If you want to learn a thing or two about failure, just talk to a venture capitalist. As August Capital’s David Hornik recently told an entrepreneurship class at Stanford, for every 1000 pitches he gets, he meets with 100 entrepreneurs and invests in about two companies.
“The odds suck,” he volunteers.
So, since the numbers show that you’re probably going to fail, what’s the best way to do it? We recently caught up with Hornik at his office on Sand Hill Road. Here’s what happened:
1) It’s a good time to fail: “It used to take a long time to figure out that something was a bad idea,” Hornik said. “Particularly in the consumer internet today, you can determine it was a bad idea on hundreds of thousands of dollars and months rather than millions of dollars and years.” (more…)
I had a chance to sit down yesterday with a friend who recently joined a top-tier venture capital fund. He humored me by sharing tidbits from his first months on the job.
What’s your favorite example of money being thrown around in the VC world?
We went to dinner and a colleague ordered a really expensive bottle of wine. He had a sip, didn’t like it, and ordered another. Again he tried it but didn’t like it. He ordered one more. The total wine bill for the night was over $30,000.
Walk me through your most extravagant work experience. (more…)
“Think of venture capital as crack: it makes you feel great, but it will kill you,” venture capitalist Guy Kawasaki said to a group of Stanford students last week. He was referring to what happens to startups when they receive VC money and see it as a cue to spend all the money trying to scale too quickly.
Instead, the best time to raise VC money is when you don’t need it. Rather than show up at a VC meeting with just a powerpoint, bootstrap for a while and show up with a prototype “the dogs are eating.” Prototyping is a process rather than an event, so start user-testing early, and don’t visit a VC until users actually want the product.
While many VCs say they invest in teams rather than ideas, Kawasaki said it’s much easier for them to say this in hindsight. ”I’d rather invest in an asshole who made me money than a nice person who lost me money.”
If investing was like online dating, it wouldn’t be eHarmony to find your soul mate, he said. ”It’s hot or not.”
Frank Quattrone at ETL
“I was accused of a bunch of stuff I didn’t do,” tech investment banker Frank Quattrone said at Stanford last week as a part of the Entrepreneurial Thought Leaders Seminar Series.
Quattrone was referring to his prosecution for interfering with a government probe into Credit Suisse First Boston’s behavior in allocating “hot” IPOs in the 1990s tech boom, but the case was eventually dropped. (more…)