Jelly Talk with Bijan Sabet, Shawn Broderick

Bijan Sabet and Shawn Broderick took the time out last Friday to talk about fundraising for the Jellytalks series.  Video of the talk isn’t yet posted but @jonpierce and Yahoo are working on it.

The format was Q and A and some quality questions were presented.  Most of the discussion lead back to well worn themes in entrepreneurship and building startups.  A few of the comments gave me new insight on some past situations:

When VC firms make early stage investments (we’ll call that investments less than $1M) they are looking to get in early on a company that has a good chance at making it on a much bigger scale.  The VC investment model works on the scale of $4M+ in capital.  Companies that can’t take that much money (and turn it into even larger numbers) won’t be a big win for the firm even if they can generate huge returns in the 200-1000% range.  What this means is that your business model, the problem you are addressing, the amount of value your company adds, and the amount it is able to extract must be on a scale that can give a good return to the VC firm.  This math is a prerequisite for the investment opportunity you are presenting to be interesting to a VC firm.

Don’t give up though if your company is only addressing a $50M yearly problem, and can potentially extract $5M in revenue.  There are other types of investors who operate at the scale of $100,000.  Check out angel investors, investment arms of large corporations, and the SBIR program for some starting points.

Bijan talked about the events that lead to Spark investing in Avner Ronen and his company, Boxee.  Over the course of 18 months or so, Bijan and Avner met several times.  On each successive meeting Avner took Bijans feedback to heart, tried the suggestions that Bijan made, and explored the assumptions.  Avner came back with a better investment opportunity each time, he made improvements to the product and the company and had good reasons why Bijan’s suggestions were good ideas, or why they were misplaced.

Steve and I have pitched HaveMyShift to a few investment groups over the past 18 months or so.  We are in a great position right now, with lots of suggestions to explore and people to follow up with.  That said, this post is getting long and I’ve got work to do!