Joseph’s Weekly Twitter Digest for 2009-08-21
- More startup investment data from Cooley Godward. Have we hit bottom? http://bit.ly/v1UNs #
- Posted interview with with Ray Rothrock of @venrock on VC biz, startups, people, and his fav iPhone apps http://bit.ly/dlfJV #
- RT @pakman Don't confuse traction with value. http://dpakman.wordpress.com #
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RT @pakman Don’t confuse tract…
RT @pakman Don’t confuse traction with value. http://dpakman.wordpress.com
Read More
Posted interview with with Ray…
Posted interview with with Ray Rothrock of @venrock on VC biz, startups, people, and his fav iPhone apps http://bit.ly/dlfJV
Read More
Startup 130: 10 Questions for Ray Rothrock of Venrock
This post is an “email interview” I did with Ray Rothrock of Venrock. I sent Ray 10 questions on venture capital, what he looks for in his investments and the people he backs, as well as what are his favorite iPhone apps. Enjoy.
On Venture Capital
1. Venrock is celebrating it’s 40th anniversary this year. That’s a long time in the Venture Capital business and does not even include Laurance Rockefeller’s “venture” investments in the 1930s in Eastern Airlines and McDonnell Aircraft. How has the venture capital business changed since those early days and in what ways has it stayed the same?
Differences in the business are around the limited partners. These days the money comes from all sorts of institutions – foundations, endowments, retirement funds, etc. In older times, it was largely from wealthy families and individuals. As such, in the 90s the venture activity morphed into an asset class for these institutions as they diversified. The data for this asset class was based on a much smaller business, fewer venture capitalists, less money and still a fairly information inefficient world. That is all changed now. Today, success has a much higher bar because of information flow and ease of access of capital.
Similarities in the business are all about the entrepreneur. There are still people out there trying to invent things and change the world with their ideas. In short, entrepreneurs are still entrepreneuring. I think the personal drivers are also the same – it’s about changing things, not so much about wealth creation. Wealth often comes after success, not the other way around.
2. With so much money “chasing” both consumer and enterprise companies which can get real traction by leveraging services such as amazon’s ec2 and open source software, what are your thoughts about the suggestion that today’s venture model of large funds and big investments does not work?
Big outcomes are mostly driven by huge markets. If the market already exists, it is very hard to take share from incumbents. If the market does not exists, then you need some good luck for the market to happen. So, betting on the creation of huge markets and good luck is really hard to sell. I think a lot of folks have downsized because it is easier to develop numbers for the limited partners that will keep them investing, e.g. ROI. I think venture is about creating wealth – cash on cash. You cannot use ROI to buy a Christmas turkey. Make no mistake, small funds that have great results are wonderful things. If you have a big fund, then you are in a different returns regime.
3. What are Venrock’s top 3 investment areas going forward?
There is a huge trend of outsourcing everything and it is accelerating. Infrastructure that supports this is a huge trend – clouds, networks, SaaS, etc. Data control and management. As the world becomes more and more dependent on data, protecting that data is HUGE. Third, healthcare information. You can only manage what you measure. I think healthcare will see a revolution in measurement and systems associated with that.
4. In addition to a successful information technology practice, Venrock also has a very successful healthcare and medical investment team. How does the complete team work together and make investment decisions on things that are seemingly so unrelated?
Every deal is reviewed and approved by all partners. Technology is only part of the due diligence. Building a business – recruiting, selling, customers, all pertain to every business regardless of category. Since we focus on people, the CEO and team are crucial, even if I don’t understand a science or a market demand.
5. It seems most VCs keep a list of deals they “missed”. What’s your list?
We don’t keep one. We all have our story. Ours was Yahoo. Because of our early internet investing, we saw it very early when it was still at Stanford. We chose not to pursue. Ouch.
On Entrepreneurs and Startups
6. On the “quantitative” side of things, what are the most important things you want to learn about a company in a first meeting?
