Tips from VC Heidi Roizen: Three Things to Never Do When Starting a Company

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Today Heidi Roizen spoke to 35 female company founders including myself about learning from failure at Procopio law firm in Menlo Park, Calif. The event was held by Women Startup Lab Meetup group.

Roizen is a venture capitalist with Draper Fisher Jurvetson (DFJ) who also teaches entrepreneurship at Stanford University. 

In the early 80s she founded personal computer software company T/Maker and later sold it at a nice profit to the delight of her investors including VC Ann Winblad of Hummer Winblad Venture Partners. 

This was an interesting time to be in software because it was before it was hot.  At the time Lotus Development was getting started and Bill Gates, a friend of Roizen’s, was also a frequent co-conspirator at fledgling PC industry events.

I actually did PR for Lotus for several years long after it was bought by IBM. While I was there it had been rebranded enterprise collaboration software and social business which was definitely a smart move by Big Blue. 

After selling T/Maker, Roizen became vice president of developer relations at Apple Computer and after that, a partner at another VC firm before she joined DFJ. It was interesting to hear that she works part time for DFJ now, often from her home office. 

During her talk on learning from failure, Roizen emphasized the importance of knowing the numbers behind your business as well as being realistic.  

She had many great tips but highlighted three main things to avoid when starting a company.

1. RIGIDITY. Instead, be flexible and open to changing your plan based timely analysis of how things are going.  If you are not seeing the results, then quickly change up what you are doing in order to get them. 

2. PERSONAL FINANCIAL RISK. Roizen said she has seen more than one entrepreneur declare personal bankruptcy as a result of borrowing money to exercise stock options (known as the ‘cashless exercise’) and then being required to pay that money back when the company does not live up to its early promise.  She says personal financial pressure can create a hidden agenda and lead entrepreneurs to make bad decisions.

3. ASSUME A DEAL WITH A BIG COMPANY IS THE PANACEA. She once invested in a company that partnered with UPS. The company placed way too much emphasis on the deal as a key to success. Things didn’t pan out exactly as expected.  In 20/20 hindsight, they realized that although it’s a hugely successful shipping company, UPS’s business reasons for doing the deal were not aligned with what would make the startup successful.  

When I asked Roizen about hot technologies she immediately mentioned how mobile is ubiquitous and the importance for designing software for mobility. She also mentioned fellow DFJ VC Steve Jurvetson’s interest in the space industry pointing out the SpaceX launch that happened a few days ago.

The energy in the room during Roizen’s talk was high and I would like to thank Women Start-up Lab co-founder Ari Horie, my former coworker in IBM Storage in the late 90s, for working so hard with her team to put on such a fantastic venue. 

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Final note

Here are the Twitter handles of organizations mentioned in the story: @DFJvc, @HeidiRoizen, @WS_Lab, @Humwin, and @FromMichelle.

 

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Six Tips on How to get Funded from the Queen of Venture Capital

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Venture capitalist Ann Winblad recently spoke to our Women Startup Lab Meetup group in Menlo Park.

Winblad is the co-founder and a Managing Director of Hummer Winblad Venture Partners. With over 30 years of experience in the software industry she is a well-known and respected entrepreneur and technology leader. She is also on the board of directors of SVForum.

She has a slew of impressive degrees and credentials and founded a software company in the mid-80s which was acquired back before software was hot.  I used to work with Winblad when I was with IBM Venture Capital Group and it great catching up with her again before her talk to about 30 female entrepreneurs.

Today software is not just hot. It’s white hot. Large companies like IBM have shifted their focuses from hardware to software in recent years. In fact last I checked software was IBM’s most profitable group.

Winblad estimates that today 60 percent of companies that receive VC-funding offer software.

Hummer Winblad Venture Partners was founded in 1989 as the first venture capital fund to invest exclusively in software companies.

My key take-away from Ann Winblad’s talk was that she doesn’t like to invest in entrepreneurs who focus on risk.

The word “risk,” says Winblad, has a negative connotation. It is associated with the threat of failure and impossibility.

Winblad instead likes to invest in companies run by opportunists and visionaries.  She looks for company leaders with can-do attitudes who look toward the long-term goal. She says companies that IPO are on average seven years old and ones that are acquired are at least 10 years old.

Here are her six tips on how to get funded. By the way, she stressed that her firm focuses on Series A funding, not seed funding.  This means funding a company and not just a concept.

1. DON’T BE A RISK TAKER. Focus on opportunity not risk. It’s not about being a risk taker; it’s about being a visionary.

2. KEEP AN EYE ON THE FUTURE. Winblad says it’s because visionaries are inspired, enterprising, and insightful.

3. SHOW HER YOU CAN ATTRACT TALENT. Do people want to work with you? Are you a team player? Attracting and retaining the best talent is what makes or breaks companies.

4. DON’T HAND HER A COMPANY PROFILE. E-mail her but only if it’s a fit. For example, don’t send her company information if she backs a competitor.

5. HANG OUT AND NETWORK WITH VCs. Half of the companies funded by VCs are Silicon Valley-based and 80 percent of the world’s VCs are based here as well.

6. WHEN PRESENTING, DON’T BE SO BUTTONED DOWN.  VCs invest in people with personalities and heart. This is especially a women’s problem. Don’t be so formal.

Here is a list of selected active and historical Hummer Winblad Venture Partner investments.

 Selected Current Companies:

AceMetrix
Aria

Domo

Baynote

Birst

Insidesales

Kiip

Flite

Infulitive

Karmasphere

Marketo

MuleSoft

Sonatype

Piston

Plumgrid

Voltage Security

And others

 

Historical:

Wind River

Hyperion

AdForce

Powersoft

Starmine

NetDynamics

Intrinsa

Krillion

Liquid Audio

Market Wire

Net Perceptions

Star Analytics

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Visit https://plus.google.com/photos/111651143754275279070/albums/5924958611441888881 for photos of the event.

Michelle McIntyre is president and principal consultant at Michelle McIntyre Communications LLC, a high tech PR firm based in Saratoga, California. Follow her at @FromMichelle on Twitter. Women Startup Lab is @ws_lab.