• Chris Rust – The Role of VC in Commercializing Technology

• 24 November 2011 by Tim 0 Comments

In the thirteen years that Chris Rust has been a venture capitalist, he has not only identified what it takes to make a successful business but also the kind of individuals and teams that define that very success. Most of the companies that Chris has invested in were founded with one to four members looking to make a difference with technology. It is important that your idea or product is something that people want. Building something that people want means that you have the ability to secure market share and build a loyal customer base. Chris and his firm at US Venture Partners look for hyper growth emerging opportunities, solutions to problems that are either unique or currently have inefficient solutions, and high gross and net market potential. These investments involve small elite teams that are passionate in making a change in the world with their technology. Along with passion and aggressiveness, comes the qualities of being frugal especially when handling VC investments. Chris believes that frugality reigns supreme, where the founders and team members sacrifice dilution to focus on equity and not current income. Along with these key qualities, it takes an ultimate level of patience and perseverance to build a truly successful franchise.

Although VC’s focus on concentrating investments with companies that can create and dominate a market, they usually tend to avoid ventures with low gross margins, business models with long development cycles (which usually involve compounded tech risks), and companies with which the investors have potentially low exits. There are often new companies with a “kill” mentality. Usually, these models focus on trying to win customers in markets that are dominated by huge companies. Unfortunately, unless the start-up’s technology is truly innovative and positively disruptive, customers won’t buy from small private companies. For example customers of AT&T and Comcast, are loyal to the firm that has the resources and abilities to fit their needs and wants. Private companies trying to compete with giants like AT&T are usually unsuccessful and unappealing to VC investment. However, there are always exceptions, especially companies that have a solid business model, unique strategies, and incredible teams that can develop technologies that can influence market trends in their direction.

People are motivated to do something intrinsically and independently to create a start-up and work to make something innovative. Of course they are rewarded with equity and stock payouts, but the ability to gain independence, passion in the product you are making, and the opportunity to compete with large successful companies should be the real reward for entrepreneurs. Chris has noticed that the best entrepreneurs often have no prior successes and are usually young, single, workaholic geeks.

There are several keys to creating a successful business with a sustainable model. Chris and USVP emphasizes the following four points crucial for a culture of success:

On a last note, I want to go back to creating something that people want. I’d like to use Apple as an example, more specifically their method of creating innovative products. Steve Jobs never believed in doing market research, something that a number of tech companies spend significant resources in accomplishing to determine the value of their product. Instead, Jobs believed in making products that people didn’t know they wanted. This vision is based on making products that people will love to use, and the success of the business will follow.

 

• Categories:

  Blog

• Tags: