The mysterious world of Planet VC

John Shinal · September 24, 2007 · Short URL:

At its heart, the business of venture capital is the financing of dreams. Like the job of literary agents or Hollywood producers, the fundamental challenge for VCs is to sort through thousands of ideas each year to find -- and fund -- the ones with the potential to be big hits.

And because venture capital is a hyper-competitive industry, those who make their living at it face tremendous pressure to grab a piece of a promising business plan before a rival does.

Most top-tier VC firms get somewhere between 5,000 and 10,000 business plans sent to them each year, yet fund only a tiny fraction of those, perhaps a dozen or more.

That ratio means the overwhelming majority of entrepreneurs who are trying to sell VCs a piece of their dream never even get a meeting with them, and most of those that do still walk away empty handed.

As one VC recently told me, while they can only make money by saying ‘yes,' a much larger part of their time is spent saying ‘no.’

For startup executives who have poured several years of time and energy developing their ideas into companies, repeatedly hearing ‘no’ can be a deflating experience, and then some.

To help entrepreneurs improve their odds of getting funded, or at least help them understand why they didn’t, we’ve launched a new department in the newsroom.

It’s called “The Mysterious World of Planet VC,” a title which reflects the fact that deciding which deals get funded is as much an art as a science.

For these columns, we’ll ask VCs questions that we believe entrepreneurs want answers to:


Why does one deal get funded while another does not?

What’s the best way and best time to pitch a specific firm?

What's the best way to say ‘no’?


Two weeks ago, we got our first set of answers from Kleiner Perkins partner Ray Lane, in what was the inaugural video of the column. You can see that video here.


This week our answers come Roland Van der Meer, a veteran partner with ComVentures in Palo Alto, Calif. Van der Meer has been investing in communications equipment and related tech startups for two decades and many of those companies, including Broadcom, PairGain, Ascend Communications and Monterey Networks have either gone public or been acquired.


When I walked into a ComVentures conference room to wait for Van der Meer and his fellow partner, Michael Rolnick, one of their assistants asked me if I “would need the projector,” a reminder that I was sitting in the same spot where thousands of startup execs had sat, waiting for their chance to share a Power Point pitch.


After a working lunch of salad and pizza, as I got ready to tape a video pitch for Rolnick, which you can see here, Van der Meer shared his thoughts on the VC’s world. What does it take for a deal to get funded?:


Van der Meer: “It takes a little bit of magic. You have to have a combination of things line up” to get funded. “Your VC has to have the interest and the bandwidth (i.e., time and energy) and be able to bring the rest of the firm along. I’m not surprised that it’s a mystery to a lot of entrepreneurs.” Is there any good way to say ‘no’?:


Van der Meer: “There’s no easy way to do it. We’ve been wrestling with how to do it for 20 years. Being direct is good and bad. It’s hard, especially if you like them (the entrepreneurs). But if you know you’re not going to fund them…” Van der Meer finished his thought with a hand gesture that suggested it’s better to let someone down quick rather than string them along. What kind of investments are you funding right now?


Van der Meer: “We’re putting money into infrastructure plays tied to rich data, meaning video on (Internet protocol) networks. Our thesis is that you have to understand the whole picture – the entire communications stack – or else you’re going to get blindsided. The Internet wasn’t designed for video. It was designed for data, then voice came along. Now that IP networks are moving to rich data, you need all sorts of management layers on top of the stack. Video means longer packets that have to be perfectly synchronous. There’s all kinds of problems that need to be solved, and that’s helping (create opportunities for) infrastructure plays.”

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