Hummer Winblad Venture Partners
Once again, time for (ad)venture!
And with that title, I have come dangerously close to exhausting my knowledge of cars. But that's ok because I didn't need any knowledge of cars for our visit to Hummer Winblad Venture Partners (HWVP). There we met with Steve Kishi, one of the fund managers, and the representative from HWVP who worked with Brad at Net Perceptions. HWVP is an early stage investor, who invests in enterprise software companies. In order to give us a feel for how funding works at HWVP, Steve gave us the presentation he normally gives to potential limited partners who are looking to invest in a fund. In the case that I ever find myself with enough money to be a limited partner for a venture fund, I did learn a few good facts to know. For one, you should judge a fund by its tail--or its less successful investments. HWVP prides itself on having a strong tail, that is, having companies that even though they didn't come through as big winners for a fund, they returned the value of their investment. A myth of venture capital is that for any given fund there are a couple winners, those who return multiple times their investment, a few who return their investment, and several loses, who return little or nothing. That's not the case, as evidenced by HWVP. Another tip is to see how long people have been at the venture firm. Venture capital investments generally take a longer period to return, anywhere from five to ten years. That means there's plenty of time for the venture partner you're working with to self-destruct. Needless to say, that's not a good thing. Seeing how long the managers have been at the firm can be a good way to insure a little more safety in your investment.
After introducing us to the business, Steve gave us tips on what to do when asking for funding. He claims that if you follow these tips, you will already do better than 80% of the companies that come in to pitch. The first thing to to know is how the venture firm's business works. Do they look to help manage your company, or are they more hands off? When will they expect returns by? How do they want your exit to look? Do some research and tweak your presentation to play to these goals. Second, be selective in choosing your venture firm. This goes along with the first tip, in knowing the firms business plans, but also know that every firm is different. Looking for funding is much like looking for a job--the company isn't just interviewing you, you should be interviewing the company. Don't just take a shotgun approach and try to pitch every venture fund you can. Third is probably the biggest mistake that people make while pitching, focus on your business plan, not your product. Your product is (hopefully) really interesting and will make the world flip on its head. Great! You should introduce the firm to your product in one slide, then focus on your business plan. Firms need to know how you will make back their money, and just having a cool product won't do that. One of the best things you can do here is to display a knowledge of your customers needs and pain points. Show exactly how you'll provide a fix for something they desperately need, and how you'll make profit from that. Finally, your goal for the first meeting should be to get a second meeting. You likely won't be funded at your first meeting, and there isn't time to fully introduce your company to a firm in the short time you have. Again, think of it like a job or sales interview. Your goal should be to impress the firm enough to get a second interview.
We visited a venture capital firm last week when we went to Onset Ventures, and the differences between the two firms was somewhat astounding. In sharp contrast to Shomit's rule of not meeting anyone who he didn't know or have a referral for, Steve told us that HWVP hears from anyone. Though he did admit that a reference or personal connection does tend to help, and those companies tend to give the best pitches. In addition, Steve took some time to put together a slide on why he thought that the Internet Bubble 2.0 that Shomit talked about wasn't as big of a deal. According to Steve, there is evidence showing that this bubble is in no way like the first one. To be entirely honest, I didn't quite understand his evidence, but he did have graphs comparing the percentage of tech companies with high valuations to the profitability of those companies, and the curves lined up. As opposed to the first internet bubble, where the percentage of tech companies rose far beyond the profitability curve. Basically, this time the valuations are tending to stay in line with profits, so that means we likely aren't headed for a big crash. Nowadays too, the profit that tech companies are earning comes from good fundamentals and business strategies, not the hype that caused the rapid inflation in the first bubble. What about the unicorns (companies with billion dollar+ valuations by private investors), aren't they going to cause problems when they can't reach a billion dollar public valuation? Steve thinks that most of these unicorns do have a profitable business model, so there is a possibility that they can be profitable investments. Even if most of them don't, Steve believes that the over-valuation right now will only lead to a drop in price as a correction, not a crash, occurs in the market. If you really want a bubble to gawk at, Steve recommends watching cryptocurrency. I have to agree with him on that.
After we finished our meeting with Steve, HWVP kindly let us use their space so that Ryan could give his book talk on The Long Tail: Why the Future of Business is Selling Less of More by Chris Anderson. The book focuses on the long tail phenomenon.
Escape from Alcatraz!
After our final meeting and final book talk, we got our tickets from Brad to go out to the island and tour Alcatraz. To be honest, I was not overly excited going in (in my defense, I only knew Alcatraz as a super-maximum security prison), but I was astounded at how cool the island was.
