Venrock

Venrock INTRODUCTIONMartin: Hi, today we are in beautiful Palo Alto in the Venrock office. Hi, who are you and what do you do?Brian: I am Brian Ascher, partner here at Venrock.Martin: What is Venrock doing?Brian: So, Venrock is an early stage venture capital fund. It is one of the longest standing VC firms in the country and probably in the world. It got started actually in the 1930s as the VC arm of the Rockefeller family and we are in our timeline room where you can see some of the early investments back in the day when Laurence Rockefeller led companies back then the hot technology space, aerospace and rocketries, so Eastern Airlines, McDonald Aircraft, Piasecki Helicopter, Alaska airlines, they all got seed funding from Laurence Rockefeller and his advisors.Martin: Tell us about your story. So you have been quite long at Venrock, what did you do before?Brian: So before becoming a VC I was product manager at Intuit, responsible for the Quicken product family back in the early days of that product.Martin: And what made you become a venture capitalist?Brian: That’s a good question. I had some exposure to the industry while at business school and prior to that and it always seemed like an intriguing thing to do. So when I was wrapping up my work as a product manager I decided to apply to the Kauffmann fellowship which places folks early in their career into venture firms and I thought , “If I get in, I’ll see what that’s like and if not I will keep doing startups or something”. And I got in and I loved it and I consider a privilege to work with entrepreneurs, so I keep doing it.ABOUT VENROCK VCMartin: Can you briefly walk us through the typical investment due diligence process? S once a startup comes into your office in the beginning of the funnel,how it is proceeding?Brian: We try to be very flexible and really tailor the approach to the specifics of that company. I like to simplify it into three phases.So the first phase is we will have a meeting and I cons ider it a sniff test. Is there a mutual interest after a meeting and maybe a phone call or two and discussing it internally.If yes, then it moves into the second phase which I like to think of as the high order of it. This is kind of the most phases because it is when we will drill down on the most important critical few issues. So whatever that could be, it might understanding the competitive dynamics, better understanding the technology, understanding the market need, what have you. We try to do it quickly, a couple of weeks, sometimes faster. And it is really being efficient by getting through our network or through the company to the heart of the matter.And then the third phase is more of ‘Let’s leave no stone unturned ‘, let’s do management reference check, let’s make sure we have spoken to all of the customers, let’s go through the financial model, lets start to discuss what a deal might look like, let’s examine the cap table, let’s meet the whole partnership a nd we will decide and move towards a close.But really it is that second phase that the high order bid or the ‘bang for the buck’ phase where you try to really zero in on a does this make sense as an investment for Venrock and for you to have us as your partner.Martin: What is the typical conversion rate from phase 2 to phase 3?Brian: I’d say if it passes phase 2 it is reasonably high. We don’t tend to look at numbers very often but I’d say it’s the most important phase so maybe half.Martin: Ok, cool. And what is the typical time span or range of deals so maybe like form four weeks to ten months in terms of the whole process?Brian: Well, ten months would certainly be more of a case where it wasn’t right at that time, so we or they agreed, “Hey, we are going to revisit this several months down the road, six months down the road”. It happens quite a bit where for whatever reasons the company decides not to raise then or maybe they raised small round and they come to s ee us as with a status update, but rarely it takes us you know six months of rigorous analysis to get to an answer, that just doesn’t happen. We have done deals in as quickly as a week. It is not the most comfortable thing to do and I’d say it is not great for either side because it is a very important decision for the entrepreneur to know who they are getting hitched with for a long haul. And it is also really hard to really understand the business that quickly so I’d say the comfort zone starts at two weeks and maybe goes four to six weeks. But the difference, at least the way we do it is, once you have a term sheet we are really, really interested to invest and it is just legal due diligence from there and that almost never uncovers a problem.Martin: Brian, what is the sweet spot for an investment in terms of sizing or maybe business model industry?Brian: As far as size we are flexible.There is really no lower limit. It’s not that we have such a large fund, unless you can take a lot of money from us we are not interested. We could seed something for 500K, but a small check for a proper series A might be 3 or 4 million, but we have written checks as large as 10 or 11 or 12. That is a big check for us. And then our expectation is that over the life of