VC ‘09 Outlook Panel Re-cap, Girls in Tech LA Launches and TechKaraoke LA takes on the Roxy

The December event calendar is decently busy for LA. The past week I attended three: Dealmaker Media’s “VC Outlook for 2009” roundtable and mixer, Kick-off of Techkaraoke LA and the launch of Girls in Tech LA (followed by a little celebration at the Libertine.) It took me two days to catch up on rest.

Dealmaker is coming up on it’s first year as a permanent event resident of SoCal having expanded from the Bay Area. Debbie Landa, CEO, started off slow by holding more mixers than content-focused events to get people familiar with the company’s mission of connecting entrepreneur’s to deal flow. 2009 will bring a schedule more heavily packed with roundtables, panels and mini-conferences. Up next is Startonomics in February. Check out the site to sign up for Dealmaker LA event news.

But back to the panel. Jason Nazar, CEO and founder of LA-based Docstoc held court with several local-areas VC’s, two that invested in DocStoc and the rest ones he pitched during his VC hustle. Line up was as such:

Moderator:
Jason Nazaar, Founder, DocStoc

Speakers:
David Travers, Associate, Rustic Canyon Ventures
Brian Garrett, Managing Director, Cross Cut Ventures
Jim Armstrong, Managing Director, Clearstone Venture Partners
Mark Suster, Partner, GRP Partners

The main takeaway’s:

• Yes, the economy sucks but there is still money out there to be found but entrepreneur’s need to work harder building equity pre-investment and adjust their payout expectations. In previous years it was easier to land some cash and make your investor’s somewhat happy with a 10-15x return on a few million investment- the equivalent of house flipping, really. Now, tired of the high IRR’s they were being beheld to, VC’s want to see these crazy things in the plans beforehand: a real business-model and revenue. Crazy, huh?

• Traditional VC’s are looking for entrepreneurs with the big idea. The investors who are happy with the smaller pay outs in the 30-150M range are what I call the “sweet spot” investors, more in-demand of late with entrepreneurs I know in LA. These are companies typically funded by friends and family or small angel investments. They often want to wait for larger VC funding, if at all, and need $500,000 to 2 million to execute to reaching a more cash-flow positive state. This is also used as a transition phase to get the company to a point of being ready enough to present for a proper A round with VC’s.

• They all weren’t terribly worried about the economy. Jim Armstrong with Clearstone Ventures said he didn’t buy into all the “doom and gloom” stuff. He cited having weathered these storms many times before as the reason Clearstone isn’t panicking, a sentiment Mark Suster with GRP echoed but was more pessimistic on the potential length of a slowdown. Armstrong said among the many hard lessons learned during the bust were the deals they did pass on in 2002 and 2003, and Suster said most of their investments for their last fund were handed over in 2003 and 2004. All agreed now is an excellent time for entrepreneurs to be creating because the last downturn in 2000-2002 saw the birth of multiple game-changing companies.

• Traditional VC firms like Clearstone are currently focused on incubating companies and building towards 36-60 months out but have still cut back, some having turned away existing portfolio companies looking for hold-over money.

• Another point was that this “market crash” is having an impact on personal wealth, which is a long overdue counter correction to the hemorrhage of spending the past several years.

.Tips for entrepreneurs:

• All investors want athletes. Do you have what it takes to run the long race? One excellent woo’ing tactic that was shared by David Travers when doing the VC money dance is to share benchmarks with a potential VC. Then come back two months later and show the progress made and goals achieved, then show what you’ll do the next few months. Then when it comes time for the serious money discussion you’ve already proved your ability to create and follow a plan that leads to growth.

• Metrics is the language VC’s speak. Become fluent

• There’s a mutual love between local entrepreneurs and investors. They prefer to invest local and Jason praised the benefit of having investors and board members close by.

• Be persistent. A lot of investors are afraid to give a solid no for fear you will never return to them but until you hear it, keep in touch. If they give you feedback, listen to them. Show them changes you have made based on their counsel, as appropriate of course. This shows that you’re willing to work with them. As I see it, investing is like any other relationship. You’re looking for a mutual chemistry, compatibility and common respect.

• Don’t think of not going out of business as being successful. It’s nothing to be proud of. Continually growing the business to a leadership position is successful.

• All expect lowered valuations on companies and it was counseled to let the market set the valuation, not the VC. “Don’t negotiate with only one VC.”

• It takes time. VC’s want to feel comfortable knowing they’ll be working with you a long time. They want to get to know you before investing time and money with your vision.

• Give your company a leg up on the credibility ladder by building an advisory board that can open doors and help create excitement about the company.

• Make friends with portfolio companies, if they like your vision and the evidence they’ll likely make an intro with their investors.

• Tap your local network. Take meetings. See who your friends know.

• Know how to pit VC’s against each other, have confidence in your company (without being cocky) and know how to make your offering sexy. As Jason Nazar so cleverly stated, “Be the guy at the bar the girl wants to sleep with.”

To read the Dealmaker write-up (including some choice quotes) visit their blog.

Girls in Tech LA

Thursday night was the Girls in Tech LA launch, hosted by Causecast at Mahalo HQ (they share an office.) It was pretty crowded with a lot of new faces. Kogi, the underground Korean BBQ taco truck, brought the #nom. I gave it a sample and am thinking it would be a good addition to Twiistup. Congrats to Robyn Cohen for a fun kick-off event.

Tech <3’s Karaoke

After that was a trip to Karaoke Bleu on Sawtelle for the first TechKaraoke LA, to continue the movement started by LA-techster buddies Brett Petersel and Michael Gruen in NY. All three of the tech communities in SF, LA and NY are linked by groups of common friends, which makes it easy to have some cross country fun with one another in a way only the tech-hipsters can. Francisco Dao (@thekillerpitch) and Efren Toscano from TechZulu (@techzulu) have decided to throw the “Mother of all Karaoke Christmas Parties,” on December 18th at on the Rox at The Roxy Theater. The kicker is, the whole thing will be streamed live. We’re hoping our pals in NY can get one together and stream theirs so we can be part of their fun too. That’s one event I am definitely not going to miss.