A VC - Latest Comments in The VC's Customer (continued)

Re: The VC's Customer (continued)

jivadeveloper1 — Fri, 31 Jul 2009 09:34:14 -0000

looks good

Re: The VC's Customer (continued)

Speed Venture Summit — Fri, 17 Jul 2009 09:14:24 -0000

Marc and Ben are correct. Together with the VCs and Angel investors, Speed Venture Summit is committed to matching capital and business more effectively and efficiently in order to help them build great companies around their technologies and ideas.

Re: The VC's Customer (continued)

kidmercury — Sat, 11 Jul 2009 12:47:19 -0000

you can dismiss it as a conspiracy theory all you want, all that reveals is that you have been affected by propaganda. after all, saying a guy in a cave and 12 hijackers got past the world's most powerful military to crash two planes into two buildings to cause THREE buildings to fall at near free fall speed is a conspiracy theory. and not a very credible one.

you are of course free to behave as you wish, know however that it is not in your interests to disobey and ignore the truth. also know that mocking the truth makes it harder for those who do want to be socially responsible to do so, as it creates a stigma associated with telling the truth.

Re: The VC's Customer (continued)

Ted Rogers — Sat, 11 Jul 2009 12:21:04 -0000

I'm not sure what I said in my second comment mandates dismissing what I said in my first.
Anyway, since conspiracy theories can never really be proven or disproven, they are basically an entertaining exercise in speculation, serving a psychological of those participating (including me, at the moment). That need has been sufficiently served for the day :).

Re: The VC's Customer (continued)

kidmercury — Sat, 11 Jul 2009 11:53:51 -0000

well i'm going to have to dismiss everything you just said in your last comment. after all, as a wise man once said, "That which can be asserted without proof can be dismissed without proof." :)

Re: The VC's Customer (continued)

Ted Rogers — Sat, 11 Jul 2009 11:31:54 -0000

My own opinion is that our federal government can't find its a#$ with both hands and thus successful conspiracies are extremely unlikely. If it was a conspiracy, however, I sincerely wish you success in exposing it.

Most people believe what they want to believe, about themselves and their world, then they look for facts that support those beliefs.

Re: The VC's Customer (continued)

kidmercury — Sat, 11 Jul 2009 10:24:45 -0000

oh schnap....regular AVC readers, can ya'll believe this.....obviously our friend vcbrazil is not a regular reader of comments here at AVC, as AVC comment readers are well aware of how kid mercury has dropped a bazillion facts on 9/11 truth time and time again.

but as the truth is to be celebrated, let us drop another truth bomb starting now:

1. the osama confession is dubious for a number of reasons, but my preferred counter-argument is that osama denied 9/11 as well. clearly, in one instance he is not telling the truth.

2. numerous peer-reviewed papers by scientists prove that the official story, which is that two planes crashed into two buildings to cause THREE buildings to fall at near free fall speed, is scientifically impossible from the perspective of physics.

3. intuitively, we should be suspicious of how two planes crashed into two buildings to cause THREE buildings to fall at near free fall speed. we should also ask ourselves WTF is going on when we consider that the third building, WTC 7, fell late in the day. and how a 9/11 first responder is on record as saying he heard a countdown. in fact, the whole story of WTC 7 is so ridiculous, that alone is enough to cause a five year old to question the official story. which illustrates just how broken mainstream media is, because most people don't even know about WTC 7.

4. 9/11 hijackers are still alive.

5. even if the hijackers did do it, they were trained at US military bases.

6. i am just scratching the surface here, there is so much evidence of an inside job it is ridiculous. i literally could go on and one for days. the most compelling evidence, in my opinion, comes from all the people in government who are pretty much saying it's an inside job. check it out. it's also consistent from a historical perspective and what we are seeing in today's world geopolitically.

9/11 truth is the reality, let's start being responsible citizens and living in the appropriate context. that is how we solve all problems. while this obviously sounds unpleasant, i assure you the alternative of ignorance will end up being far more unfortunate.

Re: The VC's Customer (continued)

Ted Rogers — Sat, 11 Jul 2009 09:04:28 -0000

i know what you mean.
but, on some level, if someone is paying us, we are their employee (despite MY psyche's wish to create an illusion of independence).

