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Networking: Its how funding gets done

March 26th, 2008 · 2 Comments

Last week I got to sit down for an hour with David Hornik of August Capital as a part of the Kellogg VC Trek. David was a blast, giving us the inside scoop at the Silicon Valley VC Fund that launched companies like Microsoft, Intel, and Sun.

 

A few things struck me about the conversation more than anything else. The first is how VC funding is almost exclusively driven by relationships. Although David will occasionally look at business plans without referrals, the vast majority of his funding is referral based.

To illustrate the point David explained about how himself, Steve Jurvetson (Founder of Draper Fisher Jurvetson), and Jerry Yang (Founder of Yahoo) were all buddies at the Stanford freshman dorm Branner.  When Jerry needed funding for Yahoo he knew exactly where to go. To this day they still fund each other’s ventures, pass market intelligence, and discuss current events.  I sat down with Steve Jurvetson the next day (I am starting with DFJ this summer) who confirmed that they still call each other regularly and discuss deals.

 

The second is how helpful a VC can be to an entrepreneur beyond just funding. That experience really hit home for me earlier today based on some interactions I had with an entrepreneur.

 

 A few weeks ago I met the younger brother of one of my UT buddies, and founder of a succesful firm on the sidelines of the Houston Technology Center’s Energy Technology Conference. He had just moved to Houston and is currently working on a few startup ideas.  Although I was somewhat interested in his technology driven idea in the consumer retail space, it wasn’t really ready for venture investing. Fast forward to last night when another VC mentioned an idea similar to his. I got the VC to shoot me a publically relatable version of the story which I then shot over to the entrepreneur to help him as he develops his idea. Long story short, VCs like working with people with references and can be helpful without investing capital. That directly translates into two things that Entrepreneurs need to do.

 

First entrepreneurs need to network; Alexander Muse has an excellent post on how to do that. Second is to not be disappointed if a VC doesn’t pull out the checkbook immediately. We really want to see you succeed and will do everything we can to help you, and sometimes that doesn’t mean giving out money.

Tags: Entrepreneurship · Venture Capital

2 responses so far ↓

  • 1 Marc Nathan // Apr 10, 2008 at 6:00 am

    I believe that networking is a key component to any business, but it’s much more prominent in the VC & Startup world. Any investor worth his checkbook will tell you that a qualified introduction from a trusted source is worth more than a well-written business plan and detailed financials. Entrepreneurs, especially those that come from hard science and engineering backgrounds tend to overlook personal networking as a crucial aspect of the real-world business environment. Most investors talk to one another to get business validation and share risk among co-investors – those that don’t can’t really help entrepreneurs past the first check.

  • 2 goldverkauf // Dec 12, 2010 at 3:58 pm

    great thanks \o/

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