4 ms·

One thing that struck me was that both Ron and Marc said they mostly invest on referrals. Ron said that almost no-one came in unannounced anymore - every seed

by adwf 12y ago

One thing that struck me was that both Ron and Marc said they mostly invest on referrals. Ron said that almost no-one came in unannounced anymore - every seed investment was a referral from someone he knew. Marc said that almost every A round was a referral from Ron or someone else he knew. My question is: If you can't get seed funding without already knowing someone in SV, who are you supposed to know and how do you get to know them? Is there no way but to work at another startup first and then branch out once you've made connections with the management/board? Or go to Stanford and hope your professor has connections like Google? Edit: Obviously YC is an option too ;)

ericb 12y ago
YC is a hack around the old-boy you-have-to-know-someone network. It's ingenious. YC implements a better filtering algorithm than the dumb who-you-know filter and sells the companies to VC's at a premium. It's amazing most of the VC's have not worked out a better filtering algorithm themselves.
- rdlecler1 12y ago
  I'm hazard a guess that YC uses back-channels as well. Firms like SVAngels and a16z get 10-30 deals per day with referrals so they can focus all their attention on making type II errors.
  - adwf 12y ago
    Yeah I've been reading a lot of the "How we applied to YC" articles recently and it does seem that even YC use a lot of referrals. Quite a few were along the lines of: Apply to YC, email a friend who knows a partner and see if you can get a referral. It may only get you to the interview stage, but when you have the mass of 1000's of applicants, it's more than most people get.
- 7Figures2Commas 12y ago
  > It's amazing most of the VC's have not worked out a better filtering algorithm themselves. Why should they? Venture capital is a compensation structure disguised as an asset class. GPs lock in 10+ years of 2% annual fees on the capital their LPs commit to their funds. A few years into an initial fund, they can raise another, larger fund, locking in 10+ years of 2% annual fees on the capital committed to that fund. There's virtually no incentive to do anything innovative or stray too far from the herd.
soneca 12y ago
This would be the easy way. Another way - harder, but with more chance to succeed after funding, not at it - is following Steve Martin's famous advice "be so good that they can't ignore you". I don't know much, but i have the impression that was what WhatsApp did. For what I know, it was Sequoia that went to them, not the other way around. Sequoia is a top VC not because they sit on their throne waiting for the vassals be referred to them. They work their ass to have the chance to back the really good startups. Something similar with what Sam Altman is doing more now at YC - actively pursuing good companies to sell them the benefits of being at YC. This is not binary (as in "bad companis pitch, good companies are pitched"), but it shows that there is another and eficient way. Even if rarer and harder.
- tim333 12y ago
  >For what I know, it was Sequoia that went to them, not the other way around. They talk about that in the Startup School SV 2014 talk http://www.youtube.com/watch?v=8-pJa11YvCs&feature=youtu.be&t=12m18s http://www.youtube.com/watch?v=8-pJa11YvCs&feature=youtu.be&... having realised WhatsApp was a success they resorted to walking the streets of Mountain View to try to bump in to them (13m15s)
wellboy 12y ago
It's not that hard to get to know someone who knows someone at SV Angel. If you have something to show, just write an investor or entrepreneur you like if he can give you advice on something on your startup and they will surely be willing to give you an intro to SV Angel. This goes for all other investors besides SV Angel as well of course.
dsugarman 12y ago
you don't need to work at a startup, you should have founder friends or even mentor types from people who are around 12 months ahead of you. if you can impress some small group of people you should gain access to their network and so on. there are other serious benefits of frequently talking to people in the same situation as you (startups can be extremely depressing for one)
abiekatz 12y ago
Build something that people want and make it grow and things have a way of working out. Many VC firms actively monitor the top of app stores, angellist and ask what software their friends and portfolio companies are using. Build something awesome and people--including investors--will find a way to connect with you. There are benefits of working at another startup first: gained skills, experience and network. If you want to go right away into starting a startup it'll take some combination of increased hustle and more solid proof/the company being further along before raising a seed round. Many investors also regularly check app store rankings, angellist, accelerator demo days and ask their friends and portfolio companies about "what is interesting?" or some version of that question. Build something interesting/awesome and word can spread across silicon valley very quickly.

