The number one takeaway of the VC Unlocked investor training program was that there are lots of different paths to becoming a successful investor – and no one way is best. This was great news for the diverse group of participants, who came to Silicon Valley from all over the world for an intensive two week course run by 500 Startups in partnership with Stanford Center for Professional Development.
The program, Venture Capital Unlocked: Secrets of Silicon Valley Investing, ran from Feb 8 – 19th, 2016.
On the last day of the program, participants reflected on the question, “Did we really unlock the secrets to venture capital?”
The answer was a resounding yes.
They agreed that although there is not one formula for success in the game of venture capital, which is more art than science, the program gave them a framework for thinking about different aspects of VC such as starting a fund, fundraising, assessing opportunities and structuring term sheets.
Many participants noted that the program was just the right combination of theory and practice. The teaching staff was comprised of Stanford professors Michael Lepech, Mike Lyons and Pedram Mokrian, together with 500 Startups partners Dave McClure and Bedy Yang, who have extensive tech investing experience.
Participants also heard from eight rockstar Silicon Valley VCs, each of whom came to the industry in different ways.
Thanks to the advice and insights provided by the guest speakers, the program participants left the program inspired to apply the lessons learned in their local ecosystems.
Here are five of the top takeaways:
1. Stand for something; be a brand.
Nearly every one of the VCs mentioned how important it is build one’s personal brand and have a recognizable portfolio in order to generate deal flow.They encouraged participants to speak, host dinners, post content and to generally be active in the specific sphere they chose.
Other insider tips for generating deal flow included “join an angel network and steal their deal flow”, “be a twitter nerd in your country for entrepreneurship” and “ask founders about which of their friends’ companies they are most impressed with.”
VCs like Dave MClure and Mark Suster have definitely followed their own advice. Suster has a popular blog called Both Sides of the Table, where he publishes new content almost religiously every Sunday night for his 243K followers. Meanwhile, Dave blogs on medium.com under the name 500hats and tweets all day every day to more than 300K Twitter followers.
2. Have a thesis; be explicit about your investment criteria.
A large part of the VC Unlocked program was focused on helping participants refine their investment theses so that they could be more focused when evaluating deals.
Jeff Clavier of Soft Tech VC encouraged participants to be explicit about their investment criteria and to have a defined differentiated strategy, whether related to geography, sectors and industries, stage, value-add, infrastructure or ecosystem. He recommended applying the investment thesis as an absolute filter.
Clavier summarized his firm’s investment criteria as the “3 asses: a smart ass team, building a kick ass product, in a big ass market.” He has specific questions that his team asks themselves when making a deal and if the answer is not a clear “yes” to all of them, they pass.
Aydin Senkut of Felicis Ventures stressed that there is no clear recipe for success. He said, “Find something that works for you based on background and which companies you think you can be the most useful to. Stick to this, but be open.” He encouraged the class to envision the future when making investment decisions.
3. Listen to your gut when investing in a team.
Many of the most successful VCs in the Valley spoke of the importance of the founding team and listening to their gut feeling when first meeting with founders.
The Stanford professors said a way to measure your conviction about a team when you are working for a fund is that you would be willing to put your own money into the deal.
Tomas Korte of AngelPad said that after the A round, most companies really have one founder who is leading the decision making in the company. If he doesn’t spot that kind of leadership in one of the founders in the initial meeting, he doesn’t invest.
Jason Calacanis said his “superpower” was finding resiliency in founders. He added that once he has committed to a company, he tries to find ways to be an important resource for the founders. He said,”The person who is most helpful to founders wins.”
4. Always be transparent and accountable – both up and down.
Reputation and relationships are key to the VC-entrepreneur community. VCs urged the program participants to always be sure to communicate clearly and transparently with LPs, other VCs, and founders. They said many of their best deals came through a friend or contact.
Building an ecosystem around you, especially in geographies where they are just beginning to form, is very important.
5. Stay hungry. Stay open. Stay humble.
Participants remarked that no matter how much experience a VC has, it doesn’t make her better at picking winners. A lot of the game is luck. In this asset class, you have to stay in the game, stay positive, and remain humble.
Jeff Clavier warned participants to be aware of the “quick pass” in which VCs pass on an opportunity to meet with founders because they didn’t seem interesting at first glance to they are “too busy”. He recommended keeping an open mind as the merits of each opportunity, especially if founders seem legit and the reference is from a respectable source.
According to Aydin Senkut, the key to the success of his firm, Felicis Ventures, is that they deliberately brought in partners from diverse ethnic backgrounds, which makes it easier for them to make objective decisions. He says, “Our immigrant DNA brings us closer to our founders.” Felicis backs companies in 35 different countries.
So there you have it, we have revealed a few of the secrets of venture capital. Now you will have to take the full program in order to learn the rest…
Photos by Yiying Lu