Re: The VC's Customer (continued)

fredwilson — Sat, 11 Jul 2009 08:29:16 -0000

I'm not an employee. In fact I'm unemployable

Re: The VC's Customer (continued)

Ted Rogers — Sat, 11 Jul 2009 08:21:11 -0000

I was going to weigh in that the LP is the customer but, analogizing the situation to other businesses, this is wrong. The LPs are management, the VCs are the employees and the entreprenuers are customers.

Following the money:
1. The LPs run a business: managing money for ROI.
2. They have "hired" various people (like Fred/Union Square) to achieve the business's goal of maximizing ROI.
3. The employees (VCs') job is to attract the customers (entrepreneurs) most likely to boost ROI.

Its analogous to a software company (LPs) hiring a salesman (VCs) to develop business.
Like the software salesman, the VC has to a) sell to the customer (entrepreneur) and b) follow up with a lot of high-touch interaction to make sure that the customer is successful and lasts. Also, like the software salesman, most of VCs' comp is based on commission.

Btw, The thought that VCs do not have to sell/market themselves to good entrepreneurs is dead wrong. Even the best have to hustle hard to get into the best deals.

www.vc-brazil.com

Re: The VC's Customer (continued)

Ted Rogers — Sat, 11 Jul 2009 07:53:12 -0000

"there is no evidence to support the government's hypothesis that a guy in a cave did it" except for the unsolicited confession by the guy in the cave that indeed he did do it. In most systems of jurisprudence that tends to constitute "evidence".
(I know, I know, Osama was in cahoots with the CIA, Bush, whatever, and they got him to admit to it. Or created a video and dubbed him in etc. To which I reply, "That which can be asserted without proof can be dismissed without proof." (Thank you Christopher Hitchens.))

Re: The VC's Customer (continued)

paramendra — Fri, 10 Jul 2009 17:48:46 -0000

You mean there are VCs who don't think of entrepreneurs as customers!?

Re: The VC's Customer (continued)

Professor Paul Katching — Fri, 10 Jul 2009 00:58:30 -0000

Wow! Chance it looks like I stumbled up on a location where we have qualified thinkers!

Here I will attempt to extend your questions/observations of:

• Those who do a variety of things and bet more on potentially big markets and future valuation

• It's a good point you bring up, how do VC's model acquisition of customers/revenue and what helps them understand what is appropriate?

• I'll just answer this by saying that it would be FASCINATING to see the Projected Sales in business plans that get funded by VC's compared with the ACTUAL SALES post funding.

• Now that would take the debate somewhere interesting, driven by data and stats.

I get these 4 points!

Now what If we agree that an equation must always balance and we are looking for a simple, very simple, outrageously simple model where the customers, revenue, and stock price could be predicted before the IPO process for ANY product or service.

And this equation is x=(a*b)/c were X is stock price, A is revenue, B is earnings as a percentage of earnings, and C is an rate of return and 1 share is outstanding.

Now lets say that we have this $1 widget needed by 14 million preassembled people salivating for this $1 widget because from every new IPO they get 2 shares free just for purchasing this $1 widget.

$14 million times .63 divided by 61 million shares divided by a .03 rate of return is a stock price of $4.82.

Now the reason that these 14 million are salivating is because their $1 purchase gives them two values, the utility value of the $1 Widget and the 2-share value of $9.64. Yes this is a 9.64 to 1 ratio on a $1 product with these fundamentals.

What we have now is the ability to replace credit, debt, interest, and employment with Product Equity Value©.

Would you buy a $30 product to have $600 worth of free tradable shares in an IPO?
http://www.productequityval...

The death of credit, debt, boon-bust cycles and unemployment
http://www.productequityval...

Re: The VC's Customer (continued)

Professor Paul Katching — Fri, 10 Jul 2009 00:30:16 -0000

Dale I agree capitalism is not dead, napping may be the right word for it…

Why the Capitalist Theory is no longer fundamentally flawed
http://www.productequityval...

