Tour Diary. 19 May 2014. Day 1.
The first day of our Business tour for investors! There was a short welcome meeting the day before, we also bought phone numbers and had a dinner in a Japanese restaurant. But Monday morning we had the first meeting of the tour.
We met in Café de la Presses for a nice breakfast and then we walked to the meeting room in the Financial District for the first meeting. During this meeting Oleg Afansyev, one of the most influencial business trainers in RCIS, introduced the program. First everybody introduced themselves, talked about their jobs, interests, background and about why they joined the tour. Then Oleg talked about the goals for the tour and Anna Degtereva, Happy Farm accelerator CEO introduced the different meetings we will have during the two week tour.
After two hours, we had a short coffee break and then welcomed Igor Shoifot, partner at TMT Investments and Board Director of Happy Farm. He introduced Investing in Silicon Valley. He talked about different funds, VC companies and incubators: what they do, who are there main partners and what are the difference between them. He gave a lot of examples of what is going on here in Silicon Valley and what the options are. It was a great presentation to start these two weeks with and gave a general overview and we can get in more details during the next meetings with different funds, investors and startups.
Afterwards we took a taxi to the last meeting of the day. We went to the 500 Startups office in San Francisco to meet Artem Gassan. Artem is co-founder of Whale Path, an on-demand research platform, and he has over 8 years’ experience in building new successful startups and managing teams. He is an alumnus of Founder Institute, Plug and Play Startup Camp and recently finished the 500 Startups acceleration program with Whale Path. Artem did a great presentation with a lot of information about the history and evolution of Venture Capital, the difference between different investments rounds, the growth of seed funding and accelerators. He had a lot of great graphics to show all the different evolutions and trends. It was a really interesting presentation.
It was a very interesting, busy first day and everybody was ready for a calm evening to get ready for the next day.
Tour Diary. 20 May 2014. Day 2.
We met for breakfast at Le Boulange, a very nice place, and after breakfast we drove to Happy Farm Chairman of the Board Igor Shoifot’s office for a meeting with Julian Zegelman. Julian is a lawyer and partner at Velton Zegelman. He works with startups and investors (both venture investors and angel investors). He talked about all the legal issues around registering a company in the United States. He explained where you can set up your company and what the differences are. He also took some time to answer the questions the investors had.
After the meeting with Julian, we met with Deven Soni, co- founder of Sprayable, a consumer health and wellness company. He first talked about his background a bit. He started his career as an investor banker. He used to work for different funds: Lazard, Goldman Sachs ant Highland. For Highland, he lived in Sofia for a while and even spent a few months in Odessa.
Deven explained how a lot of things have changed in the startup world during the last decade. In 2001 you still needed a lot of money to start a company and founders only ended up with 10% of the company. From 2004 on, cheaper hardware and software enabled companies to create a product of less than five million dollars and the founders owned around 20% of the company at the exit. Between 2010 and 2013, companies can start making their product and selling it with only $500k that they raise from angel investors and they keep the biggest part of the company. And now with Kickstarter, they can even keep 100% of the company.
He talked about how he started. It started on a cruise to Antarctica. He got along very well with his cabin mate, Ben and they soon decided to start a company together. But what kind of company… Ben had experimented with putting caffeine on his skin, because he couldn’t drink coffee, and they joined an startup accelerator in Chile and started working on Sprayable Energy, a revolutionary caffeine based product that users spray on their skin to get the energy they would get from coffee or an energy drink.
They worked in Chile for one year, testing the product, finding a manufacturer for the product and creating a marketing strategy. Then they put their product on Indiegogo (a crowd funding platform) and asked for $20 000, they raised $176 000 and they were mentioned on more than 1300 global media outlets (Time, Good Morning America, etc)
In the next few months they manufactured the spray, designed the bottle,… Then they mailed a bottle to some influential journalists and bloggers and asked them to try the spray and write review about it. Only a few answered, but the stories they wrote about Sprayable Energy got pick up fast by other journalists.
