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Rob Hayes, Marcus Ogawa, Deborah Jackson, Larry Marcus, Alex Vittal explore that question
How have early-stage venture models evolved? That topic was discussed at the recent Venture Shift this past summer, with a panel consisting of Rob Hayes of First Round Capital, Mike Levit of Founder's Den, Marcus Ogawa of Quest Venture Partners, Larry Marcus of Walden VC, Deborah Jackson of Plum Alley, and Alex Mittal of FundersClub. James Conlon of Bullpen Capital moderated.
James Conlon: Hey guys, I’m James Conlon from Bullpen. If I seem jittery, it’s not because I’m nervous. I’m just still tingling from Duncan’s presentation, so thank you for that, buddy. We’ll get the panel up here in a minute. This is early-stage panel. We’re going to discuss sort of the – you know, we heard a little bit about series A crunch from the investor or from the entrepreneur’s standpoints. We’re going to hear little bit more from the early-stage investors now with portfolios heading into that area. We’ve got Alex Mittal from – CEO founder of FundersClub, we’ve got Marcus Ogawa from Quest VP, Deborah Jackson from Plum Alley, Larry Marcus from Walden VC, and Michael Levit from Founder’s Den. So if you guys could maybe give about two sentences about your organization to introduce everybody and we’re going to get started.
Alex Mittal: Good evening. I’m Alex Mittal, FundersClub CEO and co-founder. We are the first online VC “in a nut shell”, what that means is we invest like a VC. We see venture capital returns. We do due diligence. We source guilds. We co-invest with other VC’s, but our capital actually comes from contributions made online and notably from accredited individuals. And so, I look forward to sharing my perspective on today’s topic and hearing from the other panelists.
Marcus Ogawa: Hi. I’m Marcus Ogawa, managing partner of Quest Venture Partners, we are Series C and Series A fund. We’ve done about 47 deals. We’ve been in venture for about 6 years. We do a lot of investments on mobile. And that’s about it.
Deborah Jackson: Hi, I’m Deborah Jackson and I wear a number of different hats. I am a finance expert, I was on Wall Street for 21 years starting off at Goldman Sachs, and I worked in the area of healthcare technology. I’m an angel investor. I have about 12 companies in my personal portfolio. I am a co-founder of Women Innovate Mobile, which is a mobile accelerator in New York City based on building new mobile technology, and finally I have an e-commerce company called Plum Alley which is an e-commerce site as well as a funding site for female entrepreneurs.
Rob Hayes: Hi, I’m Rob Hayes with First Round Capital. We’re a Seed C capital fund based in San Francisco, in New York, and Philadelphia. I opened up the San Francisco office about 7 years ago, now it seems like an awfully long time ago. In seed investing years and according to Duncan, I do about a deal a week, which isn’t quite true.
Michael Levit: Hi, I’m Michael Levit. I have a problem. I’m an entrepreneur. On the side, I am a managing partner at Founder’s Den, which is a co-working space for experienced entrepreneurs. I started it with a few other friends who are entrepreneurs, who really wanted to have a place that’s one part clubhouse where we get these experienced entrepreneurs who come together, one part co-working space where we go to get stuff done. So although I don’t have the finance background of those around me, I certainly see a lot of deals and I’m familiar with a lot of entrepreneurs.
Larry Marcus: Hi, I’m Larry Marcus from Walden Venture Capital based out of San Francisco. We are sprout-stage investors; it’s a new word for you. We tap into the seed-in-the-angel deals, we’re looking for the products or the technologies that have sprouted so it really starts with a great demo, a very product-centered approach to that initial screening process. So if you have a great demo, that’s something that I’d love to see it afterwards. We lead series A deals or you can call them seeds or whatever you want with the terms, but we do priced rounds as a fund, not notes.
James Conlon: Okay great thank you, guys. So we’ve had enough time now to see a lot of different models in the early-stage world, we’ve seen the incubators, the accelerators, why seed’s making the big push? And then we’ve also seen time for all of that to adjust, why seed’s cutting back on class sizes some accelerators have shut down. We’ve got certain seed fund settings; we have dorm-room funds and things like that. So what’s working? What needs adjustment? And what do you see upcoming in the future?
