Late Night with Raj Kapoor: A look into the mind of VCs

As this year's Vator Splash started to wind down, attendees got to see one VC lead a late night talk-show-esque panel with other investors, revealing the insight behind all those capital investments. 

Raj Kapoor, a partner with Mayfield posed some fun and tough questions to the panel.

Meet the Vator Splash late night panel: 

Mike Hirshland: Founder of Resolute.vc, a bi-coastal seed stage venture firm. Hirshland invests in various Internet tech projects with his new seed fund. 

Previously, he was a Partner at Polaris Venture Partners, where he created Dogpatch Labs and led many of Polaris's Internet investments. Previous investments have included: Automattic (the company behind WordPress), Q1Labs, Heavy.com, Black Arrow, Quantcast, Sprout, Thing Labs, Lolapps, The Start Project, KISSmetrics and Formspring.me. 

Michael Brown: The Director of Corporate Development at Twitter. Brown tends to be vital in the crystalizing stage of a company's positioning and value proposition, hiring key employees through my network and making customer introductions.

Brown has previously been an executive on Facebook and has invested in companies including: Counsyl, Venture Beat, Get Satisfaction, and Tapulous

Sharon Wienbar: An investor in mobile and Internet companies at ScaleVP. Wienbar sits on the boards of Actiance, BeachMint, Everyday Health, PlayPhone, Reply.com and uTest. Prior to ScaleVP in 2001, Wienbar was Vice President, Marketing for Critical Path and Amplitude Software.

She spent most of the 1990’s at Adobe Systems, starting as Product Manager for Asian Products and later led marketing for many of Adobe’s applications, and spearheaded numerous cross-product initiatives. Before her technology line experience, she practiced strategy consulting at Bain & Company for nearly five years.

Tim Chang: Am investor at the Mayfield Fund. Chang invests in the mobile, gaming, digital media and enterprise applications sectors and co-leads Mayfield Fund’s investment practice in China.

Some of his most notable investments in the U.S. include: ngmoco (acquired by DeNA), Playdom (acquired by Disney), Iridigm Display Corporation (acquired by Qualcomm). Prior to joining Mayfield Fund, he spent five years as a Partner at Norwest Venture Partners. 

Here are some (notes) of the highlights from the late night discussion:

Raj: Mike, you did something that is such a precursor to VC, you played football at Harvard and were a clerk for a Supreme Court justice. How'd you end up in venture?

MH: As a junior associate on a case I got really close to malpractice run-in. Essentially, some lackluster organization and filing practices led me to move into venture capital. 

Now I am focused on my new seed fund, the Resolute VC.

R: Some would say why another seed fund?

MH: I probably don't have a good answer for that. But, I don't think you should ever take capital from an investor unless, in the time you are pitching them, you discover that they can really teach you something. In the bigger firms, you don't get the feeling that any one person's attention is on your company.

R: The "headless" seed is something I just keep hearing about, where the startup doesn't have anyone really taking the reigns. (Raj asks the audience if they have run into a headless seed and at least four people admit seeing this.)

R: What is the worst pitch you've heard?

MH: In 1999, an entrepreneur showed up hammered and about two-thirds of the way through he "booted." . . .  He didn't get any capital from us, to say the least. So for entrepreneurs can easily avoid that by sticking to one or two drinks.

R: So Sharon, I hear that you wake up every morning to row at 5 am?

SW: Yes, I wake up at 4 a.m. and am in the water rowing by 5 a.m.

R: How much sleep do you get?

SW: I go to bed after 10pm.

R: Were you inspired by the Winklevoss twins?

SW: I was sick of being a gym rat and I wanted to be on a team. And what I learned from this is how hard it is to receive feedback. After joining a team late in the season, I was getting yelled at for not being up to par and was getting discouraged at the constructive criticism. This has reminded me to listen, not shut down. 

R: You are in growth investing. Every one thinks it is super expensive, how are you competing? 

SW: We don't do late-stage or poster deals. We look for companies interested in single-digit millions when we put in funding. The trick is get in before it becomes the hot deal. Last year I invested in BeachMint when it was 7 months into revenue. 

R: That's a well-know celebrity-backed company, any words of warning?

SW: By cautious of drive-by endorsements. Those are deals where a person is merely lending their image with minimal interaction. What BeachMint and other successful companies have is a deeper social interaction with celebrities. To do social commerce with a celebrity you need them to really be on board and be a part of the creation, curation and the conversation online. Now with Twitter and blogging other real-time feedback, the conversation part is a big component.

R: Has celebrity-backing worked for you Mike?

MH: Its hasn't yet with our current project but in previous investments, Shoedazzle became a great investment. 

R: David Cowen at Bessemer Venture Partners has created a list of all the deals that they passed on have made it. Do you have a most humiliating pass?

SW: I passed on Zappos. Yeah, ouch! A number of my partners couldn't get on with Tony [Hsieh]. And I was too new to know when to listen to my gut. It gets even worse because Hsieh never lets me forget that I turned him down.  The hardest selling point was the return policy, bit now it is this ultimate measure in customer satisfaction. 

R: Michael Brown with Twitter has been involved with a lot of Twitter's moves to buy smaller companies. All the social media companies are obsessed with acquisition hires -- why are they not stepping up for the bigger acquisitions?

MB: When you have a really strong growth machine, it doesn't make sense to layer on big additional companies when growing at that rate. If we know where we want to go and we are going there, I'm not sure that buying new companies makes a lot of sense. Smaller companies are easier to fold in, but bigger ones require a different business structure to adopt.

R: Whats a big company? More than 10, 20, 50?

MB: If you have to add a new whole product into your company and manage that change, that is what makes the acqusition hire more complicated. 

Internet companies are organized more for functionality than those big companies like Cisco, so adding in whole other businesses focuses is not easy to flow.

R: What should Twitter buy next?

MB: BeachMint might be an interesting one. Or a second cousin to that like OpenSky. Celebrities make Twitter interesting to read, but we don't pay public figures for that content. So celebrities making money by sharing on Twitter doesn't change that concept too much if you think about it. 

SW: BeachMint did a live stream on Twitter and sold out. So Twitter is like a new QVC.

R: What excites you most these days in the tech sector?

TC: Quantified self stuff. Like really healthy people bragging about how healthy they are. Measuring what you do and who you are is really catching on. I really think the only reasons that Asian Americans use Facebook is for sharing food porn. 

So I don't see why can't you do some analysis in the cloud over what you eat, using photos? I have been a gamer all my life and so the idea of creating an objective and getting instant feedback is familiar with gamers and is being added to a lot of other companies now.

R: What should people with an idea but no development skills do?

SW: Go where the fish are. There are meet-ups and circles they should insert themselves into. You need to talk to people in an adjacent space and make allies.

R: I think it is crucial to get someone in development to partner with. Learn to code or find a coder immediately.

MB: Go to Stanford and get someone to mock-up a visual or prototype. Making something to show others can be all the difference.

After Late Night, it was onto the Vator Splash afterparty with Coverflow. Raj went from host to band frontman.

(Image source for panel: Alastair Goldfisher. @agoldfisher)