Chris Risley, venture capital anthropologist: Think bigger

Aug. 30--SANTA CRUZ -- After 10 years as operating partner at Bessemer Venture Partners where he saw 9.6 percent of the deals make 80 percent of the money, Chris Risley wants to stay close to home at the Santa Cruz harbor, where he has purchased an office and rented another, with room for five or six tiny companies.

"It's the most beautiful place in the world," he said, entertaining a rapt TechRaising audience of 50 Thursday night at NextSpace, while delivering punchlines amongst his strategies for pitching venture capitalists.

"I'm a VC anthropologist, I've seen them in their native habitat," Risley said, explaining venture capitalists want to change the world and get a big return working 30 hours a week.

"They don't want to control your business. That's a disaster scenario for a venture capitalist. They live an overpaid life. If they control your business, they have to think about it all the time," he said.

His advice: "Don't give them a business plan. They won't read it. To be duly diligent, they have to read it. They'll be paralyzed and they won't invest."

Work backward: "Start by writing your press release on the big announcement. Then work your way back."

Risley said Defense.net, a security startup with $9.5 million from Bessemer, sold this year after 18 months for $50 million.

Yet misfires have been plenty.

Bessemer turned down a startup to sell stamps, coins and comic books online.

"That was eBay," Risley said.

In 1998, he heard Larry Page describe a startup as "better search."

Risley, thinking of Inktomi, responded: "Search is over."

Google triumphed.

In 2005, Risley said no to a pitch to put instant messages together and Bessemer declined the deal. Use of the new service doubled every week for nine weeks, embraced by students and soldiers. After seven years, Meebo was sold to Google for close to $100 million.

"It almost doesn't matter if you can explain it, but if the graph goes like this," said Risley, pointing to a chart showing Meebo's escalation, "You can raise the money."

Venture capitalists are awash in money they get from pension funds, insurance companies, university endowments and wealthy families who become limited partners.

Bessemer got its start when Henry Phipps, co-founder of Carnegie Steel with Andrew Carnegie, reinvested proceeds from the sale into other ventures.

"Santa Cruz suffers from startup myopia," Risley said. "The market ends at Scotts Valley, there's the Summit. VCs won't give you the money to make that happen."

The solution is to ask: "Am I addressing the biggest opportunity?"

Venture capitalists won't drive Highway 17 so "hold your board meetings at their place," Risley said. "Use Silicon Valley arguments, not Santa Cruz arguments."

Santa Cruz attorney Jill Jacobs, who represents green businesses, said she liked Risley's advice to set up a landing page with a credit card slot to test product demand.

"Maximizing the opportunity" and "addressing the pain" resonated with Mitch Slater, 41, who is putting 19 years' experience teaching and love for math into his startup Leverage Learning.

Hiring the best talent, as Risley advised, can be a double-edged sword, noted Doug Erickson, who saw a hire recruited away to San Francisco after 10 months.

"If the most important thing is money, they're probably the wrong person," observed Chris Miller of Launch Brigade and Caffeine.

Mark Adams, a 2014 UC Santa Cruz graduate and campus hackathon organizer, considered working in San Francisco until he got an appealing offer from a new nonprofit in Santa Cruz.

TechRaising co-founder Andrew Mueller announced the group has grown ot 500 members.

Must-haves for VC pitch

--Who are you?

--How big is the market? Must be $1 billion or more

--Why is it in pain? What itch do you scratch?

--Why the current solutions aren't working: Usually it's lousy user experience

--How does your solution improve the consumer experience?

--Who is the team?

--What proof do you have? Demos, testimonials

--How will you sell? Or will you give your product away?

--Do you have a matrix of you and your competition showing you in the upper righthand corner?

--How fast can this grow?

--Financials: Revenue, expenses, starting cash, cash balance by quarters for three years

--Why are you the right team?

Source: Chris Risley

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