FUNDRAISING IN SILICON VALLEY – PLUS A FEW RANDOM THOUGHTS. ARIEL POLER

I've been on three sides of the table...Started three Internet companies    - I/PRO (1994): VCs & strategic investors (4 rounds)    - Topica (1998): Angels, VCs and private equity investors (3 rounds)    - TextMarks (2006): self financed to profitability.

Chairman or Active Board Member at 10+ companies    - Kana (VC, PE, IPO); LinkExchange (VCs); Freedom Financial (angels); Passporta (angels); Papilia (angels); Odeo (VC); StumbleUpon (angels); LOLapps (angels, VC); SpeedDate (angels, VC); Strava (angels, VC), MixTent (angels).

Angel in over 40 start-ups    - NexTag, AdMob, Kongregate, SlideShare, Flixster, Rockyou, Xobni, Causes, Aptimus, Outright, Urbano, LatiLists, Blippy, Digital Impact, Thumbtack, Viikii, Instructables, Groupspaces, Evite, WeGame, ccLoop

Silicon Valley is Another Planet – Be Very Careful When Trying to Replicate It

- Very unique, even within the US and California- We have the process down to a science:    - term sheets    - compensation arrangements    - partnerships    - technologies & services    - legal, banking, accounting, hr...- You get to eat with the influencers every day!

VCs and Angels only represent a tiny fraction of the financings in the world – Including in USA

Most companies are bootstraped, funded by friends & family, credit cards, cash flow, etc. etc.

But: VCs & Angels do account for a large share of innovative technology start-ups in the US.

It is not a Black and White distinction between Angels, VCs, Private EquityThere are many shades of Grey...-Angels with funds.-VCs that focus on seed investments.-VCs that participate in seed rounds.-VCs with Private Equity like late stage funds

What matters most is the individual, not the firm!

On "average", It takes 6 Months... 

But averages are often meaningless

"Hot deals" are done in a few weeks, some times a few days

Most deals never get done.

And somehow the average is 6 months...

The best thing you can do to increase the odds of a successful financing is to move your business forward. Be careful about spending tons of time fundraising.

International Companies have better chances of fundraising elsewhereSilicon Valley is the only region with too many good deals. Investors elsewhere HAVE TO invest outside their region, but we don't. So the bar is much higher...

So non Silicon Valley companies might be better of fundraising in places such as London, New York or Boston.

"You are too early for us...” and other excuses…Most investors do deals when they get excited by them. But they don't like to say "i am not excited", so instead they use an easy excuse, such as:

- You are too early- The deal is too small- I want to see more customers/revenues/technology

Be careful about trying to solve their excuses, because once you do they are likely to find others. Instead, figure out how to get them excited.

A Few Random Thoughts…

Speed is overrated!

What good is going fast in the wrong direction?

The better you understand where you need to go, the faster you can move

But, never stand still!

Don’t believe what you Read

Most success stories are made with 20/20 revisionist hindsight

It often takes time, e.g. StumbleUpon, OpenTable were not overnight successes as some people think…

20/20 Hindsight gives great strategic vision. Realistically, successes are built incrementally.So, don’t obsess over your world domination vision.

Just make sure you have a vision for a small success – from which you will be able to build a larger one.

You can’t literally follow all the advise that you getThere are many ways of building companies

You must find the approach that works for you

Advise should help you gain insights and to experiment

It is the same for competitive athletes…

Hire Slow & Fire FastThe moment you start thinking someone might

not be working out, he/she most likely isn’tBut letting someone go is difficult and painful for

everyone, so…, take your time hiring.

Take advantage of opportunities - but be

careful about where you end up

IPRO story:Started with consumer analyticsFollowed customers to traffic auditingBecame World leader Web traffic auditorBUT…That turned out to be a lousy business!

Make sure you enjoy the roadPeople, product, learning, fun…

Focus on your most important market from the

startBe careful about starting with the “local”

market. You might get stuck there and never quite make it to the larger markets

If you want to be a global player, focus on a large market, such as the US or Brazil, from the start

Moving to Silicon Valley?PLUSES:

The “center of the universe” Money Experts Partners Customers in some cases A “must do” in some spaces

MINUSES: Much harder to hire talent More expensive?

MIDDLE GROUND: Come for a while - or come frequently Send some of your team

Leveraging Silicon ValleyHelp us help you

Do your homeworkThe right people to talk toThe topics you want to discuss

Be SpecificAdd value

Investors Back People not Presentations

A presentation is like a resume, a door opener, a conversation starter…

What really matters is the people and the business, not as much how they present

Make sure your presentation doesn’t get in the way, but don’t over-optimize it…

Questions?

@ariel

www.octaven.com