Jeff Clavier: A Cool Billion Dollars

Jeff Clavier is the founder of SoftTechVC, a venture capital firm that specializes in investing in consumer internet startups. Born and educated in France, Clavier spent the early portion of his career working in enterprise software as an entrepreneur and venture capitalist primarily on Wall Street and in Europe. In 2000, he became President of RVC Capital, which was responsible for running the $600 million dollar Reuters Greenhouse investment fund with 82 companies. Currently, SoftTechVC is funding up to 60 startup companies on a total investment budget of $15 million dollars. Clavier maintains that in the internet era, it’s relatively inexpensive to test out a business hypothesis for a fledgling enterprise, but it’s still expensive to fully scale up companies. We spoke about his approach to investing, the basic strategy for business success, and why he’s looking forward to speaking at the upcoming International Startup Festival in mid-July.

JI: You’ve said that part of the reason it’s great to be an investor now is that there is a minimal amount of money required to get any entrepreneurial venture launched. Do you think this particular era where it’s easy to innovate is going to be a new business model for the 21st century?

JC: When it comes to consumer internet opportunities, so, services you put online that target consumers using Facebook, Twitter, or any of the very large scale services, it’s there to stay. When you understand what is involved with developing a product, you have to come up with the idea, you have to get the product developed and hosted somewhere in the cloud and then you have to acquire users. All of this can be done pretty cheaply by a couple of gifted engineers that put those products up in the cloud hosted by Amazon, and you can acquire users using viral techniques, using Facebook, buying ads or keywords on Google, and all that can be done and validated pretty cheaply. The thing is that you can build an initial product and validate your concept on the cheap—half a million, three quarters of a million, a million dollars—but in order to build the company to scale, you might still to need to raise 25 or 50 million dollars. What people sometimes make the mistake when they talk about typical efficiency, “it’s cheap to build companies to scale” and no, it’s actually cheap to validate the initial thesis and once the company has proven that there was something interesting, then they go ahead and raise the bulk of the money. You look at Xanga, Facebook, Groupon, they’ve all raised hundreds of millions if not billions to get where they are, but the initial phase was cheap.

JI: You have talked about how there are three major steps to becoming a successful enterprise, the first of which is assembling a team, then developing a product, and then targeting a market. In terms of assembling a team, it is impossible just to make it as a single visionary? How important is it to have someone at the forefront of the company who has a really strong vision versus a team of people who collaborate?

JC: That’s a great question. First and foremost, the way I think about the filters I use to consider an investment. Team product market is a set of filters, but in order to build a successful company, you need more than that. You need everything to come together in a perfect alignment for success to be had. In terms of a solo founder in terms of a team, I’ve done both. I’ve backed a 26 year old solo founder doing everything on his own, and I’ve done the four founder team that builds to success. I think it depends on—the solo founder has to be pretty unique as an individual. Typically, you have to look at a set of skills to be in the team. In this environment, the three that I at look at are technical ability, design ability, and . Technical ability is obvious. You need someone who’s able to put this thing together and get it to scale, which is always tricky. The second is design. For the consumer internet, having a pleasant design, something that catches the eye, makes a world of difference. When users are bombarded with something new every day, you need something that is lasting. User design is very important. Execution is: how do you acquire traffic? How do you acquire users? That is the fundamental skill set that you need to have. Sometimes you have those three abilities in one person. I personally prefer to see a founding team, because it’s a lonely road. It’s easier on people to have someone to compare notes with, do some soul-searching with, and so forth. However, sometimes you have exceptional individuals, so you go for the founder.

JI: You’re going to be speaking at the International StartUp Festival. Why do you want to speak there? You’ve talked about how when you speak at panels and conferences, you don’t necessarily make “deals” in terms of accepting unsolicited pitches. You enjoy talking to people and inspiring them?

JC: It’s a mix of everything. One is that I have a bunch of friends in Montreal. They said, ‘Hey, you have to come and do this, it will be fun.’ The other is that I do enjoy interacting with people and sharing my thoughts and views. I think it’s a sort of duty as investors to try and help entrepreneurs to get exposure to the mistakes we make, the extent we gain, because it makes the world a better place. I took on blogging back in 2004 and became one of the early VC bloggers. The goal was to open up the kimono and explain to entrepreneurs how things were done under the curtain of venture capital. Today, it’s very easy for entrepreneurs to go online and find resources that will tell them about term sheets and financing strategies. All of that didn’t exist 6 or 7 years ago. When I became a VC it was slightly mysterious. There were all these terms, like term sheets or liquidation preference, and I had no idea what they meant and there was no resource online to figure out what the hell these people were talking about. It was very simple math and finance. Why do these people hide behind this pseudo code of science? So I had to break that. I think it’s the continuation of that interest. I have to share what I’m doing and what my peers are doing so it’s easier for entrepreneurs to deal with this kind of painful process their companies have, which is raising financing. So speaking at the Montreal Startup Festival is an interesting opportunity. I get to do a keynote around one thing which I’ve always wanted to do but have never found the time to do, which is: what are the key numbers of a good startup? So my presentation will be a discussion of what it takes to start, to get finance, to scale a company to a cool billion dollars. I’m not quite sure what my ending will be, but at some point there will be a cool billion dollars. •