Video Investor Discussion: Steve Goldberg & Amos Ben Meir
Investor Discussion: Steve Goldberg (Venrock) and Amos Ben-Meir (Sand Hill Angels)
Don’t miss the chance to hear from more experts like Steve and Amos at the many tech startup events at Founders Floor in San Jose.
Steve Goldberg is an Operating Partner at Venrock, a leading venture capital firm. Prior to Venrock, he was a Program Director at Trimble Navigation. He also co-founded DataRunway, Inc., a broadband wireless communications company and was President and CEO of Vivint Systems, a manufacturer of video analytics solutions for the physical security market. He was also primarily responsible for the merger of CoWave Networks, as its CEO and first employee, and Advanced Radio Cells, Inc. to form Arcwave in January, 2003.
Amos Ben Meir
Sand Hill Angels
As an active angel/venture investor and a member of Sand Hill angels, Amos Ben Meir looks to invest and work with great founding teams that are harnessing cutting edge technology to deliver great products and services and that will result in significant outcomes to all stake holders.
I actually had the pleasure of doing this event before, and it’s, it’s a wonderful organization. We were just talking a little while ago about how it’s a South Bay activity, and as much as we all know there’s a lot going on in the city, but since it takes two hours to drive up there, I’m glad we have this. I’m glad we have founders who are down here for that and a whole bunch of other reasons.
Anyway, I am a fellow entrepreneur. I worked at big companies first and my career, biggest mistake I ever made was not being an entrepreneur right away, but back in the middle ages when I started, you had to put your house up as collateral and I didn’t have a house, so it was hard to be an entrepreneur back then anyway, but 20 years ago I, I got involved sort of in the entrepreneurial community and started a couple of companies and ran a couple of companies and then one of the investors that was involved in one of the Venrock offered me an opportunity to join us, what’s called an operating partner.
There are too many of them in the Valley, but basically I manage all of our super high tech portfolio as sort of the semiconductors in wireless and network infrastructure back in the day when there were lots of those. So there’s less and less and less of those of you who are doing hardware companies now it’s robotics and drones and IOT and so I’ve sort of morphed into that space. If you don’t know Venrock its 50 year old VC firm that used to be the investment arm of the Rockefeller family. Now it’s an independent firm where the Rockefellers invest individually. So they’re just kind of a small part of it. $500 million every three or four years. We invested in 30 plus or minus companies per fund and over half is health care, which is a bit unusual. As a matter of fact, it’s extremely unusual in the Valley.
We’re one of the few that’s been very successful with it. And then the other half is all tech and a lot of enterprise software just because that’s kind of in, we do some consumer stuff. And the one thing that I’ve always liked about Venrock is we’re just looking for good deals. So you always, we’ll talk about this, but the thing you need to know about venture capital firms and investors in general, and as much as it hurts me to say this, some of you may have heard me say this before, but I went to school for all these years to be an engineer and I was so proud of it and I turned it into a banker. Like I, I don’t even know what to say except as the truth. So when you’re talking to investors, you have to remember they’ve got the banker hat on, how are you going to make money?
Right. That’s been a hard thing for me to learn. But anyway, that’s a bit about Venrock., been a great run for the last 10 years. And I hope I can answer some of your questions.
Well you did your, you did your time
I did my time.
So I have a long career in the high tech industry. I was mostly in the semiconductor and systems industry, so kind of places of my age, but I was at six startups, five of them I was either, I was an early employee, one of them, I was a founder and four of them were successful, so I was fortunate.
Last startup I was at, I was a fonder and I left at that company after we were acquired and we had a, we had an earn-out and after, after we finished the earn-out, I left that and that was the 2014 since most of my career was spent in startups. I also dabbled in investing in startups and when I left my last operating role I was thinking of doing another one, but I ended up joining a group called Sandoval Angels and became an active investor in that group and I joined the board of directors. I’m on my third year on the board of this year on treasurer.
The group actually started in 2000 and it evolved over the years. It’s quite different today than the way it was when it started. I’ve only seen it since 2014 and it’s, it’s mostly, well, first of all, it’s a very diversified group. Most of the folks that join are entrepreneurs themselves or were past entrepreneurs. And in general, we’re a very entrepreneur friendly group to member on organization. We don’t charge startups to present and startups and we invest in, we really try to help them as things progress.
