Venture Explorer

Should Entrepreneurs go to Venture Conferences?

Greg Costikyan (game designer, entrepreneur, blogger) writes a tongue-in-cheek look at the entrepreneur's experience at Venture Conferences.  You know, the ones which promise you a moment in the sun pitching to a legendary pantheon of VCs ...
Here's an excerpt which had me nodding my head  ...

From an entrepreneur's perspective, the supposed appeal to the venture conference is this: I'm pitching to a room containing maybe 200 people, all interested in venture investing, and even though there's a fee attached (and maybe travel and a hotel room), and even though it's a couple of days out of my (and maybe my senior staff's) life, it's a more efficient way to reach a lot of potential investors at once!

Right?

Well--no. That room of 200 people is maybe 25% other entrepreneurs waiting their turn or listening to other pitches to get a better sense of how to polish their own, and maybe 50% service folks who actually want to sell you stuff, and maybe the other 25% are investors of one kind or another. Of whom the vast majority would never invest in whatever it is you're pitching. And of the handful who remain, almost all are so junior that unless they go back foaming at the mouth with excitement, it doesn't really help.

I've been wondering how long entrepreneurs will keep paying up to be one of a crowd pitching when they could far more easily research relevant investors online (that's one of the many benefits of LinkedIn and, now, Facebook!) and wangle a one-on-one meeting instead.

This bit had me ROTFLMAO ...

The basic problem with the venture conference panel is that the conditions under which they are created mitigate against anything of the slightest interest ever being said. They exist to motivate the attendance of VCs, who may be flattered to participate; to reward service firms for contributing money (by allowing them to provide the moderators); and to attract the interest of entrepreneurs, who may reasonably be expected to find what potential investors say of interest. But the choice of topic is inevitably anodyne ("Emerging Trends" -- can't pass that one up!), and since the moderator is from a service firm, which has an interest in sucking up to both investors and entreprenuers, he is extremely unlikely to ask challenging questions, and is likely to stick to the equally anodyne. E.g., "Which is more important when you're looking at a company--the finances or the team?" -- a question at this actual conference, to which the only honest response is "Which are you, a moron or an idiot?"

That's why my first conference this year is GDC in mid-Feb ... conferences of, for and by practitioners tend to be far more rewarding than those catering to investors.

Will Google Spawn a Mafia - Like PayPal?

No, this isn't a post about La Cosa Nostra.  But many recent articles such as this one in the New York Times talk about the PayPal Mafia - entrepreneurs who emerged out of PayPal - and the potential for the fraternity of ex-Googlers to invest in, and found, the next wave of innovation in Silicon Valley.

Implicit in such speculation is the belief in a contagious, high-tech version of the Midas touch - Google was so successful in such a short time that the Kool-Aid in the company cafeteria must have been liberally dosed with the entrepreneurship gene.  After all, PayPal (in which we were the first institutional investors) alumni went on to start or invest in high-profile companies such as Facebook, LinkedIn, Slide (portfolio company), Yelp, Geni, YouTube ... with its crop of young, affluent and connected techies who know no boundaries, shouldn't Google spawn even more of the next generation of successful startups?

My answer is a resounding ... maybe.  Yes, there is a very real PayPal mafia, but there isn't an equivalent eBay mafia - and eBay invented C2C e-commerce and bought PayPal.  Nor is there a Yahoo! mafia or an Amazon mafia, even though both companies invented and dominated large categories of the Internet.  Was PayPal really that special, and can Google be similarly special?

PayPal, unlike so many of the large Internet players, was always an embattled company.  They morphed their business plan dramatically along the way, struggled initially to exist as a value-added service on a hostile platform (eBay) that had a competing offering, were attacked by all manner of fraud artists, faced periodic state and federal investigations, and went public in one of the most trying times in recent US economic history.   PayPal's primary problem was always survival, and being nimble while dealing with dinosaurs was crucial - just as it is for most startups. 

Google's journey to eventual blockbuster status wasn't all smooth sailing either,  but after the first couple of years, when Google had figured out the CPC model (with some help from Overture :-)), Google's primary focus was on scaling - and that's usually a problem that emerges late in a startup's evolution.  Most startups don't have the luxury of dominating their target market (Search) while also running a printing press spewing forth hundred dollar bills (Adwords).

PayPal was very successful, but raised a lot more money (~$250M) than Google ($40M) and exited for far less ($1.5B vs. Google's current market cap of $180B).  The average PayPal employee got a whiff of wealth, but hardly the tens or hundreds of millions that so many Google veterans pocketed thanks to Larry and Sergey's generous options granting policies and the lofty valuation of Google by the public markets.  And while it takes guts to climb out of poverty and build a business, it takes even more to sustain ambition and hunger when your biggest problem in life is dodging calls from wealth managers anxious for your business.

Because PayPal was acquired by a much bigger company, there was a pretty rapid exodus of top talent, many eager to prove that PayPal's considerable success was neither a flash in a pan nor enough of a showcase for their abilities.  PayPal was still relatively small and tight-knit as a company when it was acquired, and the smart techies leaving PayPal all knew each other well.  When they ventured out on their own, these entrepreneurs had a cohort of investors, co-founders and advisors who were aligned in attitude, experience and timing, a fortunate coincidence indeed.

Google's success continues to this day, seemingly without bound, and the incredibly smart, talented, rich and connected folks who choose to leave are on a very personal timeline, usually dictated by options vesting dates; and Google tries hard to keep them by offering a mix of professional and financial blandishments.  Departures take place in a trickle, therefore, and not en masse, and given Google's size, connections within alumni are necessarily looser than at a smaller outfit like PayPal.

Startups need to start out laser-focused, often on ideas that seem quite small and all about the here and now rather than the distant and transformational. I wonder if after helping build a colossus like Google, its alumni will be satisfied working on startup ideas that of necessity will appear tiny in comparison. To their credit, many of the first few Google progeny (e.g., FriendFeed and Weatherbill) seem delightfully concrete, although no doubt with ambitious expansion plans - I sure do hope this trend continues, although I've seen my share of (unnamed!) ex-Google companies that are venturing far beyond the realms of the possible.

Googlers do have quite a few things going for them, of course - the Google selection process was skewed towards off-the-charts-smart people, they did well in a decentralized meritocracy that valued engineering talent much more highly than competitors such as Yahoo or eBay, and Google's policy of allowing employees to spend up to 20% of their time on pet projects has let hundreds of them experience the full lifecycle of conceiving, developing and launching a new product or service. 

A few of these services succeeded, but I suspect the most valuable lessons were learned from the many more flops and Googlers imbibed a culture of failing fast and objective metrics-driven decision-making.  These are essential ingredients for entrepreneurial success.

So PayPal was a very special place,an incubator of talent unrivaled in decades.  But there's enough going for Google that it just might become #1 in that contest as well.