We’re all gearing up for TechCrunch50 next week, and with all the startups and venture capitalists at the conference we thought it would be a good opportunity to talk about what it takes to get VC funding these days and whether or not venture capital even maters as much as it once did. I will be grilling a panel of VCs on what they are looking for these days, how spooked they are by the liquidity drought, and how the venture capital game in general is changing. The VCs on the panel will be Roelof Botha (Sequoia Capital), Raj Kapoor (Mayfield Fund), Ross Levinsohn (Velocity Interactive Group), Sumant Mandal (Clearstone Venture Partners), George Zachery (Charles River Ventures).
I’ve got plenty of questions for them, but would also like to know what you would ask them. Submit your questions in comments, and I will select some of the best ones to ask the VCs on stage. (If you like a question that’s already been submitted, you can second it (or refine) by replying to that comment). Here are some questions to get the ball rolling:
1. At what point does the lack of IPO exits start to impact what you will invest in today? And how?
2. You are still raising plenty of money, is it harder or easier to invest than in the past?
3. Have you seen any startups in the past three years that could be the next Google or Facebook?
4. Do startups even need venture capital anymore with so much angel and corporate money out there, and with startup costs for Web companies going down?
5. How are you competing against all the seed incubators popping up all over the place like Y Combinator, Tech Stars, LaunchBox, DreamIt, etc.?
6. What are the biggest problems that need solving that startups should be focusing on right now?
7. What business models will you absolutely no longer invest in?
8. Is there any danger of innovation dying in Silicon Valley?
9. What was the most memorable pitch you ever saw? What was the most effective?
10. Does Silicon Valley need a shakeout? Are we already seeing one?
I need ten more.
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? Many startups seem to be just a clone of Google (Cuil) or a spin off of some other site or service that we have seen in the past. What do startups need to do to make their company new, fresh, and innovative and not a clone of some existing company.
damn we have same question lol
you answered your own question - do the opposite of what you mentioned
When do you think we will start seeing more diversity in startups? Where is the all female owned and operated start up? When will more minorities jump into the pool and start creating tech or web 2.0 startup companies?
what do you think of all companies that are copying twitter, youtube, facebook model ?
Imitation - a form of flattery
Are you willing to invest in an idea or a technology, or is the business plan still equally relevant?
We can see now that Microgle will cover all the web space.
Is there any good reason to keep on investing in Web Start Up, would you rather invest in wheat, corn and rice to feed the planet.
What are the most common mistakes you see that entrepreneurs make in pitching VCs?
I like this question. I’d be tempted to expand beyond pitching: what are the most common mistakes entrepreneurs make in the early stages of building a business?
1. How do I pick a management team if I have no experience selecting them?
2. Is there such thing as a VC that will help me select the proper management team?
Why do you perpetuate the bad business models and practices that represent the worst of Web 2.0 by investing in knock-off startups that are either simply features or offer nothing new?
If Twitter goes down in the middle of the woods and no one is actually tweeting at the moment, did it really go down?
Question 1: If you had the choice to invest with a) 50% chances of losing or 50% chances of quadrupling your money, or b) 80% chances of losing and 20% chances of getting 10x your invesment, what would you choose? What’s you risk appetite?
Question 2: Has your risk appetite changed from 2 years ago?
Question 3: How many deals over the past 2 years have been about truly innovative technology, versus about innovative business plans that any techie could reproduce?
I like question #2, especially in conjunction with other trends: Do changing startup costs (lower costs for web companies) and exit opportunities (fewer IPOs) alter your risk appetite?
If you had to pick one, which is more important: having a real revenue model with decent user traction or having great user traction but no revenue model ?
a bird in the hand is worth two in the bush.
absolutely right
I like this one.
I love this question.
Bang on brother.
Further:
From my own experience with VC’s:
What is the optimal exit multiplier you look for when considering an investment?
What exit horizon do you look for: 3, 5, 10 years?
As to web based/mobile games; How do you feel about the micro transaction model vs. Ad supported model?
Why would you pass on a start up with a product vs. a start up that was Ad supported?
What impact do you think Android will have in the mobile space?
Why are generally VCs are very cautious about globalizarion ? How many VC-backed companies have a global view from get-go?
What can you offer aside from money and a loose network of connections? (Money isn’t everything)
What is your track record of successes/failures and what role did you play in the outcome? (We’re watching for folks who just got lucky off of other people’s hard work with this one)
How would you define a successful venture? (”the next Google” or similar answer is a cop out)
What’s the difference between the typcial Hollywood script approval process and typical vc funding approval process?