And um, we do about nowadays we do about 40 deals a year and deploy about six to $7 million. Probably half of that is in new investments and half of that is in Fallerons. It varies from year to year. This, this year we’re on track probably to do 7 million in investments, which is, I mean, small potatoes compared to Venrock, but, but we invested at different States.
Yeah. Yeah. So yeah, perhaps, you know, one of our highest profile investments that you might’ve heard about recently in the news is Juul Labs, the e-cigarette company. It’s the vice company. But yeah, we were one of the first investors in 2008 when it was valued at maybe two, 2 million. And now it’s a 16 $17 billion company. So we’ve had other successful exits, although maybe not as high profile and a Juul was not quite an exit yet, but I’ll probably go public sometime soon.
So I’ll, I’ll start off asking the first question. Okay. But I want to let you know though that if you want to ask your question, you can, so you can actually introduce yourself to the investor panel, talk about your company quickly and then ask your question too. Okay. So I’m going to ask the first one. But you know, a lot of companies tonight, they were fundraising, so, and there might be fundraising for the first time. How much time does it normally take, start up from start to finish? From the time that they decide to start pitching to money’s wired in the bank.
How many months does it typically take you think to get their head wrapped around it? You know.
Well that’s all right. That’s obviously an important and a great question but I’m trying to figure out the best way to answer. I think that the right thing to say is you need to know who to pitch to I think the biggest mistake, and it happens every day in my world, entrepreneurs go to the wrong investors. Like for example, if you’re just, I mean I’ll answer whatever questions you have and I’ll stay afterwards and talk to as many of you as I can. But for Venrock for example, is a Series A Series B investor and minimum check size might be a few million dollars, but that’s not the important thing. The important thing is we invest in companies that are at the Series A bar, which changes all the time. It kind of goes up and down depending on the economy, how, how comfortable VCs are with how much money there is. When this one does it finish to raise another fund.
So right now things are pretty good, but the bar for Series A as I describe it, is you’ve got a team, you’ve got a market, a large market, it has to be $1 billion plus market. And that’s not just a magic number. We can talk about that later. If anyone wants to know why is $1 billion so magical? I’ll tell you why. And then it has to be a billion dollar market. You have to have some product, prototype, or something that you show up to someone in your market and you’ve got the response back that it’s something they would buy. And if you do that for five or depending on the market, if it’s an enterprise market, you only need a couple of customers to say something. If you’re a small medium business, you might be 20 and if you’re consumer, most of them won’t even invest until you have metrics on your uptake because no one trusts what consumers say.
You could give me a survey and say, Steve, do you like this water bottle? And I say, I love it. And then you say, that’ll be a dollar. And I’ll say, no thank you. I mean, consumers are the worst. We’re all consumers. And so VCs for the most part, don’t invest in consumer deals until you’ve proven that people will pay for the service. So on the market you’re in, the kind of validation you need determines things. And then I’ll answer the question. I’m sorry to take so long, but it’s important, and then I would say it’s a bi-modal distribution. In other words, there are companies who have everything set up.
One of the guys that are the front row, you have a company and you’ve got your pitch deck, you’ve got your executive summary, you’ve got your financial, your proforma financials. You have your list of referenceable customers. You’re all set to go. If it’s a check mark and all the good market, good team, good whatever, you’ll get funded in the cotton one months or less. If you don’t have all of those things ready, people will never say no because they don’t want to lose you. God forbid you invent the next Google, they don’t want to miss it. So they’ll say, let’s just stay in touch. All right, which is the kiss of death for you if they say that, just run the other way. So what, what’s you’re, what’s your either again, in that first pocket where you’re already to go and you’ll find the right investor or it’s just going to take months and months and months and months or never happened.
