1Mby1M Virtual Accelerator Investor Forum: With Julien Nguyen of IT Farm (Part 3)

Julien Nguyen: Alzheimer’s certainly is a huge problem. It’s very important for everybody. It’s even more important because drug development to go against Alzheimers has hit a huge wall. All the major drugs have failed so far. One of the key reasons they have failed is they don’t know exactly how the patients are doing while they are taking the drug. They don’t know the progression of the disease. With Darmiyan, they would know if the brain has progressed or stabilized. You can do that before you have any symptom.

Sramana Mitra: Very interesting. I’m going to ask you some trend questions on what’s happening in the industry and how you process those. How do you process the current investment climate where capital is moving further and further upstream? How does a seed investor or an entrepreneur mitigate the Series A gap?

Julien Nguyen: From the point of view of a VC, the fact that we have more and more investors jumping in early and earlier creates a lot of noise. The noise is on two aspects. Number one is, there are a lot of investors coming in. You see more competition. With number two, there are startups out there who should not exist.

Sramana Mitra: There are a lot of companies that are being seed-funded that should not be seed-funded.

Julien Nguyen: It’s a complete disservice to everybody involved. It is better to be told early that an idea is a bad idea.

Sramana Mitra: There are a lot of dumb investors operating in the system.

Julien Nguyen: You have a Gaussian curve and you make the threshold lower, you get more out of the fringe. The gap in the Series A has always been the same. My theory is the good entrepreneurs go and raise Series A just like before. Tings look harder because all of these startups, which shouldn’t have started at all, fail. Therefore, the statistics of failure become really bad. The good companies are still the same.

Sramana Mitra: The way I look at it is, it’s not so much a value judgement on good and bad companies. It’s more like venture-funded companies versus non venture-funded companies. The problem that is being created is, a lot of companies that should not be venture-funded are getting seed funding and believing that they should go try to get venture funding. These don’t have the characteristics of a venture-funded company.

They are not huge opportunities. They are not hyper-fast growth companies. It’s not like they’re bad companies. If they operated on different assumptions, they would be fine companies. Because of our mission of One Million by One Million, we are very big supporters of bootstrapped companies because, of course, they’re not going to be a million funded companies. There are still too many companies and businesses that should not get funded but are getting funded.

Julien Nguyen: Are there entrepreneurs that should be funded today that were not funded until you had a lot of investors? Absolutely. Only the top 2% will really make it. Coming back to your goal which I find fascinating, the only way to do that is enlarge the recruitment pool.

Sramana Mitra: Train people to understand the realities of the game. If you tell everybody that everybody should go raise venture financing which is what Y Combinator is doing, you’re misleading a very large number of entrepreneurs. Not everybody should be chasing venture funding.

Julien Nguyen: As you know, it takes a very unique cocktail of qualities from entrepreneurs.

Sramana Mitra: Absolutely.

Julien Nguyen: I’m surprised that there is no personality test at the beginning just to see if you’re even in that area. It shouldn’t be that hard.

Sramana Mitra: Do I have the tenacity to do this? Do I have the desire to make the sacrifices that are required to do something like this?

Julien Nguyen: That maybe should take a few days as a test.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Julien Nguyen of IT Farm
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