VentureWoods

Sramana has a post on venture compensation, but I found the part at the end more interesting:

I would go so far as to submit, working for a VC-funded startup is more like having any other job, than true entrepreneurship where you actually are your own boss. Entrepreneurs / CEOs answer to a Board. There is a compensation committee that decides how much you make. You get fired and washed out of your equity stake based on the VC’s whims. This may be perfectly legitimate at times, since not all entrepreneurs scale to become good CEOs of larger companies. But often, these decisions are gut reactions, not legitimate, and entrepreneurs get slaughtered due to the VCs’ lack of experience or seasoned intuition.

Personally, I have found this topic of what leads people to entrepreneurship fairly interesting. For some it is the ability to create something truly big. For others, it might be the money. And for others, being one’s own boss. The last one is certainly not the one with which you want to chase venture investment. VCs, whether experienced or otherwise, are fairly driven by the economic incentive, and hence by their desire to maximize their economic opportunity in a startup. As entrepreneurs, you need to be (a) aligned to that objective, (b) be able to protect your own objectives.

Had a couple of very hectic weeks with TiECon and couple of our partners visiting India. The opportunity to go around, see 10 “shortlisted” companies with some of my partners last week gave a good sense of contrast between what is expected in a mature venture system like the valley, and what is available here. One of the things that stood out was the lack of detail on pitches. What is interesting is that most of the missing detail did not seem to be a function of articulation, but of ignorance - people who had missed the details had not thought about those aspects. Also, most of the people who had missed details had not operated in those markets before. Nine out of ten presentations had no competitive analysis whatsoever — some more mentioned competition but with a dismissive tone.

I have noticed some of the same contrast in my visits to valley pitches. And if I may draw a parallel, I have seen similar lack of detail in corporate environment here in India — VP level plans and presentations get approved often without sufficient level of detail and analysis.

In terms of our education process for entrepreneurs on venturewoods and elsewhere, we have long focussed on “what all to cover” which again leads to a shallow view of the plan — entrepreneurs look at a question, and answer it at a high level, and they are done. We need to start putting more emphasis on the level of detailing. Maybe if someone can share their pitches, we could do a critique. I have a lot of, what in our view are, good and bad pitches, but I dont have the right to share any of them… Any volunteers?

Just saw a couple of side discussions on some comments posted elsewhere on VW. Am bringing this up as a main post as it might be of interest to others as well.

Rad said

What applies to the rest of world, doesnt apply to India. Everybody - Indian Entrepeneurs, Indian VCs, Indian Angels need to think and act differently. If you guys think about your country and strive for a pride that comes from having a Sony or a Google, you would find yourself spending more time with young guys nurturing and mentoring them, rather than than just chasing fund targets.

Whats missing in India is Idealism, Romance and long term vision.

Rad, I understand what you are saying. What we also need to understand is that in the investment business, there is no “long term” unless the fund targets are met. As important the long term vision is, it is equally important one understands how to get there. Sony and Google are prides of their countries because they are business successes, not because they are romantic.

Anon said

… please tell us what are the things a VC is looking at when he invests in a startup ?

Anon, I think at 30,000 feet, we look for the ability for ourselves to make good returns on investments. That typically requires large markets, great teams and sustainable differentiators in the business. At a high level, it is really that simple. As you dig in, some factors become more important than others. In Internet, a great team might mean passion and understanding of the medium; in enterprise sales, it also includes past experience in selling to enterprises. Sustainable differentiators might exist on day one due to technology, or you might be able to build them over time (as in case of consumer internet companies, where brand and first mover advantage can be significant).

And then, our own understanding of the space and our ability to address risks in that specific business become important. Most successful early stage investors are conscious of the fact that all good investments are not necessarily good investments for them.

Would love to continue the discussion,

and yes, we are adults — we can use our names here