Following up on some of the themes from the successful chat about the Portland startup scene, Mike Rogoway at The Oregonian will be bringing a few folks from the venture capital community to the table.
Interested in chatting with them? I thought you might be. Just swing by the Silicon Forest blog at 9 AM Friday morning.
Who will be there?
Oregonian technology writer Mike Rogoway leads a discussion with venture capitalists David Cremin (DFJ Frontier), Eric Rosenfeld (Capybara Ventures) and Diane Fraiman (Voyager Capital) on the VC scene in Oregon.
Of course, I’m hoping you’ll be there, too.
That’s the good news.
Now, if you participated in the last chat, you encountered the chat system we’ll be using. Same thing. It’s not horrible, but it’s kind of wonky. And it could make conversations a little difficult to follow.
Keep typing as fast and you can. And try to keep up with the bursts of the stream. It will all be captured, so you can go back through it again. At a leisurely pace.
To be safe, just make sure you’re well caffeinated—or wide awake—going into it.
Since the Oregonian blog didn’t support comments on this event – I’ll leave them here, with a little trepidation. To be very clear, I agree with about 95% of what Eric, David & Diane said. So, when I disagree with the other 5%, please keep that in context.
One issue was: “Is a life style business and VC incompatible?”
My answer, in contrast with the panelists is, “Yes – it is incompatible.”
To be fair, there is NOTHING wrong with a lifestyle business. It can be one that is very gratifying to the founders and employees, and can grow to a modest size and someday possibly provide a modest return for its investors (likely friends, family and angels). But that’s not what venture capitalists are here to do.
We are here to take big risks. We are wrong about 1/2 – 2/3 of the time. So we need out-sized returns when we are right to make up for the companies that fail, and still give our investors attractive returns – returns better than they can expect in the public markets where they can get the constant liquidity we can not offer.
A successful lifestyle business that grows to $10M or even $20M in revenues means it is likely worth $20M-$40M in an acquisition. If one of us VCs own say 25%, that means we get $5M to $10M return. That’s not enough to move the needle for us. It may not be much more than we invested over the life of that company.
The other comment I take issue with is how VCs work with angels. The panelists all said they love angels (politically correct position) – but did not choose to tackle the elephant in the room of why angels sometimes feel burned by VCs.
We absolutely welcome angels in deals – as long as they understand the rules.
Here are the rules: You don’t get to invest once and then, if the company needs more money, ride along not investing, but not suffering any consequences. Ours is a very tough but fair system. If you don’t play, you pay. This is every bit as true for VCs as angels. For example, OVP is about to pass on a follow-on round in a company (not an Oregon deal). With that decision, we face the prospect of being converted to Common, and perhaps see as much as a 10-1 reverse split of our shares. We may not like it, but we don’t feel “burned” by the VCs who are going forward. Those are the rules.
As long as angels know that if the company needs additional cash, they need to be ready to play at their pro-rata (and BTW we will be happy to allow that) – then the angels will never feel “burned.”
Other than that, I think Mike’s “chat” with my three colleagues in the industry was very valuable and insightful.
I’d be interested in further follow-up / discussion with Eric and Diane about where there are “slow-moving, lazy incumbents” in the “hot” areas in technology: software as a service, cloud computing, virtualization, “web x.0”, social media and text/data mining. As I noted in the chat room, there may be slow-moving, lazy incumbents in the automotive industry, but I *don’t* see them in computer hardware or software.
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