And and the only and the other. The final comment about investors, find the investors that match the size of your deal that have invested in the past and the sector that you’re in, right? If you’re an investor, use the house analogy. You’re probably not as best served if you just moved to San Jose and God forbid you have enough money, but you wanted to buy a house, you’re not going to buy the first house. You’re going to look all through the neighborhood. You’re going to look at all the neighborhoods, so when you come to an investor that’s likely to invest in you, they know your market already. If you talk to an investor that does it, know your market, they’re probably not going to invest. It’s too risky, so you need to find that people who know what you do and that’ll get you halfway there.
Most entrepreneurs don’t do that anyway. I’m sure Amos has some comments.
Well the, the ideal period I think is to keep it as short as you can because you’re trying to build a business and you want to get back to work. But I mean, I agree with almost everything that Steve said that you need to be prepared. You need to know when you go to and yeah, I mean you have to have your act together so, so yeah, but, but I don’t think there’s like, there’s not like one formula for everybody, those startups that are really well prepared and have it ready to go raise money quickly. And I’ve seen startups take anywhere from, you know, just a couple months to eight months to raise money. The worst scenario is if you’re, if you do a drip financing at the seed stage where you’re constantly raising money over a long period and you don’t really have time to work on your product and, and on building your company.
Guys, well, my question was what are some of the issues with founders that keep you from investing in, in them and or their projects?
Well that’s a, I mean that’s a tough question to answer and is when you have an investor founder meeting and there’s two people there, there’s got to be some chemistry. Every investor has their own, they own their own things, are looking for of it obviously that you’re looking for a passionate founder. I mean I, I, I look for passion, I look for articulate, Oh is it somebody that can express their vision properly that has domain expertise is a big plus. The kind of founders I stay away from are those that become argumentative and defensive. You never want to be defensive when you’re pitching to an investor. You know, if you don’t have the answer or if you, you can say, I respectfully disagree with them and provide, you know, provide arguments that or provide what you think might like be supporting, supporting arguments for your, for, for what you’re thinking about.
Yeah. I think those, those are the things that come to mind are, I’m sure there are others.
Yeah, I would say this, it’s not so much the entrepreneur, it’s the team. So sometimes there’s two things I would say. What is this? Where somehow the team has to be matched to the market. Even if the CEO or somebody else came from a different industry, the team has to feel like a good fit. So I think in a large percentage of deals where its quote unquote founder related issues is that the founding team is not well matched to the market, which in one means one sense me is they don’t have the right experience where they don’t have the same insight. Now for consumer deals, you could argue we’re all consumers, so that probably doesn’t apply as much as enterprise deals or service provider deals or healthcare deals.
We’re really looking for people that know things. The other bit of advice I’ll give you, and it’s one of my favorite pieces of advice just relates to all of us have relationships in life, either with our significant other or whatever. You build friendships, something college. You get to build relationships by meeting someone or dating someone or whatever. Every day, week after week after week, month after month after month. You talk on the phone, you mean for dinner and you go to the movies, you do whatever you want with your friends and you do this bro. Long period of time. I mean, some of us were married, you know, maybe got married in a few months or you know, for some of us date for a few years or whatever. But it’s a lot of meetings. I’m talking hundreds of meetings, right? I mean pretty unusual for you to have a best friend or a significant other that you didn’t go out with a hundred times before you shortly acknowledged, Oh, this is one of my best friends, or it’s my significant other.
Put yourself in an investor point of view. We’re getting married for ten years. It’s to, to, to you, and so we’re, we’re going to be together until you have an IPO. I mean, we’re thinking positive here. You’re going to build $1 billion company and we’re going to be together all these years. How many times do we get to see you before we write a check? Five, six, seven times. That’s it. That’s it. So just think of that situation that you’d have to make that kind of a decision, right? Both sides with just that, that shorter number of meetings. So the advice for you in it really isn’t advice on what to do, but it’s advice on what not to do and that is, it’s unfortunate but we’re looking for red flags and what falls out at the bottom are the people that didn’t have any red flags on that component.
I mean we’re looking at the market or looking at your product, we’re looking at all these things, but in there in the bucket of things that says founder issues and can we work with this person or these people? Anything you say that is sort of off the reservation or isn’t quite right. You’re almost thrown out. And I don’t mean that to sound harsh cause it’s not this hard to do. You just have to know it. So if you answer a question that you didn’t know the answer to and you answered wrong, jeez, this person guesses. Ooh! I don’t think I want to invest in someone who guesses or if you don’t disclose something, which may be happens 0.5% but the person sitting next to you is your husband or wife or cousin and you don’t disclose it, you’re done. So all of that, that’s a minor one.
