Colin Barry

Day 1, Silicon Valley IXP

silicon-valley-ixpyear-two

Sierra Ventures "State of the Space" on Venture Investment
VC is an industry of collusion as much as cooperation (why vast majority of reputable firms are on Sand Hill Road)

Interesting concept: Sierra's "CIO Advisory Group" => informal relationship with CIOs of 75 large tech firms
-- Makes it easy for portfolio companies to get feedback from potential enterprise customers
-- Enables Sierra to get information on market dynamics to drive investment decisions (Will big IT departments buy the latest, greatest SaaS CRM app?)

Flow of LP money into VC has tailed off in the last 24 months. Not all is well.
Why? Frothy environment? Mediocre returns across VC asset class as a whole? Low barriers to entry for software startups driving VC disintermediation (angels and growth equity are still huge)?

Eric Ries on the Lean Startup
"I'm a big failure. If you follow me, you too can be a big failure." -- E.R.
(Caveat: clearly I am a fairly serious believer in the value of hypothesis-driven entrepreneurship, or I wouldn't have pre-ordered/read the book and most of Ries' blog posts.)

On the lack of customer development:
"Most entrepreneurs are waiting for Zool."

Basic premise is that development of IT has changed the nature of tech entrepreneurship. Almost everything can be built. You CAN build a social network for dogs. Our problems have shifted from:
We don't have enough stuff (productive capacity).
TO
How do we make the right stuff (allocation)?

Ries on all successful companies:
"Founders look like idiots at the beginning."
Publicists and ghostwriters and marketing departments for successful companies make it seem like the founders were visionary at the beginning. Usually not true.
Examples:
Digital cash for PDAs => Online payments for eBay (PayPal)
A better BASIC interpreter => the most enduring operating system monopoly on the planet (Microsoft)

"Whatever you think [about your new venture], you're probably wrong."

IDEO group activities/tour
Critical factors: (1) empathy for your users and (2) humility to learn from your users.

How to learn from your users: Listen to specific stories; don't ask general questions.
Example: "How did you get home for Christmas last month?" NOT "How do you usually get home for the holidays?"

Good products are: Feasible (technology), Viable (business), Desirable (human factors/design)

Michael Dearing, Harrison Metal (incubator)
Incubators = between retail-level angel investors and traditional VC funds. Sweet spot is the time between technical insight and actual paying customers.

Basic investment model: $500K-$1M investment, exit in 5-10 years

Resource: Series Seed Equity Documents => easy template for early-stage equity financing

Book to read: Gordon MacKenzie's "Orbiting the Giant Hairball"