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Our Take: Early Stage Panel at the Southeast Venture Conference
Good News! Less Bad News!
Posted by ExitEvent
Topic: Events
2.25.10
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The early stage panel discussion at the SEVC was a glimmer of hope. Well, more than just a glimmer, maybe an entire ray. While some of the same sentiment about the toughness and challenges of 2010 was echoed in this discussion, there was also definitely a hint that early stage funding is not dead. It's tougher, sure, but deals will still get done, companies will be funded, home runs will be hit.
The appetite for risk has not changed, but the way that risk is applied has changed. The best way to think of this is to think of the growing amount of financial risk that's inherent in the environment right now. As that ratchets up, VCs are less likely to take on too much technical and market risk. So these things have to be in place. The product has to be built, or at least close, and the market has to be proven. That may not mean necessarily revenue, but identifiable customers are crucial. In other words, it focus is less on the idea, more on the model. Again, we like that.
The team is also key. It's of utmost importance to have the strongest possible team from the beginning. We knew this, but here's another area for risk. If there's a weak link in the team, it's almost easier to find another great idea with a team that can execute.
And as for the idea? Find large cash-flowing industries with issues. Find problems that need to be solved and purport to solve them. Then develop the application of technology that can solve those problems efficiently, can scale, and has a verifiable and hungry market.
These aren't new rules, but they're more important now than ever.
A nice side note that came out of this panel was a discussion of what's overdone. And there was a little hemming and hawing, but fingers were pointed at online shopping clubs, mobile and/or gaming simply for the sake of the cool app, semi or hardware for the sake of smaller or more efficient, even a hint at the cloud. In all cases, this is due to too many players and not enough return in a crowded market.
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