The distribution is only online right know, so they have a great contact with their customers. Later they will partner maybe with other companies who know a lot about distribution and can help them get Sprayable Energy in the stores.
One of the most amazing things about Sprayable’s story is that they are only a three people team with 2 virtual assistants! And every month they sell between 5k and 15k bottles right now.
It was really inspiring to meet Deven and hear his story!
In the evening we drove to an amazing house in the hills of Woodside. Sasha Johnson from DFJ Aurora invited us to a Global Technology Symposium event. There was a short introduction from Steve LeVine, Washington correspondent for mobile financial news startup Quartz and then there was time for networking. After a few hours we drove back to San Francisco to end the second day of the tour.
Tour Diary. 21 May 2014. Day 3.
On day three, we drove down to the famous Sand Hill Road in Menlo Park, well known for its concentration of venture capital companies. We were there to meet Jim Smith, General Partner at Mohr Davidow, an early stage VC fund. MD does seed, series A and series B investments, sometimes also later rounds. They are especially interested in consumer and enterprise software.
He started by saying that the dynamics of ventures is: you miss a lot! 20% may succeed, 80% will fail. He then taught us the difference between the investment rounds and what it means at MD:
- Seed investing: (usually between $100k and $2M): At this point, there is usually nothing more than an idea. You can see it as a loan to the company. MD gives the money as a convertible note and they get a discount on equity in the next investment series. About half of the seed funds transfer in Series A investments at MD. It is not like this in all funds, some invest in 100 companies and only expect one to do great.
- Series A: (around $5M – for about 20 to 25% of the company): In this round they have to finish the product and start winning the first customers.
- Series B: (between $10M and $15M): MD still participates but new investors are leading the round. Now they should really start to plan a sales model and also have some revenue traction, but it is important to keep the cash burn low, so you can make mistakes and changes fast and without big consequences.
- Series C: (between $20M and $25M): In this round MD still owns 25% of the company, but they only invest a few million in this round. Here they need to be growing at least 100%/year.
- Series D: (around $25M): Here MD mostly doesn’t participate anymore.
This is the basis, but of course often things don’t go as planned, so there are a lot of exceptions of this.
At MD, each fund has about 25 to 40 companies. They are now on fund 9.
The investors had some questions about how to join a fund, where MD invests and there were also some questions about exits.
It was very interesting to hear Jim’s experiences and ideas and to learn more about how a successful fund such as Mohr Davidow works.
After the meeting with Jim, we went to the Menlo Park Grill for a lunch with Max Skibinsky. Max is a serial entrepreneur, angel investor and start-up mentor. He was the founder and CEO of Hive5, a social gaming company that was sold to Playdom/Disney. He is now a Venture Partner at Andreessen Horowitz. He talked about his experiences as an entrepreneur and investor. It was a nice lunch and great talk.
After lunch we drove back to San Francisco to meet with Marvin Liao at 500 Startups. Marvin is Venture Partner at 500 Startups, but before that he also did some angel investments. He started his career in e-commerce startup and after two years he joined Yahoo and worked there for 10 years. After he left Yahoo, he mentored at a lot of incubators and travelled the world meeting with startups. He knows a lot about startups, angel investing and investing as a fund.
500 Startups is a seed venture company. They invest in startups with a working product and ideal some customers. They in general give 100K for about 5 to 7% of the company. Most of the time, they don’t lead the round. As a venture partner, Marvin sees between 12 to 30 companies a week. He looks for a good product and a customer base: how well do you understand your customers.
The investors had a lot of questions for Marvin about incubators, when the best time to invest is and how do you know who to invest in.
Another great meeting, with a lot of new info to think about. A nice end to the third day, talking to three different funds, each with their own specialty and focus.
Tour Diary. 22 May 2014. Day 4.
On Day 4 we drive down to San Mateo where will have our next two meetings.
