03/05/2013 02:31 am ET Updated May 04, 2013

Straight Talk For Startups At San Francisco's Launch Festival

by Nishat Kurwa

Rockets that launch commercial satellites and robots that manipulate cell phones are the sort of big, bold ideas that excite some of the Silicon Valley investors who addressed the opening of the sixth annual Launch Festival on Monday in San Francisco.

"In the (pitch) meeting, I want to feel inspired," said Charles River Ventures partner George Zachary, one of five VCs on the first plenary panel at the conference, which showcases promising startups and gives them an audience with high-profile investors. "If I don't have that feeling, I'll drop out even if I think it's a good business."

Because social platforms have made it so much easier for consumer web products to gain traction, the panelists reminded the five thousand-strong sellout crowd, simply showing user growth isn't enough to set your company apart.

"I think it's a beautiful time to be an entrepreneur," said Tony Conrad of True Ventures. "The community is bigger and easier to plug into. With that comes a lot of noise, and it's harder to find the's not enough just to get product traction." Entrepreneurs have to demonstrate knowledge of what builds viral loops instead of depending on one of the big platforms, he said.

The VCs told a sellout crowd at the Design Center that there's a paucity of radical ideas among recent startups...radical ideas like, you got it, Twitter.

Zachary reminded the crowd that back when Twitter was Odeo, there were six thousand users. By the company's Series A funding round, there were 60,000, but they were highly engaged, he said. "People wouldn't Tweet unless they felt other people were listening. The adoption curve really took off at the time of the Series B, when celebrities jumped on board. At the time of the Series A, (investors) had to believe it was a good idea, or you didn't," and that's why a lot of investors didn't go for it. Zachary got a laugh when told the audience that beyond a vague plan for a "groups" function, and a hunch that the service would be "the RSS for SMS," there was no grand, revolution-fueling vision at Twitter during its early days. The founders, he suggested, were primarily interested in their service's ability to help them, and others, find out things like where they could drink in San Francisco's Mission District and not run into colleagues. "I'm not kidding."

Ted Maidenburg from The Social+Capital Partnership said many companies are very single-feature focused, which is insufficient when it comes to showing the kind of flexibility and vision that builds investor confidence. "We see a lot of entrepreneurs who look at the examples of Twitter and Facebook and think they don't have to articulate what they want to be when they grow up."

Talk of the investors' hunger for big visions seemed unrealistic to some in the crowd, like a Chicago founder of a medical tech company who told me that for him, the emphasis on "crazy idea(s)" typified a Silicon Valley mentality that isn't grounded in practical needs for disruption in a number of industries outside of media and communications. Many of the startups that pitched today fell into the latter categories, but there were also some notable ones concerned with hardware and manufacturing.

We'll have a rundown of those and other Launch presenters tomorrow.