Re: The VC's Customer (continued)

Professor Paul Katching — Fri, 10 Jul 2009 00:23:49 -0000

No Simon you are not missing anything; in fact you are on the right tract to carrying this VC entrepreneur observation to its logical conclusion, which is the cash paying customers. I believe that what we are missing is that the VC and the entrepreneur do not understand the math behind the value creation process for publicly traded companies. Because if they understood this math then the revenue variable can clearly be predicted before the IPO process by identify a precise number of customers and then giving them an exact percentage of free shares that are always greater in equity value by 3, 11, 20 or even 40 times their purchases.

Lets elevate this discussion to included the real customers, the customers.

Who determines, or what is the current formula used in given free shares, free stock options to management, employees, charities etc? Was it not the cash paying customers who started the value creation process in the first place? Does not a portion of the cash paying customers cash go to dividends? Can I go to an accounting text and find this formula for the amount of equity that is directly attributed to the customers?

You see from a scientific point of view and the path of least resistance, why should the customer be making investment decisions in common stock when they are ill equipped to do so as evidence by the VC and the entrepreneur inability to count, or predict a certain exact number of customers before the IPO process?

The math and the multiple value creation formula for public companies say find the ratios, give the free shares, and the investment decision is made for the customer as far as common stocks are concerned by each of their purchases.

Simon you are on the right tract of asking questions that it seems that many are either afraid to ask or do not know how to ask. I am not saying that you agree with my assessments of VC and entrepreneurs math abilities just written. They are leaving too much money on the table by not having the correct value-creating math and leaving out the predictable customers where we all lose value.

What is missing is the thinking process that makes a VC a VC and an entrepreneur and entrepreneur. I mean a complete thinking process. To be sure it was difficult to introduce Product Equity Value© before the personal computer, Internet and in just 10 short years 3.6 billion people with cell phones.

But now there is no excuse and one serious VC- entrepreneur can help to make Product Equity Value© happen!

Re: The VC's Customer (continued)

bombtune — Thu, 09 Jul 2009 17:49:12 -0000

Thanks for clarification.

Re: The VC's Customer (continued)

bombtune — Thu, 09 Jul 2009 07:38:08 -0000

Is the value in VCs just making the investments in these startups to help them get launched?

Live private equity I don't think there's much value contribution other than pumping $ in, a support role.

Re: The VC's Customer (continued)

ShanaC — Wed, 08 Jul 2009 11:21:11 -0000

(same person as above- having technical problems...eh)

I've never met one in person. I was reading, and someone made an excellent point to me, webpages, ect, are personal outward focusing bling.

The toys I see implemented here and at other VC/Tech blogs are very different than say, friends' blogs. Or twitter, or whatever.

And it would be totally fascinating, I agree, to see the comparisons. What would also be fascinating, beyond the Zemata post, about why certain companies are chosen.

At the end of the day, its not just about the business model- it's about how well the product works with the user in conjunction with the business model. So it is just one of those questions that seem to discretely hang over this process...

Re: The VC's Customer (continued)

ShanaC — Wed, 08 Jul 2009 11:10:33 -0000

Really? Interesting to note... I find the interaction level extraordinary.

Re: The VC's Customer (continued)

fredwilson — Wed, 08 Jul 2009 09:26:19 -0000

That interaction is directly linked to the implementation of disqus on the blog

I don't spend much time on the web during the day and during the evening. The web is a 5am to 7am experience for me

Disqus brings the discussion to my blackberry (where I am writing this right now)

Mobile computing ftw!

Re: The VC's Customer (continued)

Chance Barnett — Tue, 07 Jul 2009 18:28:16 -0000

I haven't been exposed to a wide enough array of VC's to know if there's a skew. From what I see, VC's and firms come in a few flavors:

* Those who specialize in areas and sectors - could be more likely to be 'typical' users, or understand these users and paying customers more intimately.

* Those who specialize in broader sectors, but generally with a focus on companies in various Stages or Deal Sizes (Seed, Early, Late, etc.) - across the board in terms of being a typical customer or understanding customers. But perhaps the Seed and Early stage guys have more hands on understanding or a desire to get their hands dirty with how to get paying customers

* Those who do a variety of things and bet more on potentially big markets and future valuation

It's a good point you bring up, how do VC's model acquisition of customers/revenue and what helps them understand what is appropriate?

I'll just answer this by saying that it would be FASCINATING to see the Projected Sales in business plans that get funded by VC's compared with the ACTUAL SALES post funding.

