Startup Advice on Using Venture Capital

In Chapter 14 of 19 in his 2012 Capture Your Flag interview, Boxee co-founder and head of product Idan Cohen answers "What is the Role of Venture Capital in Building a Company?"  Cohen shares its relevance as a tool to build things that might not have financial viability from day one.  He notes when it is useful in building products that later can be sold and when it is not a good idea.  Cohen shares concern around success being measured by raising venture capital, rather than creating a successful, profitable company.  He goes on to discuss different markets and technologies outside the Internet domain that would benefit from disruptive innovation and what variation of fundraising or venture tools could be applied there. 

This is Idan Cohen's Year 1 Capture Your Flag interview.  Cohen is co-founder and head of product at Boxee Inc, an online video software company.  Previous to Boxee, Cohen held telecom software innovation and developer roles at Comverse.  He was a Captain in the Israeli Defense Force (IDF) and graduated from Tel Aviv University with a Bachelors of Science degree in Geophysics and Art.


Erik Michielsen: What’s the role of venture capital in building a company?

Idan Cohen: It’s a tool that was put in place to allow us to actually build things that might not have, you know, financial and business viability from day one. And, so that’s great. It’s an awesome thing, the fact that there’s a mechanism out there where you can, you know, someone can put faith in you because he thinks you have a good vision and an idea and a theme. And he can let you—he can give you that lay to go and build it, for a while, before you need to commit to any real business, because, you know, he understands that it will take time to build the product that you later can sell or you later can monetize but at this point, you can just start out of the blue and make it happen, or maybe there’s a learning process in that product that you need to achieve and you’re not gonna be able to pinpoint the right answer exactly from day one, and it will take a process and he’s willing to be patient with that. So that’s great.

I think that if you look at it, for instance, definitely today, then on one hand, a lot of people measure success by being able to raise venture capital and that’s extremely wrong, in my opinion, it’s just it’s becoming this competition or—people are getting so much credit for being able to raise money, being able to raise money shouldn’t be a lot of—shouldn’t get you a lot of credit. It means that someone out there believed in your vision, it’s great. There’s so many other ideas out there and maybe someone believed in your team and that’s even more important sometimes, or most of the time, but at the end of the day, your ability to deliver on the product and the business is much more important than actually being able to raise money.

I really wish that there were these tools also for other types of businesses, if someone wants to put together a restaurant, there’s no need for him to struggle and definitely in today’s economy, not being able to bring together a quarter of a million dollars to open that restaurant, yes, the numbers are not the same as the internet industry, it’s not gonna explode, it’s not gonna grow as a hockey stick and you’re not gonna be able to monetize it in the millions. But there should be better tools for other types of businesses to get built and established. So I wish that more people would take these tools that maybe—or some variation of them that were invented for venture capital, as we know it today for technology world. And apply it for other types of businesses.

Today we look at venture capital as tightly coupled with technology. Venture capital should be much more tightly coupled with entrepreneurship. So just someone having a good idea and having a good vision and being able to build a good team and go out and build a business, so I love the fact that there’s now, you know, for instance, Elon Musk doing space acts, this is awesome, yes, you know, yeah, it might be a business—a huge business in the billions of dollars just because of the cost of sending rockets into space, but still just someone being able to go out and do that, and I don’t know if he would’ve able if he wasn’t Elon Musk and didn’t have billions himself. But still, just the fact that I think these businesses are starting to see, you know, it’s not pure technology, it’s not internet, it’s not gonna acquire million of users, no, it needs probably like 10 actually that are gonna pay for these missiles. But it’s still gonna work. Same for cars, you know, if it’s from like Tesla or something like that. Just—I would love to see many more people supporting these kind of businesses. Just—or cameras, you know, why is the camera market not ready for disruption? Like why can’t someone build a better camera than what Canon and Nikon has been doing for—Nikon has been doing for 50 years I’m sure someone can. So for instance, now with those Lytro that came from a little bit of a different angle – I would like to see many more businesses like that.