Andrew Chen Archives

The story so far

As of the new year, I am finishing up my quick tour of the venture capital industry.

I spent most of 2007 affiliated with Mohr Davidow Ventures, where I started out as an Entrepreneur-in-Residence, and then transitioned into a consulting role about mid-way through the year. It was a great experience – more on that below.

As I mentioned in a previous post, What is an Entrepreneur-in-Residence, the key elements of a program like that are that:

• EIRs come from industry with background in a specific area, in my case advertising
• They are sponsored by a partner to start a company after some time period (let’s say 3 months to a year)
• EIRs may come in with a specific idea, or not – in my case, not :)
• They find team members, incubate the idea, and find funding
• The EIRs will also often work with the investment team to do due diligence on new companies coming in
• There is no quid-pro-quo that you have to get funding from the
  specific firm the EIR is at, and no guarantee the VC will fund the
  business

Of course, I wanted to get into the thick of it right away.

I had a preconceived notion that I’d get an office, start
working on a project, and 6 months into it, be pitching for capital. In fact, in anticipation for the EIR program, I spent 2 months up in Seattle meeting with all the folks I could from the games industry. I was in a big hurry to reach an idea and start working on it ASAP.

What I really did
The wise advice of several of the partners (Thanks Jon & Dave!) was NOT to jump right in, but instead focus on being a sponge and absorbing what the Bay Area had to offer. After all, the entire point of why entrepreneurs thrive has to do with the environment, people, and resources. Moving here from Seattle and not immersing myself would be a big shame.

As a result, I turned my attention to going to dozens of events including:

• EconSM
• Game Developers Conference
• Web 2.0 Expo
• Mobile Persuasion
• CommunityNext
• CHI
• Future of Entertainment
• Virtual Goods Summit
• … and many other random ones

The focus here was to meet as many folks as I could from the San Francisco area, from all walks of life, and pick their brains about everything. I remember that in my first 4-5 months at MDV, I almost never ate at the Sundeck, which is pretty much the only choice for food on Sand Hill Road but instead spent it driving all over the place. I met 2 or 3 new people every day, which was great.

4 months on the conference circuit was enough for me – it started to get boring, particularly the ones that evolved purely around Internet media. The best conferences were the ones on games, mobile, entertainment, etc., which were peripherally related to online media, but only somewhat. From there, you could get a different angle on the world we live in.

My goal shifted into finding a co-founder, and moving on to prototyping some new ideas.

The venture capital business
Along the way, it was a very compelling opportunity to get to see entrepreneurs and deals coming through the door. With my background in online advertising, these were the types of Internet businesses I looked at:

1. Businesses that either were advertising plays in themselves (infrastructure, ad networks, etc.)
2. Or, they depended on advertising to monetize
3. Or, they depended on advertising to acquire users

Of course, in 2007, that pretty much constituted 99% of the Internet companies that came through the door ;-)

Overall, I was very impressed by the venture process, and the honesty and integrity of the people involved. The highest consideration was given to reaching decisions quickly, giving insightful analysis, and providing useful relationships. I saw this across the board, not just at MDV but also with other firms I interacted with.

The biggest lesson I learned was about the way VCs qualify deals, and that in many cases, getting venture money is not the right thing to do for the business – and that’s OK. I saw many companies which I thought would be strong, profitable companies, but didn’t have billion dollar potential. In many of these cases, the companies are likely to do quite well, but things might actually be a less optimal outcome for them if they took venture money.

Another important thing I learned was that, for all the ways that the VC industry is opaque to outsiders, the folks are actually very accessible. It was hard not to run into people I knew from the venture industry at any and every conference, regardless of what city it was hosted in. I also continue to see VCs blogging, which is great, because you can always send them an e-mail and start a conversation about anything.

Also, one nice outcome of immersing myself in the conference circuit was that I was able to bring a couple interesting companies to the partnership. One company that was funded, as a result, was Hi5, and the other is still unannounced.

Conclusion and next steps
Overall, the experience at MDV was great, and I would do it again. For entrepreneurs, I think EIR programs are a great way to transition into a new geography, or market, or otherwise learn a lot more about the industry.

Later in the year, I ended up transitioning into a consulting role as a motivation developed to live in San Francisco rather than down in the peninsula. Also, I had ended up finding a co-founder for working on prototypes, and we wanted to go and learn from the best internet folks – which today, are mostly located up in the city particularly around the SoMa area. We’re still continuing to tinker away on a couple projects.

And I won’t leave it unsaid – Happy 2008 everyone! ;-)

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

Leave this field empty if you're human: