ABOUT THIS EPISODE

Rory O’Driscoll is a successful VC by anyone’s standards. He’s been in the business for almost two decades and invests in mobile, internet, and enterprise software companies. Some of his successful deals include: Omniture (Nasdaq, acquired by Adobe for $1.8B), Connect, NetGenesis and acquisitions including ScanSafe (acquired by Cisco), Frontbridge (acquired by Microsoft), Zone [...]
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TRANSCRIPT

00:00:01this is Venture perspectives the scale Venture Partners podcast Venture perspectives explorers the world of venture capital showcasing that verse voices and insights from a premier Venture firm active in technology and Healthcare investing
00:00:17I think a lot of the mix is chemistry and you know I find in my meeting for the entrepreneurs do I give these people 4 5 6 7 years you really want to feel that you click with them and that you get on that your interactions. And they're can work together I finally time to skip forward Fast and Loud of the presentation and then try and drill down on the one or two sale in fact that I think is most important to managing director in scale Venture Partners doesn't mince words when he's describing how he invests his brevity is served in well Rory is one of the leading Venture investors today I'm Jennifer Jones and I caught up with Roy his offices to learn more about his investment strategy in his background for when I was 18 I actually ran a manufacturing business in the UK for 4 years that didn't work out the 91 and immigrated to the US I actually had me on the proverbial 200 bucks in my pocket and came here in December 91 was lucky
00:01:17how to get into Venture Capital to a very indirect Road in late 92 So within a year of coming to the United States I was working in venture capital and I've been in the business of a sentence for environment is tough for an entrepreneur today because it's really difficult to get financing here's more from Rory on this the Empire cup less or more ideas get funded depending on the capital of the vailable and then pipe for the entrepreneur is one less ideas get funded it is by definition hot if it gets funded but you're more likely to be successful because of Love competition convexly as we saw in 99 2000 when there's lots of money it's very easy to get funded good news but it's very hard to be successful so nothing that I think you're actually better off with an entrepreneur right now because the worst the thing that's really scares for an entrepreneur and frankly scares for everybody's time you only have a 30 35 year career
00:02:17you don't want to spend five years of it was something that the waste of time so the beauty of a tougher for Nancy Mark and is only the best ideas get funded and only three or four companies get funded in the space not 10 or 20 what that means for you is the entrepreneur is yes it might be hard to raise money
00:02:36but once you've done that and you're going to give four years of your life to something of five years of your life to something maybe more you're far more likely to be successful in today's environment so what does it mean in Practical terms the it when I go to find good ideas we're going to find great ideas so your first and foremost you really got to make sure that the essentials which really haven't changed are there you have to have a big Market that you're going after you have to have some way of being disruptive in that market you really have to have a chance of becoming a multi hundred-million-dollar Revenue company in a 5 to 7 your time frame
00:03:09you have to have a decent team that can address all the functional issues around building that business you know I'll be safe we just in product development you have to have less or built our team then if you have the full benefit trying to rap rapping you but you got assemble a team of folks who can get the passcode ham done that's kind of the big picture as I said some level that really doesn't change throughout the cycle at least it shouldn't change throughout the flag on the bar might go higher or lower but fundamentally for you is an entrepreneur that we should focus on this is very clear on what they want to finance so that they don't waste anybody's time so what are they investing in we want to fun in Revenue technology companies on the technology side so early in Revenue all the way through your company's as we say it from lunch or later that I have some Revenue have some customer validation, just started the scale and Sundance Kid Venture partners
00:04:09good new infraction and both of those are worth talking about in a big Mark we trying for actively identify the market that we want to play and we believe the big markets make that God comes in small markets make you can't build a big company in a small markets no matter how good you are the other thing we look at the size of big Market is near and traction and we really find that the only evidence of long-term out performances near enough performance put another way the companies that are doing well now continue to do well as a rule and the companies and haven't found the groove now really find a Groove overtime so we really kinda oscillating to approach to any deal on focusing on to Big questions is there a big long time story here and which is kind of a big picture comment and then it made tactical name in comment isn't happening right now a customer's buying our users using I'll people with teething and very practical granula focus on how we doing it building the business
00:05:09efficient financing today because it's very key to getting financed here's more from Rory think all the time about how much of the risk you can get out as early as possible and the beauty of that from your perspective of the entrepreneur is the more risky get out of the deal the last dilute of the financing will be if you have to get a whole ton of money up front before you can no anyting that money is going to come in the very expensive cost at the result will be at the end of this process you want to own a lot of the company if you can get the rest out early on you know what a small amount of money then you can raise the bulk of the cash and need a much more attractive term for the deals when do it so I think that Capital efficiency ND whisking is a key part of financing strategy especially in a time when money is tight so what are some other tips if you want to get money from DC's here's Rory again then after that it's come to practical stuff the day-to-day stuff and getting funded and this is incredibly obvious but you know probably sees who do
00:06:09what kind of deals that you are I mean would like this isn't like everybody else we all have a stage we focus on we all have kind of Industries we like to invest in and most of the time if you are a software company and you go call on a phone that's only focus on claimtek you're not going to persuade them to change your fun focus and you're not going to put sway them just changed have stayed focused see you are far better off and you really gotta focus on targeting funds that you believe are appropriate to the kind of company is trying to build and the best way to calibrate that is look at the other deals they've done the best in the as to whether or not a venture fund will fund a deal like yours is have they funded other deals like yours that's great advice from successful Venture investor Rory O'Driscoll of scale Venture Partners is known for a software service deals like Armature remember to heat it closely if you want to succeed as a venture Finance entrepreneur
00:07:06Royce three key insights have a capital fish and financing strategy take as much of the risk out of your company before seeking financing to avoid dilution and Target the VCS or doing your type of deal I'm Jennifer Jones thanks for listening to venture perspectives

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