19-02-2019

Neal Dempsey: tips from a Silicon Valley investor

Silicon Valley VC investor Neal Dempsey visited Groningen this week, to check out the scene and meet with promising startups and scale-ups. Dempsey is a General Partner of Bay Partners, one of the oldest investment funds in Silicon Valley, and is currently looking for promising startup cities around the world and help improve local startup ecosystems.

During his two day visit, Dempsey spoke with promising Groningen based startups like EV Biotech, Mr. Chadd, Envitron and Satys on Monday morning. Later that day, he met with scale-ups like Chordify, Voys and Dataprovider, as well as local government officials, investors and StartupDelta’s Special Envoy Prince Constantijn.

Tips for startups

Funny and to the point, when the startup pitches began on Monday morning, so did Dempsey’s rapid-fire barrage of questions and advice: “Do you make your own hardware too? Don’t! There are companies like Cisco who’ll beat you to the punch in no time, so focus on the software, that’s where the money is. Is the product subscription based? Focus on monthly customers and drop all the others. How much is already invested? On what terms?”

The high-speed interrogation serves a purpose though: “I’m not trying to be mean here. I like the ideas, but this is how it’s done. The sooner you learn that, the better, because these real time tests are really valuable. Also, don’t give me a 30 slide presentation, give me five slides or three. Be concise and convince me in 25 words or less.”

Crowdynews founders Jeroen Zanen and Edwin Kuipers are the reason behind Neal’s visit, because he’s one of their investors and was also on the Board of Advisors. “The first time I met Neal at a conference, he told me my pitch totally sucked”, Jeroen says, laughing.

Neal’s Running Start

Aside from his work at Bay Partners, lecturing at the University of Washington in Seattle, sailing and scaling the world’s tallest summits, the prolific 77-year-old also set up Neal’s Running Start, a mentoring program for startups: “We rented a house in San Francisco, met in the living room and kicked the shit out of their ideas”, Neal says, laughing. “No, but the program really helps them to learn what’s important and what they’re capable of as entrepreneurs, as well as seeing how things are done here.”

Notes on the Groningen ecosystem

His impressions of Groningen so far? “It’s a very vibrant and young town and I think it’s a perfect place for early stage companies. There’s also a good mix of education and entrepreneurship”, Dempsey says.

Exposure however, is something that needs improvement. “Show your capabilities and start organizing things like international events and conventions to let the world know about you. Also make sure you have more local investment funds, because you don’t want California guys like me take off with all the money and the most promising startups”, Dempsey smiles. “Make sure you get the credits for having the infrastructure here to make companies successful. And keep them here”

As for finance, Groningen could learn a thing or two from the Valley. “The Dutch are conservative and grounded, which is something we gunslinging Wild West types could learn from too, but you could learn to take more risks and not be afraid to fail. Every successful company has pivoted at one time and sometimes the investments are lost. It happens”, Dempsey says. “Also make it easier for companies to be financed and give them room to experiment and sometimes fail.”

Almost getting fired

Failure is something Dempsey embraces. “I started three companies before I became an investor. The first one failed miserably and I thought the world was going to end. The second one did a little bit better, but failed too. The third one was moderately successful and after I sold it, Bay Partners offered me a traineeship. I was 38 or something, and the other trainees were at least 10 years younger.”

Dempsey fondly remembers the first investment opportunity he brought to the boardroom table. “I met a very passionate and capable entrepreneur I wanted to invest in. The board told me: ‘Neal, we’re a tech fund and this guy wants to sell coffee… The next time you bring something like this to the table, you’re fired.’” Neal laughs. "I did invest a little of my own money and became one of the first investors in Starbucks.”

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