P&L and Balance sheet are really important. We do all sorts of “unit analysis” and compare margins, rev/empl, and things to determine if a plan is reasonable. One thing not to do, don’t show five year detailed projections unless you know every number. Someone will ask you about why the marketing budget, for example, change in 2013, and you better have a good answer.
7. On the “qualitative” side of things, what do you look for in a company and its founder/CEO? And what turns you off as well?
The CEO must be a leader and a good one. First impressions are crucial as well as impressions after the fourth meeting. I always ask myself if I would want to work for this kind of person. They of course must be knowledgable about all aspects of the business. They should not be flip in their remarks and answers. If they don’t know something – they should just say it and move on. The biggest turn off is, when asked a question it should be answered immediately. Don’t talk for 5 minutes and wander around. That tells me you don’t know the answer or afraid to state it or whatever. Answer, then elaborate, not the reverse.
8. What are the top 3 do’s and don’ts for an entrepreneur presenting at an all Venrock partners meeting.
Do – be mindful of the time and keep the presentation complete
Do – a demo if possible as this conveys best what it is you have
Do – know who are you are talking do. Do your homework.
Don’t – be too jocular or sarcastic or dismissive
Don’t – assume every one in the room has detailed science background to understand. If science is important explain it at a level all will get it
Don’t – don’t forget to tell us why we should invest, e.g. returns, outcomes, comps, etc.
9. What makes for a successful Board of Directors/Investor/Founder/CEO relationship?
Trust and openness. In meetings, keeping an agenda and sticking to it. Startups are complex and staying on point is important. Investor/directors need to be respectful of the preparation for a board meeting and do their homework, e.g. read the materials in advance.
Talk often. This eliminates things drifting too far before the group resyncs.
Bonus
10. What are your favorite 3 iPhone apps?
Music 2 by Simplify Media – access my home music server on my iPhone – I don’t have to carry my iTunes library with me. Shares with 30 people.
TripIt – trip itinerary automation.
AroundMe – access to local business and activities based on location.
———-
I hope you liked the post and feel free to leave a comment or question and I will relay to Ray.
Lastly, if you like this, please share it with friends using the buttons below. And, if you want an update for the next post, sign up below or follow me on twitter. Thanks.
More Links
- Startup 124: Term Sheet – Valuation and Dilution
- Startup 125: Term Sheet – Liquidation Preferences
- Startup 126: Term Sheet – Anti-Dilution
- Startup 127: Term Sheet – Voting Rights
- Startup 129: Term Sheet – Board of Directors
- Startup 128: An Interview with Bill Gurley of Benchmark
- Venrock – Full discloure. Venrock was an investor in Vontu.
- Follow Venrock on Twitter @venrock
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More startup investment data f…
More startup investment data from Cooley Godward. Have we hit bottom? http://bit.ly/v1UNs
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Joseph’s Weekly Twitter Digest for 2009-08-14
- Someone stop the insanity. Congress to spend half a Billion to buy 8 new private plans for travel. http://bit.ly/PSOME #
- Out biking today and ran into quite quite the dummy cop. Budgets must really be tight! http://bit.ly/UYVje #
- interesting VC fund returns data from Cambridge and NVCA http://bit.ly/mn7jz #
- And as a leading indicator, IPO registrations are up. http://bit.ly/iIt5s The ying to the yang of previous tweet? #
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And as a leading indicator, IP…
And as a leading indicator, IPO registrations are up. http://bit.ly/iIt5s The ying to the yang of previous tweet?
Read More
interesting VC fund returns da…
interesting VC fund returns data from Cambridge and NVCA http://bit.ly/mn7jz
Read More
Out biking today and ran into …
Out biking today and ran into quite quite the dummy cop. Budgets must really be tight! http://bit.ly/UYVje
Read More
Out biking today and ran into quite quite a dummy cop. Budgets must really be tight!
Out biking today and ran into quite quite the dummy cop. Budgets must really be tight! http://bit.ly/UYVje
Read More