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Some of you may have met Adam Quinton at our New York conference on Thursday. He is a loyal supporter and a great friend. The conference prompted him to connect what he saw, the discussions he had with CEOs afterwards, and with a NVCA survey on the “Brand Gap” between start-up CEO and VC attitudes from earlier this year. He has writing this fabulous and informative article. Read the full version at www.analysttoangel.com
“What do entrepreneurs want from a VC vs what VCs think they want!?
There is just so much noise in the start up world. So many people giving so many other people advice, solicited or otherwise. So many blogs to read. So many forums, panels etc where investors explain how entrepreneurs should most effectively do this, that or the other. Some of this is well informed, some not. Being a small part of this noise generating equation myself I do my best to add value where I can, or shut up! But when it comes to what entrepreneurs value and what VC investors think they want are “they” and “we” aligned?
In answer to this question a recent National Venture Capital Association (NVCA) commissioned survey provides some hard data, which I discuss below. And I supplement this with some more anecdotal observations from the recent Capital on Stage event in New York…” Continue reading…
Just like any product, there are features and benefits that are more relevant to particular target groups, at particular times. The same can be said for venture capital and corporate venture capital, yet there are some strong views out there, implying one is always better than another. In my opinion, investment deals should be viewed by relevance, in order to achieve business success.
If you caught this interview with Fred Wilson, New York-based venture capitalist and co-founder of Union Square Ventures, you would know he is not a fan of CVC. He explains that corporations are not interested in the company or entrepreneurs success, but exist for their own interest. In his blog, Wilson shares his view on why the CVC is not in it for the interest of the entrepreneur. “Corporate investors don’t really share the profit motive with entrepreneurs… none of the employees who made the investment get rich… the company gets rich.”
But Wilson’s is not the only one to question the concept of the “corporate VC”. Sarah Lacy, Founder and Editor-in-chief of Pandodaily.com wrote an article expressing that the corporate VC is “like a division of a big company pretending they can operate ‘like a startup’ …Its like a cat pretending to be a dog.” She ridicules the concept of large corporations developing CVC divisions to try to learn from startups or to cultivate innovation.
Both VCs and CVCs participate at Capital on Stage and are equally popular. I am yet to see the corporate VCs shunned, and sitting alone in the corner. The latest BC Insights report suggests that CVCs could help reduce the “Series A Crunch” as they are increasingly willing to take risk at early-stages. These days 40% of deals made by CVCs are at Seed or Series A stages.
The BC Insights report shows CVC has it’s place and is growing. Twenty-five percent of all venture capital funding includes funding from corporate VCs. CVC venture deals are larger than typical VC deals, averaging $15M in Q2’13 compared with the VC average of $9.5M.
But there must be more benefits than just the money CVCs bring? The greatest advantage of a CVC is the operating business(es), and the connections this brings. Business synergies such as markets, clients, users, partners are actively sought by CVCs, and could translate to real value for the startup.
The other advantage is business/operational experience of CVC. While it is clearly not always advisable for the investor to meddle with operational aspects of the business, the typical operational backgrounds of CVC can sometimes help the entrepreneur go through the growing pains of building a business.
CVC may also provide a great exit option, and when statistics show that 90% of exits are trade sales, rather than IPOs this can be a real benefit. If a CVC is invested early, and understands the business, an exit at the right price/time may be smoother, than compared to an outright search for an uninitiated buyer.
The report lists the top CVCs. Google Ventures and Intel Capital coming out on top. Both Fred and Sarah acknowledge that maybe there are exceptions to the rule, claiming Google and Intel do the opposite of what other corporate VCs do; they invest for financial return first, and strategic fit second.
Lisa Lambert from Intel Capital is participating at Capital on Stage on Thursday at Goodwin Procter. I asked Lisa to comment on what she sees as the benefits of partnering with a corporate VC and her view on corporate VC strategies for financial and strategic return.
“When considering venture investors, entrepreneurs should evaluate the value they will receive from the competing VC firms. As a corporate VC, Intel Capital is naturally positioned to provide important resources in addition to capital to help our portfolio companies scale from startup to a global corporation. These resources include the ability to provide connections to potential customers and partners; access to the Intel’s technologists and product GMs; one of the few truly global investor networks and the credibility that comes with being associated with a Fortune 500 company.
At Intel Capital, we invest for both financial and strategic success. This is one of the key reasons we have been so successful for over 20 years. Financial success is important to assure that we are building long term value with the portfolio companies. Our investments are also aligned with Intel’s divisions so that we create strategic value for Intel’s operating businesses. We also invest in emerging trends to assure that we are going where the market is heading.”
I was once explained by a wonderful investor “Pure Financial = Dumb Money” and “Strategic = Smart Money”, but I truly think it all comes down to relevance. Ultimately, both types can become smart or dumb depending on how the fund views and manages the investment. The same goes for selecting VC or CVC money, and what is right for your business, right now? Founders should always do their due diligence on any investor they are looking to partner with, no matter the category.
It was a long weekend, so we’ve extended the deadline for any founders out there who didn’t manage to finish their application before last nights deadline.
As the event is only days away, we urge you all to apply today. We have our selection team ready and waiting to approve those applications as soon as they come in. As soon as you’re approved you can buy your ticket and be included in Open Office Hour selection platform.
We look forward to receiving your applications today!
It kind of became a tradition doing a pre-conference Meetup the night before the conference. On Wednesday Nov 6 we’ll be at the Galway Pub formally known as Galway Hooker from 7pm onwards for some drinks. It’s very close to the New York Times building.
See you there!
The above VC lineup says it all…. We’re proud of this years’ VC lineup of Capital on Stage New York held next week Thursday again at Goodwin Procter in the New York Times building. Two VCs who attended our Berlin conference earlier this year – e.ventures and Target Partners – even fly to New York to meet with more founders!
The 17 confirmed investors cover the entire range of venture capital investments – from seed to Series C, but also geographically they invest in companies from many countries – even though the main focus remains US-based companies.
Startup who are ready to get funded should apply today for a ticket!
It is only 1 week before Goodwin Procter open their doors to the second edition to Capital on Stage New York… and we’re just as excited as you!
However, in the spirit of Halloween (did you see Google today?), we need to shock you into realizing that there are only 4 more days to apply for Capital on Stage and register for the Open Office Hours.
Anyone who applies after Sunday will be taken into special consideration and may not get access to the Open Office Hours… don’t mean to scare you, but it is Halloween (the truth)!
Everyone who has purchased a ticket will be sent an email with access to the platform. If you have been selected, but have not purchased your ticket yet, you wont get access to the platform until you do. So hurry up!!
For those who still have not applied or accepted their invite make sure you do before Sunday.
Happy Hump Day! (Happy Wednesday).