Hah.. I’m definitely asking this one. Two of the VCcs are from LA (Levinsohn and Mandal), so they should have a good answer.
Where are the VC’s that “get” mobile…
What would it take for you to be ready to take the step towards investing in internet startups from other regions in the world, like the Middle East and Africa for example?
All these techo-hype-machine.. does this even go beyond 500 ppl in the valley? seriously. Ya’ll need to get out into real world.
Dude.. u need to read this
“Here are some brands that had no launch at all: Starbucks, Apple, Nike, Harry Potter, Google, William Morris, The DaVinci Code, Wikipedia, Snapple, Geico, Linux, Firefox and yes, Microsoft. (All got plenty of PR, but after the launch, sometimes a lot later).”
http://sethgodin.typepad.com/s.....f-lau.html
Now go back to your basement and start coding..
Question:
when explaining your company to VC’s they normally mention competition and barrier to entry in the Top 5 most important issues. Yet it is very evident that a new company that is the #12 entrant in photo sharing or #9 entrant in a travel/social sector gets funding before a start-up that is attempting to establish a new market or niche. How do you explain the inconsistency with more mature market funding vs new market funding? as well as the horde mentality?
many thx
How do you think of open source business models? Would you today invest in a business built on giving away its software and monetizing through tools or services or some other means?
If the chances of hitting it out of the park are twice as rare for an entrepreneur, why are VC’s quick to give previously funded entrepreneurs money a 2nd time?
Where is the Innovation in VC Business Models? {seesmic_video:{”url_thumbnail”:{”value”:”http://t.seesmic.com/thumbnail/i4VDBkFYBq_th1.jpg”}”title”:{”value”:”Where is the Innovation in VC Business Models? ”}”videoUri”:{”value”:”http://www.seesmic.com/video/Cy5WLid1MB”}}}
Are you noticing an increase of SaaS start ups in this downturn economy?
[1] What does it take to get in front of / get a meeting with you (the VC)?
[2] How much does youth / inexperience of a founder affect your decision to invest?
I would also like to hear examples of cases where VCs have had an direct impact on the succes of a company (besides money for growth), and what they think they did to make that difference. I would also like to hear why so many Silicon Valley VCs are so Valley and UScentric? Do they really believe it to be paramount to the succes where the company is located? And does this relate to the benefits the VCs believe they bring or the benefits the Valley brings?
-Benjamin
Here is my question in 3 parts plus 1 supplemental:
How are you preparing for the recovery in Q2 of 2009?
Have you rolled the dice on Android/location based tech or clean tech?
If so which one, if not, then what have you rolled the dice on?
Here is a supplemental question
What if the great 2009, Q2 recovery is a lie? What if people don’t switch to clean tech and upgrade their phones out of economic fear? The developing world is creeping up and globalization is starting to hit.
What do you do then?
These are good too. Basically, you are asking: Where’s the growth?
What are the best ways for a founder not to get pushed out by VC-built management teams?
In what situations are VCs required for success?
What are some examples of mergers or acquisitions that have benefitted everybody who went through them?
Question:
A follow up to # 2
It’s no secret that it takes less money to start and build a company these days. So why are your limited partners throwing money at these large funds? Is it they don’t really know what’s happening in the marketplace these days? From your position (as a VC) collecting management fees of 2%/year on a $700M fund is quite lucrative. So what gives? Will there be more funds in the next 5 years in the range of $100M to $150M filling a the gap in what has become a huge opportunity in the Next Generation Series A; $1M to $2M round?
Question:
Do you believe that in 5 years time over 50% of a Series A will have some liquidity provisions for Founders? Maybe building on top of Founders Fund FF shares? After all, would such an incentive for Founders truly align the interests of all parties involved?
Question:
Do you believe that a prerequisite of becoming a VC should be previous someone who has started a company, bootstrapped it, lived month to month in order to understand the ups and downs a Founder goes through.
Question:
Why are there not more minorities serving as General Partners (GP) at VC funds? Looking at the mug shots of the distinguished guests on the panel they fit the stereotype GP which is Anglo, Indian or Jewish. Are women, Hispanics and African Americans simply just not qualified to become GP’s?
Is there a secret handshake?
All kidding aside. I find it difficult to understand how the two largest Pension funds in the United States (Calpers and Calstrs) invest in these venture funds that have little or no minority ownership representation. Of all states California.
How should international entrepreneurs approach US investors?
