Actually they’ve been coming for the past 5 years to Silicon Valley Open Doors – an investor conference sponsored by AmBAR for Russian and Russian-American entrepreneurs. This is my fourth year attending and I’ve found it insightful in terms of the dynamics of innovation and migration of innovation centers. An interesting example was a company that presented in 2006 which designed a product for India, manufactured it in China and came to Silicon Valley for funding – the company was based in Israel.
This year has been notable in terms of the sophistication of the investor presentations and also in the complexity of the offerings. It’s not just twenty-somethings with a Web 2.0 application they coded in their dorm room. There’s more gray hair, more serial entrepreneurs and not so many hockey stick revenue projections.
What’s interesting this year is the migration of financing. A US-based company that started to flounder after receiving its Series A funding went to Russia for its next round of funding. It received funding from Troika Dialog (Russia) and DoCoMo (Japan). It was then able to close a sizable Series B round from Morgenthaler Ventures.
In addition to learning about entrepreneurial activity in former Soviet Union states, there are always nuggets to be gleaned from the high quality VC speakers they secure. A few highlights from my perspective are noted below:
- We invest in the entrepreneur’s character more than the idea…we want someone who knows when to zig and when to zag in order to develop a product that will gain traction in the market. Ron Conway (Angel Investors LP)
- Venture capital is morphing in response to the difficulty going public due to Sarbanes Oxley…a number of venture firms have moved to private equity. Aydin Senkut (Felicis Ventures)
- Opportunities for vertical applications on top of mobile phone and Facebook platforms are greatly underestimated. Jason Pressman (Shasta Ventures)
The second day included a one hour Q&A session with Vinod Khosla of Khosla Ventures who offered his point of view across a wide area of topics but some particularly interesting ones on CleanTech:
- Government regulation has both helped and hurt CleanTech….Incentives helped electric cars but because the incentive program was defined too narrowly it hurt hydraulic hybrids … incentives discouraged investment and development in hydraulic accumulators.
- In contrast, the renewable fuel standard helped to start a new market and provided the protection needed during the first five years when costs are high.
- It’s best to start with a global view …most growth markets for energy (namely the BRIC countries) don’t have any subsidies. Incentives are helpful for the first 5 to 7 years to help achieve scale economies however after that the industry or product category needs to be able to compete without regulation to serve the global market. Successful CleanTech startups start as global companies.
- A lot of CleanTech is not fashionable… renewable plastics…internal combustion engine…., waste heat…(non?)-lithium batteries. Most VCs are looking at investments in the latest hot sector….Khosla Ventures tries to focus on the areas that are not hot or sexy. We take the risk of jumping into new areas that no one is paying attention to… trend in venture funding is towards financial investing rather than technology investing but some VCs are going into funding deep science.
- Ignore experts…Vinod cited a detailed study by Professor Philip Tetlock, the Mitchell Endowed Professor at the University of California, Berkeley, and the author of Expert Political Judgment: How Good Is It? How Can We Know?, that measured the accuracy rate of notable experts…turns out they had the same accuracy as dart throwing. If we invent the future we’ll get a very different outcome than what the experts had projected.
And after 18 presentations culled from 80 submissions the winner was announced….The winner is….PTP Group Americas.