Value Worth Investing In: A Conversation With Michael Abbott

When a venture capitalist firm evaluates a company to determine its potential they look at a variety of factors. Some of those are hard figures which can demonstrate the on the book value of the enterprise. However the intangible elements - personality, philosophy, focus, and drive - are the real metrics which can make a difference when calculating whether a business is worthy of investment.

A group of up and coming industry professionals recently had a chance to discuss this topic with Mike Abbott in an intimate fireside chat. An entrepreneur and leader in the world of technology, Mike has been involved in the development of high performance products at Palm, Microsoft, and Twitter, and is currently managing investments for Kleiner Perkins Caufield & Byers. He was able to share some valuable insights into what VC’s are really looking for.

In some cases, ostensibly solid, profitable businesses are not the best choices for venture capitalist investments. It’s a problem of qualitative versus quantitative analysis. Some companies look good on paper, but they don’t have the potential for high profit returns that other innovative organizations have. It’s also difficult to evaluate a startup based entirely on numbers since cash flow is often dictated by who they are negotiating with at any given moment.

One of the things that Abbott stressed was the importance of the people involved in the start up. Venture capitalists are trying to see the big picture, and when they look at a company they are evaluating whether it can be a meaningful, stand alone business. The goals and philosophies of those involved will determine the focus of the organization, which will in turn establish the potential impact it can have on its industry.

A common mistake that companies make is skewing equity too sharply towards the owners. If the initial team fueling the startup has no share in the organization, then there will be no employee retention if they are acquired. From a venture capitalist's point of view that removes the majority of the potential profitability from the organization.

Venture capitalist firms use a variety of metrics to determine the viability of a company for investment. Some of these involve hard numbers, but often the philosophy, focus, and personality of the people involved are paramount to their fluctuating finances. The most important thing is that the business has a viable goal, with a talented team that will be able to achieve success.

Riviera regularly hosts fireside chats with some of the leading minds in tech. Recently a group of up and coming industry professionals had the chance to sit down with Michael Abbott of KPCB - this is the third of a series of posts recapping key insight.

Client News This Week

It has been an exciting week for our clients! From being named top in their fields to new rounds of investments, here are some highlights from this week’s news:

Cloudera Names Intel CEO to it's Board

Apple Named Storehouse One of The Best Designed Apps in The World

Wellington and Fidelity Expected to Lead Uber Investment

Elasticsearch raises $70M and is taking JSON analysis global

 Airbnb wants to use search to become a ‘personalized travel magazine’


Internal Promotions & External Hires: A Conversation With Michael Abbott

When you’re building a company you generally want to try and promote from within existing ranks. This helps to create a sense of good will among your employees, while also leading to the development of stronger, more cohesive teams. However there will be times when the best person to fill a management position will be someone from outside the company. In those cases you should take steps to try and smooth the transition process, and help to integrate the new hire into your organization.

Recently a small group of rising industry professionals had a chance to discuss hiring strategies with Michael Abbott in an intimate fireside chat. A renowned expert on enterprise infrastructure, Mr. Abbott was able to successfully oversee the growth of Twitter from 45 employees to 400 in less than two years time. When the topic of external hires came up, he was kind enough to share some of his wisdom on the subject.

The first thing that he stressed is that internal promotions are almost always preferable to outside hiring for management positions. It’s much easier for the leader, and it creates a better corporate culture by rewarding employees who have invested their time in the company. Of course situations like the one he handled at Twitter do arise when an organization has to rapidly scale its teams, precipitating the need for outside hires.

One of the most important things you can do when filling a management position with a new person is to try and bring them on as a member of the team for at least a few months before hand. This will greatly increase their chance of success by allowing them to get a sense of the group’s dynamic, and meet the other members on equal footing. Once acclimated they can then more naturally take on a leadership role.

He also stressed the necessity of creating a work environment that encourages people to take the steps necessary for them to be considered for promotions. You should create opportunities for your employees to stand out and take on more responsibility. The best companies will be merit based, rewarding for results rather than hours logged, or relationships formed with those higher up. In this way you will make it easier for quality leaders to emerge from within existing ranks.

In general, it is better to promote current employees to management positions than it is to bring in outside hires. This leads to the creation of stronger, more cohesive teams, while promoting a corporate culture that shows rewards for those who have invested time and effort in the company. When hiring someone new for a leadership role is unavoidable, you’ll have better results by bringing them on as a team contributor for a few months before promoting them.

Riviera regularly hosts fireside chats with some of the leading minds in tech. Recently a group of up and coming industry professionals had the chance to sit down with Michael Abbott of KPCB - this is the second of a series of posts recapping key insight.