Instrumented Interconnecteds Intelligent

(L to R) Mark Fernandes, managing director, Sierra Ventures; Mark Gorenberg, managing director, Hummer-Winblad Venture Partners; Don Wood, managing director, Draper Fisher Jurvetson; Promod Haque, managing partner, Norwest Venture Partners.

Q: What captures your attention?

Fernandes: Like any sales call, you have to go in with a referral from somebody I know and trust. I don’t go into a meeting without looking into somebody’s LinkedIn profile.

Gorenberg: We do take some meetings over the transom, but it has to be a big idea. It has to be transformational.

Wood: Be sure to get in front of the investor in person. Don’t talk by phone. We look for the magnetism and the spark of the entrepreneur. That carries the day.

Haque: Sometimes the referrals come from customers. We maintain relationships with a lot of CIOs. We want to talk to entrepreneurs who have at least validated their ideas with potential customers.

Here’s Don Wood of DFJ, talking about that his firm looks for in an entrepreneur:

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Q: How do you define what has been a good deal for you?

Gorenberg: We want a good return for our investors, but beyond that there’s also the relationship. You want an outcome that’s good for all the parties over the long term.

Haque: There are times when you don’t make money in a deal. In one case we had to file Chapter 11 with a company, Yipes, a metro internet company. We lost our initial investment, but put money in the company again. The relationship with the company later helped us get into Rackspace, and we made $500 million on the deal. So it all worked out.

Wood: Right now there are a lot of angel investors in the US and around their financial objective may be very different than a venture capital fund. They’re interested in shorter term investments, quick exits. If your company is like that, angel investors will be happy with the outcome. But investors in larger funds need the bigger returns.

Q: How do you think about the startups in China?

Haque: We have multiple local deals in China, in ecommerce and a semiconductor company. They’re growing like weeds. It’s a huge market opportunity.

Wood: We struck gold early by investing in Baidu, the Chinese Internet search company. We made another 30 investments, and we haven’t had next Baidu. It’s hard. The government can shut Internet companies down overnight.

Fernandes: We look for models that work in the US but have a local flavor. Salesforce.com has had trouble in China but we invested in a local Chinese company that’s trying the same thing. You have to localize to these markets.

 

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