VC Lifestyle Myths

This year’s holiday card from Blueprint Ventures totally made me crack up.  Like all things that are comic genius, there’s so much in it that resonates as true. 

Gary Snowman is a successful entrepreneur who fantasizes about the decadent and jetset lifestyle he imagines venture capitalists lead.  Ah, yes, Venture Capital is a ‘lifestyle’ job, but as he says towards the end of the video, “Life as a VC isn’t exactly as I expected.”

Disappointingly for Gary Snowman, it turns out that being a VC involves long hours, lots of hard work, and a lot of hustling.  His assistant interrupts his reverie with, ”I have your itinerary for your trip.  You have a 6:30am to Boston, an 8pm to Minneapolis, a 10am to Chicago, and a 2pm to New York. And business class was too pricey so you’re going all coach.”

This is funny because it’s so true.  It made me think of my typical week here, which basically involves running from meeting to meeting to meeting.  Here’s what my average week has looked like:

And lest you think it’s because I’m the newest person of our team, I would have to say that the partners here work even harder.  It reminds me of my days as a cofounder of a startup – you’re fighting for market share in a ruthlessly competitive environment and ultimately, the company is no more and no less than what YOU put into it. 

There is also this interesting dynamic – all of these meetings on my calendar are with other people – with entrepreneurs, potential portfolio company hires, potential partners of some kind – so I spend the bulk of my day socializing with other people, yet as Seth Levine has noted, it can still be somewhat of a lonely business.  Fortunately for me, it suits my personality type and interests well, but it is an interesting dynamic.   More on this later. 

Raph Koster announces Areae – Web 2.0 meets MMOGs

Raph Koster announces his new company, Areae - and we at Charles River Ventures are very excited to be part of this journey.   I’ve known Raph since 1994 or so – back when we were MUD developers, and I’m excited to support him in finally realizing the dream he’s had since starting Legend MUD. 

Though Areae is still very stealthy, Areae sits at the intersection between Web 2.0 and MMOGs.  If you think about it, the Web 2.0 and the Massively Multiplayer Online Gaming communities have largely been pretty siloed – gamer developers go to game industry conferences and Web 2.0 folks go to Web 2.0 conferences, and there has not been enough intermingling between the two communities. 

But both industries have been inching closer and closer together.  I predict that the successful online communities in the future will continue to more strongly resemble MMOGs.  And MMOGs will continue to extend their reach and exposing their data to other Web applications – either formally, by the developers/publishers themselves, or informally by folks like Rupture. 

Here’s what the 2 communities can learn from each other: Game designers have been creating rich, fully immersive environments for years.   All of the design principles that I thought about when I was designing MUDs are identical to the issues facing Web designers today – how do I create more immersive environments? How do I give participants -equity- in this virtual world? How do I make users feel like real citizens in my social ecosystem? How do I create better scale around world and object creation? How can I expose building tools that were previously available only to Admins and Devs to the end users – and make them dead simple to use?   How much content should I pre-seed and what content containers do I think users are going to be more likely to want to customize and make their own? 

For Web 2.0 designers, there is a brilliant, must-read presentation that Amy Jo Kim put together about how to intelligently apply game design principles to Web 2.0 services to make them richer, more compelling, and more immersive (read: “sticky.”)

Yet, the Web 2.0 crowd knows a lot that the game devs don’t: how to create massively scalable, low barrier to entry, micro-chunked experiences.  How to create appealing, mass market products that are appealing to a diverse demographic.  How to iterate quickly and create production processes that give you tremendous economies of scale around innovation. 

I’m excited by the possibilities – Raph has brought on an excellent team and advisory board.  It’s time the Web 2.0 and Gaming communities begin collaborating for the betterment of all users, everywhere. 

Here’s some of the coverage on Areae thus far:

GameBiz Daily:

“I would describe what we’re trying to do as marrying together a lot of the philosophy of the web and web 2.0 with virtual worlds,” Koster told GameDaily BIZ. “We’ve been paying a lot of attention to how the Internet is going. If you remember my speech at the Austin Game Conference last year about whether or not the games business is full of giant dinosaurs… a lot of that ties into this.”

