Few business owners ever get to sit down one-on-one with a
venture capitalist to have a chat. To help you understand what goes
on in the minds behind all that funding money, we asked several
venture capitalists what they look for in entrepreneurs, big
mistakes they've seen made, and what trends they predict for
the future.
What common mistakes do entrepreneurs who are looking for
funding make?
"[Many entrepreneurs] plan for the best case as opposed to
preparing for the worst."--Barbara Schilberg, managing
director and CEO, BioAdvance
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"A big mistake people make is hiring the wrong people. If
you’re not teaming up with someone with a lot of integrity,
that will come back to bite you."--Patrick Ennis, managing
director, ARCH Venture Partnersv
"A pet peeve of mine: plans where the business model is
created in a vacuum, with no recognition of either competition or
substitutes."--Robert Chefitz, general partner, New Jersey
Technology Council
"People put too much focus on financials. How many business
plans do we get where you have 10 pages of problem, statement,
solution, approach to market so forth and then 30 pages of
financials? I take the 30 pages of financials and I throw them
away. I don’t even look at them."--Chad Waite Jr.,
general partner, OVP Venture Partners
What is your advice for entrepreneurs who are seeking
funding?
"What [entrepreneurs] need to do is state a proposition and
make a case. What I tell them is, “You need to think like a
lawyer, because if nobody knows where you’re going, usually
by the time you get there, everyone else is lost."--Steve
Domenik, general partner, Sevin Rosen Funds
"What makes for a great pitch is an entrepreneur who can
stand up and speak intelligently, articulately and with
passion."--Eric Young, general partner, Canaan
Partners
"You’ve got to look at fundraising as a process. You
don’t get the order on Day One. The first meeting ought to be
a good, crisp, concise introduction. You want us to come back to
find out more."--Chad Waite Jr., general partner, OVP
Venture Partners
"Make sure the venture firm you’re pitching is the
right fit for your business."--Andrea Kaufman, partner,
Novak Biddle Venture Partners
What trends did you notice in 2005, and what do you expect to
see for the rest of 2006?
"I think it will be a very robust year for investments. It
was robust in 2005, and I think you’ll continue to see that
in 2006."--Nader Naini, general partner, Frazier Healthcare
and Technology Ventures
"[There’s going to be a] shift away on the IT side,
from things driven by enterprises to things driven by the consumer
market. We'll [also] see an increase in focus across the
venture community on alternative energy or clean tech
investments."--Bill Wiberg, general partner, Advanced
Technology Ventures
"I think today we have seen much more of a movement toward
the quick hits in our industry, and those investors that are out
there investing in the five-year-plus kind of time horizons are
actually fewer and further between."--Joseph Landy,
co-president, Warburg Pincus
"The entrepreneurial revolution that has swept this country
in the past 15 years is here to stay."--Patrick Ennis,
managing director ARCH Venture Partners
"VCs are going back and looking a little more closely at
early stage investing, so we’re seeing a positive trend for
early stage companies."--Barbara Schilberg, managing
director and CEO, BioAdvance
"Many of the emerging new business models are being driven
by a much wider-spread consumer adoption of the internet, which has
been picking up nicely for the past couple of years."--Eric
Young, general partner, Canaan Partners
What do you look for in companies and entrepreneur you're
funding?
"We look for [entrepreneurs] who are creative, who
[aren’t] afraid of running into problems and can figure out
how to solve them."--Barbara Schilberg, managing director
and CEO, BioAdvance
"[We’re] looking for someone who’s looking for
help, looking to expand their horizons and who recognizes that
you’ve got to reach out for those things. You don’t
bring them all to the table from Day One."--Joseph Landy,
co-president, Warburg Pincus
"A great venture investment is three things: You have a
great team, a huge market and novel technology."--Bill
Wiberg, general partner, Advanced Technology Ventures
"It’s an old saw, but our business is about investing
in people that can get it done. The idea is almost
secondary."--Steve Domenik, general partner, Sevin Rosen
Funds
"One of the things we look for in an entrepreneur or
founder is someone who has a very distinctive view of the industry
they’re selling in to. That isn’t what you can go out
and read in analyst reports in everyday press and media
sources."--Scott Irwin, general partner, El Dorado
Ventures
"I think a lot of people overlook the fact that the
investor- or board member-entrepreneur relationship is often a
five-year horizon, so you want to find people that you think will
work well with you."--Scott Irwin
"Companies need innovation, and the truth is most
innovation and most new products come from small entrepreneurial
startups."--Patrick Ennis, managing director, ARCH Venture
Partners
What are some of the strangest pitches you've
received?
"[I] saw [a pitch] that was using high-altitude Russian
Cold War military aircraft to map the surface of the earth. That
kind of info is very valuable, but it’s mostly collected by
satellite or people driving with maps or using GPS-style
information, so I thought this was a pretty out-there idea to use
Soviet-era aircraft and custom-developed radar tech to collect this
data."--Scott Irwin, general partner, El Dorado
Ventures
"The quirkiest pitch I heard last year was a company that
wanted financing for a technology that could control people’s
brains—maybe right for another fund, but not for
us."--Andrea Kaufman, partner, Novak Biddle Venture
Partners