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VC 2.01

January 30, 2006

I just read Rick Segal's post about vc2.0 part two, and I wanted to clarify some areas I hadn't really touched on yet.

Firstly, about the rolodex, the users, and so forth:

Doc, Dave and Rick are right here. Partly. It's definitely correct that it's your users who make or break your offering. I'm involved in a pre-seed project right now where we've been requested to give info and then told “We want to invest, but you need to prove yourself with users first”. We're clear then on what we have to do: publish, prove and pray. But what if it is that you need or want to work with someone who's doing something similar? If you are a service offering, but need the software to support it? It's these mashups that are what is really sparking growth. For example, upcoming.org would not have been as feasible had it not been for Google negotiating the usage rights to the mapping data, and so on.

I've had a couple of interesting conversations with people who are angels or VCs about ideas i'm developing. Nothing is remarkably innovative - there is so much to be done right now without re-inventing the wheel. Often I get a statement such as - “have you heard what so-and-so are doing, they would probably complement your offering. Let me get you their im/email/skype”. This über networking comes from the fact that VCs get pitched all the time - and so tend to know almost every project of interest going on in their space. Wow. I love having access to that!

Then again, I noted with interest that those invited to e27 were the likes of scoble and techcrunch - that's a sure sign of the growing diversity of today's rolodex. The blogosphere is absolutely my buzzagent - but is it my entire rolodex yet? I don't think so. If the blogosphere could get over its clique, and if we had a clearing-house of buzzagents so I'd know who to contact in an area i'm interested in then maybe. I just don't think I can replace any angel worth their salt with a good blogger for knowing the right people.

nb: if scoble (or anyone, for that matter) offers to blog about my new product or service, I won't have to debate it first!

on money down:

Rick should be proud of his daughters getting bitten by the startup bug. But money down is still really important most of the time. I believe it takes an average of three months to turn a web2.0 idea into a realistic offering (a view shared by others, i'm not just stabbing in the dark). For those at an age where we can play in the bubble 2.0 market (either two young or wrong industry for bubble 1.0), it's our first pitch. And yes, we're going to need some money to jump in and help pay our bills for 3 months.

I think alot of bubble 2.0 players have been bubble 1.0 players and therefore have funding ready to go. This is probably what's most concerning for VC/angels- there is almost no way in there. A good product in this space seems to be flipping 6-18 months in, and often (as Rick later points out) by bigcorp. Who needs any kind of VC then?

Of course I can't help but refer to my previous post and to ycombinator for two examples of where incubators are crucial to 'new' entrepreneurs trying to make their first crack at starting up.

on battling hr

Rick has this spot on. Yahoo! are definitely not stupid and realize that to stay fresh they must adopt and embrace the latest trends. It doesn't hurt that alot of the work done now tends towards their goal of a digital connected lifestyle (aka, stickability to their web properties). So either by acquiring entrepreneurial talent and giving them r&d space, or by allowing 20% work time to be focused on fun/research, it's clear to see that we're going to fix problems and innovate faster than ever.

on the paperwork

This is a problem. I've seen more than a few people say, 'Sure, investing in you sounds great, but you just don't qualify. Come back when you're in round 1'. So how about a bunch of you on Sand Hill Road form an innovation foundation? each plow an equal share into a fund (1m suggested) and get equal equity back, work with small budgets so that you reduce the overall risk of an investment therefore making it easier to give.

Is working with other VCs a problem?

Then how about using washington connections and getting a dowry from the government? Again, one to ten million startup should cover it if used wisely. Then you can have helping input, but you know you compete for the end result of getting the biggest slice of startup equity.

I'd love to see the think-tank approach where there is a mind-meld of great people with various skillsets. Regular seminars on topics from business administration through to marketing. Course credits for MBA. For me, starting up is more a learning experience than one to become super rich. I've got stacks of time for that. Right now, I'm living in the moment and trying to figure out how to pay rent next month. :)

vc disruptive capital 2.0

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Love your rolodex remarks. My trackback doesn't show up, but I blogged it here : http://ookles.wordpress.com/2006/01/30/vc-201-and-other-thefts/

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