Deborah Jackson: I guess I’ll go first on this one. I feel like I’m representing the East Coast here, so we have a different ecosystem and different opportunities, I think. In New York now, there are approximately 20 different accelerators or incubators that have started up in the last 3 or for years, and the accelerators that we’re seeing are really focused on a specific vertical, so there’s a FinTech accelerator, there’s Kaplan education accelerator, there’s three different healthcare-specific accelerators.
So I think we’re moving in that direction to actually using technology and applying it to a very specific industry. So the accelerators actually have representatives from a specific industry who are working with the tech people, so there’s a slight variation on a model and I think our accelerator is very focused on quality not quantity, so we’re very specific. We pick companies, and if we don’t have enough companies that we think are worthy, we simply shorten the class or decrease the class, so that’s one thing I’ve seen.
Rob Hayes: I think any of them could work well if done right. The question is just who’s doing it right? Who’s doing it better? So when we started First Round Capital back in the day, there were very few seed funds or hardly any. Now there’s a lot so you have to keep improving the product, and that’s how we see VC’s, a product so there’s our customers who are founders. There’s our shareholders who are our LP’s, I think too many VC’s see LP’s as our customers, and then there’s what we build which is a product. So the VC product for 30 years had been money and a smart person, and the least money and hopefully a smart person, and it needs to be more than that. You need to keep building things, that’s why you see people beginning to build, communities beginning to build, content products beginning to build, all sorts of different things that can help companies be more effective and kind of getting that everyday stuff out of the way.
With accelerators or incubators, they all have the same formula which is they’ve got a little bit of money, they’ve got some community, and they’ve got a yoda, and so the ones with the best building community and the most compelling yoda are going to win, right? And so, I mean Alex can talk a lot about what he’s working on FundersClub. We are investors in FundersClub, and I think that they have in there space to have an incredible model. There’s a lot of competition so all of these things are going to be successful but it’s going to be a few players in each of these who are going to be very successful.
Alex Mittal: …also maybe challenged that moderator a little bit but just the comments on incubators are getting smaller. If anything, I think I have seen one or more crop-up but I think some of the comments on the East Coast just now and I see that you’re in the bay area. Any even with Ycommodator, at least if you listen to the yoda there, he’s remarking and he aspires to double or triple or where they currently are, so there’s certainly action and aspiration to grow.
And I think part of the reason that is, because you’re seeing the market recognizing that there is opportunity to access very high quality deal flow at the incubator and seed stage still, and people are trying to pursue that but it does. I agree with what Rob just said as well about, ultimately it does come down to a few key things and whatever’s best of those key things can win. Obviously, we have a unique approach to that but –
Larry Marcus: Quality matters meet at the end of the bubble that Duncan made a nice chart of and in 2000, they started being referred to as incinerators and stinkubators because there were so many of them and getting through them didn’t really matter, but obviously the model’s been honed and it’s really important to realize that even if you’re getting into one of those and even if you are getting that initial capital, you have to really execute extremely well to get that product built because that next round really is a tough one and then the good incubators or accelerators can help that process a lot.
Marcus Ogawa: I think it’s actually, if you look into it, it’s a history of the case, and if you look at something like wide Y comodator, 6 years out they made, they came out and started making a really big impression. You see, everyone’s stepped in, they try to duplicate the process and capitalize on the opportunity. And so then you see a plethora of these different incubators, so it has emerged.They all compete on the same model, eventually they realize it doesn’t function that way and they’re going to start competing against each other and eating their own foods.
So because there are limited resources you see them start to evolve and they start evolving over time into certain issues wherein they are doing geographically or in a particular sector and they migrate towards that and they polarize themselves naturally, and then the other ones will shake themselves out. So I think we’re still in that process of evolving and seeing the evolution which is also part of what’s contributed to that series A crunch, a lot of these deals coming out because there’s more people that are facilitating and start-ups actually move out. So I think there’s still an evolution process and we’ll continue to see that shake out, but I think it’s already starting to conduce. You’re going to see it already with a lot of the incubators and accelerators for your focusing.
