Money Talks: Getting Financed in a Recession

By Ravit Lichtenberg (blog)

[LeWeb 08, Paris] The afternoon panel comprised of VCs and angels who presented somewhat differing views about the current state of investing. While Wilson and Clavier presented a brighter picture, having funded a number of companies in the last month and expecting all calls to be met, the others presented a more grim picture. No matter of geography and size of investments, all agree it is both a difficult and a propitious time.

• Eric Archambeau – General Partner, Wellington Partners
• Jeff Clavier—Founder & Managing Partner, SoftTech VC
• Martin Varsavsky—Founder & CEO, FON
• Fred Wilson—Partner, Union Square Ventures
• Moderated by Ouriel Ohayon—General Manager, LgiLab, Editor, TechCrunch France

Highlights from the panel discussion

Archambeau:

• Firms are afraid they may not get more money from their investors. It’s not the reality yet but they tend to be extremely careful about new investments and make sure there are no accidents in their portfolio. No time to spend on new companies. That can be a self fulfilling prophecy. Not a great time for VCs nor for entrepreneurs. Predicting in the next few months people will realize it’s not the end of the world and interesting deals might be struck.
• The role of VCs is guidance—but with a distance. If you still have the entrepreneurial need to get involved, you can’t be a good VC. For CEOs, you shouldn’t look for answers from your VC. At the same time VCs shouldn’t ignore issues that can be problematic for the business.

Clavier:

• Entrepreneurs aren’t clear which hurdles they need to overcome. Q1 and Q2 are still unclear—and VC (expected) capital calls are uncertain.

Wilson:

• Union Square Ventures has made two capital calls on their funds and haven’t had any late and have had 5 phone calls from limited partners looking to take over any defaulted calls. 
• Web 2.0 is a gift to the VC community. Used to be that the amount of capital to invest in a company was linear with duration. The curve now looks different. Entrepreneurs can enjoy less dilution while VCs can invest at a later stage when the product is already developed. When the exit comes, 20% out of $0.5mil is still a lot of money. 
• Good VCs help entrepreneurs be better. Bad VCs make entrepreneurs things that don’t help their business. 
• We have bad reputation because we don’t take the time to give a helpful suggestions. We say no 99% of the time…10-15 times a day makes it really hard to be helpful. If you’re going to say no, you should try to give them a reason and helpful guidance. Varsavsky:
• “I resent the way Sequoia presented their presentation.” Presented it 6 months after other companies have, less polite, too severe. Other firms presented the information earlier to us. The key is that you are successful: With their money there’s higher likelihood you’d be successful.

What would be the best way for one of your portfolio companies to pitch you today?

• Wilson: “Don’t pitch me. Send me a link to your existing service. If I like what I see and enjoy the use experience, I’ll call you and invest.”
  About 2/3 of the investment we make are as a result of having used it and calling up the company rather than the other way around. Boxee came to see me 3 times and all three times I said no. They were persistent without being annoying. They have 50K users and another 50K to whom they couldn’t give products. Union Square Ventures invested in Boxee’s last round.
• Varsavsky: Only invests from his own money and yet also tends to discover the companies he ends up investing in rather than the other way around
• Clavier: See first, then invest. We won’t fund the initial development. You have to build the initial prototype or mockup. Going conceptual in the consumer world doesn’t work.
• Archambeau: We tend to take our time and look at what the market is saying. Qype—we said no the first time but we kept tracking them and we have recently invested in them—pre-empting their recent round.

Hubert Nguyen
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Tags: LeWeb