and Gib Myers — funded Simplex and they were quietly unwavering right up to and through my IPO. Oak Investment Partners — and Bandel Carano — have funded FirstRain and again have been supportive and unwavering, this time through the challenge of the great recession.

Great VCs know the founders and entrepreneurs are doing the heavy lifting, and they put the company out front and support it completely, right up until the day the company either reaches liquidity, or the VC decides to write it off. There is no middle ground. The Sutter Hill masters know this too.

So when you’re interviewing VCs for your deal, remember All Venture Money Is Not Equal, and look for a VC like Paul.

Equality

Cougar night busted in Silicon Valley!

September 9, 2012 Leave a comment
The bar at the Rosewood Hotel, at the end of the fabled Sand Hill Road of venture capital fame, has been building up a reputation for a while now as a pick-up joint. I wrote a blog about the bar scene more than a year ago now, not realizing I was seeing the myth develop in front of my eyes.

But last night, as we sat at the outside bar watching the sun go down with some good friends, we commented how odd it was that a bar and restaurant that had always seemed packed seemed half empty.

And now this morning I found out why. The bar has been faux-busted for Thursday cougar night. According to the Merc, “a recent report that police
had arrested several big-name venture capitalists for solicitation — by
all accounts, a false story on a satirical Web site — seems to have
helped chill the scene, at least for now.” 

Faux-busted, not even really busted. The VC world is actually pretty conservative. Mostly white men, mostly funding deals they’ve seen before, following the pack. Only a few are truly risk taking visionaries. And sex is under cover here. Cars, wine, jets, houses are all on show, but the women I meet through my VC friends are almost always wives or daughters. Even so, the scene had definitely been building up at Madera, but who knows if it was pickup for fun or for money (or both)?

The scene will be back. And in the future, as we get more women in power in technology, maybe the Joss Whedon imagined universe of Firefly will happen even here.