Deborah Jackson: I think one - sorry. I think one thing too I’ve observed when I wear my investing hat which is that when you go to the demo day for some of these accelerators, you go and you see maybe 10, 20, 30 different companies presenting back to back and it becomes actually these companies are competing against one another because as an investor, you tend to say, “Okay, which are the 1 or 2 or 3 companies look interesting and which ones do I want to follow up on?” And so what I’ve seen is that sometimes there’s a tendency for these companies to actually be competing, and so one of the things we do in our accelerator is we meet individually, privately with investors all throughout the process, and we try not to emphasize one specific day where you have this big drama presentation.
Michael Levit: To exactly that point, I think, that the point that we jumped the shark a little bit was recently San Quentin’s demo day when you had prisoners. I think it was wonderful that they were out there getting in front of technology at the same time they don’t have access to the Internet or applications. And so when you start to say, okay San Quentin’s having a demo day, maybe demo days are getting a little overplayed. Just a little, so you have got more accelerators, more incubators starting up there as we climb up that cliff that you saw earlier, there continues to be more interest from different incubators wanting to get a part of that. And so you’ve got more and more and more “me toos.”.
You have a few brands that are starting to standout, the Tech Stars, the Y combinators, the 500 startups, and a few others that are looking really good. But these are really bundled services and so I think the other trend we’re starting to see is slightly disaggregated services. So if you start to say, “What is the role of an incubator or an accelerator?” Well clearly there’s money. Money is going to be an important component. There’s some leadership so that you’re going to get some help we referred to a yoda, and not just one particular person but a network of people. You want a group of peers, and those peers are going to be people who are going to support you, who are going through the painful times that you are as well. There’s the blocking and tackling of “I need space” and some services that may be shared or may be recommended. And so when you start breaking down each one of those pieces, you start to say, “Oh, well there may be some network of experts, there may be a yoda, there may be funding which may or may not be separated out,” several people here are in that business.
And so when you start disaggregating those services, what you start to see is a co-working space can be one part of that. You start to see funding can be a separate part of that, a network of individuals who are going to help you come together can be yet a separate piece of that. So you’re still going to have a few of these incubators and accelerators that are going to bundle all that up. Those are going to be great sources for discovery of talent. You don’t want to go to 500 demo days, it’s too painful, and so you’re going to have a few that are going to be the winners, then you’re going to have brands that you’re going to be associated with. This is the place you go to the demo day to meet that talent, to have the network that have those things, and then you’re going to have others that are going to be decentralized networks, and you’re starting to see that pop up and I think you’ll see more of it.
James Conlon: I’d like to build on that actually as…
Marcus Ogawa: I’d like to say one last thing though. I’d like to point out that probably the most important factor in seeing success from a lot of these incubators and accelerators has been actually the investment banking aspect, where they’re able to get their companies funded further and leverage their brand to raise evaluation for them at roughly 7%, which is exactly a traditional decimate mark. That I think is probably one of the most unique things is they’ve adapted the investment-banking model to the early-stage startup with all the other full service suite of the other things they provide. That’s about it.
Michael Levit: How much of that do you think needs to come from an incubator versus coming from correct funding source? You’ve got someone in funding who’s going to help –
Marcus Ogawa: I think it’s completely about amplifying the signal and if you’re using someone like Paul Graham with 500 start ups and you’re coming from India, it’s a huge advantage, and I think that’s the leverage that these guys are playing on their own brand.
Michael Levit: Absolutely.
James Conlon: There’s been a lot of help in financing, a lot of help with the mentor network and the people network and all of that, but there are now as seed funds are proliferating and there’s more competition for deals. There are new services being introduced including stuff at First Round, recruiting help concierge services for research and things like that. Can you discuss a little bit more about sort of what’s going on there in the competitive environment for deals and in the support for your brand and for your portfolio companies? I don’t know Alex that you have been funded by First Round so you probably have first-hand experience with some of this, but –
Alex Mittal: Sure, I can share some of those experiences. Yeah that’s absolutely – I mean first of all, I’ll step back and I’ll say, I think there’s this perception, and maybe a reality, that some VC funds are offering these suite of services: value-added services, could be marketing, could be hiring and recruiting what have you, as just marketing for themselves for the VC’s, but I think you’ll see the now successful folks in the business, actually are doing it because they are approaching it very much like hey, this is actually – as Rob said is kind of perfect. We approach it as a product for creating the best product, what’s the best product we can create? Naturally you look at who you’re serving. On the one hand you’re investors or LP’s, but on the other hand you have startup founders, they have needs. How can you help them with those needs?
