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The Stanford Graduate School of Business has a great series of technology startup videos on YouTube with talks from a number of famous people. Recently, I watched Don Valentine, the founder of Sequoia, tell his story and share his philosophies: A Dream and a Way to Solve a Problem Are the Path to Sequoia Capital’s Door.

My biggest takeaway from the video is that Sequoia chooses markets, not people. Of course, the people that they back are super smart, but it’s the size and scope of the market opportunity they’re most interested in. When you hear him talk of their investments in Apple, Yahoo, Google, Zappos, etc it’s amazing to think of how they analyzed the markets and made bets that turned out even more impressive than imaginable. Sequoia’s goal is to build big businesses, and that’s only possible with big markets.

What else? What are your thoughts on choosing markets, not people?

Bonus: Don makes a great point that he doesn’t accept questions of more than 20 words from the audience — he wants concise questions and not speeches.

John Greathouse, an entrepreneur turned VC, writes one of my favorite anecdote-filled startup blogs called Infochachkie. His most recent post is titled The Series A Crunch Is For Entrepreneurs Who Can’t Create Their Own Luck. In the post he quotes one of his VC partners, Jim Andelman:

If a venture does not have a reasonably high-perceived chance of a $250 million exit, most Series A investors are passing.

In the startup world, billion dollar exits are idolized and thrown about like they’re an everyday occurrence. In reality, there are very few deals that exceed $100 million, let alone $1 billion. With venture-backed startups taking longer to reach an exit, and startups raising more money because of the long time horizon, shooting for a $100 million exit is no longer enough. Now, the target is a $250 million exit, or as my friend likes to say “I shoot for a $300 million exit so that everyone will be happy and make good money.”

The next time you hear an entrepreneur talk about wanting to raise VC money, ask them how their company will be worth $250 million in 5-7 years.

What else? What are your thoughts that raising a Series A requires a reasonable chance at a $250 million exit?

In talking to hundreds of entrepreneurs over the years, I’ve had the opportunity to hear from people with a number of different backgrounds. One segment that is particularly interesting is executives from mid-to-large companies looking to make the entrepreneurial plunge. They have an idea, maybe a prototype, and they’re out raising money and often have low six figures ready to go from friends and family.

Now, as an executive at a mid-to-large company, they have $150,000 – $300,000/year compensation packages, so naturally, I like to ask the question: how are you going to reduce your lifestyle to handle a startup salary? A startup salary is often 1/4 to 1/2 what they were previously making, assuming they raise a sizable angel round. Too often, it hasn’t crossed their mind just how little salary they’ll get and how they will have to change their lifestyle.

Here are a few thoughts on lifestyle reduction to take the entrepreneurial plunge:

• At the simplest level, the compensation should be no more than the bare minimum to support the existing lifestyle (e.g. save no money each month and cut down on frivolous purchases)
• One approach is to do a flat, round salary like $50k or $100k and keep it simple, regardless of lifestyle
• Another approach is to maintain a salary similar to that from the large company, but to require that the entrepreneur invest 100% of his or her life savings into the company immediately, so that there’s significant skin in the game and alignment of interests

This is one of the most difficult topics for successful people that want to change things up and become an entrepreneur. Society glorifies the middle class lifestyle and many people get trapped by their mortgage, car payments, school loans, and more such that they don’t have the ability to make a career change without a significant lifestyle reduction.

What else? What are your thoughts on the appropriate reduction in lifestyle to take the entrepreneurial plunge?

Recently I was talking to an entrepreneur about a new B2C web-based product he was building. After digging into the idea and business model, he said he was trying to figure out if he should invest more in product development to accelerate the pace. I inquired as to why he wanted to burn more cash and he said that it would help find success or failure faster.

That’s right — it’s important to determine if something isn’t going to work as quickly as possible. Too often, all the focus is finding a successful opportunity, which is the right approach, but usually happens to the exclusion of determining if it’s more appropriate to hang it up. Most ideas will fail, and speed to failure is an important skill, such that there’s energy and stamina to try a new idea.

Hard work, passion, and being blissfully ignorant are great traits for entrepreneurs changing the world. At the same time, it’s important to move fast to find success or failure as quickly as possible.

What else? What are some other thoughts on moving fast to find success or failure?

Recently I heard a new term called dripping cash into a startup. I was talking to an investor who was describing an investment that hadn’t gone as expected. The startup was running out of cash and it came down to the typical predicament: shut it down, put small amounts of money in the company until it turns a corner, or make a big bet and capitalize it for another 18 months.

Here are some challenges with dripping cash into a startup:

• It’s hard to invest for the future when the plug can be pulled at any time
• With each bridge round comes more disillusionment, especially if the valuation keeps getting lowered
• Desperation starts to set in if milestones aren’t being met, creating a more difficult environment

Now, in the ideal scenario, dripping cash into a startup works and things take off. This investor I was talking to prefers to either shut it down or make a big bet to sufficiently capitalize it — he doesn’t like dripping cash into a startup.

What else? What are some other thoughts around dripping cash into a startup?