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Tod Francis, Ben Ling, Emily Melton with Alastair Goldfisher on Unicorns and Super-Sized A's
At Vator Splash Oakland 2015, Alastair Goldfisher, Venture Capital Editor of VCJ and peHUB, moderated the panel: "Unicorn and super-sized A rounds. Do you need these to run and build a successful startup?". He was joined by panelists: Benjamin Ling, Investment Partner of Khosla Ventures; Tod Francis, Managing Director of Shasta Ventures, and Emily Melton, Partner of DFJ.
It was a fascinating discussion. Here are some highlights about what these top-notch VCs think about startups hitting "Unicorn" status - in other words - getting a $1 billion valuation. When Aileen Lee, Founder of Cowboy Ventures, first referred to $1 billion companies as "Unicorns" in 2013, there were 39 companies. Today, there are 100, and now everyone is keeping track. CB Insights is keeping a good list here.
Here are their thoughts [slighly edited].
On what they think about Unicorns:
Melton: We're not hunting for Unicorns. We're focused on entrepreneurs with big ideas. Entrepreneurship and building startups doesn't follow a linear path. There's a lot of ups and downs and reaching this Unicorn status is just an interim level of success. Basically, you're calling the success of a startup too early.
Francis: Most startups would be lucky to have a $200 million to $400 million outcome. Very few companies become Unicorns but the danger zone is that a lot of entrepreneurs expect to have pre-Unicorn valuations. My advice is not to worry about being an Unicorn. Raise enough to get the product out to market.
Ling: This business has always been about billion-dollar businesses. The term "Unicorn" is just a name given to this valuation. For us, the Unicorn conversation hasn’t changed much. We still ask ourselves, 'Is the market size sufficiently large so that you can impact the world.'
On what they look for in entrepreneurs:
Melton: We like entrepreneurs who want to attack huge hairy problems. Fundamentally, businesses are built by people. What it comes down to is: what’s the motivation of this team? Do they have grit? Even Elon Musk has the darkest and darkest of days. So does the entrepreneur have stamina?
Ling: We look gof similar things. We also want entrepreneurs who want and seek advise. We like to be hands-on.
Francis: We’re looking for awesome teams, unique vision to the customer proposition where the technology today is going to change the customer experience. We like to see an unique vision, an incredibly passionate team and early data points of working with their end user.
On Series A and Seed:
They all agreed that Seed is the new Series A. (Surprise!)
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Khosla Ventures offers venture assistance, strategic advice and capital to entrepreneurs. The firm helps entrepreneurs extend the potential of their ideas in both traditional venture areas like the Internet, computing, mobile, and silicon technology arenas but also supports breakthrough scientific work in clean technology areas such as bio-refineries for energy and bioplastics, solar, battery and other environmentally friendly technologies. Vinod was formerly a General Partner at Kleiner Perkins and founder of Sun Microsystems. Vinod has been labeled the #1 VC by Forbes and Fortune recently labeled him as one the nation's most influential ethanol advocates, noting "there are venture capitalists, and there's Vinod Khosla." Vinod Khosla founded the firm in 2004.
Joined Vator onI've worked as a business reporter and an editor since 1994, with the last 10+ years focused on venture capital, covering everything from startup to exit, including fundraising, data and tech trends, personnel, M&A, IPOs and entrepreneurs.