Yesterday I organized and moderated an event on SaaS/Cloud Computing. The event was through SDForum Venture Finance SIG, which I’m a co-chair of.
Jim Lussier of Norwest Venture Partners and Ken Gullicksen of Morgenthaler Ventures we part of the event. In addition, there were four pre-VC backed companies who provided a 5 minute product/company pitch, followed by 5 minutes Q&A from the VCs. The presenting companies were Qlubb (consumer application), Trevaly (enterprise application), Continuent (infrastructure open source application), and TapInSystems (infrastructure application).
Some of the feedback provided by the VCs:
Jim Lussier: when looking to invest in a enterprise application SaaS company that is seeking a Series A financing, he typically looks for a company that has a complete product with 5 to 10 beta/paying clients.
Ken Gullicksen: when looking to invest in an open source SaaS company that is seeking a Series A financing, the company needs to be further along than a typical SaaS company as the company doesn’t have IP defensibility that a start up company typically has.
Jim and Ken: when pitching an idea to VCs there a few key areas you need to focus on; you need to indicate and quantify how big the market it, indicate what the pain of your customers are, and indicate why your company solves the pain and also how you are differentiated from any competitors you might have.
Jim and Ken: when indicating the market size, you should not only rely on specific figures provided by reports such as Gartner. What they would like to see is a bottom up approach and the ability for the entrepreneur to quantify the market on his/her own.