What are VCs looking for when investing in a cloud startup? Lawrence Aragon Editor-in-Chief, Venture Capital Journal and Private Equity Week, led a panel of VCs who answered the question yesterday. Here’s the second-half of the conversation: Panel VCs are: Satish Dharmaraj, Partner, Redpoint Ventures; Promod Haque, Managing Partner, Norwest Venture Partners; Ping Li, Partner, Accel Partners; Michael Skok, General Partner, North Bridge Venture Partners; and Glenn Solomon, Partner, GGV Capital.
Aragon: What are the biggest holes you see in pitching cloud entrepreneurs?
Haque: Sometimes it’s product people who haven’t measured value, and sometimes it’s marketers who don’t know the tech.Our job is to pair the two up.
Dharmaraj: We love a heavy tech-focused cloud company. One of the three founders must be a tech genius. Great technologists attract other great technologists to companies. Also, business needs to scale for us – we’re looking for bigger exits. Is there a path to $60-80 million in revenue?
Li: There’s not enough emphasis on how you package the product and make it delight the consumers. Putting more emphasis on easy-to-use product is as important as back-end technology. Dropboxis amazing because it’s such an easy product to use. Also, insertion: how do you start talking and engaging with customers from day one?
Solomon:One of the things we like is companies that understand that they’re dealing with an international market right off the bat. Since the cost of startup is so low, copycat products crop up quickly in other countries.
Aragon: What are the problems startups aren’t tackling?
Li: There is a new data-stack being created. Next-gen cloud apps will need a new data layer, a new data-management infrastructure.
Skok: Entrepreneurs love to forget that there is legacy. Smart entrepreneurs leverage legacy instead of trying to displace it.
Haque: There is a need for traditional stacks of software that bridge hybrid public/private cloud environments.
Solomon:Video. Over half of current internet payload is video. The demand of consumers for higher quality video is going to be huge.
Skok: We like to look at cases where’ you literally couldn’t do anything unless you come up with something new. Communities, collaboration and transaction need the cloud.
Li: In 5-7 years, the cloud will envelop enterprise software. If I look at what startups in our portfolio, they’re building on all cloud apps. The coffee machine is the only server they have.
Solomon: it’s a fait accompli that there is no enterprise software left.