Understanding the Changing Geography of Silicon Valley and San Francisco

Understanding the Changing Geography of Silicon Valley and San Francisco

As many folks move to the Silicon Valley and choose where to dock their office and home I think this topic is worth some understanding. It is key to be physically close to where the action is and be ready to take a breakfast or dinner meeting in San Francisco or Palo Alto and not get caught in horrible Bay Area traffic which rivals L.A., Moscow and Shanghai. We’ve got the most evolved and complex ecosystem for startups, venture capital, tech titan corporates, etc. There is no point to being here if you are not meeting the right people and going to the right events. Choosing to live or commute to the wrong place will have negative consequences. Things are always changing in Silicon Valley and I have had friends from around the world ask me about this; so I thought to share my views with everyone. I used to strictly think of Silicon Valley as the area of land south of San Francisco and all of the Peninsula and inclusive of the South Bay cities and towns of San Jose, Cupertino and even a bit stretching towards Santa Cruz such as Los Gatos. I used to not think of San Francisco as technically part of the Silicon Valley, because it was not really the physical Valley that is between the Santa Cruz mountain range and the SF Bay of water. I always thought that San Jose was kind of cheating to be in Silicon Valley and the East Bay is really more part of the greater San Francisco Bay Area. The truth is anyone in the San Francisco...
Creating A Win-Win-Win Among Corporates, Startups & VCs

Creating A Win-Win-Win Among Corporates, Startups & VCs

I gave a keynote address on corporate venture capital interviewed by Duncan Logan at Rocketspace’s Innovation Collective Summit today and thought it appropriate to share this article I wrote for the NVCA CVC magazine a few weeks ago. I am nearing the final stages of finishing my second book on the topic of venture capital –MASTERS OF CORPORATE VENTURE CAPITAL: Collective Wisdom from 50 VCs on How to Get Funded & the Playbook for Corporate Venturing to Access Startup Innovation, Create Winning CVCs & Avoid the Classic Mistakes (May 2016). I was partly motivated to finish this book now, because I have also been advising a large Chinese corporate on the formation of their corporate venturing program. I first organized my own ideas for a comprehensive book on the topic into 10 chapters with detailed sub-headings. I then embarked on taking over 50 meetings and phone interviews with top corporate venture capital (CVC) practitioners including Intel Capital, IBM Ventures, Qualcomm Ventures, Teléfonica Ventures and many other usual suspects both old and new to the CVC scene. To be honest, before taking any of these interviews I foolishly felt as if I could just sit down and fill in each chapter based on my own experience of being a founder that raised over $27m in CVC funding for my own venture and then a decade of being an active angel and advisor helping 20+ startups raise VC funding and then running an angel group and finally my own VC fund – Rubicon Venture Capital. What I learned from these interviews was entirely humbling and enlightening. Many of the interviews began the...
Understanding VC Target Ownership Percentages

Understanding VC Target Ownership Percentages

VCs often have target ownership percentages that are driven by two things: 1) ability for each investment to return 100%, 50% or 25% of their entire VC fund and 2) a VC can only be effective on so many boards; so may as well join the board of the companies where they own a meaningful amount of equity. Many VCs have a minimum ownership percentage they target when making investments. Depending on the stage the VC invests at and their strategy it is often seeking to own at least 20% of the company when leading a Series A investment, buying 10% of the company in a Series B when the A investors want half of the B round and maybe 5% of the company when joining a syndicate of a few different investors in a Series C. Many VCs will want to take 20% regardless of stage and walk away from an A, B or C round if they can not buy at least 20% or 15% of the company at that time. In ancient times (80’s, 90’s and early 2000’s) these numbers were a bit bigger with VCs seeking to own 33% minimum and even lifting that up to 45%. With the power in recent years moving from the investor to the entrepreneur the amount a startup is willing to sell in a single round has gravitated downwards to 20% and goes up a bit to make room for many elbowing VCs trying to get in. With the macro economy cooling things off we may see startups moving back to selling a third in a single financing again...
Not Getting Pushed Around by a New VC & the Playbook for Treating Existing Investors with Allocations for Future Financings

