Biverbal Bytes by Anna Khan

On Heartbreak, the VC variety

Venture capitalists get a lot of slack for breaking the hearts of entrepreneurs. Most perceive that we sit on our leather chairs every day and tell a bunch of CEO’s that their “babies are ugly” - aka, “your business will never scale.” This is far from the truth. 

The difficult reality is that there is a lot of inbound interest for capital from start-ups that are just getting started and haven’t truly vetted their product in the market. There are rare exceptions to the rule: entrepreneurs that jump out at you and force you to take a leap of faith. The hardest part is figuring out whether the start-up you just passed on, is one of those. 

Even more rare is a business that has all the right metrics (customer traction, revenue, stellar management team) but doesn’t want you. I call them our shooting stars; You only see them once or twice in your career and they zip past you before you can figure out what to do next. 

Just like entrepreneurs have their pie-in-the-sky firm they hope to raise capital from, we have our shooting stars. We all have a list of start-ups we wish we had invested in, or entrepreneurs we courted who chose another firm. We don’t talk about it often, but its there. In the back of drawer or a sad evernote log. It’s like having your dream guy (or lady) ask someone else to the prom. It’s not fun. 

So if you are an entrepreneur that has gotten the infamous VC “pass” email, take a step back and realize we’ve been in your shoes. We’ve been passed up for another firm, or having been an entrepreneur in another life, been passed up for capital. It’s part of the job, and part of this scary ecosystem. 

It isn’t fun for a week, or two weeks, or several months - but you get back into the routine of things and it makes you want to work harder. 

And, for the record, if Bessemer has been the source of your heartbreak, check out our anti-portfolio and send us an e-mail when your company files for an IPO. We’ll add you to the list. 

The Acquisition Question

A big acquisition is an exciting time for those in venture capital and technology as a whole (even if it isn’t an acquisitions that directly benefits you!) 

The NYC tech landscape was in dire need of a large b2c exit like Tumblr, for all the implications around what we like to call a post-acquisition talent exodus (read: engineer exodus), future angel investor exuberance, and geographic sustenance (read: NYC legitimacy). For that, we salute you David Karp!

More specifically though, I have always wondered whether acquisitions bode well for the competitors that follow suit. Does a large acquisition in an adjacent market mean that there is room for similar acquisitions or does it mean that the ships have sailed and you were not chosen to come on board? 

In the mobile advertising world, for example, Google made their bet with Admob, and Apple quickly followed with Quattro. No one expected, Millennial Media, to be the astounding success it was at the time of IPO in 2012. Other ad networks met a more undetermined fate, with no natural acquirers willing to pay upwards of several hundred million dollars and the IPO market drying up in preparation of Facebook’s $100 B affair. 

Similarly, in the social media management and analytics space, Salesforce made a bet with both BuddyMedia and Radian6 in order to perfect an out-of-the-box marketing cloud solution. Most thought the market had picked its winners, but more acquisitions followed as Oracle acquired Involver and Google acquired Wildfire. Even now, several companies in the space are well-funded and growing significantly in revenue. 

Is there an effective barometer to help figure out if you can continue to make bets in a space, or is a dried-up market harder to pinpoint before it is too late? 

Telling a Story

My roommate in college went through the extremely bureaucratic process of designing her own major. After much research she chose to study: “The Narrative: The Art of Storytelling.” It was a combination of history, comparative literature, and social studies. Her goal was to map the way in which historians, technologists, and artists frame their impact. The types of impact she studied varied - leadership, product, and revolution. 

Spending four years of precious college time to study the ambiguous “narrative” did not make much sense back then, but it does now. More than ever. Storytelling and the framing of one’s narrative, both in one’s personal and professional life, is crucial. In venture capital, especially, an entrepreneur can have the best product in the market but without a narrative to frame his/her thinking (i.e. why he/she chose the space, how the product will transform the market in the future, and who will become the staunch competitor) — the company is stale. 

Steve Jobs was my generation’s greatest storyteller, and talked us into the iPod, the iPhone, and the iPad. He gave us prologues to life-changing narratives, and then let his products do the talking. Apple products have the simplest and most compelling story lines. Short, but captivating. 

Jobs and Apple continue to remind us that narratives command enormous importance in the technology landscape. The best companies start with a strong narrative, that in turn builds the foundation to a stronger product. 

Does your product have a story?