Ever dream of being an entrepreneur but need to know how to get started? The “VC Panel” at the Microsoft Imagine Cup Worldwide Finals, held in NYC last month, was a practical how-to session on starting a company, and getting funding.
The event connected student teams with investors, entrepreneurs, seasoned start-up founders, and inventors, including:
- Dan'l Lewin, corporate vice president for Strategic and Emerging Business Development, who is responsible for Microsoft Corp.'s global relationships with startups and venture capitalists.
- Joy Marcus (@joymarcus), Venture Partner, DFJ Gotham. She was the former general manager for French video site Dailymotion.
- Oliver Hurst-Hiller, CTO, Donors choose.org (@donorschoose). He has started two start ups; one bought by Amazon, and is now leading a company he is truly passionate about.
- Stan Vonog, an entrepreneur who participated in the Imagine Cup 2004 and 2005; won in 2005 which he says was a pivotal event in his life. He is now in stealth mode with a new technology company that he founded.
- Dean Kamen, @deankamen, the founder of DEKA Research and Segway inventor. He introduced himself by stating he would be the “contrarian” of the bunch.
To Get Funding…Or Not, That is The Question
“Remember: The VCs get to choose to keep you as CEO, or fire you.” Stan Vonog, entrepreneur.
Venture Capital is something many entrepreneurs seek immediately after founding a company, or coming up with an idea. Stan Vonog, an entrepreneur on the panel who is pro VC money, said to approach the funding like a long-term relationship. “Trust your gut…Spend a lot of time with the VCs—you need to trust them. You need to make sure that you do the due diligence and understand their DNA.” Having investors who truly understand the space your company is in, and are similar to you as people, will improve your chances of a good investor-entrepreneur relationship.
Oliver Hurst-Hiller said, “VC is the last place you want to go. If you need money, take it from your account, family friends. Why? Because they will dilute you.” In Oliver’s opinion, getting as far along with the company first—before getting funding—increases your leverage as a CEO and founder when approaching VCs. Dean Kamen seconded this. Oliver said, “A good VC will become fans of your business, fuel your success. This is more important than the capital.”
Dean Kamen, said, “I thought I would be a contrarian but I violently agree with what they have said.” Dean said that people are the most important thing in any startup, and he reminded the audience that part of starting a company means embracing failure, and change. “The product you start with will not be the end product. It is the iterative process. You will fail; you will fail again…until you succeed. After 5-10 years, you will be an instant, overnight success.”
While the audience laughed, the panel nodded their heads in agreement.
Dean Kamen said, “The last person you will want to go to is the VC. This is the last! The more you get done, eliminate failures on your one, the more value, the more control you will get to maintain. They decide if you get the money and get to keep your job. If you want the VC to take the first pain, the VCs deserve to take the bulk of the risk. If you don’t work harder, more of your time and risk then you would have in any other situation, then you are drinking the kool-aid and myths of this world about entrepreneurs.”
What do VCs Look At?
Joy Marcus said the questions she always asks are, “Could it scale? How big can it be? What is the total market size? The next thing we look at is the people. I meet a lot of entrepreneurs, and know within 60 seconds if this will move forward based on people.” She said they look at product, pricing and how could it make money.
Joy Marcus said that most VCs are not interested in the “fast buck” or entrepreneurs that clearly are doing this for the money. They want someone who is very passionate about what they are doing and will stick with it during the down times.
Dean Kamen reiterated that creating the value should be the goal in the mind. “Think about a big problem and solve it. Financial reward should be a result of the great project but not the cause of it.” Kamen, who is excited about three non-profits (clean water non-profit for 6B people around the world; electricity to the 2.5B people that do not have electricity; teach children around the world abut science and technology), stressed that being passionate about your subject is what keeps you going.
The Great Myth: Overnight Successes
Correcting the great myth that entrepreneurs have instant success, the panel explained more about the lifecycle of a startup, and the funding process. Joy Marcus said, “Bootstrap, find your money in the beginning; come to a VC when you are ready to scale. Prototypes are rarely funded,” she added, “Before the product is really ready, the VC is a waste of time. Likely you will get bad money.” Meaning that the VC money may come from investors who don’t truly understand your product, and who want a fast return.
Dan’l said, “Evolution is a slow process which is really brutal—constant correction of your product, the prototype. Yet evolution is what entrepreneurs are all about.” He reiterated that VC should be approached when you are ready to scale—not before.
Kamen agreed saying “Revolutionary things happen when you partner with the people that are good at what they do—and for a VC—that is scaling.”
Do You Have What it Takes To Be An Entrepreneur?
Dan’l asked the audience to identify their internal motivation. He said that when you understand what truly drives you, the world is your oyster.
Oliver from DonorsChoose said ultimately he is a manager and his job is to constantly understand how to overcome barriers that keep them from growing, it is an iterative process, and some people don’t have that personality type to sustain that.
Stan Vonog’s opinion on whether to be an entrepreneur was to ask yourself, “Are you having fun or not? If you are not having fun for 6 months, maybe you should do something else.”
Dan’l said that “No well-rounded individuals in the world but there are well rounded teams,” reminding the audience of the importance of your team, and working with others to build from the ground up.
Dean Kamen said, “If you want to run a big company, being an entrepreneur is likely not the way to do it. Organized societies depend on stability. If people tell you that you are nuts, the first thing you know is that you have a good idea.” He talked about how stability is necessary in our society (for example, we wouldn’t be very happy with a plane that keeps their wings on the plane 75% of the time, which would be a good ratio for startups), and people who need stability in their jobs are not going to be happy as entrepreneurs.
Questions from the Audience
A Senegal student wanted to know how to take their idea to the next level, given a lack of infrastructure and partnerships available in their country. The panel suggested developing relationships with partners in the U.S and having a representative from the team in the U.S. Joy Marcus, suggested France, which has a good community and robust innovation, and the benefit of speaking the same language.
A team from Slovakia asked how to find the people to complement your team? Joy Marcus said that you have to be willing to understand what you don’t know, and to “Hire the best person you can find no matter how threatening it seems. Be willing to hire your boss or your future boss.” Dan’l said, “You may be looking for someone who is older, failed a lot, accumulated experience. There is wisdom in stepping outside of where you are.”
Dean Kamen agreed, saying, “You don’t buy a dog and do your own barking. If this person is good enough to hire, then you need to trust them. Otherwise you will never be able to do more than one person can do because you will be looking over their shoulders.”
When the panel ended, the student entrepreneurs were excited to have some time speaking with each of the panelists. The energy in the room was one of innovation and passion. We think the panelists motivated the entrepreneurs, and not one was deterred about whether they have what it takes to succeed.