Now that would take the debate somewhere interesting, driven by data and stats.

Re: The VC's Customer (continued)

pfreet — Tue, 07 Jul 2009 11:40:00 -0000

Interesting idea, except I don't think it true. If anything, the entrepreneur/startup is your product. The eventual acquirer is your customer. To suggest otherwise is a gross misrepresentation to entrepreneurs.

A VC takes money from LPs, buys stock in companies, sells that stock at a profit to an acquirer and pockets a percentage. A simple but great business model. But how you can suggest the startup is your customer? That's boggling.

Re: The VC's Customer (continued)

ShanaC — Tue, 07 Jul 2009 03:34:26 -0000

So question- do you think there is a skew of the kinds of companies chosen for a fund because VC are not typical customers by any stretch of the imagination.

I wrote a whole blog post about it-
http://www.shanacarp.com/es...
- but basically all of these fact you list about why VC's need to get close to the paying customer makes me wonder how they model what is appropriate. You need to choose something that is far reaching yet grounded in the here and now. A tough call- since a far reaching future is not the here and now by any stretch.

Re: The VC's Customer (continued)

Chance Barnett — Mon, 06 Jul 2009 20:19:24 -0000

Are VC's customers the entrepreneur? I believe they should be. But here's perhaps an even more radical idea-

That entrepreneurs are the VC's customer only in the context of the entrepreneur being the one to find and nurture actual Paying Customers in the long term.

VC's are after returns at the end of the day. So why wouldn't they focus more on what actually creates those returns? Entrepreneurs who find ways to create Paying Customers...

And....

Finding and understanding Paying Customers, who they are, and where these mysterious and elusive creatures come from (and how to get them).

This is assuming that Paying Customers/Revenues lead to consistent cash returns which can lead to Higher Valuations... and then some Exit Events.

I don't have much experience around how and what VC's have to do to raise their funds and please LP's, but it sounds like a version of a 'chicken & egg' situation.

Thinking long term, I'm always a 'chicken' kind of guy myself- create real value and let is demonstrate itself with good old fashioned sales and revenues. (then investors, LP's, whatever will come) But I've never been saddled with trying to raise a fund, so what do I know.

Aside from LPs, I want to get back to the question of Entrepreneurs and who the VC's customers are...

When it comes to businesses that are highly focused on 'product', as you often see with technology businesses, the entrepreneur seems to make much much more sense as the customer- often because many of the bets have to be big ones on the part of the VC's.

When you have a nascent business/market that no one 'fully' understands in terms of how to effectively drive users/customers/revenue and achieve growth and profit... it's the entrepreneur who is tasked with testing and finding the way to create the magic of paying customers and a sustainable model.

VC's can help in the highest value way by being mentors/resources to speed up and improve the entrepreneurs thinking, and help create "short cuts" - connections, people, relationships, data, etc.

But you still have to have to ask- why aren't the Paying Customers some of the VC's customers? Again, with technology businesses, the actual "use cases" for a product or service, and the identity/profile of Who the paying customers are, is usually something that has to evolve and take on a life of it's own- even with great products and good marketing from smart entrepreneurs.

So... it goes in more complex/new businesses that the highest value the VC can provide is to make the entrepreneur the best he can be as he drives forward in his process.

Finding Paying Customers and a profitable model in environments that are NOT well defined doesn't look like a VC's job or highest value. I believe that it's the entrepreneur who should know, or be on his way to finding out and knowing (by using testing and data). The VC's can help- often by teaching and adding value to the entrepreneur and his efforts and process around this.

Andreessen is a good example of this kind of customer/entrepreneur- the kind that a VC would want to treat like a customer. He creates big new ideas and big 'products' that aren't just another 'me too' business or model. One could argu he even creates new kinds of customers with his new products - so trying to take a 'formulaic' approach as a VC with him and tell him how to find customers isn't the right way to go about it.

However, I do believe that there is a TON of value in VC's getting even closer to the Paying Customer and understanding more and more about them as the lifeblood of their business/fund.

Re: The VC's Customer (continued)

fredwilson — Mon, 06 Jul 2009 18:59:26 -0000

Hmm. Sounds like dave wrote something about me and twitter today. I guess I'd better go see what he wrote

Thanks