CNet:

Koster is not divulging much about Areae, but the company’s site alludes to its pure, massively-multiplayer online game DNA: “We’re working on some new tech that will literally change how virtual worlds are made. We’ve got a cool world or two incubating on the back burner.”

Gamasutra:

With what sounds like a firm emphasis on user participation, as well as user customization and content, all central tenants of the Web 2.0 ethos, we make an obvious leap toward the current open virtual world leader, Second Life, which Koster laughingly dismisses. “See, you’re already jumping to conclusions about what we’re making! Honestly, there are as many differences from Second Life as there are from Everquest.” He pauses, but concludes, “I’ll just have to leave you tantalized.”

Art of the Pitch: Avoiding Common Presentation Mistakes

Though I may write about ways entrepreneurs can improve in their efforts to woo and pitch VCs, make no mistake about it: Entrepreneurs are the Customer in this relationship and VCs are merely the service providers. 

I say this because even though a regular part of our job involves saying no to highly qualified entrepreneurs, the process of deciding what VC firm to work with is a mutual one.  It’s not enough that we might want to work with you. You, as the entrepreneur, have the decisive voice in this matter.  It’s a significant decision, much the same way a marriage is.  And you should only enter into this relationship if you think the VC you’re committing to is one you want to be partners with for the long haul. 

(Fred Wilson and Rick Segal have also written great posts about the topic of “Entrepreneur as Customer” on their respective blogs.)

I attend about 30+ pitch meetings a week.   The reason why I bring up this topic of entrepreneur-as-customer is that a pitch meeting is a good chance for you to ask YOUR questions of the VC as well – something many people don’t do. 

Here’s a list of the most common mistakes I’ve observed entrepreneurs make when presenting:

• Talk about the team and your backgrounds as early as you can in the presentation.  This helps us understand why you are particularly well suited to solve the problem you’re tackling.  Who you are can be more important than what you are building.  This is even more true for very early stage companies.   Also, it’s very helpful if you tell us where you think you need to add to your team to round it out.  Being able to realistically inventory your personal strengths and weaknesses as well as understanding how to fill in these gaps is attractive. 
• If you have a working product or prototype, please demo it!  Don’t just mention the fact that you have a working product on a slide.  If you do demo your product, try to do it earlier in the presentation rather than later, because this gives us valuable context for the rest of the meeting. 
• Don’t forget to mention what the financing opportunity is.  How much are you raising? What milestone will it get you to?  Why is this the right amount? Why is this milestone the right milestone?  The amount you’re raising shouldn’t be arbitrary – it should be driven by some well formed assumptions you have about why X milestone is the logical first step to winning in this market.  And by the way, the actual milestone is less important than the thought process you used to reach that conclusion. 
• Do research on the people you’re meeting with.  You should know the backgrounds of the people you’re meeting with so you can better tailor your presentation to their worldview.  Be familiar with the firm’s portfolio companies.  Read up on any interviews the person you’re meeting with might have given recently about their investing style.  If you’re coming in for our QuickStart program, read up on the terms that are published on our web site. 
• Don’t be afraid to ask for guidance.  If you’re uncertain in which direction to take your presentation midway through – don’t be afraid to ask your audience what they would like to hear more about.  (e.g. “I could take you through a few slides about the technology infrastructure or we could spend more time on the partnership strategy – which would you find more valuable?”)   
• Don’t be afraid to rein in your audience.  If your presentation gets sidetracked by too many questions that you don’t think are critically important to understanding your business, don’t be afraid to say, “I would be happy to answer those questions offline, but since we only have 15 more minutes, I want to make sure I get to the really important stuff about X and Y.”)
• Don’t spend too much time on generic market trend data.  This is especially true if you have done research on your audience.  For example, if you know that the person you’re meeting with has already invested in an advertising arbitrage play, you probably don’t need to spend a lot of time telling him/her that the online advertising market is growing at X% a year.
• Be careful of using too much extraneous material in your presentation.  Making heavy use of props such as press clippings or professionally produced videos deters from the primary goal of getting to know who you are.  Unless of course, these props convey something about you or your business that you can’t convey yourself.  We want to hear from you – dynamically and in real time – why your business is so exciting.  

