A founder's ability to "judge signals really well" is one of the most important traits Venrock partner David Pakman looks for when considering whether or not to invest in a startup, he says in this episode of The Deal's Behind the Money online video show, taped at Silicon Alley Insider's
Startup 2009 contest last week.
Successful entrepreneurs get feedback from the market and make changes quickly, including adjusting the company's business plan or product, says Pakman.
"Unsuccessful entrepreneurs stick with one thing too long or maybe they won't make changes in their team quickly enough," he says.
Responding to feedback and altering the course is essential, even if it means abandoning a plan venture capitalists bought into.
"VCs invest in teams first, markets second and ideas third," says Pakman. "If it's a great market and a great team, but your idea wasn't quite right, big deal. Change it. Go after the same market but tweak your idea to read the market feedback."
Pakman knows all about being an entrepreneur. Before he
joined Venrock last year, he served as the CEO of eMusic,
co-founder of Myplay Inc., vice president of N2K Entertainment and
co-creator of Apple Computer's Music Group. He regularly offers
entrepreneurs advice on his
Disruption blog.
What was Pakman's biggest mistake as an entrepreneur? we asked. His reply was refreshingly candid: "legendary
deal" between Myplay and AOL, which was not only too expensive for the music startup but also caused Yahoo! Inc. (NASDAQ:YHOO) to
rescind its $200 million offer. Ultimately, Myplay was sold to Bertelsmann AG for about $30 million in 2001.
Check out The Deal's other Startup 2009 videos: Click
here to
see our conversation with grand prize winner Cheryl Milone,
founder of Article One Partners, moments after her victory; with finalist Path101 Inc. co-founder Charlie
O'Donnell on why he sometimes
wishes he never heard of venture capital; with Tumblr Inc. founder David Karp on how new hires have made him "
happier"; with Jason Calacanis on Wikipedia founder Jimmy Wales being a "
poser," not an entrepreneur; with Blip.tv co-founder Dina Kaplan on the
challenges New York's entrepreneurs face; and with General Catalyst Partners' George Bell on why the VC firm
co-sponsored the contest.
Still
to come: videos with AlleyCorp's Kevin Ryan and
Original Signal Recordings' Daniel Klaus.
Click
here for a video we shot with Pakman earlier, in which he talks about making the transition from entrepreneur to venture capitalist. And for more on the changing venture capital business, see
Honey, I shrunk the VCs in this week's issue of The Deal magazine. Watch the Startup 2009 video with Pakman
below or download it on
iTunes. -
Mary Kathleen Flynn
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