Draper Fisher Jurvetson
Heidi Roizen is a Venture Partner at Draper Fisher Jurvetson. She has spent her life immersed in the Silicon Valley ecosystem as an entrepreneur, corporate executive, venture capitalist, educator and member of the boards of directors of private and public companies, trade associations and nonprofit institutions.
After receiving her undergraduate and MBA degrees from Stanford University, Roizen co-founded T/Maker Company (an early personal computer software company) in 1983, where she served as CEO from inception through its acquisition by Deluxe Corporation in 1994. In 1996, Roizen joined Apple as Vice President of Worldwide Developer Relations. From there, Roizen entered the venture capital world, serving as a Managing Director of Mobius Venture Capital from 1999 to 2007.
Roizen is also a Fenwick and West Entrepreneurship Educator in the School of Engineering at Stanford University, where she teaches the course Spirit of Entrepreneurship. She is a member of the boards of directors of TiVo (NASDAQ: TIVO), Prysm, TrustedID, ShareThis and XTime, and serves on the advisory boards of Springboard Enterprises and the National Center for Women in Information Technology.
Related Links: http://www.dfj.com/
Last Updated: Tue, Sep 25, 2012
Roizen talks about what she would look for in a VC. From her perspective, acquiring a VC is the only time you're getting someone to work for you and pay you at the same time. She recommends people populate their investor pool with VCs who will add value to their company.
Timing is everything when starting a company, Roizen says. Mobius raised their money in a good time and now have a lot of gas in the tank, she notes. Some companies needed money in June 2001 when people were not answering phone calls. She considers this an example of bad timing.
Roizen reveals how much limited partners believe in their investment plans. LPs invest in VCs like VCs invest in entepreneurs. Market performance alone is not the only criteria, but she recommends not messing up two funds!
Roizen believes terms are more important than a startup's valuation. One of the biggest mistakes entrepreneurs can make is to sell part of the company, think they've made a few million dollars, and then forget to factor in the investment from VCs, she says.
In an interview with Forbes magazine, Roizen projects what will happen in 2002. Mobius Venture Capital is excited to move forward. Since the bubble of 2001, companies that should have died have died, and those that are struggling are beginning to gain some traction.
Roizen talks about the importance of customers. She shares a story where an entrepreneur identified a problem, took time to develop a solution, and got real customers to pay him to make the product.
Roizen believes startups should have venture capital, but at the right time and used judiciously. She talks about the Barbell syndrome, where startups raise money for the first and last rounds, but not the rounds in between. It is very difficult to raise these middle rounds, which allow startups to treat money better.
Heidi Roizen explains the advantages of using existing profits to fund new ideas, as the resulting startup is not beholden to anyone else. She also states the importance of attracting venture capital, but only at the appropriate time in a company's development.
Heidi Roizen, managing director for Mobius Venture Capital, explains that Mobius Venture Capital has $1.5 B under management in current fund, $1 B in prior fund, and 100 active portfolio companies. There are ten VCs at Mobius who invest mostly in software, communication, wireless, next generation and web services, she says.
Previously, Roizen says it used to take three years for startups to reach liquidity; now the time frame is five to seven years. As a result, she recommends startups get to know the VC well and trust them because they will be working with the VC for many years. Now as an entrepreneur, she says, you have to work for a living!
VCs give entrepreneurs money and want to get a lot more of it back sometime in the future, Roizen says. Unlike VCs, corporate investors generally want an early view into the technology and sweet deals from a business development perspective. If you are taking money from corporate investors, Roizen cautions, make sure you know what they want and what you want.
Roizen believes that in the VC business, most companies fail. Therefore, the rare successes of their portfolio companies has to be big. Often you hear 10X, i.e. you should see 10 times your capital coming back, she says. It is also calculated as dollars in, dollars out, or internaI rate of return (IRR). The Mobius fund today has an IRR of 90%. Roizen notes you will almost never hear a VC use IRR.
Roizen believes the M&A market has always been a primary source of liquidity. She explains why big companies examine burn rate and ways to cut cost before they purchase smaller companies who may not be breaking even.
It is important that the startup team have experience - a combination of grey hair and youth is good, says Roizen. VC's have learned that it is not wise to fund a team with only college students, but older people cannot get funding without youth. VC's are looking for a technology to exploit with a team of individuals comprised of young and experienced members.
Roizen says VCs look at how companies behaved during the downturn. Mobius was upfront with their LPs about where they stood and this paid back. Entrepreneurs that were gracious and upfront will be backed again, she notes.
Roizen talks about performance and limited partners in venture capital. Smaller funds on the most part are suffering. A large funds success depends on what a startup's past performance has been.
Roizen thinks that one of the biggest mistakes companies made in their hayday was considering VC money as their own. Entrepreneurs forgot they had to pay back their investments. If there is any value that gets created as a result of the entrepreneurs sweat and VC money, she says, then the VC's get the money back first.
The most successful teams and ventures demonstrate passion and the ability to solve problems and create solid business plans, Roizen says. Yet, they were not in it to get wealthy. The strength of the team was their cohesiveness, she says.
Roizen talks about the importance of bootstrapping and maintaining control of the company in the early stages. Not only do entrepreneurs have to work for a living, they also have to make the money raised last for a longer time. When capital became easily available, Roizen notes that people stop making money the old fashion way: by working. If you make profit, you don't need other people to invest in your company, she says.
Roizen talks about her experience in taking venture capital. She learned that if one can use venture funds judiciously to raise the inflection point, then it makes sense to do it. For her, it was an economic decision. Other reasons to take VC money involve credibility issues. Customers want to see that you have partners and money in the bank to prove that you will be around, she says.