This is kind of an interesting one because it happens, I don’t know, to me at Venrock and 10 years, probably half a dozen times that small out of thousands but it’s interesting, but everything you do in these investor meetings, you don’t want to be nervous. You want to be yourself, but you just have to remember you need to be straight. If you don’t know the answer, you don’t know you’ll look it up. Or if you had a failure in the past, you don’t have to be defensive, but you can explain what happened is just tell the truth, be yourself and you know and recognize that you’re kind of on stage but for a good reason because we’re only seeing you for a short period of time.
Now, just to that, be really transparent and don’t bullshit. Investors can really tell when you’re giving a bullshit answer. And that’s the biggest turn off. They don’t want to hear that and, and tell the truth. I mean, because if you uh, if you don’t, you know, investors will find out and, and that’ll be, you know, that’ll be a major red flag.
It’s all about the founders, it really is. We see so many pitchers that meaningless until you see the founder. The other thing I would add is domain expertise and knowledge of the industry. There’s a tendency sometimes to get so involved in your invention that you get blinded to what else is going on in the industry and we see that a lot. It’s completely understandable. I guess that I know firsthand how that happens, but to the founder that is able to identify and tell us about the competition. Tell us about the activity in the space. Tell us about recent acquisitions. That’s awesome.
To reinforce this, I mean, the reality is, especially when you’re early stage pre-seed seed, there’s very little data points. You haven’t made a decision. Okay. And so really what they’re looking for isn’t those limited amount of meetings that you have with those founders is what they can see and hear at that point. You know, it’s only when you get to the series and beyond on their real hard metrics that you’re almost trumping and dictating what that investor’s going to potentially have it or not. And so, you know, gray area in founders love, you know, pushing the gray area a little better, what their products can do now versus in the future. But you’ve got to really be honest and they’re looking for those, those, those things where they’re slightly lying. It’s always a no always, you know, cause it’s just going to be more of the same.
So Barack. Barack Aldi question here, if you want to ask it, if you don’t, I’ll ask it for you. Okay. The question is how do investors find the areas of interests? How do founders find the areas of interest for investors and what they like to invest in and the limits of what they invest in regards to stage and stuff? So all this is on the website, but sometimes interests of what they invest in, sometimes hard to find sometimes. Can you shed a little light on the stages and the areas of interest and investors have and where to find that information at?
Okay. Well the obvious thing is from, from, from folks like us, we post profiles on the website so you get it right. The second thing I would say, and this is, I think most of you know this, but I can’t emphasize this enough. We get so many inbound requests on not telephone calls anymore. I’m mostly emails, but we have pitch nights and all kinds of things, highly, highly likely, high 90 percentiles. The companies that work in a fund or either prior CEOs that we know or introductions from trusted partners now who are trusted partners or Copio. If Roger sends me a deal, I’m going to look at it. Silicon Valley bank, Wells Fargo bank, thrive founders for, I’m sorry, I get to give the host a counterpart. Absolutely. I flunked, I’m done. You’ll never invite me back. So, but anyway, you get the gist of it. The great thing about being in Silicon Valley, which is one of the, the pay, the hype, you know, to live with the traffic and to pay the high housing prices and living costs.
What you get is every other next door neighbor is in this. In the, in the industry you have contacts. So it’s all about getting context and people said, well how do I get those open up a bank account, get one of the auditor firms to sign you up. Get one of the attorney firms to you know, connect with you. There’s probably half a dozen different sort of ecosystems that partners that you can get a hold of they know us because we all circle and they say, can I send deals to you Steve? And I say, sure and we can build a relationship. They kind of know me. They know what I’ll do. That’s the way you get into, at least at the VC level, it might be different as some of the other levels.
Yeah. With, with the, what we post all our portfolio companies on our website, but we’re, I mean the best way to describe our group is we’re generalists because we have like 110 members and, and there’s a large variety of interests in the memberships.