the company we may have to double the investment or even triple it sometimes. Really depends on how the capital intensive the business is and what we think the future fundraising looks like.As far as sectors we are quite broad in our coverage of both life science and that is everything from healthcare IT, the biotech and diagnostics and medical devices. And then on the IT side it is everything from infrastructure like security or virtualization to enterprise applications, whether horizontal SaaS like a marketing technology company or vertical solutions in finance or retail or healthcare on up to consumer place.Martin: What health industries or sectors do you find very interesting or promising for the nex t two or three years? Seeing that the SaaS market was very hot over the last two or three years for example.Brian: I have a theme that is most interesting to me and it is the notion that the software is becoming intelligent. And what I mean by that is you are taking data technologies or approaches rather, like machine learning, predicative analytics, artificial intelligence, although that word is probably overused, and using it to actually answer a business problem or use the computer to provide an actual recommendation to an end user. Because if you think about what software has historically been is really a database with a UI on top. That is what salesforce.com is or CRM is or has been because they are changing, trying to add more intelligence to their app. It is a place that stores customer records and it has got an UI customized to that task and to get the value you have to run a report or look at the records and decide up in your brain what inference you would make, what action you would take and how to drive that through the organization. Quicken was really the same thing; it was a place you stored transactions and we had a checkbook metaphor and you can run reports and look up a pie chart and figure out where your spending in going and then decide, “Oh I should spend less, I should create budget and do all of that.” Whereas now with machine learning and artificial intelligence you can have the app decide, “I am going to recommend for you ways for you to save money or achieve your financial goals, send your kid to college, retire comfortably. Or in the B2B setting the software can actually tell you which prospective buyers are out there, showing intent in the marketplace that you are not even aware of. Here is how they much they are going to buy, what they are going to buy, when they are going to buy it and here is the message you should deliver to reach out to them, based on the interest that the software is seeing either on your electronic channe ls or across the web through various data sources.So I think there is a profound difference what software will do, not just in terms of how it is deployed or delivered which is the advantage for taking it from off premise to cloud but really the value. I think it is creating more value for the end user, requiring them to do less work to get the value.Martin: When you look at predictive analysis apps are you more looking at infrastructure companies or are you looking at SaaS models who are just solving some unique niche problems for some companies for example? Or are you looking at a company that owns really exclusive data sources for example?Brian: So there are definitely infrastructure opportunities. It is not where I focus my efforts. I am focused on the app. And really the key to the app is often times really understanding the domain and the problem and the customer need well enough to know what data you would want and then how to create the answers coming out of that data. It is rarely about cutting edge math. The math isn’t easy and it is sophisticated but no one is inventing new math to come up with the answer. It is really all in problem definition, there is often a lot of data cleansing work that goes on there is a lot cleverness you need and sourcing the data. Sometimes there may be unique and proprietary data. A lot of times that is more of a business model and a biz dev kind of advantage. If you can create a networkeffect even better, so you have more data than the competitors. But really it is so much more about understanding the domain and then presenting it to user experience that lets the business user or the consumer solve their problem in a quick and delightful way.Martin: What kind of interesting stories did you experienced over the last 18 years with entrepreneurs where you say, “Wow, this was very interesting, this was a problem and entrepreneur occurred and that is how he racked it or I and some of my partners gave them some helpful ad vice”?Brian: Great question. I’d say that the big observation is just how rare the true force of nature entrepreneur is. And by force of nature we mean that person for whom failure is just not an option and they will keep coming at the problem and modifying their approach if they need to and just make a much bigger outcome or company than the innate market suggested was possible.And so when you are in the presence of a truly great entrepreneur who just exudes that sort of drive and energy and creativity and combines this optimism for the