Investor Perspectives


Illuminate Ventures is in a category called micro VC's. Some who started out 30 years ago, this is bigger than what they raised. We focus on enterprise Cloud type companies. 1-3 million, they still need to determine if they have a business that can truly scale.

--Aileen Lee, Cowboy Ventures/KPCB @aileenlee
--Ann Winblad, Hummer Winblad
--Christine Herron, Intel Capital
--Cindy Padnos, illuminate Ventures @illuminateVC
--Sonja Hoel Perkins, Broadway Angels

Moderator: Lisa Stone, @lisastone

Lisa: Introductions. Start with a description by each of you on what are you looking for? If they were to come up and give you an elevator pitch?

Cindy: Alright so, Illuminate Ventures is in a category called micro VC's. Some who started out 30 years ago, this is bigger than what they raised. We focus on enterprise Cloud type companies. 1-3 million, they still need to determine if they have a business that can truly scale.

Ann: Hummer we always start with A brand. The reason we do a smaller round is that we believe there is such a large technical risk. Our focus is software. All we have to abe is good patter managers. My job is to invest in the future. Our focus is direct to the enterprise. We do not focus on direct to the consumer. I don't recommend that you race up to the podium and give us your pitch as fast as you can. Introduce yourself and spend some quality time with us later.

Sonja: We are looking for huge markets, technology where there is lots to do, great management already put together. Then I started Broadway Angels and lowered my standards (laughter). Group of women investors, all girls, we look at companies together. We crowd due diligence. Looking at companies with both men and women. We usually put in 10% and we are still looking for big markets. It's just no fun trying to sell in a small market. Looking for open governance. I've done well with investments that are hard technologies, technologies that you can't repeat. Just hard technologies, you don't want to have a million competitors.

Aileen Lee: I've spent the past 13 years at KPCB our bread and butter is series A series B. Last year after 13 years at a socially acceptable place I decided to do start up ventures, I think that what people can get done with 1 or 2 million is just so different today. People who have gotten a lot done with 1 or 2 million, including heavily trafficked.
There is a new emerging class of see investors. Rounds of mostly seed investments and then we pull individuals into the rounds. We are looking for really large markets, some special innovation or twist, technology, we like to back product oriented companies.

Christine: Intel is one of the larger, we have 65 directors, invest half a billion a year. We are very stage agnostic. Smallest check we wrote was $200K. I'm on the consumer internet team, I know what I tend to look for. I'm much more interested in the products, the people and the customer acquisition strategy. How do you scale and market size is important.

Lisa: Set something straight for this community, what do you see as the difference between angel and venture and what are the differences in outcome.

Christine: As far as angel vs. venture, when you sit down with an angel is is THEIR MONEY they can whip out the checkbook and give you some cash. When you are investing someone else's money it's a different story. Some level of vigor I need to apply, more structured process. Very blurry as how much capital you get.

Cindy: Typically an angel is frequently not expecting to take a board set or have domain knowledge to share with you. Venture tends to invest in areas and categories they know. There are frequently angel groups who do as much or more due diligence. Not quite as black and white.

Christine: I am a big believer in corporate governance. Having accountability within the firm. What a board does it gets a company back on a strategic level. What are the numbers, is our market really buying this product. Corporate governance takes the strategy to a higher level. It's also voting. What the value of what the business is trying to do. And so you have more power as a venture capitalist, as an angel you don't.

Aileen: If I was an entrepreneur with an idea, most cases people are able to build prototype with no money. People don't have expertise, there's no board yet. Once you build a prototype, all of the companies have effective board meetings. Everyone has clear milestones. There are some companies who want to do party rounds, party rounds don't actually do well.

Ann: Everybody keeps taking about series A crunch, not series A crunch, C round abundance. There are about 2400 companies that got C round, 700 got A round. There's no growth in A round, significant growth in C round. The number of companies that don't get an A round...Finding stakeholders who actually know what they are doing so they can make the introductions for you. The number of deals we get to look at are astronomical. We get to be very, very picky. The other thing about A round investors, there's nothing traditional about venture capitalists. We have to invest in companies that want to be large. How they are going to be so much more relevant than others in their space. We see a lot of great products, we don't see enough great companies. A lot of CEO's get so involved in building a great product. How does this turn into a company?

Lisa: Are you looking for companies that want an IPO?

