Why venture capitalists should be scared

Tonight I convinced a couple of my colleagues to attend a Silicon Valley Bank event focused around letting a number of startups "pitching" their ideas to current CIO's. Nobody believes me now, but I really meant to show these guys that startups are cool.

Silicon Valley Bank (SVB) did a great job of running the event. Good food, lots of wine, and everyone was properly dressed (except me of course.... nothing but the good ole jeans and a polo shirt). They designed a simple process by where the "start-up" had 5 minutes to pitch their idea, the CIO's had 2 minutes of questions followed by a vote using paddles - red for NO, green for GO ;-)

So I didn't keep official numbers on every company but lets just say it was pretty pathetic.

There were 2 companies I was "really" impressed with, Azul and ShoreTel. Azul Systems simply because I know them and I wasn't sure that the Azul guy could actually inspire me and ShoreTel because I have used their gear before, I buy their story and product and I honestly like the fact that they are a little guy in a big market.

This being said, everyone else sucked and without naming names....let me tell you why.

There was a definite lack of "purpose" exuding from all of these startups. Not a single one (with the exception of Azul) could tell us "why" they were the leader or going to be the leader in their particular product area. They also with rare exception (including Azul and ShoreTel) delivered any kind of compelling pitch regarding the "value" of their product to the customer.

I have been around Silicon Valley for a while (granted I used to commute here but that counts right...) and I remember why the dot-com days actually were interesting. The companies "then" were looking to solve real problems. Their focus was on solving real problems and in order to figure out the solutions, they thought big. Unfortunatly the VC community and business/corp dev folks got greedy and well we blew and burst that bubble pretty badly.

Startups need to answer relatively few questions to impress me. I am looking to hear "what" you are doing, why you are doing it, what problem you are solving and what makes you better than the other guys (either the existing market leaders/segments, or the up and coming startup competition). I don't care about valuations, research reports, lame market directions or even where your company is located. I do care about you telling me what you are going to do and then having real customers validate your idea.

The closest we came to hearing that tonight was a customer who told us that he had met with 8 of 10 CIO's and they told him what they viewed as their current security problems. What he forgot to tell us was why we should let him solve those problems and what his solution was.

My vote... all RED paddles. Lets get some of the smart people out of Google, Apple and all the other cool kid companies and get it right this time ;-)