The first meeting is with Pavel Cherkashin, one of the leading business angels and early-stage private investors in Russia. In the past he has started and exited three companies in Russia: Actis Systems, a web design company; AdWatch, an online ad agency and Sputnik Labs, a provider of CRM in Russia. He also worked as a general manager for Adobe Systems, Siebel Systems and Microsoft Online Services.
As private investor and mentor, he supported several online Startups, including Tvigle, an online TV portal in Russia; Toonbox, a cartoon producer; ID East, a mobile app developer; and many others.
He talked for a long time about all his experiences. It was a great meeting covering all the different sides of investing.
After the meeting with Pavel, Victor Shaburov arrived.
Victor was the CEO of Handster, an App Store solution company offering a white label platform and aggregated content. In 2011, Opera Software acquired Handster and Victor worked for them as the VP of a Storefront Services. He recently left Opera and he is now President at Botan Investment, a seed and angel investment fund focused on mobile apps. He is CEO of Looksery, a startup that is working on a mobile app about face recognition.
The investors were very interested in his story: the exit, the new company and his story as investor. It was a very interesting meeting.
After the meeting with Victor, we drove to Redwood City to meet with Happy Farm alumni, Coursmos. We met Roman Kostochka and his team: Kate and Masha. Courmos is the world’s first micro-learning platform. Roman explained what Coursmos did and how they grow to where they are now: more than 10 000 registered users, 70 000 viewers, 8 full-time team members and 13 part-time members and opened an office in San Francisco. It was great to hear the story of Coursmos and hear Roman’s experiences as startup in Silicon Valley.
After the meeting we drove back to San Francisco and had a nice dinner to wish Vadim a happy birthday.
Tour Diary. 23 May 2014. Day 5.
After breakfast we drove to San Mateo to meet Vitaly Golomb at the Keen offices. He introduced himself and explained what Keen does: it is the first cloud-based services that allow companies to build and deploy an e-commerce driven web presence.
He talked about raising angel and seed investments and then raising Series A. He also talked a bit about investments and funds in Europe and about the lack of angel investments and seed investments.
It was nice to talk to Vitaly who on the one had is building his own successful company, but on the other had is also involved in investments and in mentoring other startups all over the world.
After the meeting with Vitaly, we drove to Mountain View, to the Eye-Fi office. We were welcomed by Ziv Gillat. Eye-Fi’s patented technology wirelessly and automatically uploads photos and videos from digital cameras and smartphones to online, in-home and retail destinations. The company’s executive team and founders have a long history of successful leadership. In 2012 they raised their Series D investment.
Ziv showed us around the office and also showed us how the cards are made in Thailand. He also showed us the heart for the U.S. distribution center, hundreds of boxes full of Eye-Fi cards, ready to be send to Amazon, Target, Best Buy,…
We also met the CEO, Matt DiMaria who joined Eye-Fi about one year ago. He used to work for Roxio and spend some time in Odessa while working for them.
Then Ziv told us about how Eye-Fi started: they wanted to be able to share their photos with their family easier. First they were thinking about an UBS device, but after a while the idea of a SD card with wifi was born. The first 1000 cards were sold in September 2006, and they had revenue from the beginning. They used the next few months production and in June 2007, they officially launched. Since then, their revenue has grown 2 times every year.
It was really interesting to hear Eye-Fi’s story from Ziv. This startup has been around for 9 years, has raised Series D and is still growing.
After the meeting with Ziv, we drove back to the city to have dinner with Mike Sigal, Scott Rafer and Won Hee Chang, they all have been involved in startups and investing for a long time. Mike had seven startups and had 3 small exits. According to Mike, startup is a career. They first talked about their experiences and backgrounds. They also talked to our investors about different kind of startups, different kind of investors (are they spending their own money or somebody else’s money). They all agreed that as new investors, it is important to focus on a sector. It was a nice meeting, with again a lot of great information.
This was the end of the first week, tomorrow there will be a workshop on Leadership by Oleg Afanasyev, and Sunday and Monday there will be some time to relax, as it is Memorial Day on Monday. On Tuesday, we will be ready for new meetings.