So you get the full spectrum of companies and sectors that we invest in. In terms of finding out, you know, what, what, what you know, which VCs to go to. I mean it takes some homework, whether through, you know, if you’re targeting specific VCs or go to their websites and look at what they’ve invested in, find out how much they like to invest in. It’s usually on their website. You know, they describe what they do and, and yeah, just have to do your research. In addition, there’s just a ton of resources nowadays out here. You know, there’s a ton of accelerators. They all have information on their websites. Yeah. It was founders, founders floor. I mean there’s YC, there’s, there’s that. And if a, I don’t know, there’s a great podcast that I love to listen to. It’s Jason Calacanis, This Week in Startups. Yeah. It’s a great, great place for information. Yeah. So.
You know, part of it is the filtration process as well. I mean, you know, investors put this on their sites because they’re looking to find the individuals that actually have read that did, did their homework, if you will, before the approach. Its the ones that just mass blast the emails and the stuff that you just don’t even, you don’t even open the emails, you know, and they wonder why you don’t get followed up on it. And so it’s just one of those words we’re looking for tells, we’re looking for things, have they done their homework and they found a way to be able to get ahold of you even though they don’t necessarily have your direct email, but they went to an event just like this to be able to shake hands with Steve so they could do a followup afterwards. I mean those are hungry things or characteristics you want to look for and those founding teams you want to potentially invest in. So you know.
Well one, one more comment like for angels, you’ll typically find, which companies they’ve invested in on their LinkedIn profile of angels to put it there. A lot of angels have put it up on their angel list profile. I have all my companies that I’ve invested in on my Angeles profile, it’s about a hundred companies over the last six years, so.
Okay, last question for night. Then we’re going to get the pitch event started. Hope. Would you like to ask your question? Hope. Hope. No. I’ll ask it for you if you’d like. Okay. The question she had was how hard is it to get funding on an incredible idea when the founders only have a proof of concept? So I assume it means not an MVP type level.
Yeah, so I think in this the, okay, so maybe this is a good time to throw this in a skew. So we talked about stages of investors. So on, on the far side, right side or left side, you’ve got friends and family and I always say the reason those peaks potable, those people give you money cause they love you, your mother, your father, your grandfather, your college friends, your whoever that are. It’s the quote. It’s not meant to be an assault, but the dumb money, they didn’t do any diligence on ya. They love ya here’s a check. A lot of people raise money that way and that’s how people get started. Okay. Then you work your way up to angels and C Funds and then VCs and what sits above VCs is like growth equity where they write the 50 and a hundred million dollar checks of companies that only, they only look at the numbers.
They don’t look at the entrepreneur. They’ll, they’re just looking at are they making money? And then there’s the private equity guys on the high side, they just do buyouts, they find the whole company. And then somewhere in the middle is corporate investors that don’t make, you know, all those people after friends and family. Why did they make investments? Because they want the return, right? They want, they want more money than they gave you back at some point. And then the final reason is the corporates that may not do it for monetary reasons, they may do it for strategic reasons. They’re investing in you to learn more about what you’re doing to help their own business. So a Bosch invests in you or merch invest in the health care company or whatever strategics. Google invests. They’re generally not doing it for a return. They make money selling their own products.
So it’s either love money or for strategic reasons, right? So the question about, well, how do I, I’m real early stage, right? If you’re likely going to have to get money from someone who loves you, right? And unless you can make such an incredible case that you’ve got something so unique or differentiated or whatever, that if you got money from an angel investor to get to sort of the next round, that there’s a real possibility that it’s going to go.
But you just have to put yourself, if you were spending your money and you were going to give your money to an entrepreneur, how confident are you that you’re going to see it again? Right. And when the companies are real early for financial aid driven investors, that’s the challenge. That’s why I said early on that getting validation from the market is probably the single best thing you can do. Is that?
Yep. Yep. Absolutely.
Yes. If you’re a first time founder or you’re, you’re better off doing the friends and family thing before you approach Angel Investors or Seed Stage Investors, it’s really hard to raise money just with a proof of concept. If you’ve already had a successful exit and return money into investors, it’s usually a lot easier, even if it’s a proof of concept stage. So, so yeah.
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