Home' Technology Review : May June 2009 Contents Q&A
TECHNOLOGY REVIEW MAY/ JUNE
A year and a half ago, would I have
taken it if it were cheap? Probably. You
have to be able to be flexible about these
things. But I'm happier this way, because
everything else I'm doing got cheaper, so
I didn't need the capital.
JP: So every single one of these people---
including Leah, who has gone to work for
a larger company---isn t raising capital. No
one wants your money, Steve.
SL: That's not true!
I mean, if you're going to do it, you
might as well do it now.
Dave Goldberg: [Until] probably a year,
year and a half ago, capital was cheap. It
made sense to take that money. But the
capital being cheap made everything
else expensive. And so talent, real estate,
advertising, and anything you needed
to do to build your business was really
expensive. Everyone had access to cheap
capital. And now we just flip that around.
What these guys are saying is that every-
thing else now is cheap. You probably
can negotiate to get free rent if you really
JP: You re not going to raise capital?
DG: I'm not going to raise venture capi-
tal for this business [developing an online
music-licensing system], because this
business doesn't really need that expen-
sive level of capital for the scope of busi-
ness that we're trying to build.
JP: Well, Sol wants your money.
Leah Culver: If this is a scary time for
VCs when it comes to the consumer
Internet, right now is the best time ever
for developers. Open-source software
has got to the point where you can build
highly scalable systems. Cloud comput-
ing is cheap. Everyone from Amazon
to Microsoft is now providing cloud
computing, and it's awesome. So for the
consumer Internet, it's really been like
this great, great thing. Everything is
so cheap. And how are the VCs feeling
SJ: We're finding that we're writing
a lot of smaller checks for the Internet
companies, and that's great. We actually
JP: One of the most striking things about
this market is that liquidity events, the exit
strategies for which VCs look---initial
public offerings and acquisitions---are
very uncertain. How do VCs manage their
investments when they don t know how
they will get their money out?
SJ: There are two layers of di culty.
It's the worst time to be forcing a sale of
a startup, which you couldn't do if you
tried. You shouldn't be seeking liquidity
just for its own sake. And then, within
the venture firm there could be a sepa-
rate problem. ... You've drawn down
all the capital that was available and
yet you're still waiting for those IPOs.
There's a triage exercise some firms are
DG: This is the more fundamental
problem in the venture business, and it
a ects the investment strategy. It's not
just at Benchmark. A lot of firms at any
other time would already be public---great
firms, profitable, growing nicely. But
there's no public market for these firms.
And so you're left with an M&A [mergers
and acquisitions] decision which may not
be there. ... This might be the time we lose
a lot more of the weaker [venture] firms.
JP: [Looking at the entrepreneurs] Do you
think about exit strategies at all?
SL: We think about the exit strategy all
the time. You need to have a goal in mind,
you need to visualize and think about it
every single day. However, the value cre-
ation happens on a day-to-day basis. We
really actually focus on doing our job day
JP: We ve all said airily that recruitment is
easier during a recession, because
people are available; but it s also difficult,
because stock options aren t very
appealing when there are no IPOs. Leah,
how did [CEO] Chris [Alden] attract you to
LC: You're going to put me on the spot?
Six Apart makes lots of money, provid-
ing services for media and professional,
big bloggers. They are hoping to really
turn over this year and become profitable.
Can't talk too much about it.
KS: Lucky for us, the iPhone has been
really hot, and a lot of people are trying
to get into the mobile-application space.
We've been lucky enough to find talented
people from some of the large firms.
DG: If you want to be an entrepreneur,
the best thing to do is figure out, can you
sell people on a dream and a passion?
Because if you can, that's probably one of
the biggest qualifications. You've got to
have other skills, but if you can't do that,
it's tough to be an entrepreneur in a good
or bad period.
"IF THIS IS A SCARY
TIME FOR VENTURE
IT COMES TO THE
NET, RIGHT NOW IS
THE BEST TIME EVER
EVERYTHING IS SO
CHEAP. AND HOW
ARE THE VCS FEEL
ING ABOUT THAT?"
"IF YOU WANT TO BE
THE BEST THING TO
DO IS FIGURE OUT,
CAN YOU SELL
PEOPLE ON A DREAM
AND A PASSION?
YOU'VE GOT TO HAVE
OTHER SKILLS, BUT IF
YOU CAN'T DO THAT,
IT'S TOUGH TO BE
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