Posted on Wednesday, Apr 14th 2021
If you have been bootstrapping and think you are ready for investors, you need to learn how investors think. First, please study our free Bootstrapping course and Investor Introductions page. Then start looking for entrepreneur – investor fit. Today I introduce you to Warren Weiss.
Warren Weiss, General Partner at Foundation Capital, has a long track record in the Silicon Valley venture capital industry. When we spoke in 2015, he shared areas that he and Foundation are excited about as opportunities for building future Unicorns. You can listen to the podcast interview
here and the entire roundtable program here: Sramana Mitra: Let’s start with your overview and synthesis of what you feel right now about the industry, about ventures, and about how to build these unicorn companies. What have you learned? What have you seen? What are you thinking about opportunities for future unicorns? Warren Weiss: It’s really a great time to be a very early stage venture because of the disruptions at every level of the enterprise. We not only see that on the enterprise side of venture, but also on the consumer side. It’s primarily driven by mobility and being able to have the freedom to do things.
For Foundation Capital, I focus on the enterprise market. Every space of Denmark is being reinvented. What we’ve known as security in the past where you built a higher and higher wall to keep the bad guys out is completely broken. There is no perimeter.
It’s a great opportunity to build a unicorn in security. Analytics is also being reinvented with high-speed databases and cloud computing. User interfaces that look like consumer sites from a consumption standpoint are incredibly exciting. We see the explosion of apps in the SaaS market as well and just the whole cloud computing stack itself where you’re lowering the cost of everything from bare metal, computing, databases, to operating systems.
All that’s getting compressed tremendously, so it leaves entrepreneurs with a very unique opportunity to start companies for hundreds of thousands of dollars, which took $10 million and $20 million just a decade ago.
Sramana Mitra: Let’s talk about a couple of your portfolio companies where you have had significant success. What I want to understand is a synthesis of what parameters have made them so successful. Warren Weiss: Right, the classic thing in venture capital. It’s all about large markets. There are many other attributes that make up a successful company that can get you a billion dollars in market cap but if it’s not a large market, it’s very difficult to make it happen.
So I would encourage your entrepreneurs to really be intellectually honest about the market size. One of the two most recent examples is a company called Lending Club that went public in mid-December. My partner, Charles Moldow, is on the Board. It became very obvious that the financial services market was yearning for a different way to do consumer lending for loans that average around $25,000.
For those of you that even start businesses, try to get a small business loan or personal loan. There’s so much hassle that you have to go through with the bank to get this done, especially when you’re building intellectual property that doesn’t initially have a lot of value like a tangible asset. You find it impossible to get your business off the ground.
Even for folks that want something like combining their credit card or buying a car, Lending Club is a company that obviously was in a multi-trillion dollar market and a disruption in this case was for the company to build a marketplace where you could be both a lender and be a borrower.
The match between those in marketplaces is incredibly efficient. You have the ability to lend money and get a higher rate of return. The rate of return to a lender depends upon the risk that you’re willing to take and then they have a whole credit risk system.
On the lender’s side, it’s a very simple process to get involved based on your credit score and within minutes, you can complete a transaction where you get a loan. We have a very low default rate in the company. It’s now a public company. That disruption is in a multi-trillion dollar industry. Another example is OnDeck, in which we’re a small investor. They also went public and do small business loans. We’re involved in a company called Auxmoney in Germany. That’s like a lending club of Germany.
My partner Charles started a mortgage loan services companies for loans $250,000 under called LendingHome. The macro trend was that we saw tremendous disruption, an easier way to acquire customer service customers, and actually a lower risk and lower default rate from a traditional bank.
We see that as a cyclical trend extended for 20 years. Its very exciting for entrepreneurs. Bitcoin obviously has opportunities in those markets as well, and that’s just one recent example.
Our conversation continues
here. This segment is a part in the series : Best of Bootstrapping . Bootstrapping to an Exit . Why is Bootstrapping Important? . How Can You Play this Low-Probability Game Intelligently? . Do NOT Go to VCs as Beggars - Go as Kings . Excess is NOT Required for Success . Bootstrap First and Raise Money Later . Some Bootstrapping to Exit Case Studies . The Buy Side of Bootstrapping to an Exit . Blitzscaling vs. Bootstrapping . Bootstrapping to Unicorns More »» . Cinedigm Acquires Bootstrapped 1Mby1M Company Future Today for $60 Million . Mailchimp Bootstraps to $600M Revenue . Bootstrapping from Arizona to $10 Million . Bootstrapped Basecamp Executes a No Nonsense Strategy . How Under30Experiences Bootstrapped to $5 Million . Bootstrapping with a Paycheck . How Algo.ai CEO Amjad Hussain Bootstrapped using Services from Michigan . Seed Investors Who Like Bootstrapped Businesses . How iHeartRaves CEO Bootstrapped a Niche e-Commerce Company to $20 Million . Bootstrapping with Services . How The Intern Group CEO David Lloyd Bootstrapped to $13 Million . How Passageways CEO Paroon Chadha Bootstrapped from Indiana . How SmartBuyGlasses CEO David Menning Bootstrapped to $50 Million . Death by Overfunding . How RainmakerForce CEO Mack Sundaram Bootstrapped Decisively to $5 Million+ . How FormAssembly CEO Bootstrapped a Virtual Company with a Paycheck . TimeSlips CEO Mitch Russo Bootstrapped to Exit with Sage . The VC-Entrepreneur Compensation Disbalance . BioConnect CEO Bootstraps with Sophisticated Strategic Maneuvering . Tremend CEO Marius Hanganu Bootstraps from Romania . Gesture CEO Jim Alvarez Bootstraps to $10 Million . SproutLoud CEO Bootstraps to $30 Million from Florida . Tuft & Needle CEO Bootstraps to Over $100 Million . Co-founders Bootstrap Linguamatics to Over $10M from the UK . Ownership Matters . Vainu Co-founder Mikko Honkanen Bootstraps from Finland . Entrepreneur Couple Bootstraps to $10M from Colorado . 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Bay Dynamics Co-founders Bootstrapped Using Services . Building an AI Software Company from Dallas . RJMetrics Co-founders Bootstrapped First, Raised $22M Later . Bootstrapping Niche E-Commerce Business BuyAutoParts to Exit . TemplateMonster was Bootstrapped to $15 Million . Bootstrapping Edge Hosting to $18 Million . Bootstrapping, Fund Raising and Exiting with Sefaira . Bootstrapping IdeaScale to $5M from Scratch . Bootstrapping to $10M from Finland . Happy Grasshopper CEO Dan Stewart Bootstrapped to Inflection . Bootstrapping Gravity Pro Using Services . Founder Builds Multiple Bootstrapped Education Software Companies . Bootstrapping to $10M from Australia, Raising $25M from the US . Bootstrapped Y Soft to $30M from the Czech Republic . Bootstrapped from Belarus, Raised Money from Silicon Valley . Bootstrapped SproutLoud to $30M from Florida . Bootstrapped 2600Hz Using Services . A Serial Bootstrapping Entrepreneur’s Journey . 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