Make sure you don’t miss part I of this interview with Jeff on trends and markets.
Andrew Bellay What about the fund raising market for venture capitalists right now? What’s it like out there?
Jeff: First, the sky is no longer falling – so that’s good news. It was a really ugly fund raising time for the people who were raising money in late 2008 – early 2009 who were literally one the road-show when Lehman was going under and Bear Stearns was being gobbled up by JP Morgan for pennies on the dollar. We closed our last fund in mid-2008 and we’re not in the market right now. But from what I understand from my friends who are in the market, it’s still tough and LPs are looking for three things: performance, consistency of strategy, and transparency. LPs are really punishing GPs who allowed for strategic drift during the good times. You hear a lot of stories of LPs who are getting spun, who are not getting clear, honest, direct feedback from their GPs.
Andrew Bellay How do you give LPs the transparency they want?
Jeff: You tell them where things stand. You give them the good news and the bad news, and you don’t try to spin them and sell them. You give them a lot of data about where the portfolio stands and where the firm stands. They want it all. No surprises – especially no personnel surprises.
Andrew Bellay Is VC scalable?
Jeff: I don’t think it’s scalable. This is a business that is still art more than science. It’s a judgment business. I’ve been at it 15 years – half as an entrepreneur and half as a VC – and I still feel like I’m learning a tremendous amount every day. It’s really hard to scale this business because it’s so peculiar.
Andrew Bellay How does your experience as both an entrepreneur and a VC add value to your portfolio companies?
Jeff: The CEOs I work with appreciate that I can bring both a particular perspective as a former entrepreneur as well as a global perspective as somebody with a broad portfolio in a firm that has decades of investment experience. I try to bring that blend, the best of both worlds, to the table. Some people who just have the entrepreneurial experience are sometimes too focused on the short term. Some people who just have the VC experience don’t have that empathy for what entrepreneurs do every day.
Andrew Bellay What’s your style?
Jeff: I view myself as a service provider. When my CEOs call – when they need me – I let them know I’m here. On the flipside, I hold them to high standards. I use this analogy in my book about American Idol: There’s a reason that everyone loves Simon Cowell. It’s not just because he’s funny or because he’s a hard ass. It’s because he tells the truth. He’s really blunt, he’s really direct. He’s not mean, he’s just honest. For me, I try to be really honest and direct with my entrepreneurs, to hold them to high standards, and in an empathetic way keep pushing them to excellence.
Andrew Bellay Do you have any advice for all of the entrepreneurs in our audience who want to get started?
Jeff: Being an entrepreneur is an irrational endeavor. So if you’re looking for a super-rational, logical approach to choosing a start-up or a new venture or choosing a career path, than already you’re behind the eight ball. Great entrepreneurs make emotional choices about passion and relationships. They can’t stop thinking about a certain area or opportunity. It’s not just about rational, personal NPVs that will result in the opportunity. Follow your passion, listen to yourself really carefully. What do you like to read? What conversations engage you? Really focus on those things.
Andrew Bellay What about the aspiring VCs?
Jeff: The best way to become a VC is to go make a VC some money.
There are really two paths: join when you’re young as an apprentice or go make a VC some money as an entrepreneur and cut over from there. There’s no way to endear yourself more to a VC than to make them money. Be a part of a company that makes money and the VCs involved will be thrilled to have you on board.
Andrew Bellay Do you think that great players make great coaches then?
Jeff: Not necessarily, but it’s puts you in a position.
Andrew Bellay Silicon Valley has gotten most of the entrepreneurial attention for the last few decades. What’s going on geographically and is that changing?
Jeff: What’s fun is that each region thinks that they’re surging. Talk to people in the valley and they say it’s never been hotter. Facebook, Zynga, Twitter, LinkedIn – We’re going to have some massive IPOs. It’s never been better. You talk to people in New York City and they feel like this is their moment given media and advertising transformations. Finally there’s a real critical mass for a NYC tech startup ecosystem.
You talk to people in Boston and they feel like we’re totally hitting our stride. The genome was mapped here. We’ve got all these great hospitals and institutions. Harvard and MIT are just cranking out start-ups left and right. Access to New York City has been really positive for Boston because the media and advertising companies can shuttle back and forth. The energy sector is going gangbusters in New England with cleantech. It’s great! I think it just says that the whole entrepreneurial community is on the rise right now.
When I was a student at HBS 15 years ago we had full time faculty members in the so-called entrepreneurship department. Today it’s at 32 and it’s the largest department on campus. You tell me. Is that a sign of one region doing better than another or is it just a sign that the world is beginning to appreciate the value and importance of entrepreneurship?
Thanks so much to Jeff for a great interview and don’t miss part I of this interview with Jeff on trends and markets.
Jeffrey Bussgang is a general partner at Flybridge Capital Partners and entrepreneur in residence at Harvard Business School’s Arthur Rock Center for Entrepreneurship. Check out Jeff’s popular blog on helping demystify the venture business for entrepreneurs: Seeing Both Sides.
[Originally published By Andrew Bellay on aonetwork.com]