By SUSAN LAHEY
Reporter with Silicon Hills News
There were startups from Guatemala and Germany, Malaga, Spain, France, Australia, Russia, Denmark, Sweden and more at the invitation-only SXSW Global Startup Forum at City Hall. In addition to local dignitaries like Austin Mayor Lee Leffingwell and SXSW Interactive Director Hugh Forrest, was a panel of venture capitalists moderated by Laura Kilcrease of Triton Ventures and including David Teten of ffVenture Capital, Pablo Salazar of Naranya Ventures, Rogelio de los Santos of Alta Ventures and Sandeep Kumar of Tech Ranch.
Teten, whose company is based in New York, said he had recently done a study and one of the interesting data points was that VCs get better returns when they invest outside of the hotspots of New York, Boston and Silicon Valley.
“Intellect is equally distributed. Great ideas are equally distributed. Capital,” he said, “is not.”
To find the great ideas outside their geographic area, the VCs said, they go to a lot of conferences, host their own events and talk to a lot of people. De los Santos said a warm lead is always better than a cold introduction but he won’t turn someone away if they contact him on Twitter, email or any other mode of communication. Teten said his company was working to attract good companies by providing strong support and mentorship for the companies they already fund.
Kilcrease asked Kumar what best practices entrepreneurs can use to encourage investment.
“The first thing is to get a customer,” Kilcrease said. “ One of the challenges entrepreneurs have is they think they can only get a customer after they get a product. That’s actually not true.” All they need is people who say they would pay for the product.
When asked by a member of the audience how many rejections constitute an actual rejection, the VCs said “One.” If something in the company changes, the market changes, the numbers change or the track record of the startup changes you might come back in a year. Otherwise no means no. However, startups should expect to get hundreds of rejections before they get a check.
“I’ve had several incidents where I’ve said to an entrepreneur ‘No, I’m sorry, I don’t think it’s a good time to meet with you and they acted insulted.” Teten said. “We do make mistakes all the time (not investing in good companies) but it’s not possible to do the job and meet with everyone. You have to have a high filter.”
There’s also a matter of fit, the VCs said. “It’s harder to get out of a marriage with an investor than to get out of a marriage,” Teten said, “so you’d better make sure you’re comfortable with the VC. That they’re someone you want to have around the table.”
In the tech world, Salazar said, there’s “A lot of arrogance on both sides…everybody believes they’re going to be the next Twitter. So it’s hard to find the right fit between two arrogant parties.”
When asked about the playing field for exits, Salazar said that the more mature U.S. market has many companies that “are born with the exit in mind. Other countries don’t have that hunger. That makes a lot of difference on how not only how the company is designed but also executed. That only exists in the U.S., England and maybe Germany. In other countries, entrepreneurs have to change their mindset and focus on the exit from day one.”
Conversely, Teten said, his company doesn’t focus on exits at all. “Once you have a real business there’s always some way to exit,” he said. “The exit is totally unpredictable from the seed stage and we usually have a small stake in the company at exit anyway. Why worry about something we have no control over and can’t predict?”
The event was part of a new push by SXSW to incorporate startups from all over the world.