future with the pragmatic sense of what it is going to take to get moving today. You don’t want to overthink your way out of doing those kinds of investment based on “Oh, well what if this goes wrong or that goes wrong”, because that great entrepreneur will figure it out, hopefully it will help as well. But it is remarkable how there is so much that is possible that you might envision at the outset and so it is a great entrepreneur that ta kes you there.Martin: Many people think that we are currently at the brink of a bubble bursting. What is your perspective on that?Brian: I don’t feel like it is a bubble that we had in let’s say in 2000 or even 2008. I think the public markets have remained largely disciplined on valuation. You have some late stage private valuations that have gotten crazy but fundamentally the basis of innovation is incredible right now.There is so many technology catalysts, social catalysts, industries willing to adapt cloud or technology based solutions that I feel really good at the real innovation, real value that is being created. And so if the late stage private markets cool off a little bit that is ok, that is not going to create some huge explosion and nuclear winner like we had in 2000, 2001, 02, 03. I think there is a little bit of market cycle on the late stage stuff but the early stage I think hasn’t gotten quite so overheated because there is still so much risk in the beginning, particularly because it is obvious that there is still a lot of traction. I don’t spend that much time worrying about timing the market as far as our investments go.Martin: When you look at an entrepreneur coming to you and pitching for an idea and you are an early stage investor, how do you balance the evaluation of the founder or the founder team with the business idea or the business model that is currently “The plan”?Brian: It comes back a little bit toâ€" if you really hate the idea it is hard to meet someone who is so compelling you are going to follow them into the idea you is just don’t believe in. But if the idea seems a little small, but generally ok, like a good idea you’re just not sure how big, a good entrepreneur is worth backing his idea. You really can never tell just how big an opportunity will be because there are always opportunities that present themselves once you get into the market and the customers start telling you what else they want, etc. But for us we are really people centric so it is more people first and market second. There is a school of thought the opposite approach is ‘Give me a huge market and I will find a team’. It is just really hard to match a great team and pull one together and make sure that they are cohesive and was it their initial idea or not.I think there is something special about a founding team that came up with the idea, feels ownership in every fiber of their body and it is going to walk through walls or through fire to make it successful and passing by that by bringing in professional management I think kills some of the magic. So ideally you are starting with a great team in an interesting market and then it gets even more exciting as they find their way to the sweet spot.Martin: Brian, imagine you have 10 entrepreneurs in front of you. How do you really identify the great entrepreneur and also identify the not so great ones?Brian: It is really hard and there are always surprises and I don’ t think anyone had had it figured out perfectly. But so common traits areâ€" smart is a given, there are a lot of smart people around the world and so it is highly necessary but insufficient.I think the great entrepreneurs have a personal energy and enthusiasm and it doesn’t necessarily mean that they are the life of the party with the lampshade on their head, but you can just tell that their conviction and passion around an ideaand it permeates everything they do and every conversation you have. Then, I think they also have pragmatic sense of “I face a lot of challenges right now, but where I am going is great. And they are kind of diametrically opposed in a way because you don’t want someone who is just dismissive of all the challenges they have today, “All is great, oh we have this problem solved, we have nothing else to learn.” That is probably not a healthy attitude, nor is a one that is constantly worried about, “We are going to fail, this is wrong” and they are shooting to a nice safe outcome, not a big outcome. So if you can do both â€" be abundantly optimistic about the future and really pragmatic and disciplined about the present, that is important.The best entrepreneurs have this mental agility or flexibility to be constantly taking in feedback and adjusting. And it is not a big pivot, so to speak, but just all those little adjustments that you need to find your way to the sweet spot of a market and a solution.I guess the last thing I would say is the best entrepreneurs tend not to get defensive. They can take tough questioning and respond appropriately or with good answers or admission that, “Hey, that is a risk. I don’t know. We are going to figure that over time but that is a risk you as an investor need to be willing to accept along with me”. Because I think however hard questions