So if done correctly, that can be actually extremely helpful and just as very recent data point, First Round’s horn too much, but we did jut – we just hired, for example, 2 folks straight out of First Round’s recruiting service for its portfolio companies. And then as a little – just a data point on our own network for FundersClub, we believe that very strongly. We think that companies, when you’re starting out, you don’t have a lot of resources, you don’t have a lot of open doors for yourself, hiring for example, key challenge partners, customers, really serious business issues that help move things forward.
Those wheels can be greased for real, if people are there to help you, who do have those connections. And so through, FundersClub for example, our network of people – we have a very big network of people. We’ve been able to literally get key people hired at our portfolio companies to get companies customers and partnerships and coverage and media and so forth. So it’s definitely when done with the right intention, which I think is actually serving the entrepreneur serving the company, it does actually help – where it’s perceived as, “Hey, we’re just doing this to look good so we could get good deal flow.” I think that’s where people don’t actually deliver and where maybe people start to actually raise the questions you’re asking, about like “How valuable are these things?”
Rob Hayes: I mean the genesis of everything that we do began 7 years ago when we had our first CEO summit and we did this CEO summit that it seemed like we were brand new in the business and every other venture capitalist had a CEO summit where they would have people come and talk to their companies and I’ll never forget a friend – when Twitter was brand new and a friend of mine was on Twitter and he tweeted out, he was at this CEO summit for another VC and he tweeted out. He said, “being motivated by a blue angel.” And I though, “Oh my god, that sounds awful!” – I mean it might be really cool but I’m not sure how that’s a creative to his business, right? And so we decided it wasn’t going to be about that.
It was going to be very functional and very like about building culture and hiring things like that, and we put together this session that I thought was great, and at the end of it, we had it over at Quadris where we could fit our companies in that room. Afterwards, people came – CEO’s came up to me. They said, “This was really great. We really enjoyed it, but you know the time I really enjoyed it was the time spent with the other CEO’s and catching up with them and hearing their stories and that sort of thing, and we begin to scratch our head and think, “Oh my God, we always say that being a CEO is the loneliest job in the world,” but it never dawned on us that we could help make it less lonely.
And so the next CEO summit was much more about creating time for the CEO’s to spend time with each other, and so is listening to them where we built our first product which was essentially a way for there to be a sense of community amongst the CEO’s that lasted throughout the year wasn’t just at the CEO summit, and then we listened to them again and they said, “You know, CEO may be the loneliest job, but CTO is the 2nd loneliest job. And those guys are so nerdy, they don’t want to talk anybody anyway. Right?”
And so we said, “Why don’t we do another group for CTO’s?” – which I don’t think anybody else does, and that was the CTO’s were like, “Oh my god, this is great!” And then we started talking about building culture and things like that in an engineering organization and they were like, “Oh no one talks to us about this kind of stuff.” And then we listened to them again and we said, “What’s your biggest problem?” and they were like, “Well, hiring.” And so then we put together a hiring function. So it’s just – back when I did something useful for a living, I was a product manger. My job was pretty simple, right? You go out and you go talk to customers and they tell you what they want, and then you build it, and then you give it back to them, and they’re like, “This is great!” Okay, so I get this. Now I understand how VC works, right? And so that’s what we’re doing, it’s not that difficult but it seems to be relatively new and I think a lot of the companies who were work with, like it.
James Conlon: All right, we’ve heard a lot about the series A crunch already, especially from the entrepreneur’s standpoint, but times aren’t too easy for investors with seed portfolios either. So from an investment strategy standpoint, what are you guys looking at, in terms of sort of escorting your deals through a difficult financing environment and maintaining portfolio strength through a time like this?
Marcus Ogawa: Tell them, “Get shit done.” Good companies will always get funded fundamentally, but the other thing probably where telling them much more to focus on is revenue. That is an absolute – I mean as long as you’re generating revenue, you’re reducing your burn. You’re more likely to raise your fundraising because you derisk the model a bit more. So we’re definitely telling them, guiding them more or less, to increase their revenue opportunities.
