10 September 2008 - 6:31Ask the Venture Capitalists

Erick Schonfeld and Mark Pincus of TechCrunch asked leading venture capitalists 20 questions, most of which were submitted by readers. The venture capitalists who were quizzed: Sumant Mandal (Clearstone Venture Partners), George Zachary (Charles River Ventures), Roelof Botha (Sequoia Capital), Raj Kapoor (Mayfield Fund) and Ross Levinsohn (Velocity Interactive Group).

Snipped from TechCrunch’s coverage of the event:

Is innovation dying in Silicon Valley?

Botha says the question isn’t whether it’s dying here, but rather that innovation is no longer limited to Silicon Valley. He also says VCs need to continue to take big risks with crazy ideas in order to win.

Schonfeld: What’s more important, great revenue model but no user traction, or great user traction but no revenue?

Zachary - great user traction is really important.

Roelof noted that PayPal had terrible cost issues and little revenue, but founders focused on creating a highly efficient architecture.

Pincus asks how important an obvious monetization strategy is in the early stages. Botha says they’re willing to take the risk.

Schonfeld: What are the most common mistakes by entrepreneurs in pitches or in the early stages of a business?

Levinsohn - if you can’t tell the story in a couple of sentences, its a problem. You need a story. Pincus asks what percentage of investments are made on formal pitches versus connections. Levinsohn says more formal pitches because they are fairly new.

Zachary: Whatever the mistakes, recognizing them quickly is important.

Mandal: In a pitch, make sure you prepare and understand your audience. Also, realize that VC decisions are largely emotional, you have to tell a story and connect with the VC.

Pincus flips the question, offers advice to VCs: When you find an entrepreneur or deal that you like, be faster velocity and lower friction. Don’t worry about how to add value as much as make it easy for them.

Number one indicator of success in a company?

Thiel: low paid CEO.

Zachary: A good team that doesn’t want to take too much money early. Shows they believe in themselves.

Levinsohn: A sincere passion for the product.

Mandal: People. And honesty.

Kapoor: Ability to adapt