Video interview with Jason Mendelson, co-founder and a managing director of Foundry Group, an early-stage technology venture capital firm. Jason has over a decade of experience in the venture capital and technology industries in a multitude of investing, operational and engineering roles. Prior to co-founding Foundry Group, Jason was a Managing Director and General Counsel for Mobius Venture Capital, where he also acted as its chief administrative partner overseeing all operations of the firm. He currently serves on the board of directors of Brightleaf, Next Big Sound, Oblong, Organic Motion, Pie Digital and Sifteo for Foundry Group. You can find Jason on his blog Mendelson’s Musings and Twitter @jasonmendelson In this interview Jason shares his ideas about the similarities between venture capital & dating.
Transcript follows & video below. This is Part III of the interview. You can view Part I and Part II here.
I noted in a recent article in Venture Beat ‘A survey of the venture capital industry released Wednesday shows that the valuation of startup companies funded by VC firms improved in the second quarter over the first, but the amount of money raised by VC firms to fund those companies declined in the same period’. With all the negativities out there in the global economic environments possibly starting to affect investment, and the focus changing to become more risk averse, will we see even more women startups sidelined for male startups? This fear has been expressed to me a few times by various people, both women venture capitalists & women entrepreneurs?
So let me take a stab at what those numbers mean first, then let me answer your question. I think that the statistics you’re seeing might be deceiving. Here’s what I think is happening: you’re seeing that the valuations are going up. Which I agree with, we’re seeing the same thing. What you’re also seeing is an increased amount of seed & early stage funding. You literally can’t open the newspaper today without seeing some other venture capital firm that now has a seed program (whatever that means). But what you’re seeing for sure is venture capital, private equity, practically everybody is funding early stage startups. Now what does that mean? Early stage startups need less money than later stage startups. So you’re seeing valuations going up because there is more competition at the early stage but what you’re seeing overall investment going down because early stage companies need less investment. Plus on top of this you have a whole lot of companies from accelerator programs like Techstars & ycombinator & a whole bunch of younger people starting companies. And frankly the younger you are, the more cash efficient you seem to be. You don’t need the $200,000 salary because you don’t have a family & a mortgage. You’re a 23 year old kid who is still living like a college student. So I would actually tell you there are more early stage, more new companies being funded now than I’ve seen in the past 5, 6, 8 years. So I would actually tell you that its the easiest time in the world for early stage startup to raise money so I disagree that its harder for women. Is it going to be harder in the late stage stuff, I’ve no idea I don’t play in the late stage. But I actually think its going to be easier for both male & female startups to get funded right now.Jason Mendelson
That’s so encouraging, thanks for that perspective. Often advice for sourcing venture is equated with dating, implying that there is a matching that has to happen with entrepreneur & investor. What do you think are the key ingredients that need to exist between venture capitalists and entrepreneurs that promote attraction & synergy between them to develop a great startup? I’ve said to you before that I’ve heard mainly this theory that like attracts like & I beg to differ on that because I feel that there’s the opposite quality that also needs to exist for that attraction & chemistry to happen.
Well unfortunately you’ve just put that awful Paula Abdul song in my head, ‘Opposites Attract’ & I’m going to spend the rest of my day trying to eradicate that from my brain. That I don’t thank you for. I think you’re the only person I’ve ever seen who uses this dating analogy. I use it too. I teach a class at CEU & I always surprise the students when I say venture capital & entrepreneur dance is just like dating. And it needs to be mutual from both sides but you go out & you have that first date & you’re all excited like ‘Wow I really want to be with this person!’ You fall in love: I want to fall in love with the company & the team. And every time you get together you want to feel like there’s more energy & accelerating towards goodness. And at any point before the investment if you feel ‘Aah its not so good!’ just put your dating hat on & say ‘What’s it been like?’ and you should cut bait. You should get out of there & say no & save everyone’s feelings. So I think you’re absolutely right, I think sometimes like attracts like; I think sometimes opposites attract. My own personal viewpoint is I don’t want to invest in myself, I’m a crappy entrepreneur in many ways. I want someone who’s out there willing to take larger risks than me, who’s got a better vision than me, who’s smarter than me, who’s more talented than me. So I’m always looking for folks who are like me in that we communicate similarly, we have some ethical code, we both like to be honest & transparent. But other than that please be as far away from me as possible, you’ll be more successful.Jason Mendelson
That’s really great feedback & obviously encouraging for my theories. What I’m hearing too is that in your process, in the dance with an entrepreneur you’re actually trusting your gut instincts & feelings that happen within the relationship them as signs about what’s happening in the business, in the startup?
Absolutely. At the end of the day being a successful entrepreneur or being a successful venture capitalist isn’t so much about the idea. It’s about the team. And the team is all about the people & once its all about the people, it’s all about these human things. Getting along & conflict & how do you communicate & things are going to get rough, invariably with every investment we make something bad is going to happen. It’s just like any interpersonal, whether its someone you’re dating, you’re marrying or best friend, you need to be able to have that connection & communication style that you feel comfortable with.Jason Mendelson
Wow that’s really great & I’ve learnt so much & thank you so much Jason for being involved in this project.
Well like I said I’m a huge fan of what you’re doing, I’m a huge fan of these issues & if there’s anything we can do to help, you know we’re here.Jason Mendelson