Ann: Everyone can be an IPO candidate. Small acquisitions contribute to your gains at the same time you can't be a venture fund without some large companies. We took a little company called Hyperion public it went bigger than Netscape. Typical company in 1995 funded as a 2 person start up. Our companies that we fund today are about 7.5 years old. We have to stay with companies for a long time. It's a big commitment.

Lisa: You have to understand the market. What's interesting is that quite often I find is that when they finally click with the right investor they've fallen in love with the personalities and the product. You made us some fantastic introductions. Three rules, great people, great terms, the money will follow.

I started thinking about margins from the beginning. I also had to find someone who fell in love with the product. Aileen can you talk about that?

Aileen: It's always good to have great technology but it's not as hard as it used to be. In the age of Apple we grew up with could you master the hardware and the interfaces for AOL and Yahoo weren't that great. Kids today are used to more sophisticated software. You are not going to have a lot of money for marketing so your best marketing is going to be your homepage. Companies who have product that is differentiated. One King Lane invested in the brand, a voice and an interface and it felt like a
special user experience. They could have treated it like 75% off. The user experience is more important than ever.

Lisa: What about non consumer based?

Ann: We are the most boring at a cocktail party, but really one of the things we have to look at, is there more value than money. How do you find some unfair advantages in your investor. They know customers. By the way we wouldn't invest in anything we weren't extremely proud of. Our name gets attached to that company. It's our goal to make you as successful, give you every competitive advantage. We are putting you as a person and your products forward.

Christine: A couple of more recent I've worked on have been around social marketing. Just closed an investment in Sprinkler. What's the possible? What possibilities with a new Cloud structure. New investment about email marketing that's exciting. It's a different kind of excitement, more of that change the world, magic happening around you.

Cindy: They will continue building this product out for a long time to come. It's about an entrepreneur who truly has a vision, people on their team who have a vision and if it's a change the world kind of vision.


"Hi My name is Shanti just graduated London school of economics, what keeps you at the top of your game?"

--Entrepreneurs are the most optimistic on earth. Only crazy people or happy people, everything is new everyone is young or young at heart.

--Getting in front of as many people as possible you don't know who can help you. We take more meetings than we should, we meet at the playground, so the more we do that the more new ideas we see. It's really exciting to see the emerging patterns.

--When I see this panel that I'm on it's a pretty remarkable group of women. It' really is only 6 or 7% of all venture capitalists are women. If you look at this group every single one of these women chooses to shake it up. Pretty interesting.

--And we all wear black.

--It's a very demanding job to be a venture capitalist. You also need to be a life long learner. Every day we need go say are you still relevant. It's highly competitive, especially here in the Valley. There's nothing like it. I have such a sense of urgency. The other thing that is really exciting is winning. It is a remarkable thing when you remember two people but you know these companies have some sort of a fantastic exit. It's a fun, fun thing to do.

--I never feel like I'm above the curve, don't tell Cheryl Sanburg!)

Lisa: What differences are you seeing between the way women and men pitch?

--I invest in both men and women and I meet with a lot of women entrepreneurs and it's a great thing but one thing I encourage them to do is thing bigger. I can say it's really interesting to focus on making dresses but you need to think bigger. You need to tell me how you are going to get bigger. Every company has a potential vision but they don't go big. Guys say they are taking over the world of fashion. It's easier to get excited about someone who has a broad vision.

--My last meeting yesterday was with a woman entrepreneur. One of the bigger challenges. The more your pitch gets interrupted the better the pitch is going. Women answer the what with where and when and why. I just want the what. Women don't like the gap in the conversation. We like to explore all the nuance but the investors just want the what. If we want more we'll ask.

---Having been an investor for 24 years, there is this quest for perfection that women have. We can tell when someone has over practiced their pitch. 90% of the guys that pitch looks like they have just gotten out of bed. They look imperfect. The stuff that comes out of their mouth, who would have the balls to say that stuff but it caches our attention. 40% of the pitches, English is their second language. Russian guy came in with a translator. This quest for perfection is causing
women to not just go out there...give a pitch to someone who is not going to fund you. It's not a performance. Census in 2011 10-8% venture funding to women. If you look at the demos, age, ethnics, where they went to school. 87% of the venture capitalists have advanced degrees. We actually have to know what we are doing. We actually have to write code. Women are opting out of the sciences right and left. The choices women are making makes them less viable as candidates for us. If you have daughters show them the stats. We'd love to see more women, there just aren't enough seeking the career paths that lead to the jobs that fund.

