1Mby1M Virtual Accelerator Investor Forum: With Asheem Chandna of Greylock Ventures (Part 2)

Sramana Mitra: What you’re saying is counter to the trend of the venture capital industry right now. It has become the age of lean startups at the early stages these days where entrepreneurs are expected to bootstrap to significant traction before they get to Series A.

What you are doing is more the fat startup model where you’re putting in money up front and building a product. You’re doing it with a very extensive customer immersion and validation by talking to customers and getting the specs before you write that check. What are your thoughts about how venture capital is evolving?

Asheem Chandna: It’s a good question. I consider myself as a supporter of entrepreneurs. I’m a supporter of startups. Most startups are on journeys to nowhere unfortunately. Most people are working very hard on things that will not materialize. Many of these folks are better off going into other companies. More people should really give additional thoughts to what they’re doing and try to be more strategic about where these journeys go to.

To your question about other VCs and why the VC industry is operating a particular way, there is an over supply of venture capital. There’s a lot of very smart people in venture capital. It’s similar to most professions. Most people are lazy. Most people want everything served up on a plate.

Sramana Mitra: Thank you. You said it.

Asheem Chandna: Some of the best opportunities actually do appear that way, but many of them don’t.

Sramana Mitra: I always say VCs like to come to the rescue of victory these days.

Asheem Chandna: Absolutely.

Sramana Mitra: Look ahead. The area where there is a lot of potential is machine learning, cyber security, robotics. Many of these are R&D heavy areas and not necessarily that conducive to the lean startup methodology of putting something together and taking it to revenue before you raise any money. How do you advise entrepreneurs to navigate the capital gap give this situation?

Asheem Chandna: It’s a great question. One is, it’s fairly easier today to build a software or a hardware offering than it was even just three or four years ago. I was looking at somebody else’s Twitter feed yesterday and he had an image there of all the API and other offerings on AWS. He titled it the Walmart of App Development.

It’s quite incredible what a young software developer can do today. That said, I think products that command a lot of value do take a certain number of engineers. In my experience, in order to get one product out, you’re most likely talking 15 to 25 engineers working for a year to two years. That just takes a certain amount of dollars.

If you want to sell something where you can command many tens of thousands of dollars or between $100,000 to $250,000, you probably are talking 15 to 25 engineers working for at least a year. That takes a certain amount of dollars up front. That is the reality of the situation. If one was to go back and look at companies that have gone public and are publicly traded today or companies that exited for north of $150 million or $200 million, one would find that many of those companies raised a check of several million dollars.

One good news for entrepreneurs today is there is an oversupply of money. What used to be considered Series A several years ago is considered a seed check today. We see many people come into our office and tell us they’re having a seed check of $1.5 million to $3 million. Once you get to the $2 million to $5 million range, that’s the Series A of several years ago. The good news is, there’s not shortage of money for very smart people who have compelling ideas.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Asheem Chandna of Greylock Ventures
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