Developer Funding – How to Build Your Team and Raise Money (Google I/O Panel)

The VC Panel at Google I/O

The VC Panel at Google I/O: Don Dodge, Rich Miner, Kevin Rose, Naval Ravikant

I’m in San Francisco, attending the Google I/O, Google’s flagship developer conference. My head is still spinning from the past 3 days, which have been incredibly packed with events, information and networking. This morning, I attended the VC session titled “From Weekend Hack to Funded Startup – How to Build Your Team and Raise Money“, with Naval Ravikant (founder of AngelList, ePinions, VentureHacks), Rich Miner (Partner at Google Ventures and co-founder of Android) and Kevin Rose (founder of Digg, Milk, Pownce and Partner at Google Ventures), moderated by Don Dodge. It’s the first time that I/O has a 3rd day and the session started at 9am, but nevertheless the room was packed with people.  The discussion was lively and there was a long queue of audience questions. Below are the highlights from the session, including some great questions from the audience.

Don: What do you look for when you make an investment? 

  • Kevin –  I like big, innovative ideas. 99% of the times copycat ideas will fail. Something that wasn’t done before, I’m tired of seeing the same thing over and over again
  • Naval – ideas are dime a dozen. Instagram, Yammer, Groupon, are all pivots. If you’re smart and work in the right space and just not give up, you shouldn’t take a weekend idea and make it into the startup. Because a startup is a 5-10 year commitment. Like marriage but worse. You’re in Silicon valley, competing against the best of the best. 99% is not enough. you want to be on the 99.9% and the way to do it is to keep pushing and not give up. A good investment needs to have knowledge, the right people, it has to be unique, the execution has to be flawless, you have to team up with the right people.
  • Rick – something about people. When I’m really impressed with the team, even if it’s a crowded space, I think founding teams are hugely important
Don: Team, idea, market. Do all have to be present? what stage do you get involved in? 
  • Rick – I first see if  I like the team, how are they going to start targeting the market they think they can address. You don’t need all of them, you can have a couple.
  • Kevin – consumer Internet plays, often times they don’t have a business model. When I met Instagram, Kevin (the founder) had great numbers, but he wasn’t even thinking about revenue. He put a lot of emphasis on performance. I invested in a company called Yobongo – the founder blew me away, he ended up selling his company and I made most of my money back. You sit down with the person and you just know this guy is going to hit it, even if it’s not with this idea.
Don: Naval, AngelList really changed the investment scheme. Can you share some insights? 
  • AngelList recruiting

    AngelList changed the face of funding. Now it’s eyeing recruiting.

    Naval – We started AngelList about two years ago and still a work in progress. 72,000 projects listed. 15,000 actual startups, 3-4,000 are fundable .We drive 600 introductions between talent and startups a week. I don’t think it changed the investment landscape that much. The landscape itself changed. A lot is happening because we have deployment platforms, code platforms, and now we have capital platforms like angellist.

  • Most recently, Rally.org raised $4m on AngelList, out of $8m total, that’s amazing. A lot of VCs are playing the seed market now. They want to be the first money in, to keep the influence. Series A used to be the first money in, but the chain got much larger now, with accelerators, angels and super angels.
  • Kevin – I found out about Rally.org on AngelList.
  • Naval – We have 100 new profiles created a day – 80-90 we can’t even look at. The top 10-15 we manually review. The team is the most important thing. We are working hard on features to help angels screen the founders and check their background.
  • Note (Eze) – check out Sarah Lacy’s post on AngelList’s push into recruiting: “AngelList Has Transformed Seed Investing — Are Recruiters and Job Boards Next?
Questions from the audience.
What about the medium size companies that aren’t going to be a huge startup (creative team, but only a dozen people)?
  • Naval – If you’re saying that you’re trying to build something small, you’re un-fundable. Angels won’t invest because VCs won’t invest, because PEs won’t invest. That said, the things that end up being huge, didn’t look huge in the beginning. Don’t shoot yourself in the foot by saying that you’re building something small.
  • Kevin – different angel investors put money in things that they are passionate about. Try to find those passionate investments. Also, sometimes you don’t need investment. I started a service called wefollow, that got to a million users. It ran on two servers and made a few thousand a month from Adsense. It paid for some meals and some Uber cabs, but I didn’t need the money from external investors.
How important is education? Do you care if someone didn’t go to the ‘right’ schools? 
  • Naval – Pedigree is just a signal point. Lots of founders are college dropouts.
A lot of us in the room are starting mobile companies. What do you need? screenshots, clickable demo, out in the market? when should we raise seed? 
  • Rick – it depends on the people. Sometimes with a functional prototype you’re not convinced.
We hear a lot about ‘traction’. Is it bad for us to raise a round before we launched? 
  • Rich – Your best bet is to set up a meeting with a VC before you have traction and say, “Can you please take a look with what I’m doing and give us feedback?”
  • Kevin – Come back when you have traction is a fancy way of saying, I don’t believe in what you’re building right now. I had people come up to me and say hey, I need 30 secs of your time. Even if there’s no backend associated with it.
Coming from the suberbs in Mass where there’s no VCs. What would you suggest? 
  • Naval – build something really cool and the world will find out about it. You can’t walk 20 feet and expect to find an investor. We show you your 6 degress of separation to investors at AngelList.
  • Kevin– if you’re building a startup, do it on some of the social environments. network and meet new people. Go to the coffee shops.
  • Naval – There’s more networkers in the system than builders. If you’re in a coffee shop and building something cool, the value originates from the builders, that is the scarce resource.
  • Rick – I’m a Boston-based VC. In your case, come to Boston. There are meetups every day, office hours with VCs, etc.
  • Don– the best path to starting a startup is to work at a startup. Join a startup. Learn how they attract investors, partners, recruiting. The next step – network with friends who have done it and they will lead you to investors, etc.

