Panel Participants:
Paul Ahlstrom, vSpring Capital
Blake Modersitzki, UV Partners
Dan O'Keefe, Pequot Capital (Not in attendance)
Taylor Randall, University of Utah
Venture Capital Panel
Blake Modersitzki - UV Partners - We invest in Life Science companies. I was at Novell running their venture fund for 5 years. We have a $120 million fund.
Paul Ahlstrom - I have been an entrepreneur since I was a kid. I raised money for several start ups and now $200 under management 4 partners focus on IT (2/3) and Life Sciences.
Stephen Reidy - EuclidSR - focus on Mealthcare investments. Fund has about $250 under management. The portfolio is primarily US, east coast based. We haven't made an investment under $5 million in the last 5 years.
Dinesh Patel - Founding partner of vSpring. I have the experience of starting a company and going public, so I have the whole experience.
Question: How do I go about raising VC money?
Paul Ahlstrom - Keep it small, lean, and nail it before you bring it to me. Keep it clean. Hire Wilson and Sonsini. Proof of concept, patience, pain.
Dinesh Patel - We see 500 business plans and we only fund 5. Having the right introduction is the key. Bring in a partner that has credibility and connections.
Stephen Reidy - We do have a lot of people that come to us that know nothing about us.
People should do research about who you are pitching to. Do as much homework as possible.
VCs manage other peoples money and you should figure out how to fit yourself in their flow.
Paul Ahlstrom - I saw a presentation yesterday that nailed it. They had proof of concept, they did their homework, and they were referred to us by 3 sources, and they were a perfect fit for us.
Question - What are common mistakes for an entrepreneur?
Blake Modersitzki - Get great advisors. A messy deal will be a stumbling block for VCs. People are not prepared when you go talk to VCs. Be prepared when you pitch to us. Understand who you are pitching to. Prepare, prepare, prepare some more. Do lots of dry runs.
Stephen Reidy - It is hard to get 6 partners together, so make good use of that time. We have a sponsoring partner. Often entrepreneur will go on and on without getting the real primary concepts.
Q&A from audience
Question - How important is it to shop the type of firm you are going to? How far a field would you go to invest?
Blake Modersitzki - We won't go out of our realm of experience.
Q. What are things that a start up can do to make it easier when you go to a VC
Paul Ahlstrom - You have to get the "customer definition" right. That is the biggest mistake I see. You have to know your value proposition.
Q. What is the process for business plan reviews? What is your screening process?
Stephen Reidy - We have a very formal process. We do allow business plans come in over the internet. Our secretary screens those. We use our network and depend on this referral network pretty strongly. We give these a lot of weight. Also, with 6 partners, we all have our own networks. Referrals are the key way to get a deal in the door. Look at our website and look at who we have invested in before. They might be ways to get a referral.
Paul Ahlstrom - If you don't have the network to get introduced to a VC firm, you probably don't have the network to hire the right management. With homework, you can find a service provider (attorney, etc.) who you can hire and they can help with introductions.
Q. How do you weigh the concept against the people running the idea?
Blake Modersitzki - Great question. You need to have really good people. At the end of the day, we invest in people. Go get those people who will take you to the next level.
Paul Ahlstrom - I look at Market as the most critical component. You can change people and technology, but you can't change the market. Then we look at people, then technology, and then at structure.
Stephen Reidy - We do a lot of deals that are in the healthcare field, that has a lot of regulatory risk. Our enthusiasm for a deal lies with the management team and in this environment, those management skills are a little different.
Dinesh Patel - It is a dilemma for the young entrepreneur who hasn't had the experience, so it is difficult to raise outside money.
Q. How do you raise money for your funds?
Dinesh Patel - We grovel just like you grovel before us. We use referrals. In the early stage, we try to find people who know us well. Later the money comes to us.
Stephen Reidy - Conventional wisdom is that it takes about 2 years to raise a fund. Now 65% of our fund comes from mutual funds who have clear criteria of their allocation in different sectors. We need to know those people. There are people that you can hire who will introduce you around.
Q. Can you talk about valuation and deal structure?
Blake Modersitzki - It is really a factor of the deal. As a VC, you don't want to be in a bidding war. Whatever you put in the term sheet, you will have to live with on the next round.
Paul Ahlstrom - I now try to align myself as much as possible with the entrepreneur. If you overshop a deal, you can be dead. We talk to the other VC firms if they have seen a deal or not.
Dinesh Patel - We see our clients as being both the investors and the entrepreneur.
Stephen Reidy - You can't assume that just because the market is private, that it is inefficient.
Q. What is the single biggest factor to having success?
Paul Ahlstrom - Picking the right people.
Dinesh Patel - The expertise of the partner is really important in picking the right deal. A big failure place is overpaying.
Blake Modersitzki - This is very much a relationship deal. If I am difficult to deal with, I won't be invited back for the next deal. We have a good relationship with vSpring where we can discuss across the firms.
Paul Ahlstrom - You got to find people you like to work with and look at dealing with them over the long term.
Dinesh Patel - This is a game of averages. You need 2 out of 10 deals to be successful. 3 to 4 go bankrupt. 3 to 4 you get your money back.
Q. Best opportunities out there right now?
Dinesh Patel - Genetics, personalized medicine - on an exclusion basis, this drug is not for us.
Paul Ahlstrom - Clean power technology - Ambassador from India stated that the number one thing holding India back is being able to store power. So we are looking at some of those companies that can help that. We are looking at the regulatory trends of Sarbanes Oxley and the impact that will have on businesses.
Blake Modersitzki - VCs are like 6 year old soccer players. We all crowd around the ball. We try to follow Wayne Gretzki's advice - I don't skate to where the puck is, I try to skate to where the puck is going to be.
Paul Ahlstrom - I want to put in a plug for the University Venture Fund. What an amazing concept and what a great job they are doing.
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