David Pakman is a partner at Venrock and a board member at the New York Venture Capital Association. He was formerly an entrepreneur, helping to introduce the idea of the “digital locker” for music files and serving as CEO of eMusic.
Q: You always remember the ones that got away. Tell us about the startup you regret passing on the most.
A: That’s easy. Twitter. It’s not really fair to say that we passed, but we did not fight hard enough to get in to their Series C round.
Q: The last thing you want to hear from a founder is…
A: “It’s a massive market and we only need to get 1% of it to succeed!”
Q: What “me too” trend should we avoid or invest in?
A: Transaction advertising and local commerce are real markets and are trendy right now, deservedly so. True, I wouldn’t do a series A in a Groupon clone these days, that ship has sailed. But there are definitely ways to invest in me-to markets and still do well. I think the fascination with new ways to share photos is awfully over-heated and likely over-stated as a market opportunity.
Q: What’s the strangest pitch you’ve heard?
A: Those are usually the best ones. The ones that stretch your imagination and border on the unbelievable. When Cloudflare pitched us several years back, they were a bunch of security guys, saying that customers would be willing to send all their data to an external service in order to have it secured. At the time, it sounded nutty, but that is kind of what defines a great entrepreneur, they see things differently.
Q: What’s the best way to ride out a bubble?
A: As you know, Venrock is a VC firm that has been investing in startups for more than 40 years. Needless to say, this firm has seen many cycles come and go. Our approach is to keep our bar really high and invest in approximately the same number of companies each year, regardless of economic conditions or where we are in a cycle.
Q: Explain, without jargon, what the word pivot means to you?
A: First version didn’t get traction, trying another approach.