I learned that Alcatraz was actually built as a civil war fort to protect San Francisco. I'm still not entirely sure why San Francisco thought they were threatened by a war on the opposite side of the country, and then why they decided to build a naval defense fort rather than a land-based one. Still, you can see places where the fort was designed in order to house cannons and protect itself in case of siege. After the Civil War, the fort became a military training compound, then a military prison, until it eventually was transformed into the prison it's famous for being.
After being a prison for 29 years, Alcatraz was shut down in 1963, and the compound was mostly abandoned. In 1969, Native Americans sailed out and took over the island, kicking off the Native American Rights movement. They held the island until they were forcibly removed in 1971, but you can still see signs of their occupation. If you're like me, at this point, you're wondering what else we didn't learn in history class.
Learning about the island's history outside of just being a prison was interesting, but the audio tour through the prison compound was not only informative, but incredibly entertaining. The audio tour is narrated by one of the former guards at Alcatraz, along with interjections from three other former guards and four former inmates. It's complete with sound effects of slamming doors, shouting, guard announcements, and more. If you ever get a chance, this is absolutely a must see.
On the tour, we got to hear about some of the more famous escape attempts, including the "Battle of Alcatraz," where five prisoners ambushed a guard, got up into the secure gun gallery where they managed to steal a gun and keys, but then jammed the lock, ruining their chance at escape.Two prison guards and three inmates died in the attempt, with the other two conspirators being executed later
I don't have the time or space to tell you all of the stories and facts we learned, but Alcatraz is a fascinating place where I would never want to be imprisoned.
I will give one more fun fact though, because it blew my mind. At any given time while the prison was operating, there was somewhere around 300 non-incarcerated people living on the island, 60 to 80 were children. The guards and their families lived on the island in a style resembling a small town. They even had a general store and bowling alley. It's your idyllic quaint American small town, just with the addition of a really big jail.
Neither Here, Noir There
After our Alcatraz tour, we wandered around Fisherman's Wharf for a bit, until deciding we were ready to head home. In a stroke of luck, we actually made it home without any major transportation issues! Hey, with our public transit record, I'll take the small victories. Once home, we threw a few leftovers together to make dinner (and try to put a dent in the rising food stores in our fridge), and then went out to have what is possibly the coolest night of the trip. We're staying in the Castro in San Francisco, a neighbourhood famous for it's LGBT activism, but also for its theatre. After doing some research earlier in the week, we discovered that a noir film festival--Noir City 16--was starting up at the Castro Theatre, so on the recommendation that we had to experience the theatre while we were here, a group of us decided to go out to see a noir double feature.
This is the part where I geek out a little (read: a lot). I'm a big fan of old films. Especially when they're shown (as I mentioned earlier) on old film. We got to see I Wake Up Screaming and Among the Living, both 1941 flicks that were at the forefront of the noir movement of cinema. Even cooler was the fact that we saw them on 35mm print. Some people may disagree with me, and that's fine everybody has to be wrong sometimes, but I think that there is no better way to view old films, than through a reel-to-reel projector, and on the original medium. Of course, this does mean that there are grains on the screen, and at times the picture can warp. That just makes it feel more real to me. You can emulate the look on digital, but it still doesn't have that feeling that you're watching something that's real, and that took someone's sweat and tears (though hopefully those didn't get on the film) to make. Watching it in a historic theatre made the whole experience even better. A couple of fun facts: the Castro Theatre was built in 1922 for roughly $300,000. That translates to about $4.4 million in today's currency. It is also one of the few theatres from that era that is still operational and showing movies. Just another thing for the list of what to see in San Francisco.
I didn't go into this as a fan of noir films. In general, they don't tend to be my style. I've seen The Maltese Falcon (1941), but that just about hits the limit of my noir experience. Despite that, this festival has turned me. I wish I could be here longer so that I could catch more films. I Wake Up Screaming was everything I love in an old movie. Witty dialogue, suspense, intrigue, and the smug satisfaction of discovering the killer before the characters do (though that one can be hit or miss). Among the Living was a little different, but mainly because it's a lower budget, shorter movie. The festival double features were organised much like movies used to be. There was the "Classy A" flick, with a higher budget and longer run time, and the "Trashy B" flick. Both were entertaining, though the A movie was definitely my favorite.
There's something really unique about seeing movies with an audience that really appreciates them. It's not often that you have a crowd so engrossed in the style that they cheer and clap when a famous noir star appears. When the crowd you're with is so interested in the films, it's impossible for you not to be. If you ever get a chance to go to a film festival, especially on opening night like we did, I implore that you do. Even if the genre isn't your favorite. You may be surprised.
Tomorrow we bike across the Golden Gate Bridge (weather permitting), so hopefully we get clear skies and no fog!
Excerpt taken with permission from Devin's blog.