VC Interviews
"Many startups find financing from non-VC sources, such as government grants, strategic partnerships and angel investors. Some manage to make tens of millions of dollars going that route. In the early stage, how do you determine when to write a check or walk away?
BRANDT: Team and technology! If the team is strong and the technology is stronger – defined as protectable and commercializable – we are very interested in investing. Some technologies are just that, others are the base of a solution that can change something that we believe could be a huge market.
FAGNAN: I love companies that bootstrap through grants, partnerships and customers. I call this free money, as it’s usually dilution free from an equity perspective. I also like to pull free money into deals after I have already invested in them. I don’t think free money and venture capital contraindicate each other.
MCCALL: We have two situations when we have to decide whether to write checks or not. The first is during the initial due diligence. VCs look for promising markets with sizable potential, business models that are rational and management teams that you trust can do as they say and generally have a history of doing so. Most plays in the nano and micro realm are solid niche technologies that don’t have the breakout potential required in venture capital. Government and angel funding are great sources to take some of the risk factors off the table before pumping significant amounts of institutional capital into a deal.
The second situation is where we’ve already invested in a company and new funding is required. In these situations, VCs will assess if the company still has a compelling and credible business proposition and if they have trust in the management team to execute. We all make macro bets and assumptions when we back companies. Sometimes it’s clear that the company is treading water, if not sinking. We have to sit down with the management team and assess if there really is a business here or if everyone agrees to find a home for the company. In other cases, you try to manage down the burn rate until the business model is clearer.
QURESHI: One of the important keys is to assess whether the startup truly has a unique and sustainable competitive advantage over the long term, such as through intellectual property. Intellectual property is particularly important for any platform technology. For example, intellectual property around diamondoids and their applications is a key focus area for us at MolecularDiamond. "
Mark Brandt, Managing partner, The Maple Fund
Jeff Fagnan, Partner, Atlas Venture
Matthew McCall, Partner, Portage Venture Partners
Read more here.
BRANDT: Team and technology! If the team is strong and the technology is stronger – defined as protectable and commercializable – we are very interested in investing. Some technologies are just that, others are the base of a solution that can change something that we believe could be a huge market.
FAGNAN: I love companies that bootstrap through grants, partnerships and customers. I call this free money, as it’s usually dilution free from an equity perspective. I also like to pull free money into deals after I have already invested in them. I don’t think free money and venture capital contraindicate each other.
MCCALL: We have two situations when we have to decide whether to write checks or not. The first is during the initial due diligence. VCs look for promising markets with sizable potential, business models that are rational and management teams that you trust can do as they say and generally have a history of doing so. Most plays in the nano and micro realm are solid niche technologies that don’t have the breakout potential required in venture capital. Government and angel funding are great sources to take some of the risk factors off the table before pumping significant amounts of institutional capital into a deal.
The second situation is where we’ve already invested in a company and new funding is required. In these situations, VCs will assess if the company still has a compelling and credible business proposition and if they have trust in the management team to execute. We all make macro bets and assumptions when we back companies. Sometimes it’s clear that the company is treading water, if not sinking. We have to sit down with the management team and assess if there really is a business here or if everyone agrees to find a home for the company. In other cases, you try to manage down the burn rate until the business model is clearer.
QURESHI: One of the important keys is to assess whether the startup truly has a unique and sustainable competitive advantage over the long term, such as through intellectual property. Intellectual property is particularly important for any platform technology. For example, intellectual property around diamondoids and their applications is a key focus area for us at MolecularDiamond. "
Mark Brandt, Managing partner, The Maple Fund
Jeff Fagnan, Partner, Atlas Venture
Matthew McCall, Partner, Portage Venture Partners
Read more here.
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For more information, visit www.EvanCarmichael.com. |
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