coming from an investor might be, the challenges that the market throws at you, competitors throw you, the key executive throws at you, those are m uch harder problems than a venture capitalist questions. And I think that great entrepreneurs realize that and take them in stride and respond with their best shot at an answer or an answer which says, “I don’t know yet. I will figure it out.”ADVICE TO ENTREPRENEURS FROM BRIAN ASCHER In Palo Alto (CA), we meet Partner at Venrock, Brian Ascher. Brian talks about how he became a venture capitalist and what his major learnings for entrepreneurs are.INTRODUCTIONMartin: Hi, today we are in beautiful Palo Alto in the Venrock office. Hi, who are you and what do you do?Brian: I am Brian Ascher, partner here at Venrock.Martin: What is Venrock doing?Brian: So, Venrock is an early stage venture capital fund. It is one of the longest standing VC firms in the country and probably in the world. It got started actually in the 1930s as the VC arm of the Rockefeller family and we are in our timeline room where you can see some of the early investments back in the day when Laurence Rockefeller led companies back then the hot technology space, aerospace and rocketries, so Eastern Airlines, McDonald Aircraft, Piasecki Helicopter, Alaska airlines, they all got seed funding from Laurence Rockefeller and his advisors.Martin: Tell us about your story. So you have been quite long at Venr ock, what did you do before?Brian: So before becoming a VC I was product manager at Intuit, responsible for the Quicken product family back in the early days of that product.Martin: And what made you become a venture capitalist?Brian: That’s a good question. I had some exposure to the industry while at business school and prior to that and it always seemed like an intriguing thing to do. So when I was wrapping up my work as a product manager I decided to apply to the Kauffmann fellowship which places folks early in their career into venture firms and I thought , “If I get in, I’ll see what that’s like and if not I will keep doing startups or something”. And I got in and I loved it and I consider a privilege to work with entrepreneurs, so I keep doing it.ABOUT VENROCK VCMartin: Can you briefly walk us through the typical investment due diligence process? S once a startup comes into your office in the beginning of the funnel,how it is proceeding?Brian: We try to be very flex ible and really tailor the approach to the specifics of that company. I like to simplify it into three phases.So the first phase is we will have a meeting and I consider it a sniff test. Is there a mutual interest after a meeting and maybe a phone call or two and discussing it internally.If yes, then it moves into the second phase which I like to think of as the high order of it. This is kind of the most phases because it is when we will drill down on the most important critical few issues. So whatever that could be, it might understanding the competitive dynamics, better understanding the technology, understanding the market need, what have you. We try to do it quickly, a couple of weeks, sometimes faster. And it is really being efficient by getting through our network or through the company to the heart of the matter.And then the third phase is more of ‘Let’s leave no stone unturned ‘, let’s do management reference check, let’s make sure we have spoken to all of the cust omers, let’s go through the financial model, lets start to discuss what a deal might look like, let’s examine the cap table, let’s meet the whole partnership and we will decide and move towards a close.But really it is that second phase that the high order bid or the ‘bang for the buck’ phase where you try to really zero in on a does this make sense as an investment for Venrock and for you to have us as your partner.Martin: What is the typical conversion rate from phase 2 to phase 3?Brian: I’d say if it passes phase 2 it is reasonably high. We don’t tend to look at numbers very often but I’d say it’s the most important phase so maybe half.Martin: Ok, cool. And what is the typical time span or range of deals so maybe like form four weeks to ten months in terms of the whole process?Brian: Well, ten months would certainly be more of a case where it wasn’t right at that time, so we or they agreed, “Hey, we are going to revisit this several months down the road, six months down the road”. It happens quite a bit where for whatever reasons the company decides not to raise then or maybe they raised small round and they come to see us as with a status update, but rarely it takes us you know six months of rigorous analysis to get to an answer, that just doesn’t happen. We have done deals in as quickly as a week. It is not the most comfortable thing to do and I’d say it is not great for either side because it is a very important decision for the entrepreneur to know who they are getting hitched with for a long haul. And it is also really hard to really understand the business that quickly so I’d say the comfort zone starts at two weeks and maybe goes four to six weeks. But the difference, at least the way we do it is, once you have a term sheet we are really, really interested to invest and it is just legal