Not Getting Pushed Around by a New VC & the Playbook for Treating Existing Investors with Allocations for Future Financings

Almost all good companies go through many rounds of funding to pursue innovation and growth as well as accommodate demand from investors that want in on a great deal. I recently spoke on a panel where the topic came up about getting “thrown under the bus” where new investors try to take the entire new round and prevent existing investors from investing additional capital. With many new investors active in the market that have never founded a startup, raised angel and VC funding for their own companies or worked their way up the VC ladder from Associate to General Partner, I wanted to share “old school” etiquette on this matter and give everyone a baseline of what I think is best for all parties. When a startup is hot there will be more demand from investors for the round than available inventory in the round. This either forces the valuation of the round up and up, which will push out sophisticated investors and the least value added investors will end up taking the entire round and the company will be worse off from not having selected the best investors to support the company at a valuation they agreed to be sensible. Often times, the new CEO is heavily influenced by the new VC coming in and the new VC has strong percentage targets of 20% or more and the founders may not want to be diluted by more than 10% and so the sharp elbows come out. Sometimes the CEO will tell existing investors that they are very sorry, but the new investor is taking the entire round and they...
Irony of What’s Suitable for an Angel: Early vs Late Stage Investing

Irony of What’s Suitable for an Angel: Early vs Late Stage Investing

It’s been over 20 years that I have been talking to angel investors in the Valley and around the world about their individual investment preferences when it comes to direct individual investments and wanted to share some of the results of these conversations. The way the real world works is that until recently most VCs do not invest in pre-seed or seed stage startups. Especially as most Sand Hill Road funds increased in fund size from $50m and $250m to $700m and $1.2bn per fund as a result of 2001 and 2008 downturns. These super-sized VCs need to write bigger checks and invest in later stage financing rounds than they did in the 80’s, 90’s and early 2000’s. So angel investors filled this need for early stage seed investing. Then we saw the birth of micro-VCs like Ron Conway’s SV Angel raising institutional funds and investing at the angel / seed stage like a machine out of their funds with fulltime investment professionals focused on angel investing. We now seem to have an accelerator for every type of startup and the best ones have their own funds and invest seed capital in an institutional manner and nearly all of these financings with the micro-VCs and accelerator funds also include angel investors. This is where we expect to see the angels active. The result of all of this is that angel investors today and in recent years do have access and are welcome to invest in seed stage financings for tech startups in the Valley and around the world. However, once these startups make more progress and progress to a...
Videos from VC / Angel Investor Workshop @ Silicon Valley Innovation Center

Videos from VC / Angel Investor Workshop @ Silicon Valley Innovation Center

Videos from VC / Angel Investor Workshop @ Silicon Valley Innovation Center Click here to go to Andrew Romans’ YouTube Channel and view the videos. (Read the notes of each video to fast forward through the first 10.5 minutes of Part I. I need more time to break these into shorter videos; so feel free to skip around.) Topics covered Overview & analysis of the market from Pre-Seed, to Seed, Later Stage Seed / Seed Extension, Series, A, B, C, D to the private IPO phenomenon – understanding trends – which are crowded, overpriced, underpriced and key risk points Why investing now is more attractive than ever before What industries, sectors, company stage and geographies are best for you Convertible notes – key points and the meaning beyond the moving parts Priced equity rounds – key points and the meaning beyond the moving parts Valuation concepts on pricing valuations when investing, exiting and risk tied to perceived exit multiples Portfolio construction strategies for angels and VCs – how to allocate your capital Best practices for sourcing deal flow and conducting due diligence Tactics to get into oversubscribed deals Strategies for continuing to invest in portfolio companies a 2nd, 3rd, 4th, 5th time, etc Best practices for post investment information rights, governance, adding value and Different options to invest ranging from Angel List, to other investor platforms, angel groups, demo days, accelerators, VC funds, SPVs, tax breaks for UK, EU and Israeli taxy payers Different options to get liquidity on the secondary market before definitive liquidity event for startup / how to sell some stock before the final exit Questions & Answers from an audience of...