August 16, 2012
Last week, I got a chance to meet with John Burke, Founder of True Ventures, to discuss the differences between the tech scene in the Washington, DC and Silicon Valley. Burke has vast experience investing in early stage tech startups in both regions; though he’s constantly on the move, he spends a few weeks in his office in Great Falls, VA, and the rest of the time shuttling between Palo Alto, San Francisco and NYC.
So, what is the biggest difference between Washington, DC and the Valley?
“Entrepreneurs and venture capitalists are very different in the Valley. They are both playing for the win. Entrepreneurs are putting everything in: they are quitting jobs, they are aiming for the gold, and here in DC they are not doing that. Here they are hedging their bets, and in California you are all in. For a startup, part-time coders do not get funded. You have to set yourself for success and doing that part time is not that.”
But it’s not only the key players of the ecosystem that differ, “there is something different about the Valley too,” explained Burke. “Startup culture is a dominant scene in the Valley. Startups do not drive the economy here but they do in California. There is this ability to have 5 meetings in the morning in a coffee shop with people who are just stopping by. So, just having everybody in a small geographical area, whether it’s investors, or customers, or clients, or potential employees, there is something valuable in that.”
Having a tightly knit ecosystem certainly helps founders overcome obstacles related to hiring talent, raising money and attracting customers. However, Burke believes that “you can build a successful company anywhere, but I think it’s much harder to build it anywhere else outside of the Valley. As long as you realize that, you’re fine.”
Another big difference between the two markets is the relationship among startups and investors.
“There is a DC tech scene and a DC investor scene, and sometimes those two do not mix. In the Valley, venture capitalists are not so friendly and are much more competitive. In DC, it’s very different. Startups generally do not talk to each other; I think that’s changing though. Venture capitalists are very friendly, and everybody talks to each other. They would ask me what I am working on that’s cool, and I would tell them. That does not happen in the Valley as much. It’s a very different mindset.”
When asked how the DC tech scene can draw more interest from investors, Burke said, “You need a large exit, and you need to build successful companies, not hobbies.”
True Ventures has already invested in 4 startups in the DC region and are currently closing on the fifth. There are only two factors that guide their investment decisions: people and markets. Burke and his team evaluate founders on personal values, passion and connections.
As for how to pick the right VC when presented with several options, Burke responded:
“Choosing between a minor player within a major firm or a general partner at a small firm with a lot of domain expertise is tough. Who do you want to sit across the table from for the next several years?
“Our deals are very competitive, but there are several reason why win these deals. One is reach and reputation, and another is the resources we provide. You will have one partner on the board, but you will have access to the entire partnership. We also built a founder network, which is a huge benefit to the companies in our portfolio. We hold founders’ camps twice a year, with speakers and formal sessions, but it’s a time for founders to get together and do their thing. So, you need to look at benefits like that when evaluating a VC.”
Final words of wisdom from Burke:
“Do not build companies with the goal to be acquired, because that’s a path to failure. Build a profit-making enterprise.”
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