Oakland’s tech scene is full of early stage companies, aka start ups, so the session at Vator Splash Oakland on the “Early Stage Investor Landscape” brought out quite a few entrepreneurs.
So just what are early stage investors looking for? How do they choose which companies to invest in among the myriad who might be looking for funding?
“It is a lot like dating. There is no checklist,” said investor Christine Herron, a partner in Intel Capital, the unit of semiconductor maker Intel Corp. that invests in innovative startups.
“For me, I tend to be about customer acquisition, team and product. I always start with those things,” she continued. “Is it (the team) someone I want to fight to the end with?” to succeed? Does she believe in the product? Does the young company have some customers?
Jeff Clavier, founder and partner of SoftTech VC, agreed that deciding to invest in a company is often a gut decision. Still he has some basic criteria that must be met before he even begins to consider.
“The key is to understand as much as about the firm as possible,” he said. Then there’s a long process of sizing up a company, its market potential, its management team and so on. “Then one in 100 deals will get to the point where we are going to invest.”
Salil Deshpande, managing director of Bain Capital Ventures, said that investors with Bain specialize in industry sectors they know. “I do software infrastructure. I try to eliminate things I don’t understand.”
The panelists said they value accelerators, the business incubation and mentorship programs that are popping up in many cities, giving a hint to entrepreneurs to find themselves an accelerator program to join.
“Accelerators are very efficient,” said Patrick Chung, a partner with NEA, about how accelerator presentation days let them comb through many potential deals very fast. “In one afternoon, you can hear 80 startups” describe their business plans.
Herron, Clavier, Deshpande and Chung all noted that there’s been a proliferation of early stage companies and startups seeking capital – and with that has come a shift in the investment landscape towards funding more early stage deals with commensurately small amounts and fewer later stage deals.
One reason for the proliferation is that starting a business requires little hardware or infrastructure these days.
“If you have a lap top and an Internet connection you can start a company,” Chung said. Of course good ideas and smart execution matter.
Increasingly, “there’s democracy” in the startup world, he said.
So there you have it.