I’m not sure what I expected from Venture Summit East, one of several venture capital conferences backed by AlwaysOn – Maybe it will resemble, at least in some form, the eclectic South By Southwest Interactive Conference. It is quite the contrary. Unlike the laid-back-ness of South By start-ups there is a high degree of severity in the VC world. This sternness however, is understandable.
When they discuss “capital” they’re talking about Midas forms of wealth, numbers with 8 zeros. They are also uniquely afflicted with “deep pockets and short arms.” But these kings know they cannot simply touch everything. As one panelist remarked, “every one of us on this stage will invest in 1-2 companies this year but we will have seen between 500 and 1,000.”
These numbers/strategies vary as each VC has his or her own take on how best to invest, when it’s right, and if the market is showing signs of “disruption.” But where methods might differ from firm to firm, jargon does not. In two days, I heard more about “inflection points” than I had the word “change” during the Obama campaign. “Inflection point” is fancy speak for profit. Is the company suddenly reaching a large market? Are they beginning to profit? Have they passed the $10M a year mark? I smell inflection…
Additionally, capitalists all agree: the entrepreneur is far more important than the idea. If you can’t sell a boardroom, the quality of your idea is generally not worth funding. Or as one panelist put it, “If you don’t know how to dig for information about your potential funders, you don’t deserve to be in the room.” So from the investors themselves: Either do your homework or bootstrap the company.
It’s not all fire and brimstone, though. The venture capital world is a great enabler. It is also best understood with a fish metaphor. These short-armed individuals have access to funds that help companies help the world. But it is important to note that they, like you, are keeping their eyes peeled for the next biggest fish. VC is only so big. Microsoft, Google, Intel, Viacom, Apple – these are their end-game, and yours. If they can get a “5x” return on their investment, things are looking good and they’ll continue to invest. But keep your wits about you because some VC are, admittedly, not as genuine as they may seem. One woman noted her firm will invest in competing companies in the same market and “cherry-pick” the best.
Courting Google for a buy-out is called “trade sale” or Merger & Acquisitions (M&A). This process has replaced a long-held tradition of pushing companies to an Initial Public Offering (IPO) which is more commonly known as “going public.” And now your eyes are heavy.
I didn’t know any of these things walking in but they are the language of Venture Capitalists – one every entrepreneur should familiarize himself with before “looking for some VC.” Venture Capital, like most things, is a cost and a benefit. So in the words of our ostentatious VSE2010 panelist: “If you don’t know how to dig for information, you don’t deserve to be in the room.”
By the way, here are a couple hip VC’s I wouldn’t mind doing business with:
Betaworks
Lowercase Capital LLC