this is where I try out: she's geeky (part 2)

She's Geeky - Day 1, Session 2
Moderated by: Mary Hodder, Dabble

Panelists:
Patricia Nakache, General Partner, Trinity Ventures
Jodi Sherman Jahic, Principal, Voyager Capital Team

VCs and Women in Tech: A Brainstorm with Women VCs and Entrepreneurs


This panel turned out to be AWEsome. I was waffling around whether to go to it or not, since I can't really envision myself ever pitching to a VC, I break out in hives when I have to deal with forecasting spreadsheets, and I think finance is BO-ring. For whatever reason, I ended up in the session, and it was so valuable.

Things I learned:

• "Venture Scale" = an endeavor that has the potential to provide a 5x-10x ROI over a 4-6 year horizon. If you can't show how your product/company is going to achieve this, you are either looking for a different kind of funding, or you haven't adequately completed your homework.
• Speaking of homework, sound advice: Do. Your. Homework. When you are asking someone to give you 6 or 8 figures, you should at least know who you are meeting with, what is his or her background/market specialty, what is his or her role in the fund. Bonus points for having some shared connections (alumni of the same school, shared acquaintances)
  
• The goal of your first meeting is to get a second meeting. You are not going to get a check at the first meeting.
• How do you get a first meeting? Network - get an intro. Very unlikely that you'll get a meeting based on a cold call or email over the wire. Making the effort to reach and know influencers in your community is a sign of ambition, savvy, and social skill - all good qualities when you're asking for the privilege of spending someone else's money on realizing your dream.
• Like many relationships, if it isn't going to work out, VCs may not be completely forthcoming with the reasons for declining your request. VCs & entrepreneurs have a symbiotic relationship - if you turn someone down in a way that puts them off, maybe they don't offer you the opportunity to invest in their next venture? Likewise, if you're a jerkface when the VCs don't write you a check, good luck getting a meeting for your new company. Also paralleling other relationships - it's not a bad idea to circle back after some time has passed and ask why the partner chose not to fund you. She may be more candid at that point, especially if you come at it with open & good intentions: to improve your pitch, to figure out what's flawed in your business plan, to better yourself, etc.
• There are 4 kinds of risk that VCs will assess against you, your company, and your product:
• Technical Risk: Can it be done? Does the technology exist or is it being created? Are the technical underpinnings proven or experimental? Technical risk is often assessed by asking an expert to perform "due diligence"
  
• Financial Risk: Can you do your thing with the amount of money they're willing to give you, or will you burn through their cash and become an "accidental non-profit"? Is your idea "venture scale"?
• Execution Risk: Can YOU do it? Do you have the right people, expertise, and materials? Do you have a demonstrated track record of success and of responsibly managing a business or line of business?
  
• Market Risk: Who buys your product? Is there someone else likely to get there sooner and take your market? Can you take down whoever is in the space now? Will consumer tastes or preferences change while you're off executing your vision? Do you really have a grasp on who you're trying to sell to, and how you are going to reach them? Do you have 2-5 potential customers that the partner can call, who will emphatically insist that they can't live without your "whatever", and would write a check for any amount in order to get their hands on it? Don't discount this as a method of supporting your market assessment - real people are very powerful.

So, taking this all on board, my question was:

"All other things being equal, would you be more likely to invest in:

a) a company with a killer idea - the best you've seen in ages - but with a spotty track record or potential interpersonal problems, and try to fix the people

OR

b) a group of people with a track record of successful execution, but whose product needs a LOT of work or may not be viable."

The answers, paraphrased:

• Of the four kinds of risk, three can be proactively managed: Technical, Financial, and Execution. You can only respond to Market risk.
• "Bet on the jockey, not the horse."
• In short, take a good team, work with them on their product. A lot of the time a great team has to tweak their product anyway (sometimes fully shifting to a different product or model), but knowing that a team has a track record of pulling through, and demonstrates the ability to get along during what will inevitably be tough times, is key.
• Along the lines of 'choose your team wisely' - this especially applies to choosing your board members. Board choices can be decisions you will have to live with for quite a while, so make it count.

There was a ton of additional discussion around different financing options (angel investors, small business loans), whether or not you should wear a suit when you go to your meetings (consensus: wear what makes you feel like you rock -but do know that appearances matter), whether VC is all just an old boys network of Harvard and Stanford MBAs (kinda, but it's changing), etc... but the above was the value I took from it. I walked away still feeling like I'm not in any rush to do the Sand Hill Road Gauntlet, but that should it become necessary, it's not out of my reach. Which I think was the point.

(cross posted from my personal blog: Confabulari)