Another excellent event by Xconomy last Monday, September 26th, titled: Consumers, the Cloud, and Beyond—New Rules for Innovation. The discussion participants (from left to right):

• David Patrick, CEO, Apperian (moderator): Recently raised $9.5 million in financing led by North Bridge Venture Partners, Bessemer Venture Partners, and Kleiner Perkins Caufield & Byers.
• Larry Bohn, Managing Director, General Catalyst
• Jeff Fagnan, Partner, Atlas Venture
• Rich Levandov, Managing Director, Avalon Ventures

What is at the top of your mind; what is currently hot?

• Activities in Cloud Services and Social Networking as relates to commerce.
• HTML5, Life Sciences, the “big data stack” (i.e. storage, cloud services, etc), hackers education, healthcare, etc. Atlas has given the authority to the partners to make their own decisions with minimal bureaucracy up to $1M. Using less strict evaluation criteria they are less exclusive of the breakthroughs; if early investors apply the usual criteria, Facebook will have never be funded…
• Emerging Platforms and other technologies enabling new services; Cloud Computing (ala Amazon)

What is a typical amount you provide as seed?

• Less than $1M; put the decision to the General Partners and take risks. Criteria:
• the entrepreneur
• the market
• the product

Small seed money are covered; large amounts are also covered by the VC; what about the middle ground?

• Avalon in the range of $100k to $250k. But companies require much more to grow
• General Catalyst asks the question: does the market allows growth to $1B or not; is it $300M? if so, they are investing more. But any investment needs to return at least $500M.

What are the key things they look for the big investments? What is the score card?

• Transformational Technology to change the market
• Passion
• Growth rate
• Traction
• People & Team, especially the Leading person – not necessarily the serial entrepreneur
• Market & competition
• Idea & Product

What is VCs think about the cloud services?

• Cloud services are good for startups but as the companies scale up it gets too expensive.
• Cloud only delays the point of needing the capital.
• Cloud can be unreliable, but in-house IT might be equally unreliable as well

Is raising capital in the East Coast harder than West Coast?

• Boston area is coming back in terms of investments. Main issues with the West Coast:
• engineers are more expensive
• the pool of the 1% talent is smaller
• people are less loyal
• get Series A in Boston and Series B in the West Coast

What is your opinion about Virtual Teams?

• Team needs to be together at some point to create a culture, especially when it builds a critical mass

Is the Cloud reliable?

• The real issue is if the internal IT is more reliable than the cloud; if you concern a lot, you might want to consider a hybrid model.

What are the reasons to consider moving the operations inwards and not using the Cloud?

• Control freaks – but they might be wrong
• Get better probing and instrumentation into the software
• Hybrid model is an alternative

Enjoy!