due diligence from there and that almost never uncovers a problem.Martin: Brian, what is the sweet spot for an investment in terms of si zing or maybe business model industry?Brian: As far as size we are flexible.There is really no lower limit. It’s not that we have such a large fund, unless you can take a lot of money from us we are not interested. We could seed something for 500K, but a small check for a proper series A might be 3 or 4 million, but we have written checks as large as 10 or 11 or 12. That is a big check for us. And then our expectation is that over the life of the company we may have to double the investment or even triple it sometimes. Really depends on how the capital intensive the business is and what we think the future fundraising looks like.As far as sectors we are quite broad in our coverage of both life science and that is everything from healthcare IT, the biotech and diagnostics and medical devices. And then on the IT side it is everything from infrastructure like security or virtualization to enterprise applications, whether horizontal SaaS like a marketing technology company or vertical solutions in finance or retail or healthcare on up to consumer place.Martin: What health industries or sectors do you find very interesting or promising for the next two or three years? Seeing that the SaaS market was very hot over the last two or three years for example.Brian: I have a theme that is most interesting to me and it is the notion that the software is becoming intelligent. And what I mean by that is you are taking data technologies or approaches rather, like machine learning, predicative analytics, artificial intelligence, although that word is probably overused, and using it to actually answer a business problem or use the computer to provide an actual recommendation to an end user. Because if you think about what software has historically been is really a database with a UI on top. That is what salesforce.com is or CRM is or has been because they are changing, trying to add more intelligence to their app. It is a place that stores customer records and it has got an U I customized to that task and to get the value you have to run a report or look at the records and decide up in your brain what inference you would make, what action you would take and how to drive that through the organization. Quicken was really the same thing; it was a place you stored transactions and we had a checkbook metaphor and you can run reports and look up a pie chart and figure out where your spending in going and then decide, “Oh I should spend less, I should create budget and do all of that.” Whereas now with machine learning and artificial intelligence you can have the app decide, “I am going to recommend for you ways for you to save money or achieve your financial goals, send your kid to college, retire comfortably. Or in the B2B setting the software can actually tell you which prospective buyers are out there, showing intent in the marketplace that you are not even aware of. Here is how they much they are going to buy, what they are going to buy, when they ar e going to buy it and here is the message you should deliver to reach out to them, based on the interest that the software is seeing either on your electronic channels or across the web through various data sources.So I think there is a profound difference what software will do, not just in terms of how it is deployed or delivered which is the advantage for taking it from off premise to cloud but really the value. I think it is creating more value for the end user, requiring them to do less work to get the value.Martin: When you look at predictive analysis apps are you more looking at infrastructure companies or are you looking at SaaS models who are just solving some unique niche problems for some companies for example? Or are you looking at a company that owns really exclusive data sources for example?Brian: So there are definitely infrastructure opportunities. It is not where I focus my efforts. I am focused on the app. And really the key to the app is often times really understa nding the domain and the problem and the customer need well enough to know what data you would want and then how to create the answers coming out of that data. It is rarely about cutting edge math. The math isn’t easy and it is sophisticated but no one is inventing new math to come up with the answer. It is really all in problem definition, there is often a lot of data cleansing work that goes on there is a lot cleverness you need and sourcing the data. Sometimes there may be unique and proprietary data. A lot of times that is more of a business model and a biz dev kind of advantage. If you can create a networkeffect even better, so you have more data than the competitors. But really it is so much more about understanding the domain and then presenting it to user experience that lets the business user or the consumer solve their problem in a quick and delightful way.Martin: What kind of interesting stories did you experienced over the last 18 years with entrepreneurs where you say , “Wow, this was very interesting, this was a problem and entrepreneur occurred and that is how he racked it or I and some