Last Thursday, Feb 26th, 2009, I attended the VC OUTLOOK '09 meeting in New York. A panel of venture capitalists --ranging from early stage investors such as Constellation Ventures to VC companies such as Signet Healthcare Partners who only fund established pharmaceuticals --talked about where they stand when the economy is harsh and what they look for before they make investment commitments. Here are the highlights from this event:
1) With good or bad economies, for venture capitalists, it's business as usual. Their business is to make investments and they will continue to do so. So, don't be discouraged.
2) Key advice for start-ups: plan that the cycle will last longer and make sure you'll last. In other words, make sure you start with enough funds to get you going for substantially longer periods than at times with better economies.
3) Relatedly, VC companies will want to know who you are, put bluntly: how much is in your bank account, do you have mortgage to pay, for how many homes, do you have kids, do you pay for private schools, etc. They are not going to pay big salaries and they need to know that you will stick through for the time needed.
4) Leadership is very important. Do you have the right team to run your business? Have you selected people that will grow your business?
5) Focus on getting revenue quickly. Ask for smaller amounts of funding and plan to have returns soon (e.g., within six months). Then build on that and ask for more.
6) If you are in social applications: have a convincing business model ready. They are not interested in the thousands of registered users that you may have or believe your will quickly get. Even Facebook is more of a platform for other businesses, itself not being very profitable.
7) If you are into clean energy: "Good energies" are funding even very early stage companies that target clean energy. The firm invests in solar, turbine-based renewables, green building technologies and other emerging areas of clean energy.