The Launch of CRV Entrepreneur Idol

First, thanks to:

Valerie Cunningham and Net Jacobsson for these photos.  John Furrier and Podtech for podcasting the event.  Stanford MBA2 John Anderson and CRV’s Kim Morioka for helping us coordinate the event. 

The premise:

60 pitches in 60 minutes. 4 judges – 3 from Charles River Ventures – me, Bill Tai and George Zachary and 1 celebrity guest judge – Matt Marshall from Venturebeat.   The first half of the contest took place in the Stanford MBA cafeteria – noisy, chaotic, and fun. 

Contestants wait their turn to pitch: 

The judges: me, Matt Marshall, George Zachary, and Bill Tai

The judging criteria: 

The judges scored each contestant from 1-100, with 400 being the highest possible score a contestant could earn.  The criteria? Because contestants only had 60 seconds, this wasn’t intended to be a business plan contest.  We were hoping this could be a fun, educational experience for the Stanford MBAs to learn how to communicate their ideas succinctly and persuasively in 60 seconds or less. 

There are some salient, real world reasons why being able to mount a convincing argument in 60 seconds or less can help you as an entrepreneur.  For example, we’ve received numerous business plan submissions in the first month since launching our CRV QuickStart seed financing program - it’s an imperative for the entrepreneur to make as strong of an impression as quickly as possible.  Or, you may find yourself on an elevator with Rupert Murdoch and want to convince him why he absolutely needs to acquire your startup if he has any hopes of properly monetizing all of the MySpace traffic.  Except, he’s getting off on the 6th floor, so you only have 40 seconds.  

In both cases, what the pitch represents is a means by which you can capture our imagination and make us want to learn more about your idea.  With the Entrepreneur Idol contest, we weren’t looking for fully baked or fundable ideas.  That’s incredibly difficult to convey in 60 seconds.  But the purpose of the 60 seconds is to get us salivating to hear more of what you have to say.  Were you authentic in your delivery? Did you come across as being credible?  Was your general target market attractive? Did you make a logical, persuasive argument?  Did you make us believe that you could be a great entrepreneur to back?

(Tip: Research your VCs before you pitch them.  People tend to fund things they are personally excited about.  It makes your job easier if you seek out people already immersed in your space.) 

 The results:

The judges chose 5 finalists based on the scores.  The top 3 got to present in front of an auditorium full of their peers.  In true American Idol style, each of the top 3 pitched, received feedback from each of the judges, and the audience chose the winner by clapping and making noise.  

The winners, Jeff, Rohin and Ned (left to right) – sorry the photo is blurry:

1st: Ned Tozun, MBA2 – Solid state LED for the developing world
2nd: Rohin Dhar, MBA2 – Online job recruitment services
3rd: Jeff Piper, MBA2 – Hedging instruments for residential real estate market
4th (tied): Vanessa Stanley-Miller, MBA2 – Kid-centric online video service
4th (tied): Ben Savage, MBA2 – Location based mobile game platform

Closing thoughts:

Based on student feedback, people had a lot of fun and it was very educational.  For them, it was illuminating to see the top 3 deliver their pitches in front of a big audience – they could learn from their peers and from the feedback we gave after each pitch.  Moving forward, I’d like to have all 5 finalists (and perhaps more) give their pitches in front of the larger audience.  The margin of difference between the top 9 scores was very small and most of the learning happens by watching other people pitch in real-time. 

We at CRV were very impressed by the quality of the pitches - by the delivery, the ideas themselves, and the enthusiasm of the contestants.

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