of my partners gave them some helpful advice”?Brian: Great question. I’d say that the big observation is just how rare the true force of nature entrepreneur is. And by force of nature we mean that person for whom failure is just not an option and they will keep coming at the problem and modifying their approach if they need to and just make a much bigger outcome or company than the innate market suggested was possible.And so when you are in the presence of a truly great entrepreneur who just exudes that sort of drive and energy and creativity and combines this optimism for the future with the pragmatic sense of what it is going to take to get moving today. You don’t want to overthink your way out of doing those kinds of investment based on “Oh, well what if this goes wrong or that goes wrong”, because that great entrepreneur will figure it out, hopef ully it will help as well. But it is remarkable how there is so much that is possible that you might envision at the outset and so it is a great entrepreneur that takes you there.Martin: Many people think that we are currently at the brink of a bubble bursting. What is your perspective on that?Brian: I don’t feel like it is a bubble that we had in let’s say in 2000 or even 2008. I think the public markets have remained largely disciplined on valuation. You have some late stage private valuations that have gotten crazy but fundamentally the basis of innovation is incredible right now.There is so many technology catalysts, social catalysts, industries willing to adapt cloud or technology based solutions that I feel really good at the real innovation, real value that is being created. And so if the late stage private markets cool off a little bit that is ok, that is not going to create some huge explosion and nuclear winner like we had in 2000, 2001, 02, 03. I think there is a litt le bit of market cycle on the late stage stuff but the early stage I think hasn’t gotten quite so overheated because there is still so much risk in the beginning, particularly because it is obvious that there is still a lot of traction. I don’t spend that much time worrying about timing the market as far as our investments go.Martin: When you look at an entrepreneur coming to you and pitching for an idea and you are an early stage investor, how do you balance the evaluation of the founder or the founder team with the business idea or the business model that is currently “The plan”?Brian: It comes back a little bit toâ€" if you really hate the idea it is hard to meet someone who is so compelling you are going to follow them into the idea you is just don’t believe in. But if the idea seems a little small, but generally ok, like a good idea you’re just not sure how big, a good entrepreneur is worth backing his idea. You really can never tell just how big an opportunity will be because there are always opportunities that present themselves once you get into the market and the customers start telling you what else they want, etc. But for us we are really people centric so it is more people first and market second. There is a school of thought the opposite approach is ‘Give me a huge market and I will find a team’. It is just really hard to match a great team and pull one together and make sure that they are cohesive and was it their initial idea or not.I think there is something special about a founding team that came up with the idea, feels ownership in every fiber of their body and it is going to walk through walls or through fire to make it successful and passing by that by bringing in professional management I think kills some of the magic. So ideally you are starting with a great team in an interesting market and then it gets even more exciting as they find their way to the sweet spot.Martin: Brian, imagine you have 10 entrepreneurs in front o f you. How do you really identify the great entrepreneur and also identify the not so great ones?Brian: It is really hard and there are always surprises and I don’t think anyone had had it figured out perfectly. But so common traits areâ€" smart is a given, there are a lot of smart people around the world and so it is highly necessary but insufficient.I think the great entrepreneurs have a personal energy and enthusiasm and it doesn’t necessarily mean that they are the life of the party with the lampshade on their head, but you can just tell that their conviction and passion around an ideaand it permeates everything they do and every conversation you have. Then, I think they also have pragmatic sense of “I face a lot of challenges right now, but where I am going is great. And they are kind of diametrically opposed in a way because you don’t want someone who is just dismissive of all the challenges they have today, “All is great, oh we have this problem solved, we have noth ing else to learn.” That is probably not a healthy attitude, nor is a one that is constantly worried about, “We are going to fail, this is wrong” and they are shooting to a nice safe outcome, not a big outcome. So if you can do both â€" be abundantly optimistic about the future and really pragmatic and disciplined about the present, that is important.The best entrepreneurs have this mental agility or flexibility