Brave New World - A Glance at the Startup Environment

Sam Colella, VC, Versant Ventures

Can you talk about your experience working with the companies in which you invest? Tell us about your investment style.

With twenty years of experience (and counting) as an operating executive, I try to use my experience to help the companies that I invest in to recruit, interview potential team members, and raise funds. I work with them in building strategies; assess them in operations such as implementation, execution, and corporate governance. Therefore, it’s a raft of responsibilities that I take on, but again it is to always support and complement the management.

I would describe my investment style as a collaborative one. I believe in teamwork, and I consider myself to be team-player. However, I have to also recognize that we are two halves; I can be a part of the team, but I have the responsibility towards the investors, employees, and even the public. My emphasis is to be a value-added investor and at the same time, work hard at trying to find situations where I can contribute.

How do you differentiate between the opportunities that you see?

We go through more than thousands of propositions a year; we only do due diligence on hundreds and end up at ten to twelve best propositions.

Also when it comes down to choosing an opportunity:

• First step: I look at the team.

• Second step: Equally important is the market. Who are the people? What are their backgrounds, experience, and expertise? Is it an attractive market, or a market available to a startup?

• Third step: I look at the innovations and invest in a breakthrough technology rather than investing in a “me too” situation.

• Fourth step: I look at how much capital we need to make the company profitable and how much does it take to go public or to sell it.

• Next on my list is the business model. I prefer to evaluate whether the model makes sense, is it executable, realistic, and feasible. After having evaluated all these, the risk factors come in; I am always willing to take the risk that’s required. I do want to assess it as each situation stands on its own.

What are the key attributes you look at when evaluating a deal?

I categorize new opportunities into two buckets.

• The first bucket is what I call “Brave New World Opportunities.”

Here the risk factor is high. These situations are breakthrough technologies or ideas or concepts. If you win, you are going to win big but at the same time, you have to be willing to take that risk.

• The other bucket that I put up is opportunities that are faster, better, and cheaper ones. This is more kind of evolutionary versus revolutionary. The risk factor involved here is moderate.

How do you work with clients post investment?

I believe in being an active investor by having regular communications with the CEOs. I have adopted an open door policy through which I try to be responsive to my clients, involve in setting goals and objectives, and give reviews to them, and likewise, take reviews from them.

What would be a piece of advice that you could impart to the entrepreneur who looks to embark on a similar venture along the lines of your service.

My advice for entrepreneurs’ or people who want to start a company is to be passionate about what you are embarking on, be dedicated for being the very best to be in each situation, strive for excellence, and lastly, recognize the commitment you want to make to be prosperous and optimistic.

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