I have an early stage startup, but it’s hard to find people that understand that long term commitment

  • Naval – there’s two things that matter at a startup – selling and building.  You have to reach back into your network: school, old co-workers, meetups. Sell your startup to potential candidates. When I started AngelList I was using Mailchimp and Woofoo. It was hard to convince people to join us. Today I turn candidates down. You have to build traction with online networks. If an investor says, ‘ you have to build a team’ they may be saying, ‘we don’t believe in you’.
  • Don – if you can attract two founders that believe in your idea so much that they drop what they are doing – it’s additional validation. Single founders almost never get funded.
  • Kevin – find the rockstars you want to join your company and start courting them. I invited a guy from Mozilla to come to SF, paid him for a week in SF, showed him the city, became his friend and he eventually came to work for me. It was a long ‘sell’ cycle.
What’s the typical seed round and what do you have to give for it?  
  • Naval – seed round $250K-$1M normally for 25% of the company
If I have a great idea and a great team – should I be afraid of big companies copying me? 
  • Don– first time entrepreneurs try to keep their idea secret or get people to sign NDAs. Don’t worry about big companies copying their ideas. Big companies don’t copy market ideas very often.
  • Kevin – I think features get copied. but a unique big idea, companies can’t copy that fast.
How should you determine that you should throw yourself to the pit of startup?
  • Naval– it’s like marriage. You can’t do it on the side at night. If you don’t commit yourself fully to it, why should I give you money.
How do you judge enterprise startups as an investment?
  • Don – Private money valuations have gone up. There are plenty of investors that are looking for developers that know how to get traction and can end up in the right market. Enterprise is where the money is, consumer is where the users are. Companies like Yammer are doing social enterprise – taking enterpise software and leveraging the users.
What else do VCs provide besides cash?
  • Rich – At Google Ventures we provide: recruiting (helping you use the google expertise to get the best engineers for your startup) Architects and software engineers (for code reviews and scalability) and we look at the things that Google has done well, and we help our portfolio companies do well.
We have a startup in Mexico city and being surrounded by the ecosystem. Would it be a good idea to come to Silicon Valley even if our market is in Mexico? Should I move to Silicon Valley? 
  • Kevin – People who drive the startup culture in their cities can help you grow your startup. They get the person with the largest Twitter follower in the city and have them tweet that you’re meeting up.
  • Naval – it’s great to spend a bit of time here because you’ll be practicing with the best Athletes. It’s good to spend some time here to make connections.
Being an entrepreneur is a lot of stress. Should I join a startup or start my own?
  • Naval – Don’t start a company unless you’re fully committed to it. AngelList jobs has 1,000 startups recruiting. Including founders http://angel.co/talent
Development for equity. how does an investor view a company that the product was built by an outsourced team?
  • Naval – I would discount it.
  • Kevin – I don’t invest in outsourced technology.

Eze Vidra
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Eze Vidra

Chief Innovation Officer at Antidote
Eze is the Chief Innovation Officer at Antidote, a startup helping patients search and match to clinical trial, to accelerate medical breakthroughs. Previously, Ezewas a General Partner at Google Ventures Europe. Before GV, Eze founded and led Campus London, Google's first physical hub for startups, and was the Head Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.
Eze Vidra
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Eze Vidra

Eze is the Chief Innovation Officer at Antidote, a startup helping patients search and match to clinical trial, to accelerate medical breakthroughs. Previously, Eze was a General Partner at Google Ventures Europe. Before GV, Eze founded and led Campus London, Google's first physical hub for startups, and was the Head Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.