to be constantly taking in feedback and adjusting. And it is not a big pivot, so to speak, but just all those little adjustments that you need to find your way to the sweet spot of a market and a solution.I guess the last thing I would say is the best entrepreneurs tend not to get defensive. They can take tough questioning and respond appropriately or with good answers or admission that, “Hey, that is a risk. I don’t know. We are going to figure that over time but that is a risk you as an investor need to be willing to accept along with me”. Because I think howev er hard questions coming from an investor might be, the challenges that the market throws at you, competitors throw you, the key executive throws at you, those are much harder problems than a venture capitalist questions. And I think that great entrepreneurs realize that and take them in stride and respond with their best shot at an answer or an answer which says, “I don’t know yet. I will figure it out.”ADVICE TO ENTREPRENEURS FROM BRIAN ASCHERMartin: Brian, you have seen so many entrepreneurs. What type of learnings that youhave seen them make and based on this what type of advice could you give them to avoid some unnecessary mistakes?Brian: I think some of the best entrepreneurs are constantly upgrading their team. And that sounds obvious, “Oh everyone does that”, but the reality is the following; you have a founding team of co-foundersand early team members who go through some really, really tough days, long, long nights, weekends, setbacks all the time. And so there i s a lot of loyalty that develops there. As you are growing and maybe things are going great or they are going well but there are problems, the thought of taking that person who was there from the beginning and bringing someone in top or even letting them go is actually pretty hard. And if they are doing a pretty good job you are even less likely to make that change because you feel the sense of loyalty or “I have got bigger problems to solve than the fact that my VP of sales is a B+ and not an A.” But I think the reality is that you constantly have to be striving to have all A players in every single position around your leadership table because any one weakness can have a ripple effects and lead to problems that sneak up on you. They are not glaring problems immediately, those you actually act on but it is the problem that, “Oh, boy, we felt like we didn’t need a CFO until we were planning an IPO and as a result we are in all these contracts that have all these weird clause s and our margins are all completely off and we are drowning in complexity.” And these are the problems that just sneak up on you after a couple of years without ever screaming, “Solve me now!” And that is one of the problems that good entrepreneurs intuitively know and many people have to learn the hard way.Martin: What other kind of advice can you share?Brian: I see another area that I feel really strongly about is the manner in which an entrepreneur approaches true partnership with their investors or their board. And by true partnership I mean way beyond just taking their money and then keeping them off your back which I think is sometimes what an entrepreneur would default to doing but rather creating this true partnership of trust. And I think there is a virtuous circle that develops if you do that well. And then unfortunately there is a negative circle of mistrust which can also develop if you don’t do it.So the positive trust loop is you as an entrepreneur recognize t hat, “My board is here to make me successful. They want this company to succeed and the same goes for my investors. And they realize that there will be problems and if I bring the problems to them early they will hopefully help me solve those problems. But even if they don’t, they will at least know that I am aware of them and I am working hard at finding solutions. And so the next time they have a question in their mind, they will know that they can ask me or they can have confidence that it is going to be addressed.” This way there is more and more positive trust going back and forth.The negative loop is really, really insidious which is, “I have a problem as an entrepreneur, I am worried to tell my board so I keep it to myself in the hopes that I will solve the problem and it will go away before I have to admit it to anybody.” The board usually senses, “Oh, there is something going on here”, and you can either see it in their numbers or even if it doesn’t show up in the numbers yet you just get a sense that something is just not quite right but the CEO is not telling me so I have to dig harder to find what is really going on and once I do I say “Ah-ha I knew it, there was a problem and you didn’t tell me and now I trust you even less. So I start to wonder if there are other problems I don’t know about “. And then you start asking your CEO, or digging on your own and they get even more paranoid and the whole thing spirals out of control in a very unproductive way.So I think it really incumbent on the board and the investors to react constructively when problems are brought to them because that is what you want. So I am of the mindset which does not say, “Don’t bring me