Today at TechCrunch Disrupt, five VCs gathered to talk about the state of investing in Silicon Valley and what skills and qualities make a successful venture capitalist. James Slavet of Greylock, Joe Kraus of Google Ventures, Shervin Pishevar of Menlo Ventures, George Zachary of Charles River Ventures, and Rich Wong of Accel Partners each weighed in on how venture capitalists are trying to make a difference in the lives of startups as well as what the perception of venture capitalists has been traditionally and how that’s changing.
“As they say, 130 percent of the value [of a venture capitalist] is the day you write that check”, said Kraus, reciting — tongue in cheek — an age old saying among VCs and entrepreneurs. The Google Ventures investor continued on to say that what he sees as the true value of venture capitalists, and GV in particular, is not just providing the capital but helping entrepreneurs to hire the world’s best engineers.
A great management team will only take you so far, he said, and every startup goes through a “desert phase” in which they wander, seemingly a bit aimlessly, as they try to find customers and the right market fit. The tendency, he said, is to think that focusing on hiring a good management team is what will help lead you out of these desert phases, when in reality the anchor is a good engineering team.
On the flip side, for those aspiring venture capitalists out there, Kraus said that the key is to avoid fostering a dependence among your entrepreneurs — that venture capitalists have to teach their founders to be independent and self-sufficient. As simple as that may sound, many entrepreneurs are young, and that education (like what a good resume looks like or what to look for in your employees), while basic cannot be overlooked.
Mark Zuckerberg is a classic case of an outlandishly successful entrepreneur who is also a top flight engineer, but what many people don’t talk about when they mention the Facebook Co-founder’s success, Pishevar said, is that he was also mentored closely by VCs and angels (like Ron Conway and Peter Thiel, to name a few).
Mike Arrington weighed in to say that, in his experience, founders are also eager to have VCs help guide them — before even considering what engineers to hire — on simple things like how to find a good accountant. The panel seemed to agree that, beyond guiding entrepreneurs through strategic acquisitions of human capital, these day-to-day, ground-level things like hiring a good accountant are important and may get overlooked during the mentoring process.
In light of this, Slavet then touched on what the role of venture capitalists will be over the next few years. The overall heft of venture capital is changing, he said, in such a way that the number of firms who invest all the way down the line (early stage to late stage) is decreasing. Ideally, today and in the future, VCs will be specialized in certain verticals, and their areas of expertise will give their startups strategic advantages at one point or another in their growth. Essentially, he said, the future of the business is investing in small chunks rather than mega rounds. “Specialization is very important”, Wong agreed.
Another important trait for venture capitalists? Being bold and entrepreneurial, Slavet said. The investor then went on to lay out three keys to being a successful VC, which included having strong instincts (usually from a product level) about opportunities in the market, being bold and aggressive in relation to those actionable opportunities, and the third is the importance of building a lasting relationships with entrepreneurs over time — not just being the embodiment of a check book. The more that VCs invest in their startups, both financially and with time and attention, the more successful all parties are likely to be.
The panel also touched on the importance of locating one’s business in Silicon Valley, to which most of the VCs agreed that, while there are amazing business sprouting across the globe, there is still a strategic advantage to being in the valley, because that is where the large cap acquirers (and VCs and angels) are in highest concentration. You can read Sarah’s coverage here.
James Slavet is a partner at Greylock. His primary areas of investment focus are e-commerce, online advertising, and Web-enabled consumer services. James’ investments include Auditude, Groupon, High Gear Media, One Kings Lane, Redfin, Revision3 and TellApart. He previously represented Greylock in its investments in Farecast (acquired by Microsoft) and Kongregate (acquired by Gamestop). His complete profile can be found at LinkedIn here.
Joe Kraus is a partner at Google Ventures, Google’s private market investment arm. His primary focus areas are: mobile internet, payment and financing services, gaming and local services. Previously Joe was a Director of Product Management at Google. Before joining Google he co-founded Excite, JotSpot, and DigitalConsumer.org. After the acquisition of Jotspot by Google in 2006, Kraus worked on OpenSocial, Google’s effort to develop API standards for social networking platforms. Joe graduated from Stanford University in 1993 with...
Shervin Pishevar joined Menlo Ventures as a Managing Partner in 2011 after a successful career as an entrepreneur and angel investor. His focus is on consumer technology investments, specifically in the gaming, mobile and social web industry sectors. Shervin works closely with portfolio companies Uber, Shaker, Warby Parker and Mr. Number, and was the driving force behind Menlo’s investment in Tumblr. During his first few months at Menlo Ventures, Shervin helped launch the Menlo Talent Fund, a $20M seed...
George Zachary joined Charles River Ventures in 2004. He brings more than 17 years of operating and investing experience in computing and consumer technology. George’s focus is on building great services and software technology companies. George led CRV’s investments in Areae, Geni.com, GoTV, Millennial Media, Skyrider, SocialMedia Networks and Twitter and is a board member at Twitter. (Source : Charles River Ventures website - http://www.crv.com/CRVPartners/Zachary.html)
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