Entrepreneurial Minded

Stuart MacFarlane was the COO and founder of MXG Media, an executive at idealab!, and the CEO of Insider Pages (one of the first large scale Ruby for Rail projects). He is now Managing Director at Momentum Venture Management where he aids early stage technology companies gain the necessary traction to turn their ideas into successful businesses.

1) What are the top 3 things not to do in a venture capital meeting?
a. Don’t start talking about your technology until you’ve explained the problem your technology is solving. Often times entrepreneurs will be so focused on the proprietary technology they have built that they forget that their audience doesn’t have any context to understand whether the technology really helps someone.
b. Being defensive and/or arguing. I am here to help and my job is to fund businesses. If I ask hard questions or offer constructive criticism it is because I am doing my job. If someone is unable to keep their composure I am left wondering how well they will attract and keep a quality team. Furthermore, the VC world is so much smaller than people think. If you upset one of us, your reputation will precede you faster than you think.
c. Do not try and close a deal on the first meeting. Often times in a first meeting you are not meeting with someone who can make the ultimate decision. If you are not aware of this there are many things you could do that would jeopardize the deal.

2) What does Web 2.0 mean to you?
Web 2.0 has been used to describe so many different things that it’s hard for anyone to know exactly what it means anymore. For me, Web 2.0 means several things. It means software as a service rather than a product. It means websites or technologies that foster communities, facilitate openness, and incorporate user generated content such as voting or reviews. It’s Flickr, Digg and YouTube. You’ll see Web 2.0 on websites that pull content from multiple other sites to improve the user experience. Look at a Google Map mash-up or any MySpace page to see how many different sites are feeding their content onto the page. It also means new technologies like AJAX that allow easier user interaction on web sites.

3) Viewing start-ups as a product, what do think the VC market is going to be the hungriest for in the foreseeable future?
Any business that solves a real problem, can scale quickly, has great margins, and can make a 10x return for the investor! To try to be slightly more specific, it’s difficult to predict where the VC dollars are going to flow. Web 2.0 companies are still hot but there are a number that have been funded that are now looking like me-toos and that have dubious revenue models, so who knows if they will continue to be funded in the future.

4) In your experience of reviewing (and also creating) business plans, what is the most common mistake would-be entrepreneurs make?
One big mistake is building a technology before you really understanding the problem you are trying to solve. Most successful startups come at it from the other way. Understand the pain point — then find a way, often using technology, to make it go away.

5) Being the principal of a multi-million dollar startup that you had to help through bankruptcy, what is the most valuable takeaway you received from your experience?
If you ever have to take a business through a distressed situation, like a bankruptcy, remain honest, open, and compassionate and treat everyone as fairly as you can. This includes the people that work for you, your business partners, your creditors and your investors. You will have to deliver a lot of bad news during a situation like that, so make sure people understand that they can trust what you say and that you will do what you can to help them.