Venture Capitalist Kevin Kinsella’s Advice For Entrepreneurs

Venture Capitalist Kevin Kinsella’s Advice For Entrepreneurs

By Kate Harrison
Forbes.com
Getting into the heads of Venture Capitalists (VCs) can be a tricky proposition for founders, but it’s essential for raising large amounts of money successfully. This is especially true when approaching rock star VCs like Kevin Kinsella, founder of Avalon Ventures — most famous for investing in Zynga among others. But Kevin is no “one hit wonder” — and he knows what it means to grow and run a company on the ground. Prior to starting Avalon he created two companies, Spectragraphics and Landmark Graphics. Landmark was the first to process geophysical seismic data into a display of the Earth’s subsurface, with anticlines that might have pockets of oil or gas. It went public and was later acquired by Halliburton for a half a billion dollars.
Since founding Avalon in 1983, Kevin has specialized in the formation, financing and development of more than 100 early-stage companies. He is known in the industry for investing with his gut, and offers founders three pieces of advice for connecting with investors like him:
1) Be Passionate
“Great ideas for new companies (or products) are originally not thought to be great ideas,” Kevin explains. “If the great ideas were just lying about — like the proverbial bird nest on the ground — other people, or more likely other companies, would have thought of them already and tried to do them. It requires a passionate entrepreneur with a unique vision of the future environment, and specifically the future growth of his/her particular product or service, to push these ideas to reality against all the naysayers.”
When facing the long odds against success, an entrepreneur must marshal a vision, get other co-founders to share it, convince relatives and/or venture capitalists to back it financially, and implement it. They then must work days, nights and weekends to make it happen. Passion is therefore a key ingredient. Passion needs to be visible, even palpable, and it is one of the things Kevin looks for in the founders and companies he backs.
2) Deep Technical Domain Knowledge
“In Avalon’s part of the tech/biotech universe, there is no substitute for expertise. Being able to do something faster, cheaper, better all stem from being ‘smarter than the average bear.’ We think the smarter bears have a greater chance of success — and those are the ones we back,” Kevin notes.
The trick is identifying them, which is why you need to convince VCs not only that you have a great product, idea and plan, but that you are the one they should be hiring to make it or do it. “We spend a great deal of time assuring ourselves that we have identified the A-Team to execute a business plan,” Kevin explained. “The nightmare scenario is to fund a company and later discover that a rival venture fund has actually funded the A-Team and that Avalon has funded the B-Team. I can’t remember that happening and the reason why is that we make sure we have the A-Team.”
3) Execute On Plan & Within Budget
Kevin is a true capitalist, and believes strongly in the importance of delivering on time and on budget. “An entrepreneur does not have the resources of a government — which can, and does, permit unconscionable waste of the people’s tax resources on gross inefficiencies and bad ideas for which there is no accountability.” In contrast, an investor-backed entrepreneur is held to rigorous scrutiny. VCs see a founder’s ability to execute against a plan within the preset resource constrictions as a test of entrepreneurial mettle and proof of a well-conceived idea. As Kevin notes, “An Avalon-backed entrepreneur who built the first privately financed vessel for the US Military since World War II — a next generation high-speed stealth boat for Navy SEALS —– using no government contracts, was asked at a public forum, ‘How have you been so capital efficient?’ His answer: ‘Because it was my own money on the line!’”
The more you can show that even a small scale execution has done well and that you have been capital efficient, the more attractive you and your venture will be to professional investors.
While “investing from your gut” sounds a little wishy-washy, in truth you can see that the things Avalon and similarly-minded firms are looking for reduce the risk of their bets. They want A-team founders with deep knowledge and passion, who have a demonstrated ability to create a plan and execute it on budget, coupled with a vision that will transform an industry. When put this way, it seems simple; but as you quickly discover when starting a company of your own, the devil is in the details and execution is everything.