[MUSIC] So let's talk about raising capital for a second. As you know, the subject of this MOOC is how to start and finance and grow a business without venture capital, at least in the early stages. And you and I have both talked to companies who have done Uber like things and at the very beginning, they're able to get some customers and they're able to suppliers without spending any capital. But at some point then they say, gee, I've got something here. Maybe I should go raise capital. How do you know when you should do that? >> In the current market conditions the expectations are generally quite high, so you cannot, unless you're a team that has built a company and just sold it successfully. You will not be able to raise capital that easily, so if you're that team that just built a company and sold it, you can easily raise $4 or $5 million dollars with a power point. If not, if this is your first time, you do need to show traction. You need to show a very, very good team, you need to be after a market that is large enough. And you need to show a product or a service that has customer adoption. So my participants know that many of these. Well, a small number of this is deliver very attractive returns on their limited partner's. >> Correct. >> Invested capital. >> Very small number. >> But it's a very small number. And the vast majority of them really don't do that. They deliver, low single digit, returns at best, sometimes negative returns. The returns in Europe have been negative, as you know for quite some time. So how is an entrepreneur to figure out who is the right VC, a good VC, as you say, they all say they're going to add value more than money. But how do you know as an entrepreneur who's going to actually do that for you? >> So first and foremost, you won a deal when you see that is highly focused in your sector. You want to make sure that they're dealing in the check size, obviously, that you're interested in, in the geography that you're interested in. And you want to also pick the partner within the VC with whom you get along very well, but before you sign up with any of them, what I really advise people to do is pick up the phone and call their other portfolio company CEOs. How was the process of going through with them? What happened when you made mistakes? What happened when things went wrong? How did they treat you? When they said they were going to do recruiting for you, did they help with that? So if you take First Round Capital, for example, and Howard Morgan is one of the best VCs in the country. He takes on very few companies but they had a CEO network. They provide user interface support, they provide recruiting support. It is an entire infrastructure and network that they provide every portfolio company. So the CEOs can work among themselves if they have issues. So that's the kind of support that you want, if you look at and Horowitz, they have a team of about 100 people that only support portfolio companies. So, money has been a commodity for a while now and what you need [SOUND] beyond that money is a support that goes with it. Which in my opinion is really really key right now, in absence of that support it's just money. >> Everybody says they deliver that support. Every VC says, well, if you just want money, take it from another guy. But if you really want help and advice and support, take it from me. You guys all say that, right? >> Yes. >> So how do you separate the what from the chaff? >> Diligence. The same way the venture guy do diligence on their portfolio companies, a good CEO would do a lot of diligence under VC to make sure that it's not putting the facts in the most flattering way, let's just say. >> Ivan, is it too late to do an Uber in other maybe, still untapped categories? Or, do we have a long time yet to run here? >> I believe we have quite a bit of time to run, so, to give you financial services, a couple of companies in the financial services that they do their platform is for lending. That segment right now is extremely hot. There's a couple of platforms for the construction segment that recently got funded, so that segment is pretty hot. RealtyMogul just raised a lot of money, it's a platform for lending between them, accredited individuals and real estate broker, I'm sorry real estate developers that segment is very hard. So, there is a lot of activity, and I think if you look at, right now there is a service that is for tailors. There is a service for private eye. There is a service for delivery. I mean, it goes on and on, and if you think about anything that we're doing on a daily basis, this intermediation will bring significant productivity increases to it. So I think this is going to continue. And the ones that I'm really anxious to see what happens is health, education and government. Those are the areas that haven't been touched yet because of regulation and the involvement of unions, but if you're able to tap those you'd do very well. >> Well to tackle those you're going to need have to have the courage of a Travis Calanoc, right? To just, just- >> Yes. >> Take them on and be well prepared and get the consumers on your side which he seems to have done quite well. >> Despite governments trying to shut them down. By the way, California government being one of them. >> Yeah, exactly. >> [LAUGH] It's funny. This is where the company is based, [LAUGH] and they're trying to shut them down. >> So my participants are from all over the world. And much of the early activity in this arena, these matchmaker models where you just provide a platform to bring buyers and sellers together with goods or services you don't own or ever touch. >> Yes. >> Much of that's been in the developed world, in California, coming out of California, coming out of London, and coming out of Berlin, and so on. What about entrepreneurs sitting in Latin America or in Africa? Should they go copy a western concept and then hope to sell it to them should they do something more localized that really fits their own contexts. If you were advising them, what would you do? >> That's a very good question. I think to a certain degree, it is highly dependent on the geography that you're in. So if you take China, I think Alibaba is a great example. And I think when Alibaba went public. It had one consequence that nobody has talked about at all. It produced a very, very large number of millionaires that went off and started their own companies. So want to see a very large ecosystem of platforms developed in China just because of Alibaba. So I think the Chinese market is going to grow very, very rapidly and they're going to do a really good job at it. If you look at South America, the internet penetration is quite high. >> Yeah. >> And bandwidth is there. And the infrastructure is there to support platforms. And if I were in Buenos Aires or a place like that, I would try to copy the best models in North America or in Europe, and grow it to scale to be a very good acquisition target. In Africa, I think. And because they're so based on mobile and their devices are not for the most part mobile devices that are smart. You have to come up with different ideas. So it has a lot to do with the penetration with smart phones and tablets in your geography. >> Yeah. And smartphone penetration is growing very fast, especially in emerging markets, and frankly pretty much leap frogging the PC. Those people don't need a PC, right? >> Correct. >> They do all their computing on a phone. But there's also the credit card issue, right? You've got to be able to pay for this stuff, and in some of those places, there isn't s way to pay. So can you foresee, for example, in East Africa, will people pay for these kind of services with Empays, for example? Do you think that works? >> I think we discussed this in class when you and I were together, and I think there's ways to get around it, because credit card penetration is one of the key factors For its geography to be able to support plant farms. But if that does not exist, but smartphones do, there is another way to get around it which is gift cards, or any form of a card that has a security number where we can physically go to a location and put money on it. >> Like prepaid minutes on their cell phone. >> Exactly, or prepaid minutes, you can go through the top of that, but there's ways to get around it, it's not the most convenient way, not the most refined way, but it's a way. The issues is with that scale maybe not, so I think we need another way around it, and that hasn't been developed yet. However, it's being worked on. >> Well Ivan, I want to thank you so much for taking time out of what I know is a very busy day for you in Los Angeles. It's been fantastic to have you with us. I know people really appreciate hearing from real world people who are living this stuff every day, so it's great to talk to you. It's great to talk to you. It's great to talk to you. It's great to talk. [MUSIC]