Tour Diary. 24-26 May 2014. Day 6-8.
Day 6, 7 and 8 = Memorial Day Weekend.
Day 6 was workshop day. In the morning we first had breakfast together at Café de la Presse in San Francisco. Then we drove down to San Mateo, to the Silicon Valley Innovation Center. We could use their office for the day. Oleg Afanasyev gave the workshop on leadership, and everybody found it very interesting and useful. At the end of the day we drove back to the city and enjoyed a hamburger near Fisherman’s Wharf.
On Day 7, we took Mike Sigal’s advice and drove to Tomales Bay for oysters! We had amazing oysters at a big table on the side of the bay. Great trip!
On Day 8, we drove to the south to see ocean near Half Moon Bay. The water was too cold to swim, but we enjoyed the view and the little town. A nice relaxing two days.
Tour Diary. 27 May 2014. Day 9.
Day 9 started very early because we need to drive to San Jose through heavy traffic. We went there to visit the eBay/Paypal Campus. We were meeting Robert Schwentker, who is responsible for the startup relations at Paypal. He arranged for us to see the eBay Showcase tour. An amazing presentation through different restaurants and shops they set up to show the new features of Paypal and eBay. It was a really interesting presentation that explained how eBay, unlike Amazon, works together with local merchants with apps just as eBay now. Things are delivered to you within one hour, but they don’t come from a warehouse, but from the local shops around your home. eBay goes and pick it up there.
It was really interesting to see how Paypal and eBay have acquired a lot of small startups to develop the new and better ways of shopping and paying. After the demonstration, we had some time to talk with Robert Schwentker and some other visitors who were from a Brazilian startup accelerator. It was a really nice meeting and nice to see Robert as always.
After the meeting at Paypal, we drove to San Mateo. We had a meeting with Alexandra Johnson from DFJ Aurora. The investors met Alexandra before at an event last week, and it was nice to talk about all the ideas and thoughts that they have after one week of the business tour. They also talked about their plans for the future and Alexandra talked about her work. It was a really interesting meeting.
After the meeting we went back to San Francisco and had a late lunch. That was the last meeting for today. Tomorrow we start early again for three meetings.
Tour Diary. 28 May 2014. Day 10.
Today started with driving to Pacifica, a city on the coast of the Pacific Ocean between San Francisco and Half Moon Bay. We went to a restaurant located next to the ocean, Nick’s restaurant. We met for a breakfast meeting with Sridhar Solur who works at HP and he is also board member of Happy Farm.
Sridhar is Managing Director for New Ventures for HP and he works on wearables, IOT and other enchanted objects. He talked to the investors about his works and his experience of working with new ideas. He also gave a great and clear explanation about how the computer and IT world has changed over the last 10 years. How before most money was made on the hardware: laptops, desktops,… But in two years, all the money will be made by the cloud services. It was very interesting! He also explained how to get startups best integrated into big companies who buy them. He says it’s important to take into account the culture of the startups. It was really nice to meet with Sri and hear his stories.
After breakfast and the meeting with Sri we drove to Sand Hill Road in Menlo Park. We met with Geoffrey Baehr, General Partner and Ross Hangebrauck, Managing Director from Almaz Capital. They took some time to meet with our investors and talk about how their fund works. Geoffrey started to say that the venture business is a people business, it takes time and money to build good venture partners. At Almaz Capital, they only to deal with people that were referred to them: friends from friends, someone they worked with before,…
After the introductions, Geoffrey talked about how the venture landscape has changed over the last 15 years. At Almaz Capital, they focus on Series A, because for them, seed investments take too much time. They focus on information security, backup systems, big data, analytics; what they call more traditional IT investments, solutions for large IT problems.