James Conlon: Have you noticed the – sort of the goal post changing from the series A guys either in form or distance, like are they looking for bigger revenues or they’re looking for a different revenue instead of user growth or characteristics like that?
Marcus Ogawa: Yes. Absolutely because the series A guys cannot play the series B guys because the series B guys have vacated to either series A or series C. They went upstack or downstack based on how terrible their performance was previously. So because of that, you see now this gap in between whenever Bullpen, for example, is trying to take advantage of that, but as a consequence you’ve also seen the series B guys who are still doing series B now stepping in and demanding a higher opportunities.
The series A guys are in the same category now because they need to bring that company to that series B, so they need to be able to have it in a position where they’re able to take it from point A to point B correctly, and that means that they already have to have to derisk the business model quite considerably more than in the past. Precisely for that slide that Duncan showed that it’s much cheaper today to startup a company.
Alex Mittal: As a data-point at FundersClub, we mainly fund in the seed round and 25 of 31 of the investment of our companies are revenue-generating at that stage, and so it’s sort of – I think it echoes with what Duncan was saying earlier, what he just said here, very much so. So there’s this – because of the series A crunch or it’s the shift of what we call different stages of the company, and so there is this stage now that’s becoming much more common. Post and initial seed round, pre and A which is becoming more like a B. That is – that’s available.
Deborah Jackson: So one of the trends that I see on the East Coast, is there’s a huge-huge growth in the number of angel investors. So back in 2008, New York accounted for roughly 12% of all angels investing. This year it’s up to 22% so there’s a huge growth in angel investing, and the angel investors there look more like series A investors so they may come together as a group or syndicate and invest up to a million dollars in a company that’s pre-revenue. If you look at Pinterest in some companies like that that came out of that kind of ecosystem that’s been fascinating. So it just feels like that whole East Coast shifting and more people are trying to get into the game, more people are putting up their money, so it’s – I think it’s a little bit different there compared to here.
Michael Levit: I’ll just echo what everybody said there of – I think there’s more pressure to get out of the gate, show what you’ve got, but the little tweak that I would say is that I’s not just about revenue, all right. If there’s a path towards revenue, that’s fine. But getting out there to prove your model and show some scalability so get some traction, get users on it, and show that with some expense you can grow that user-base or have some ideas on what it’s going to cost to get more users.
So start to get some arms around the sales marketing function as well as just getting them eating the dog food, getting users using it, but it’s a little less sensitive necessarily towards revenue as long as there’s a pretty clear idea in your business on how you’re going to get to that revenue. But again, a little bit of focus on sales marketing in addition to just getting people using the product and starting to enjoy it at some level.
Alex Mittal: From a founder point of view, it’s important to be – if there’re founders in the audience – to be talking to your customer and having a close connection to what people actually want and building product that meets that demand, and that’s way more important and honing in on that. And then how you get to the next stage is way more important than a growth curve in numbers, but as far as where the money is, it’s when you’ve done that and also sort of launches and started to generate real cash flows.
Larry Marcus: I’m not always looking for revenue. I’m really looking for – to see if that product or that technology can really gain mass-market adoption, if it has that has that broader capability and there’s kind of this pyramid of users - How many users are there? How engaged are they? And then how do you monetize them? And if you focus on monetizing them or getting yield too early, you can actually choke off the user growth, so if it feels like it’s going to be clear that the revenue opportunity is there, well there’s a theory that could be interesting, then I think that’s something that’s very fundable.
But obviously, everybody loves it when you don’t need the money, and if you’re profitable, I definitely want to write a check also. I think the revenue thing can be a little bit deceiving. I do also love little case studies. If you can nail a small market, if you can nail like one bar and there are 50,000 bars. If you can nail 1 key small city, and there’s going to be another set of those. Those case studies really mean a lot and those early user groups matter a lot, how do the first 10 users behave? Well, if you have a hundred users after that, probably not going to behave al that differently. So nailing those early cases. I think there’re other leading indicators as well, but revenue is certainly awesome, and some business’s revenue is the only way to judge them.
