Roundtable Recap: May 10 – Not All Micro-VCs Are Chasing Unicorns

During this week’s roundtable, we had as our guest Steve Beck, Managing Partner at Serra Ventures. Steve discussed his firm’s non-Unicorn investment thesis. Refreshing to hear.

Isha Pay
As for entrepreneur pitches, we started with Bama Venkatachalam from Fremont, California, pitching a cryptocurrency gateway for e-commerce companies to accept payments in all kinds of crypto currencies. Bama is a 1Mby1M premium member.

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1Mby1M Virtual Accelerator Investor Forum: With Bryce Roberts of OATV, Indie.vc (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Bryce Roberts was recorded in August 2016. 

Bryce Roberts, Managing Director, O’Reilly AlphaTech Ventures (OATV), and Founder, Indie.vc, discusses the issues with the venture capital financing model, and explored alternatives.

Sramana Mitra: You have a very different point of view about venture capital than the traditional VC point of view. Tell us what your philosophy is. >>>

1Mby1M Virtual Accelerator Investor Forum: With Greg Sands of Costanoa Ventures (Part 5)

Sramana Mitra: I think this whole unicorn mania has been created by the sheer stupidity of the entrepreneurship media. They’re so driven by funding announcements. Every time somebody has a funding announcement, they run up lots of articles about the funding announcement. Entrepreneurs mistakenly believe that funding announcements are good. It’s not necessarily good. If you raise too much money, you price yourself out of the market.

Greg Sands: That’s right. It seems crazy to not maximize price but I think what ends up happening is you can take a higher top-line price with a bunch of structure and more preference stack or lower price that doesn’t have multiple preferences or other >>>

1Mby1M Virtual Accelerator Investor Forum: With Dave Hornik of August Capital (Part 5)

Sramana Mitra: One thing that I find very annoying of what venture capital allows entrepreneurs to do is ignore fundamentals. I think there is a very bad habit in venture-funded companies of ignoring fundamentals and delivering services at rates that are not sustainable. What are your thoughts on that?

Dave Hornik: It’s bad investing. All of these companies that have gotten funded have presented a business plan where people have said, “At scale, these things work.” There is always a theory that it will work. Maybe the theory in an upmarket like today is, “We’ll get a bunch of users. We’ll get value for those users.” Ignore monetization and all of those things. Just grow a user base and we’ll be fine. >>>

1Mby1M Virtual Accelerator Investor Forum: With Greg Sands of Costanoa Ventures (Part 4)

Sramana Mitra: A few trends questions. How do you process the current investment climate where capital is moving further and further upstream? How does a seed investor mitigate the Series A gap? Statistically, there has been a lot of micro-VCs in the market. There’re a lot of pre-seed, seed, and pre-Series A investments but the Series A numbers remains constant. How do you parse this trend?

Greg Sands: That is the trend that we play into. A little more than half of our new investments are Series A investments. The vast majority of our capital goes into Series A. I love the fact that everybody else is retreating from it. The big firms have some success. Their egos grow and their fund sizes grow. They go on to piling unicorns. That’s completely good news for us. We find that we don’t end up competing against them very often. >>>

1Mby1M Virtual Accelerator Investor Forum: With Dave Hornik of August Capital (Part 4)

Dave Hornik: In the venture-backed world, there have been very few apps that have turned into big interesting things. There are big games that have gotten very large. Those are tricky businesses because while I’m currently still obsessed with Candy Crush, eventually you get tired of the game and stop playing. I am actually am maniacal about never paying a cent to Candy Crush. I’m just going to play through the free level.

It’s a tough business model. Instagram is a different story. They created a social network and a bunch of engagement around that. Same thing with WhatsApp and Snapchat. These are experiences that are uniquely mobile that give you control and create huge >>>

1Mby1M Virtual Accelerator Investor Forum: With Greg Sands of Costanoa Ventures (Part 3)

Sramana Mitra: What you’re saying is that you are open to doing even pre-seed investments?

Greg Sands: Yes. They tend to be in more experienced founders or people that we’ve known for a longer period of time. At ACME and Alation, we’ve invested, effectively a company formation.

Sramana Mitra: I think that is the trend. If you are a first-time founder, your journey of getting pre-seed investment is very tough. If you’re a repeat founder and have experience, then everything takes on a different color. The vast majority of our community that is looking for financing is first-time founders.

I tend to tell them to get more validation done. People don’t really know you. People are not betting on your 

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1Mby1M Virtual Accelerator Investor Forum: With Dave Hornik of August Capital (Part 3)

Sramana Mitra: Is domain knowledge a big part of your process?

Dave Hornik: It’s a part. There are two founders in a company called WePay. I wrote a blog post on Venture Blog about this. It talked about getting credibility if you have none. If you are a 20-year-old who’s building a business in a very challenging marketplace, you’re not coming out of that universe. René had amazing domain experience and that’s great.

Bill Clerico and Richard Aberman, who’s started WePay, didn’t come out of the financial services world in any meaningful way, but they were incredibly smart entrepreneurs. The conversation with them about what they were building was extremely important. >>>