When considering deals, Almaz Capital considers the team first. Then technology, then they look at the market and the last thing they look at finances. Geoffrey also explained how it is important for VC’s to have big address books and that they spend a lot of time calling around and asks people questions to do due diligence for the deals they are interested in. At Almaz Capital, they decide on a deal, first one of the venture partners who is interested does all the due diligence. They do all their due diligence themselves. Then they talked about the terms to the other partners and at last they vote. They all have to agree on the deal. On average, one venture partner does about 22 deals in his entire career. As Ross put it, venture partner is marathon runner, not a sprinter.
It was great talking to Geoffrey and Ross. We learned a lot about the fund and about the relationship with their portfolio startups.
After the nice meeting Almaz Capital, we went back to the city to meet with John Gower from Dialect Inc. At Dialect Inc. they help global brands to become sexy. They help their clients to discover how to best talk to your customers. John talked a bit about the different kind of customers he have and what kind of work they do.
They started as a digital magazine company, now they concentrate on companion apps and digital content. They focus on gaming, music and movie.
John gave us a presentation about media and marketing. He explained the different types of media and explained when and how a startup best spends money on marketing. In the beginning they shouldn’t spend too much, but they should also make sure they don’t wait too long. The most important thing is to have a long-term marketing plan. His advice is to plan, but be flexible and test, track, measure and optimize. You also have to except the unexpected and be disciplined.
The investors found it very interesting to talk to John, because in their personal experience, it is sometimes hard to understand why startups spend a lot of money on marketing.
The meeting with John was a great end to this busy day!
Tour Diary. 29 May 2014. Day 11.
Day 11. The last full day of the program!
We drove down to Mountain View to the Scaale Group. We met with Kaushal Chokshi and Marta Emerson for a workshop about investing internationally.
Kaushal is a serial entrepreneur. He started in manufacturing and then later on moved into internet companies. Marta was involved in the start of angel investing in Barcelona and has seen over 1000 business plans in the last few years.
With Scaale Group, they have 8 companies, 15 offices and they are in 7 countries. At Scaale Group, instead of working with countries, they divide the world into city states. That makes it easy to connect Shanghai, to Mumbai to Barcelona.
One of the companies under Scaale Group is Cross Border Angels, an angel network with more than 150 members from all over the world: China, Spain, USA, India,…
CBA chooses the best startups and brings them in front of their members. They introduce startups from all over the world. They need to have some traction already, or revenue and CBA is most interested in hitech, cloud, mobile and e-learning companies.
Kaushal and Marta talked a bit about investment stages, about angel investors and working internationally. This was very interesting for our investors, they had a lot of questions for Kaushal and Marta.
After this meeting, we drove to University Avenue in Palo Alto. We met there in a nice cafe with Brian Sathianathan. After the introductions, Brian talked about his background. He started at Apple, he worked on a lot of projects, including the first iPhone. Later he started in own company and had a successful exit and now he is working on a few different projects. With Iterate Studio, he is discovering and curating disruptive technologies from startups from around the world and introducing them to their members, retailers and media companies. The introduce startups and retailers to each other and also do the testing and due diligence.
Brian is also working on starting a fund and he wants to build a data hub where startups can integrate with the hub and retailers can also sign up to find the startups.
It was really interesting to talk to Brian who is both entrepreneur and investor. The investors were very interested in all his projects. According to Brian, the secret to being a successful investor is relationships! You have to work hard to build contacts.
After the meeting with Brian, we drove to Stanford University. We walked around and enjoyed the beautiful, inspiring campus. We spent a lot of time looking around the famous book store. After walking around, we found a calm spot outside a cafe and talked about all the inspiration, thoughts and ideas after the entire tour. The investors are very inspired, and have a lot of new ideas for the future. After the long talk, we drove back to San Francisco.
Tour Diary. 30 May 2014. Day 12. Time to say goodbye!
On day 12, the investors were flying back home, but not before we had a breakfast meeting at the famous Brenda’s in the Tenderloin area of San Francisco. The investors got their certificate and we said goodbye. We hope they found the tour as inspiring as we did!