James Conlon: Hoping I have 1 or 2 questions from the audience toward the end but before that let me talk about the job sack just a little bit. SUC just voted to lift the ban on general solicitation that could do a whole number of things, I could do almost nothing, but I’m sure there will be a ton of opinions here, but does that democratize deal flow? Does it open up a danger of having deals with any angels and no real institutional deep pocket that can carry them through or mentor the company and no vested interest and then the whole way, what are your thoughts? What does that do to the environment? And what’s the future look like over the next few years?
Marcus Ogawa: In a fertile environment everything grows, including weeds. So eventually needs to be pulled out, cleaned up again, but time will tell.
Alex Mittal: I have another account – to actually generally solicit a company is too very specific type of filing, and so we hear the headlines, “The ban has been lifted” but actually, no company today can generate solicit unless they shift their legal structure to a type of entity, a file 6C instead of a file 6B offering. And so it’s sort of a lot of legal nuance at play. I think one thing that most people though would agree with if this could actually happen is – there’s almost like a limitation on free speech right now in the context of the business we’re in, which is if you’re a company raising capital and a reporter asks you, “when are you raising your round,” or whatever it is you’re not advertising, just stating the fact, and you’re not allowed to do that today.
It seems a bit strange and it seems a bit bizarre, and if you ask any founder who’s been in that position, either because in the round you got stopped early because a reporter accidentally reported about an ongoing round or whatever. They’ll tell you that was like – it was a very annoying experience. So I think that little piece is maybe something most people could agree on, that we should be able to talk about what’s actually happening, but looking beyond that I’m thinking about – let’s say it does play out in a way where it is actually implementable company start jumping aboard, start adopting general solicitation.
Okay, that could be good for one given company, but if every company’s doing that then that affect for all investors is that you’re going to get a lot more noise, you’re going to get a lot more messaging and either just through the media or through actual advertising and marketing once that becomes legal, so the weed comment – I mean certainly there’ll be more weeds right that are in your face, that are there and separating out what is quality from not quality becomes all the more important.
And you see in the public market a level of transparency that you don’t see in the private markets today, that’s evolved in response to that. So you have ratings services, people, analysts who study different industries that doesn’t exist in the same level as the private market, and I think for you to project forward what might happen here is you’ll just see that void filled. It’s trying to mitigate some of these issues and trying to distinguish signals from noise.
Deborah Jackson: I can also see having spent my first career on Wall Street and doing a lot of offerings, public and private, and thinking a lot about disclosure and what kind of information investors really need to make a proper investment decision, and thinking about it also from an investing angel point of view. I can see a scenario where there’s a lot more work, required on the part of entrepreneurs to explain their company to educate potential investors and you think about what you have to go through when you meet with angels or VC firms and how many meetings and how many different scenarios and you increase and bring that out to the general public.
There’s a possibility that what you present about your company is going to have to be a whole lot more complete and sophisticated so that I think is tricky, and I really think being an investor myself and made some good investments, lost some money, I think most people that aren’t professional, aren’t really in a position to do that and I just fear that some people will think, “Oh this is my chance to invest in the next facebook”, and we all know on this panel you lose a lot of money. You don’t always make it. So to think inexperienced people will be making these guesses is kind of scary, I think.
Marcus Ogawa: …they’ll fix that with laws too.
Deborah Jackson: With the lawsuit? Hahaha!
Alex Mittal: And I – I mean I’ve argued to just – this is obviously a native content for you as well but quite literally, what Deborah just said is something that we ourselves experienced as former founders in our previous life and current lives too as well, raising capital from individual angel investors can be quite difficult. The best founders do seek out venture capitalists; you see this playing out time and again. And so if there’s a way to both capture capital that is there, that actually – half a trillion dollars or more some people estimate without the overhead and in a way that’s responsible, that could actually be a very good thing for us all and so that’s something that would really focus on how do you let the legitimate startups rise above the noise and how do you make surface opportunities that are more promising to investors without them having to bear too much burden of the process everyone’s referring to.
James Conlon: And again, I ask a – just a quick response on deal flow before we go to the audience. Are entrepreneurs getting sort of discouraged from this current financing environment? Are they ambitious, sort of seed stage guys still excited to be starting new companies? Is the seed glut still coming? Or has everything cooled off as talent cycling back into the ecosystem into more stable companies? Or what have you seen so far?
Alex Mittal: I don’t think founders are motivated by fundraising, at least not the best ones that I know.
