The venture capital community convened for the annual VentureCrush event in New York City today, featuring a gaggle of venture celebrities. Several of the VCs hailed from firms active in the ad tech space, such as Accel Partners (investors in Krux, MoPub, MyThings, etc.), Greycroft (33across, TagMan, Collective) and Sequoia Capital (HubSpot, Drawbridge, Chartboost).
Of note, Yahoo was the top "Platinum Sponsor" of the conference, as Yahoo CEO Marissa Mayer and her corporate development minions likely want to make clear that Yahoo intends to be a buyer of venture firm portfolio companies in the future. "Is the next mobile Facebook or Google in the house?" Or maybe just an acqui-hire or ten will do.
Among the discussions moderated by Ed Zimmerman of conference host Lowenstein Sandler was a panel centered around the acquisition of Buddy Media (acquired by Salesforce.com in 2012) with Buddy's CEO Mike Lazerow, Greycroft's Alan Patricof, who was a venture investor in Buddy Media, and Gary Vaynerchuk, who was a Buddy "angel."
As the insights vacillated between entrepreneurship and investment, Mike Lazerow revealed he's an active angel investor himself and that, no surprise, a key to getting any Lazerow greenback is that you'll need to be a great founder — great ideas, passionate, tireless.
Lazerow also claimed that during Buddy's August 2011 $54 million venture round, it never dawned on him that an "exit" might be coming in the form of Salesforce, adding that his job as a founder is always "Don't run out of money." But Lazerow did admit the importance of laying the groundwork through building relationships.
Likewise, Lazerow said that, as a company founder, if you are actively raising money, you're going to have a tough time. In attracting VC investment, he advised, "You have to change the dynamic and get them to come to you. You need to build a red velvet rope around your business, where you're just meeting people. You're telling people things are going great when they're not. You're never raising money until you are." And Buddy did raise, to the tune of $90 million before being bought out.
Lazerow also said that venture deal terms need to be uncomplicated: "Frankly, if you have to go to a contract in order to understand what you have to do, everyone has lost."
As moderator Zimmerman pointed out, Buddy Media broke several molds when it raised venture capital; it was run by a husband-and-wife team (Kass Lazerow was COO), VCs could not get "key man" insurance for Mike Lazerow (likely due to his self-documented past health conditions), and the pricing was extraordinarily high.
Buddy's sale aside, Greycroft's Alan Patricof said times have changed from the blockbuster deals of yore, where "over 90% of the deals go for under $100 million" today. He said that Pulse, which was bought by LinkedIn for $90 million, would have gone for $900 million "in the old days" — and there aren't public markets of the bubble years that provided founders and their investors a huge windfall either.
On business models and the importance of keeping them secret initially, it was noted that Lazerow first required venture firms to sign an NDA before he would tell them about his company. But Patricof sided with the code of honor among VCs and said that he's never heard of people in the VC world stealing ideas and bringing them to other businesses.
As private company investment becomes increasingly democratized through mechanisms like crowdfunding, incubators and accelerators — let alone the proliferation of venture funds — it will be interesting to see how the code of honor evolves. In fact, that code, if it does exist, may be a reason to go with VC firm funding.