A week from now I’ll announce in this space an important project involving technology startup companies, which I feel are key to continued economic prosperity for the United States. This will be my major project for 2010 with the Moon shot following in 2011. But first I want to conduct a little experiment involving venture capitalists. How interested are they, really, in your ideas or mine? We’ll see.
This is a tough time to be a VC. Investment returns have been poor for several years. Some of this can be blamed on bad investment decisions, some on a horrific economy, and some of it comes down to what are essentially deferred returns because of the drought of Initial Public Offerings. With not many tech companies going public there are fewer VCs buying private jets.
So the VC community is chastened though not poor and this leads to a trend I’ve noticed of venture firms and their web sites suddenly seeming a lot nicer than they used to be. Nearly every firm on Sand Hill Road says it fosters entrepreneurism, says it gives more than just money (sage counsel, help in hiring, really good coffee, etc.), and offers a channel for you and me to submit our business plans right into the belly of their beast, though with nothing held confidential, of course.
I find this idea fascinating, that anyone (heck, everyone) could submit a business plan for review by some of the smartest (and not so smart) VC’s in the world. Can it really be that easy? If my idea, my technology, my business model, and my target market are all good, can I really get funded through a VC web site alone? History and conventional wisdom suggest not, but those web sites are just so darned cheery that I decided to give it a try anyway.
So last week I wrote a business plan for a real startup. People with good ideas and nowhere better to take them come through my door all the time, so I grabbed one of the better ideas and just wrote it up. The geek in my kitchen this time was supremely experienced and grounded in the real world, his idea was novel and addressed a $7 billion market growing at 30 percent per year. There were, as far as I could tell, only seven competitors, the technology seems protectable, and if any of them rip it off it should be easy to tell. Best of all there wasn’t much money required by VC standards, the development and sales cycles run in parallel, and could be measured in months, not years.
Heck of a deal: one funding stage and profitable in less than a year. This would be many a VC’s dream investment. But only if they know it exists.
I submitted the business plan last week through the very friendly web sites of two Sand Hill Road venture capital firms. One firm is venerable the other fairly new but both are among the best. If they actually read the plan I’m sure they’ll be interested, not just because it is good but because it came from me and these firms both know me. I’m not an idiot — I only play one on TV — and they know that. So the real question is whether the plan will be read at all.
I don’t really know how this vetting process works, but I imagine it must be like the stories I’ve heard about how book publishers handle unsolicited manuscripts, which pile up in corners, are occasionally thumbed through by junior editors, and periodically shoveled in a dumpster, many unread, even unopened.
That’s no way to find the next Moby Dick.
Yet good books are still published because literary agents get their stuff past that pile-from-Hell and into the hands of senior editors who actually buy books. Same with venture capital, where it usually comes down to who you know.
This should be interesting. Will the VC’s read my plan at all? Will they read and reject it? Good plans are rejected all the time. If they reject it will they bother to tell me? If they like it will they bother to tell me? And how long will all this reading and telling actually take? Days? Weeks? Months?
Of course by writing this column I’m unleveling the field a bit. Most firms will do nothing special as a result but a few may actually send someone to paw through that electronic pile of business plans looking for something from me.
I’ll keep you posted.