Michael Levit: And we saw earlier that the data from Duncan that we’re still going up the cliff. I know for us, we’re seeing more deal flow than we’ve ever, seen more and more founders who are motivated, who are excited. The seed money keeps coming in as you get the phone well as we head earlier, you’re going to have more and more people who have made some money and that further stokes the angel investments that further keep this cycle going for a little while longer.
The other piece that we didn’t talk really about here is the AquaHire and so if you think about it from a smart founder who’s really thinking about, “Do I want to go get a job or do I want to start something?” It comes down to – it’s always a little scary to really go and walk without a net to catch you, at the same time in AquaHire, although it’s not a great place to fall into, it’s still a place to fall, and as long as there’s big companies that are on buying sprees, it’s going to help continue to keep this cycle going, I believe.
James Conlon: All right, we should put up time for 1 or 2 questions from the audience. Yeah, go ahead.
Audience1: Is it revenue model looked at differently between the seed and the first stage and other stages?
Marcus Ogawa: Yeah, completely – I mean, the scalability is very different, right? What you’re looking for with seed is just to see if there’s an opportunity to have a business model that generate cash. I think with series A, what you’re looking for is scalability now, where as traditionally more series B where they’re looking for that growth opportunity, is this a model that can scale to become a very big revenue model? So you’re seeing that actually downgrade more into series A, and in some occasions, people already big to get into series C. So yes, very much differs on different rounds.
Audience2: Hi. We talked about the current model being for accelerators being community, a bit of money or yoda, etc. I still would like to know where do you see it heading? Because we talked about the evolution in the past, but what’s evolution in the future?
Deborah Jackson: So I think for accelerators, at least what I see on the East Coast, is that they have huge value ad, because they not only give these companies a small amount of money, they relocate to New York, but to me it’s mentorship on steroids, so for a small period of time you have a small number of companies. I’m not talking about the big companies. But you have these companies that come together and I participated in it. I witnessed it, where they go from an idea or maybe for beta of a product to, within 3 months, actually having a legitimate product, and there’s a lot of changes that occurred during that time.
I’ve seen companies and products completely change, but I can see the value from day 1 versus when they come out and I think that’s – I think the reason you see so many accelerators springing up is I think there are very specific things that you can get out of an accelerator where I think it’s very hard for you to do if you’re a stand-alone company.
Michael Levit: I’ll take that one step further and say I think there you’ll see 3 different versions really come out. One is something that’s “verticalized”, so then you’re going to have people that are going to come together that are going to sell for reinforce the network within that vertical. Number 2 is almost the super accelerator because they’re going to package together so many things so that’s what Mark was saying earlier. You’re creating a brand and that brand is going to be so powerful, and it’s not just a brand, but a scope of services that all come together. Then that’s going to be a really important piece for discovery of talent, someone who maybe is not on his or her first startup.
In some cases, yes, but someone who’s got some amazing horsepower, has done so many interesting things, and this helps escalate them to the next level. The third category is folks who have a little bit better network who maybe have come out of an accelerator, had an exit, and are on a little bit of a different level. They still want to be around a group of different folks that are going to be a network that are going to be self-reinforcing, that are going to have co-working, that are going to have a variety of different things. That may be a little roll your own and disaggregated services but I think there’s a class of services that fits there as well.
Alex Mittal: Another thing or trend that I project happening is we may start to see international accelerators and incubators that conventionally have still been in the process of finding there way, the evolution we were talking about earlier started to deliver to something, at least I hope happens, but you start seeing signs about –
Michael Levit: That’s already happened. We get more and more people knocking on our doors in different ways saying, “Can we take your model to XYZ country? Can we leverage the brand you guys are working on creating? Different models of, “Hey we want to have anchor tenant that’s some large company that’s going to give free space, a shopping mall,” we had literally someone offer us an empty Mervyn store that they wanted to take somewhere that was in the US but take that similar kind of model abroad and say, “Hey, can we open that up for much broader audiences?”
James Conlon: Well, it’s time to conclude, but let’s thank the panel.
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Joined Vator onMarcus is a Managing Partner of Quest Venture Partners, and is responsible for new investments, evaluating and closing seed / A rounds and working closely with management from portfolio companies. He enjoys strategy games and Greek mythology.
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