a problem unless you also have a solution. No, no bring me problems early and often. That is my job; it is to help you solve problems. We can celebrate victories but we are going to do this amount of time and most of the time is going to spend on how do we get even better.Martin: And how do you define the significance level of problems that should be shared and problems that are so minor that should not be shared?Brian: There is really no bright line or rule or dollar amount or anything like that. So I don’t mind if they over communicate. I’d say the judgment call is around; what would be the strategic significance in the short, medium or long term. If it is going to be a short strategic issue, like a big partner just cancelled, absolutely. But you can even take problems that “Hey, it is ok now but I think it could turn into a problem, let’s talk about it”. If it is something like, “The lunch was delivered late today” or “the employees are leaving the kitchen too messy”, I don’t need to know about that.Generally, it is a calibration exercise. Bring the problems early and often and then you could together figure out what really needs to come and also what you get value from me. If you are bringing small problems but I am hel pful keep bringing them as long as you find value. I will probably never say, “Hey, don’t bother me with that. That is like beneath me”. In venture capital is kind of messy, and so I will help with anything you need help with. As long as I can be helpful, I’ll do it for you.Martin: Are there any more advices you can give especially on the investment side for entrepreneurs?Brian: My advice on fundraising would really be two things:One is it has become more popular to not use a deck presentation when pitching investors and I think there are certain circumstance like we may be meeting six months ahead of when you plan to fundraise and we want just to get to know you. Do we have some chemistry? Can we talk about the business in a free form way? Just exchange of ideas and if we are doing that, its fine, no need to come with a PowerPoint, that would be weird. But if you are actually In a fundraise mode where you are going to try and drive investment groups to make a decision as qu ick as possible I think it is really helpful to have a guided roadmap to the discussion, keeps you on track, makes sure to get me the information I need in the manner that you want me to have. And most importantly there is a lot of data, like if you want a strong financing and a strong valuation you are probably going to have some element of traction in there and even if you haven’t launched yet you are going to want me to have details of the team or the technology, there is almost always numbers and you just can’t talk through a complex graph of numbers. So you have to have some way to communicate with numbers and quantification and that is going to be with the deck. You could say, “I will send you the deck later” but there is a golden opportunity. We have each carved out 60 minutes from our schedule, so put the best foot forward right there in the meeting. It doesn’t mean it has to be a long deck or that you have to hand me your entire financial model, just a really well -crafted argument, point by point, at the end of which I applaud and am begging you to take my money. That is my philosophy on having a great presentation and the beauty is there is never a wrong time to have a great presentation because as an entrepreneur you are not only pitching investors but you will have opportunities to talk to the press, to present at conferences, to tell your story to executives you are recruiting, so having a well-crafted story line and summary deck is always useful, never a bad time to have that perfected.The second thing would be this notion of a combination of optimistic and pragmatic is to come in and not lose credibility by appearing naïve. Showing financials that are the best financials anyone has ever achieved in the world or a market size that is trillions and trillions of dollars even though your addressable piece is much smaller but you are promoting the trillions and trillions of spending that goes on in this category, not even for technology bu t for everything. Just really showing the balance and demonstrating that you really understand the domain extremely, extremely well even if you are not from it but you are coming in as an outsider just to disrupt it. You have done your homework, you intimately understand your customers’ pain and you have a pragmatic sense of all the challenges that it will take to solve this problem and being open about that. Because again it comes back to the trust loop, the investor can say, “Oh this person really knows their stuff”, not “This person is crazy, they have no idea how hard this is going to be”. Show me you know how hard it is going to be but then compel me you are going to get there anyway. That is an interesting business.Martin: Great! Brian, thank you so much for your time.Brian: Thank you for your interest. This was fun.Martin: Next time you are thinking about pitching to an investor craft your story very neatly so Brian or other investors are really happy to invest in y our business. Thank you so much.