Tuesday, January 1, 2008

Incubators: NetService Ventures Group (4/3)

Ok, so there's an additional section in my incubation series. It's the road that I decided to take with Vyoo. I've found that there are a variety of VC firms or other companies in the valley that offer incubation services to entrepreneurs for different reasons. These reasons vary widely from an interest in the team to an interest in the technology - or some combination of the two. In addition to incubating companies, some of these firms will actually hire entrepreneurs to be "entrepreneurs in residence". These entrepreneurs in residence are employed by the firm but either work on their own projects or find startups to spend time working with - in the hopes that something comes from the relationship.

I met with NetService Ventures Group (NSVG) several months ago, who, for the record, are not considered VC's, but more seed based investors. A good friend from Haas was working there (in a role much like an entrepreneur in residence), and he setup a meeting with the partners. We had a great meeting about both my company and what NSVG was working on at the time. As it turns out, the problem that I am attacking with Vyoo is a problem that NSV is currently working on solving. Although they didn't necessarily think that my solution was THE solution, they were happy that I was attacking the problem from a different perspective than the ones they were taking. From their point of view, having me around would both benefit my company and its growth and benefit their other portfolio companies by providing tactical discussions and different ideas.

In the end, the deal that was worked out with NSVG was in the best interests of Vyoo. I am considered a "friend of the firm"... or part of the Wolfpack as they call it. They have given me office space in exchange for nothing. Yup, nothing. What NSV gets out of it is a close working relationship with me and my company. As I move towards funding, the understanding is that NSVG will be able to participate in the event they choose too. I felt that this was in the best interests of everyone and it leaves both firms in a great position. If things don't work out - NSVG doesn't lose anything. Vyoo has an incredibly small footprint at this point, consisting of office space and a few cans of soda a day.

I've already begun helping some of the associates with developing technology for their portfolio companies. I really can't think of a better relationship and I think this will help us both out in the long term.

The relationship is certainly unique in that it's built entirely on trust. I'm hopeful that this relationship will prove valuable over the long run. I'm not ignorant of the fact that it's important to be careful of relationships like this. It's not always in the best interests of both parties - and not having contracts in advance can always potentially raise concerns. Fortunately, I know the people at NSVG well and I'm optimistic. My next post though will highlight the problems when two parties have different perspectives on what's fair. Vyoo learned that the hard way.

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