Blogging from Silicon Valley: Insights into an angel’s mindset

University of Ottawa's Telfer School of Management Executive MBA students get lessons from U.S. investors
Angel
Editor's Note

This article is part of a series on the University of Ottawa's Telfer School of Management Executive MBA annual class trip to the Silicon Valley. The recent trip was part of the EMBA curriculum on "Innovation and Entrepreneurship."

A business trip to San Francisco simply wouldn’t be complete without visiting Silicon Valley, the epicenter where big tech companies such as Apple, Microsoft, Google, IBM and just about everything else in between have come together to innovate, share their knowledge and network with like-minded people.

This spring, the University of Ottawa’s Telfer Executive MBA candidates did just that. It was a beautiful sunny spring morning when we traded the heavy traffic of San Francisco for a scenic countryside drive before descending into the Valley. The green and golden hills of Palo Alto quickly gave way to a wide expanse of low-rise buildings of bricks, mortar and glass that almost blended into the scenery and landscape.

Our first stop was Stanford University, the home of the world-leading institution in teaching, science and research.

Open innovation

Karen Nelson, a Telfer Executive MBA alumni who is now the director of social work and case management at Stanford Health, welcomed the group to the Stanford University facilities and introduced our first speaker, Kenneth Epstein, principal at NewCap Partners in San Francisco.

Mr. Epstein described Silicon Valley as an environment of open innovation. He provided the class with valuable insights of translating technology into business value for potential investors. Silicon Valley is where hopeful companies come to network, get new ideas and seek much needed funding, all of which happens at an accelerated rate in this environment. “In fact, if you look at the top profit companies coming out of Silicon Valley today, you’ll probably be surprised to learn that they didn’t even exist 10 years ago,” he said.

Mr. Epstein also linked innovation and the constant technology growth in the Valley directly to Stanford University, stating “…many of the people who were successful in the 1970s are now professors at Stanford today, and many of them are angel investors.”

He offered his perspective as to why the Valley was, is and will remain so effective in fostering a culture which continuously produces new and innovative ideas. Success in the Valley is due in great part to the immense synergies and networking potential it offers to investors, innovators and enablers who come together to build wealth and success.

“You are never more than two phone calls away from a solution, or from help and advice, and the timely connection to a potential investor, and that’s what makes (the Valley) work so well.”

What investors look for

Our second speaker at Stanford was Ronald Weisman, the chairman of Software Industry Group Band of Angels.

The stakes are high in the world of Silicon Valley for an angel investor, he said.

“Only about one per cent of the people who talk to me, talk about things that I care about. The rest talk about things I don’t care about. In my career, I’ve heard very few pitches that appeal to me,” Mr. Wiesman said.

He also talked in depth about what potential investors look for when approached with a great idea.

“Understanding your (company’s) risks and the benefits you can accrue to our funds is all that we care about.”

While this may be obvious, Mr. Weisman explained that most people who seek support from investors provide detailed information on their company’s products and solutions with very little to no attention to the financial details and projections that he requires in order to make sound investment decisions.

There is no such thing as free money. Mr. Weisman and his organization follow a strict set of criteria before even considering an investment that includes questions such as:

  • Does this investment opportunity fit our fund profile? Is this an appropriate technology that we would consider investing in? Is this aligned to other like-sectors we’ve invested in the past?

  • What is the investment styles? Is the VC attempting to tell a story or sell a new vision? Or, is this a thesis-based investment, such as autonomous cars being the next big thing?

  • Where are they in the life of the fund? Do they require seed funding, or are they farther along in the development of their technology?

  • Does the deal interest the VC team? Do I like this sector? Do I like this team? Will my partners support this deal?

  • Are the risks manageable? Does the technology work and is it scalable? Will customers want it?

As part of his ongoing commitment to supporting the continued growth of innovation in the Valley, Mr. Weisman happily meets and mentors young tech savvy enthusiasts explaining the importance of developing a sound strategic funding case that appeal to angel investors.

The concept of open sharing and helping others to meet their goals and dreams is the cornerstone of the Silicon Valley culture.

Google

In the afternoon, Telfer Executive MBA candidates visited Google and explored the main campuses. We quickly saw Google employees enjoying what we would consider unusual benefits including:

  • A highly flexible work settings where many employees could be seen working and meeting outside and using collaborative spaces.

  • Several culinary food trucks strategically parked around the campus offering bistro salads, sandwiches and snacks at no cost to employees.

  • Brightly coloured Google bicycles are available to anyone who needed to ride around the campus. All you need to do is jump on one and go!

  • Google coach line buses that provide transportation exclusively to Google employees, to and from headquarters (again at no cost).

While this may seem like a unique and envious proposition to us, it’s considered standard fare for those who work in the Valley. It is about taking care of your most important asset: your employees. Like Google, many companies in Silicon Valley have built a bottom-up culture, as opposed to a top-down philosophy that’s more commonly seen in other companies and public-sector environments.

This culture provides a very open work setting where learning and improvement thrives. Employees are encouraged to innovate and build new products with an understanding that many of their projects will fail and this is OK. What is important for the organization is the learning gained from each experience and the deep understanding of the value it brings to the entire Silicon Valley ecosystem.

– By Stephane Levesque