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Conversations with Venture Capitalists about Start-ups and Funding

Guest post by: cynthia kocialski

Article Overview: What attracts a investor to an entrepreneur? Here's a conversation with two venture capitalists about start-up funding and other issues.

Conversations with Venture Capitalists about Start-ups and Funding

Every start-up entrepreneur wants to know about what investors are interested in funding and what entrepreneurs should know about the current state of the venture capital business. Here are some highlights of a conversation with Curtis Feeny of Voyager Capital and Ted Driscoll of Claremont Creek Ventures. What do investors want?

• Quality team

• Great market

• Quality Technology

• Understanding of barriers and competition

• Customer traction

You can hire a great team, but you can't hire a great market.

Every good idea will be copied sooner or later. The question is can you get enough lead time to create the next generation before a competitor can reproduce the first one.

The business plan is an aptitude test. Can you make one? Does it show how you can scale the business?

What do you see in start-up proposal?

We are seeing the best quality deal flow since 1998. Possibly because the economy is rough, people have more free time to ponder and pursue ideas, and more people are starting companies. The entrenched industry players have cut back on their development budgets, so fewer projects are being funded and this is leaving more opportunities for start-ups. Cloud computing and open source has driven the cost of hardware and software down, and so experimentation is very cost effective now.

What you view on funding these days?

Today's start-up rounds are traunches, so start-ups are receiving their funding based upon meeting milestones. Entrepreneurs often view VCs in an adversarial role, which is counterproductive. We are partners. Milestones focus the start-up on what's important.

Some VCs will shut down a start-up as soon as they don't meet their milestones. Others will tell a start-up that if you don't meet your next milestones than some of the senior management team will be replaced immediately. Still other VCs are quite reasonable; we know that not everything goes according to plan and the plan can changes. Entrepreneurs should be careful about who they chose to partner with in the investment community.

Where do you think the venture capital industry is headed?

Entrepreneurs need to know that there is a shakeout in the venture capital industry going on. The average venture capital fund is in existence for 16 years, but the agreements with the general partners and limited partners are typically 10 years. The venture capital business is going to shrink because the funds are not returning capital to their limited partners and they won't sign up for another round. It takes a long time for a venture firm to close. Entrepreneurs should look to see if a venture firm can raise another fund.

Venture capitalists lose at least two-thirds of their portfolio companies. We have to decide which ones are they most promising and shut down the rest. Many VCs today are propping up their best start-ups because they don't have any capital to return to their limited partners, but still need to show some potential for gain to the partners.

What is your perspective on patents for a start-up?

Patents cost at $25,000. Don't waste money to patent something if it's difficult to determine when infringement happens. You need to easily prove infringement. Patents are not so valuable with software, but patents are more valuable in bio tech and life sciences.

Idea companies are those will lots of patents and they defend rigorously them, such as Rambus and Qualcomm. These types of companies are focused more on ideas than on the marketing, sales, and product. Sometimes when too much emphasis is placed on patents in a start-up, they become an idea company and that's not very interesting to venture capitalists.

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Article Tags: entrepreneur, investor, startup funding, venture capital



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Re: How I Started EvanCarmichael.com - Thanks Evan for this post. It is inspirational. Do you still have contact with those Venture Capitalists?
Re: need a capitalist to hear me out - If you have solid business plan, there are thousands of Angel Investors and Venture Capitalists that will fund your project. Google "Venture Capitalist" and you will get tons of investors who are ready to fund your project
Re: Seeking Investors For Downtown Victoria Development - Great - Google [i:hbs9217x]Venture Capitalists in USA[/i:hbs9217x] and you have thousands of them to choose from
Del Castienne - International Business and Project Brokers - In addition to the above, Del Castienne is an international brokerage firm specializing in various entrepreneural services. Del Castienne is more than just a brokerage, as we facilitate Private International Venture Capital for Business and Projects from Commodity Speculation Transactions, MBO, MBI, M&A, Bridging Finance, Patents, Branding, JV, Corporate Advisory Services, Business Plan Development, etc.. Del Castienne is linked to 1200 private international Venture Capital consortiums and Funding Syndicates with a funding capacity of $ 115 billion and 5000 international Investment Bankers and Business & Project Brokers. This in itself should provide you with a gateway to the best source of funding in the world. Through Del Castienne any entrepreneur can have up to a potential success rate of 25% (conditions apply) with absolutely no up front costs. Del Castienne charges a maximum of 5% commission which is far below the international standard of 10% - 12% on project value. If you are tired of running back and forth with countless dissappointments, please give us an opportunity to assist you. Our minimum Venture Capital amount is $1 million and we a Commitment Letter can be provided with in 30 days after formalities are in place and your information was received.
Why pay a Consultant? - Consultants can bring you into contact with a Funding Source but how do you tell whether a consultant will be successful beforehand? Professional Consultants ALWAYS ask for some kind of retainer so that they can feel they're not being used by a 'chancer'. However, when raising funding, a real consultant will offer to REFUND THAT RETAINER out of the % BROKERAGE he charges, payable once he finds your Funding Source, and payable from initial disbursements. Retainers only cover part of the costs that a consultant has to pay while working on behalf of the Client. Their real wages come from the agreed upon Brokerage, received when they are successful on the Client's behalf.


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