Silicon Valley experience report III/IV: Written by David Ballagi, Co-Founder and CTO Zippsafe AG
Listening to several VCs presentation one of my favorite analogies characterizing the valley was that if you have a good idea written on a napkin and you can sell it well, it is perfectly possible to get an investment of millions over a cup of coffee. While this might be a bit exaggerated, it definitely captures the attitude of investors in the valley of believing in people, moving fast and be ready to take risks. There are no NDAs, minimal excels and elaborate business plans, instead they want to hear your story and how you will achieve it. Whilst a European VC would analyze the business plan back and forth, here in the most extreme case for example at the Y-combinator event they invest during the presentation. Whilst they are ready to invest at a very early stage, they also require that the idea has the potential to become a Unicorn (evaluation higher than 1 billion) otherwise they will not invest. They know that if out of 100 if they catch one of these at an early stage it will more than make up for the rest.
The whole valley seems to be very laid back when it comes to formalities, everybody dresses casually, more deals are struck in coffee houses than in offices we were told, presentations are just a tool where content is the only thing that matters not the design at least amongst the VCs.
While I am not familiar with so many VCs in Europe, the ones we met here at least were very focused on a given area and made sure to only invest in that, e.g. cyber security in combination with AI. This then also shows after the investment is made, they are very much active in helping the startups and guide them in the right way as it is their area of expertise. Investors and VCs I met in Europe had the tendency to invest in a much broader portfolio. Regarding the evaluation, it was mentioned from several sources that the same idea and people if brought from Europe to Silicon Valley the evaluation automatically goes up 2-4 times just by the fact that it is there. Companies also exit much earlier than their European counterparts, the reason for this was mentioned to be that bigger companies in general prefer to buy up to move faster than developing it themselves, something that is more common in Europe.
When it comes to the “startupers” themselves, what seems to differentiate them from their European counterparts is not the talent, but instead the global mindset, thinking big from the very first moment aiming for the Unicorn status from day one. Secondly, what was mentioned several times is their ability to sell themselves and their ideas, whilst Europeans tend to focus on what has been achieved so far and the current status thus underselling themselves, in the US they are focused on the future and what it can be. The ability to sell yourself is not only important when founding, but also in everyday working life, to be able to motivate your team members, get your ideas through etc.
As an outsider what was also striking, that in the valley often the “nerds” are the kings, they are the billionaires. As opposed to wall street or even Zurich where you see the rich walking in fancy suits and nice haircuts, here you saw “programmer fashion” guys stepping out of luxury cars. If you consider the biggest tech companies coming from here, many of the founders are engineers who then also went on in leadership positions, often staying as CEOs. This was also mention for google, a special company in the sense that it is more of a group of startups working under one organization than a classical big company. These sub companies are usually led by the most talented engineers. In the end the selling in its traditional sense might not be done by them, but the fact that they can be in these positions as they are good at selling themselves and their ideas both to colleagues and the public on a daily level is definitely something to aspire too.
Just some examples of engineers staying on as CEOs after founding (in alphabetic company order)
The last part of the experience report will be published next week. Topic: Why are start-ups so important?