--I do think women get treated different than men, definitely in fundraising. A lot of markets guys are not going to get. You have to explain better, you have to know your numbers. You have to be sharper, the bar is set higher. You have to be better than men to survive. It's tough.

Lisa: If you can't talk about gross margins, you are dead.

Question: Does it matter if someone is not in the Valley, does location really matter to you?

--Every firm is different in that regard. Some investors are hyper local and will not go outside the valley. However all the brilliant minds in the world are not located in the valley. We've done one in Toronto, Pittsburgh, Philadelphia, variety of locations. It depends on what the company is building, experience of the team. When I do a seed deal, the answer is no. But every one of our portfolio companies has a sales team outside the bay area. Not just about your headquarters are.

Question: Are you guys looking at social commerce or social good attached to it?

--One of the challenges is that 99% of venture capitalists would not unless it was as attractive financially as one that is not. It has to be profitable. There has to be a return. You need to find one that specifically says we are looking for social good.

--There are however some interesting foundations that have a "mission" endowment philosophy. One in NY that is entirely about bringing people out of poverty.

Question: "Is it a ding against you if you are a mom with young kids?" I'm wondering if you find if it makes you leery. If you do, should you hide it?

--It makes me sad to think this might be the case. I certainly hope not. Some founders have children. I wouldn't worry too much about it and I wouldn't brag about it. I was the only non-married partner and venture capitalists are very family oriented.

--That brings up another question I've funded 4 husband and wife teams. That's a VC no no, horrible experience with a husband and wife team. My view is when everyone says go right, you go left. They will want to know a lot about you personally. You can't hide from them. We are with you for a long period of time so a good investor is going to have to really like these people. But there will be biases.

--You are inviting someone to (not marry you) but close enough. They won't trust you if you've fooled them. The other side of the equation is you tell them the truth and your passion. Need stock options for my nanny!

--Motherhood came up in a conversation where the men doing search the men ask directly where women are with their child bearing status. They are more worried if you haven't had kids.

--I can't wait until there is a world where they ask that for men and women.

--My advice, don't look for discrimination. You can find it but why look. Sometimes they just don't mean it.

"What about the content people, what do we do?" Who does content?

--Aileen--What is Pinterest? Twitter is content. These are media companies. Can be very very valuable. If you are an audience company, you have to build an audience. Looking for size and engagement.

--It's a concept and vision issue. Product vs. a company. You have to have a vision for your business or company.

--There's another set of investors we haven't talked about, they are the corporate investors. Seeing the return of the corporate investors. They are here in Silicon Valley and there is a lot of money floating around. They will bring other investors around. You can name any media company, all active investors. It gives you a double value proposition.

Question: Creating a company to allow me to have a better relationship with a child care provider. People in the arts can add to this? My designer is learning to code. A creative person has to be skilled in all sorts of areas today. Tech has to serve us, we don't have to serve it.

--There is this myth that you have to be an engineer. I was a liberal arts undergrad. I did get a Carnegie Mellon MBA. The reality is you have to be fearless. I had the stupidity to think I could do anything. But if you believe it, put your ego on the line and gain those skills. When I went into tech I realized I had to go and learn and be a product manager first. Built my self confidence. Steve Jobs was not an engineer. I encourage women to put aside this myth.

--Statistics say that the majority of people funded, the founders do have a technical background. You can't get a marketing job today without writing code. Most have technical backgrounds. People tend to imprint on people like themselves. That is one of the biases.

Lisa, final wrap up: How do you each want your pitch anyone in the room?

--Sonja: Get a great personal introduction and share something very high level.

--Ann: If I get an introduction that someone I know who is a colleague or friend I will be guilty. We have to read our own emails. Boil it down to 4 or 5 teaser slides and cut me some slack that it will take some time. If we say this is not for us, that's a no. Don't start a filibuster.

--Our success depends upon opening every door.

--Cindy: I recommend that you copy Lisa. I like an anchor slide. Tell me everything about the company in one slide. What problem are you solving. Sense of the market and of the product. Go where the love is. Focus on people really interested in you.

--Aileen: We get a ton of inbound. Most venture firms, extremely rare it's over the transome. Someone says you gotta meet this person they are a rock star. Summarize the size of market, what your approach is.

--Christine: My recipe is different. I do take unsolicited. I will tell you that when I stack rank my email. #1 is my CEO's. Everyone else is below that line. A few lines at the bottom is the unsolicited. I do not want to open a slide deck. I want it in the email. Four or five sentences at most.