Here in San Diego, we face a huge problem. San Diego is known for beaches, Shamu, and now even the US Open. What most people don’t give us credit for is an emerging web and technology culture that is ripe with opportunity. Although San Diego is no San Francisco, we’re certainly not a city that anyone can really ignore anymore – this town is full of startup success stories and even Venture Capitalists ready to invest in the next big thing. I recently spoke with Deepu John, Principal at San Diego based iSherpa Capital, about entrepreneurship, the startup landscape, and how to pitch VCs.
About iSherpa and Deepu John
iSherpa is a Venture Capital firm focused on wireless and supporting technologies. They typically invest anywhere from $ .5 – 3 million in seed-stage and early-stage companies with game changing ideas. One such startup is Taaz, a site that gives women the opportunity to digitally try-on makeup and hairstyle looks from their computer.
John’s own background is in technology and marketing; he has worked at both Qualcomm and Texas Instruments before transitioning to the VC business. John describes a VC’s role as…
…focused on growing a business from the ground up. The VCs role is that of a sherpa.
The Entrepreneur Selection Process
I asked John a number of questions about his responsibilities, how iSherpa finds new opportunities, and the entrepreneur selection process. Of course the nature of his role makes it easy to have instant access to the hottest startups in town, but he also mentioned that he does carefully consider the various business plans that come in via network connections or friends.
The first question he always asks himself is, “does this investment make sense from a business and a technology perspective?” According to John, the operations side of a fledgling business model is critical to determining whether or not an investment is wise. Likewise, he only wants to invest in technologies that are changing the landscape of mobile and/or web platforms – if the business is not advancing the technology already in existence then it’s probably not an opportunity he wants to back with iSherpa’s wallet.
The typical investment opportunity begins with the entrepreneur sending iSherpa a business plan, either directly or indirectly. He claims that objectivity remains a priority in the early stages, and that iSherpa will even consider ideas that are not fully fleshed out. The process then continues on a step by step basis with conference calls, an initial internal assessment, a subsequent more elaborate assessment, and finally a term sheet and investment.
The assessment pieces include thoroughly exploring the market, determining if the market is large enough to go after, and whether or not the product adds to the market. In addition, they also dissect the plan of execution, the team behind the plan, and the strategies for targeting the right market. Probably the most significant piece of the discovery puzzle is trying to accurately ascertain if the business can make money. iSherpa will only invest in opportunities that have clear monetization strategies.
After the Investment
Operations is the highest risk.
John was pretty clear that the VCs real work begins after the investment. According to him, early stage companies require a lot of operational support that the VC should be willing to provide, which is why both the entrepreneur and the VC need to do due diligence during the assessment stages to ensure that they can, in fact, work together. Ultimately, trust is an essential factor to a successful working relationship.
Tips for Entrepreneurs and Startups
John recommends…
June 23rd, 2008 at 1:41 pm
I agree, San Diego has a huge potential for growth in web and technology. It’s a really exciting community to be involved in. Great article!
Patrick Dillon
July 2nd, 2008 at 12:59 pm
Just finished a meeting with a VC group. I couldn’t agree more on the 4 tips there, but especially tip #3. The money that you ask for sometimes isn’t even right. Our business was planned for and built on the bet that we can do this on our own with very little money from friends and family. When you start exploring the idea of taking on a bigger chunk of money, your plans and needs change. What’s important is to see if the group is a good fit. Do you trust them, could you work with them, do you think they can deliver? If you feel good about the fit, the money can be negotiated later.
Robert Cording / Vision 7 Production, d.b.a.
January 21st, 2009 at 11:33 pm
Presently in development of a low-budget feature motion picture. A prospectus and LP has been formed. Presently in the process of seeking investment partners (750K private placement offering – un-registered).
Over 25 years experience in the film business – based in San Diego. I believe this story has the ingredients to do exceptionally well in a historically “high risk” investment atmosphere for these reasons: Great story, hits main theater-going demographic (12-35), on-location advantages, experience in successful low-budget films, strong worldwide market opportunities.
Script is in process. We will write, produce, direct and contract with domestic and foreign theatrical distributors, and DVD market.
Are there connections or contacts Startup SD may have – for raising the investment capital – that would be helpful?