Broken ecosystem: intro

A revealing conversation thread developed recently on Vecosys on the VC contribution (or lack thereof) to the innovation ecosystem and more generally what entrepreneurs feel they need from the environment.  I will write a series of posts exploring the issues raised but wanted to start with an overview of what happened after Sam's post, originally entitled "Not I said the VC when the community asked".

Sam's post, which you should read, is a summary of the usual "why are we not more like Silicon Valley" with a particular focus on why the VC community is not doing more to support and sponsor grassroots efforts.  It's a good post but the debate that ensued I found also interesting.

Here are some of the comments that were aired to give you a flavour:

• The Internet industry in this country seems to have a weird preoccupation with meeting up all the time and throwing events, rather
  than actually getting on with work (Peter Cooper)
• Fred [Destin, Atlas], David [Rowe, Microsoft] and Doug [Richard, Library House] your posts above read like defensive jumps head first into the sand.  [...] If anyone thinks that the current contribution is even vaguely decent then I’d say that they seriously lack imagination. [...] I want to see innovation. I want to see support. To paraphrase a business partner of mine, VC’s are like fishermen sitting on the bank waiting for fish to appear. Our suggestion is for them to help make the river a better place for fish to breed. (Robert Loch)
• I can tell all the UK VC’s right now that web Entrepreneurs (not entrepreneurs of biotech startups or large funded uni spinouts) are
  dying in the water because of lack of resources. Arguing that’s not true is like arguing with someone that they’re not actually feeling
  sick. It’s not the investors’ call to make. (Peter Nixey)
• Your post above reads like you have some god given right to receivefunding. What tractions did you achieve? Why should they have invested?Who should have invested?  I am so bored with entrepreneurs complaining about VC’s not investwhen they clearly have no idea where VC’s fit into the game. Yes, someVC’s will invest (or more likely facilitate an investment) below £1million, but that is not their game. (Robert Loch)
• VCs belly-aching about how they support startups in the UK and Europe miss the point. They may well chuck a sponsor logo onto a £1,000 a ticket conference web site, but right now some of the real innovation is not coming from conference attendees but young men and women who turn up out of the blue at events like Robert Loch’s / SCT / etc and say “I have this idea but don’t know what to do next”. It is at the grass roots level that many VCs don’t take much interest in the UK, while in the US they tend to, at the very least chuck, some money behind the bar or buy Mike Arrington’s burgers for his legendary BBQs. I agree, we need a DEMO for the UK/Europe, and not just because most UK conferences are utterly terrible, consisting of panels of people who say nothing useful and demo none of their work (usually because it’s not very good). (Mike Butcher)

I'll attempt a summary of the key issues raised by the community of Vecosys readers:

• VCs are a non-transparent, cliquey bunch who do not engage with entrepreneurs
• Most of the conference circuit today is a pale palliative to real engagement, with high price tags and stale, irrelevant panels; they do little to move innovation forward
• The Government needs to step in and do more to help seed companies (no !!!)
  
• Everyone is leaving for the Bay Area, dude
  
• Entrepreneurs meet too much and complain too much and should get on with building great companies with what they've got
  

So that's five posts to come under the broken ecosystem heading.  I will start with the Evil VCs and the cliquey ways (of course).



Technorati Tags: vecosys, samsethi, brokenecosystem, VC, europe

Comments

[Joe Cohen]

Dude
This is febrile navel-gazing unworthy of nano-discussion.

Tomorrow is promised to no one.

Joe

[Fred Destin]

One thing about Atlas entrepreneurs: they ain't sissies ;-)

[Robin Klein]

I’m not a VC nor am I an Entrepreneur. On second thoughts I am both.
Well positioned to join the debate.

On the one hand: Some entrepreneurs don’t help themselves in their approaches to VCs. Some don’t have a clear idea of the potential for their product/service. Some don’t know who their competitors are? Some simply don’t think big enough and have very limited ambitions. Some have done little or no research on the VC firm or the individual they are approaching.
Do they have the right to expect or demand that VCs give time and effort for half baked, poorly researched or developed plans?
The high rate of failure of start-up businesses means that VCs need to be very selective and need to make difficult judgements about the probability of success.
I also do have a gripe about entrepreneurs who focus entirely on dilution and price without giving proper thought to the total package of support that they should be demanding from their financial backers.

On the other hand: Some VCs don’t respond clearly or quickly enough. Entrepreneurs really do need to know where they stand. When turning down an investment opportunity, VCs would do well to add some value by being as clear as possible about why that decision has been made. Some quite simply can’t – or don’t – give sufficient time to evaluate the opportunities presented. Some don’t accord the required respect nor demonstrate understanding of how much blood, sweat and tears has gone into the preparation of a presentation or business plan.

What we (Saul and I, Sam and others) are trying to do is to help increase the interaction between VCs and Entrepreneurs and to encourage exchange of ideas which leads to better understanding. Great companies can be (and are being) built in Europe but in comparing our ecosystem with that of the valley, it does need to be recognised that the US is still the largest homogeneous market on the planet and cracking that market is a necessary requirement for building a global, word-beating company.

[Peter Nixey]

Fred,

I'm looking forward to your thoughts on all of the issues that were raised in the Vecosys discussion.

I've been trying to build a startup in the UK for a couple of years now and there are a huge amount of things that I've done wrong along the way. There are a lot of things I've done right too but since I don't yet have a successful startup they clearly don't outweight the others just yet.

The difficulties of the seedling stage are of course not VCs fault any more than they're the fault of the IPO market. VC's are by definition not seed investors and expecting or demanding otherwise is simply destructive.

My comment on Vecosys was less an observation on the difference betweeen UK and US VCs but more a relieved observation of the other footholds and sources of advice, inspiration and resources that are available to entrepreneurs in SV than are anywhere else in the world.

Clearly nobody has any right to funding or support but there are good people in the UK eager to build good product. There are a lot of things that make it difficult to do that though and whilst some of them are simply part of toughening up and learning how to build a business, others are unnecessary and could be alleviated by additional resources.

There is clearly a line between resourcing and molly-coddling and there may well be a lot of dangers in crossing that. There are no prizes for how stylishly or impressively you arrive at the top spots on Alexa though, the only thing that really counts is that you get there with a viable company.

Entrepreneurs don't have a right to anything but given that all of us seem to want more high quality startups to appear it would seem sensible to ask how that might be possible.

Paul Graham's currently got a hit rate of 50% on his and I'll vouch that that's not because developers in the states are 95% better than developer in the UK or elsewhere. A lot of it is to do with the fact that he gives people the time to develop good product, the advice on how to do that and access to finance that can take it to the next stage.

Would the reddit's and Scribds have made it without him? Possibly but judging by the number of others who've done as well on fewer resources it seems unlikely and the process has certainly not put Paul in a terrible position.

Entrepreneurs are doing a job and that job is producing great product and profitable companies. They don't have a right to any support in that just as a company employee doesn't have a right to any more than basic support in doing their job. It helps an employee though to be given a desk a place to work and a computer and lets them get on with what really counts - their job.

Entrepreneurs don't have a right to any support or advice but given that parties with a vested interest in them are in a position to provide some of it, it can sometimes seem frustrating that more is not forthcoming. Again, it's neither their responsibility nor the entrepreneur's right but there does seem to be some symbiosis in the interplay.