Day 3 – Wednesday, March 27: Wildcat Venture Partners
It’s not every day that a group of students interested in entrepreneurship get behind-the-scenes access to the venture capitalists that fund some of the most successful startups in Silicon Valley. Needless to say, we were bursting with questions: what do seasoned venture capitalists look for in a team or company? What type of markets attract them? What are some of the largest challenges faced by young entrepreneurs? These questions – and more – were answered by Bill Ericson, Geoffrey Moore, and Buddy Arnheim on the MSL EnTP’s time at Wildcat Venture Partners.
But first things first: who is Wildcat Venture Partners, and what do they do? Wildcat Venture Partners funds “young tech start-ups in the machine learning/AI, IoT, Cloud and Mobility areas of Consumer Platforms, Digital Health, EdTech, Enterprise SaaS, and FinTech.” By focusing on particular industries and market segments, Wildcat is uniquely positioned to assist entrepreneurs with the specific challenges posed by these industries.
As MSL students with strong backgrounds in STEM, and entrepreneurial mindsets, we were fascinated to hear from Bill Ericson (a founding partner at Wildcat Venture Partners and Northwestern Law alumnus), Geoffrey Moore (a venture partner at Wildcat Venture Partners, and author of seven must-read business books, including Crossing the Chasm), and Buddy Arnheim (Partner, and Chair of Emerging Companies and VC Practice at Perkins Coie LLP).
One blog post cannot even begin to synthesize everything we learned during our time with the team, but here are five of the highlights and key takeaways the MSL students learned from Wildcat Venture Partners:
(1) Choose your market wisely.
A common challenge young startups face is selecting a mature market with little opportunity for disruption, or a market that already has a top disrupting player. The reality is, 70% of the market revenue goes to the top player. Young startups try to go too big too soon, which is a surefire way to back yourself into a corner. As Geoffrey illustrated, don’t try to be the minnow in the ocean – that is, don’t try to compete with the big players unless you see trapped value and potential for industry disruption. But that begs the question…
(2) What is trapped value, and how does it lead to market disruption?
“Trapped value” is value that is being wasted, unused, or underutilized. If tapped and released (“untrapping” the “trapped value”, if you will), this value could disrupt the market. An example that was discussed in our meeting is the world wide web. Before the WWW, information was sitting on hard drives around the world, only shared with people who had direct access to it (trapped value in isolated information). With the WWW, the information that was previously trapped and only accessible to a small few became accessible to everyone.
(3) So I’ve found the trapped value. How do I approach the investors?
It depends. Some VCs only like to work with young startups; or only in specific industries; or with seasoned professionals; or only with people who have at least one failed startup behind them. Knowing the type of investor you’re approaching and the investment strategy they follow will help tailor the VC search.
(4) I’ve found the investor. But what are they really looking for?
Through our conversations, it seems that most VCs like to focus on three areas: the team, the IP, and the market – both the size of it and its potential to be disrupted. Ideally, a young startup would have strength and a plan in all three areas before talking to a VC, as the three areas are interconnected – you could have great IP, and a great market, but no team; likewise, you could have a great team, and great IP, but the market isn’t right. Moreover, what the investor focuses on could depend on the type of product you have. As was discussed in our meetings, physical product ventures tend to focus on market size and potential for disruption, while tech products and ventures like to focus on the team behind them.
(5) Speaking of teams, how do I know if I have the right one?
The key to building the right team is finding people with complementary skills. Identifying what you don’t know, and finding the people to supplement that knowledge is paramount to designing a winning team. As well, build your team to perform the tasks they are best suited to perform. In startups, where resources are slim, and time is of the essence, relay races don’t work – the person who can do the job best in the most efficient manner should be assigned the task with minimal regard to their “official role”.
These five takeaways were just a few of the many lessons gained from our conversation with Bill, Buddy, and Geoffrey. A short blog post and a two hour meeting couldn’t possibly capture all the knowledge they had to share. But even in our short time with them, we left our meeting inspired, ready to find our own trapped value, and dive into the world of entrepreneurship! The MSL EnTP group is extremely grateful to the Wildcat team for sharing their time, expertise, and insights with us – the conversation was certainly a highlight from the trip.