by adwf 12y ago

ericb 12y ago

YC is a hack around the old-boy you-have-to-know-someone network. It's ingenious. YC implements a better filtering algorithm than the dumb who-you-know filter and sells the companies to VC's at a premium. It's amazing most of the VC's have not worked out a better filtering algorithm themselves.

rdlecler1 12y ago
I'm hazard a guess that YC uses back-channels as well. Firms like SVAngels and a16z get 10-30 deals per day with referrals so they can focus all their attention on making type II errors.
- adwf 12y ago
  Yeah I've been reading a lot of the "How we applied to YC" articles recently and it does seem that even YC use a lot of referrals. Quite a few were along the lines of: Apply to YC, email a friend who knows a partner and see if you can get a referral. It may only get you to the interview stage, but when you have the mass of 1000's of applicants, it's more than most people get.
7Figures2Commas 12y ago
> It's amazing most of the VC's have not worked out a better filtering algorithm themselves. Why should they? Venture capital is a compensation structure disguised as an asset class. GPs lock in 10+ years of 2% annual fees on the capital their LPs commit to their funds. A few years into an initial fund, they can raise another, larger fund, locking in 10+ years of 2% annual fees on the capital committed to that fund. There's virtually no incentive to do anything innovative or stray too far from the herd.

soneca 12y ago

This would be the easy way. Another way - harder, but with more chance to succeed after funding, not at it - is following Steve Martin's famous advice "be so good that they can't ignore you". I don't know much, but i have the impression that was what WhatsApp did. For what I know, it was Sequoia that went to them, not the other way around. Sequoia is a top VC not because they sit on their throne waiting for the vassals be referred to them. They work their ass to have the chance to back the really good startups. Something similar with what Sam Altman is doing more now at YC - actively pursuing good companies to sell them the benefits of being at YC. This is not binary (as in "bad companis pitch, good companies are pitched"), but it shows that there is another and eficient way. Even if rarer and harder.

tim333 12y ago
>For what I know, it was Sequoia that went to them, not the other way around. They talk about that in the Startup School SV 2014 talk http://www.youtube.com/watch?v=8-pJa11YvCs&feature=youtu.be&t=12m18s http://www.youtube.com/watch?v=8-pJa11YvCs&feature=youtu.be&... having realised WhatsApp was a success they resorted to walking the streets of Mountain View to try to bump in to them (13m15s)

wellboy 12y ago

It's not that hard to get to know someone who knows someone at SV Angel. If you have something to show, just write an investor or entrepreneur you like if he can give you advice on something on your startup and they will surely be willing to give you an intro to SV Angel. This goes for all other investors besides SV Angel as well of course.

dsugarman 12y ago

you don't need to work at a startup, you should have founder friends or even mentor types from people who are around 12 months ahead of you. if you can impress some small group of people you should gain access to their network and so on. there are other serious benefits of frequently talking to people in the same situation as you (startups can be extremely depressing for one)

abiekatz 12y ago

Build something that people want and make it grow and things have a way of working out. Many VC firms actively monitor the top of app stores, angellist and ask what software their friends and portfolio companies are using. Build something awesome and people--including investors--will find a way to connect with you. There are benefits of working at another startup first: gained skills, experience and network. If you want to go right away into starting a startup it'll take some combination of increased hustle and more solid proof/the company being further along before raising a seed round. Many investors also regularly check app store rankings, angellist, accelerator demo days and ask their friends and portfolio companies about "what is interesting?" or some version of that question. Build something interesting/awesome and word can spread across silicon valley very quickly.