Thanks,
Alex
Alex, I’m in Philadelphia and would like to know the same thing. It isn’t just international.
Josh Kopelman talks about building companies that don’t target the TechCrunch crowd, but rather the non-tech community. Why don’t we see investments in more of these types of companies?
What will the VC industry look like in 5-10 years? It seems to me that the industry is going through major changes(more angel/seed investors than ever, rise of incubators, saturation of firms,etc) and more importantly can not meet the historical expectation of 25-30% returns. How are these factors going to change the landscape?
Will you provide a means for the people whose question you aregoing to use to connect them with the panelists
What do the VCs on the panel currently see as success in terms of typical valuations they’d like to see their portfolio companies achieve on exit; and how much cash are they currently looking to put into any one portfolio company over the lifetime of an investment?
As an investor, how much would you ask to be involved in the company decision? Or I might ask it in another way. In general, does a VC investor often significantly interrupt into the key company decisions such as product design or marketing?
Same question as Seesmic above, but in more succinct 12seconds.TV format; FWIW, sound quality is noticeably inferior with exact same Macbook Pro setup.
http://12seconds.tv/channel/silverton/23329
Why the restatement here? To demonstrate different emerging platforms and make the case that “it’s all about the Video Commons” in the next few years. WE the common folk are a new category of content and WE should receive the significant fair cut that all content has always enjoyed.
Yes, if “Content is King” and WE are the new content, guess what that makes the Digital Everyman? Hope this one is allowed.
The economics of the VC industry as a whole simply don’t work given the amount of money being raised by funds in aggregate. Does this concern you?
You have to choose between two companies to invest in and all you know is that one company is green tech and the other is web tech, which one would you choose to invest in?
What car are you currently driving?
I wouldn’t describe things like YC as competition for VC funds. In fact, we are a supplier of new deal flow for them. Our real competitors are employers, because we’re encouraging people to quit their jobs to start their own companies.
do the vc favors startups based in valley or ex google employee over those based elsewhere?
What do you think about TheFunded.com ? If there were one or more extremely negative comment about you (or your firm) on the site, what would you (or your firm) do about it?
What combination of age, educaton, expertise and experience make for an ideal team for a start-up?
Since the WWW sprung into a existence just a year ago, Hollywood’s Recording and TV/Motion Picture business have done a two-step dance a la digital media. On one hand, they encourage consumers to remix, as long as these start-ups eventually become available for purchase on the market a la MySpace. On the other hand, they take down via copyright lawsuits and DMCA take-downs the most original, dynamic media creations, which has resulted in an emerging digital commons a la flickR.
So for Ashton and Jason and their girly start-up, will they continue to support this hypocritical policy or will they finally called for the creation of collection societies to allow the sharing of digital content over the web (as EFF has been promoting for now a decade - http://www.eff.org/wp/better-w.....le-sharing)?
Not just for music, but now for rich video as well?
How important is unique Website traffic with good demographics and social bookmarking traffic to a Start up - and when deciding to invest in them.
Does this add to its attractiveness in your analysis of them and their potential ROI
only 2 new questions in here (about The Funded - which no VC will touch publicly with a 10ft pole and the one about ex-google/paypal/etc ‘founders’)..
these questions are boring and every answer can already be found on kawasaki’s website
ask why VCs are all too scared to take risks and are too conservative in their investing
- they won’t invest unless other VCs do (lemmings)
- they *love* buzzwords (facebook apps! mobile tv! ad networks! google kil.ler! green tech!)
- why don’t they listen more, and talk less?
- why don’t they really help grow companies and let too many of them flounder and then blame the companies?
- why don’t they have enough respect for the Madison Avenue way of doing business (ads, revenue etc)?
- why are they all white males?
- why do they fund dumb companies just because founded by a previously successful entrepreneur?
- why do legal fees for the funding come out of the company’s money?
How many sales and marketing people do you have?
If you (VC’s) were starting a company, how would you do it without using Venture Capital?
Are you ready to fund start-up companies in Asia especially the Philippines with plenty of Skilled IT professionals?
Do Asian start-up companies need VCs?
What does the US Olympic team need to do to not lose its total medal count lead at the next olympics in London? Yeah, it’s a technical question.
What do you believe is the right stage for a startup today (which can come a long way on bootstrapping and friends & family money) to see VC funding. Right stage with respect to (1) product development (2) user traction (3) revenues.
How?
Do you have a metric by which you determine a start up’s eligibility for your funding. e.g. giving weights to the metrics and getting a number.