Sean Parker: There are Too Many Startups and VCs

At LeWeb this afternoon, TechCrunch’s Alexia Tsotsis and Menlo Ventures Shervin Pishevar were joined by Napster co-founder, Facebook founding president and Spotify investor Sean Parker for a keynote interview. Starting out, Parker noted that he doesn’t consider himself to be an investor. He wants to be considered an entrepreneur who has a fund, but he doesn’t want people to just consider him to be a partner in his Founders Fund. “The world has enough VCs,” Parker said, as it’s already an increasingly crowded market.

The event is still ongoing, so check back for updates later.

The Mass of Startups is Diluting the Talent Pool

Parker’s Founders Fund just raised $625 million. According to Parker, all of the angels and VCs that are active today are currently driving up the prices and valuation of startups, but this also diffuses the talent across far too many startups. To Parker, having an amazing group of people at Facebook was the secret to the companies success, but he “has yet to experience that kind of concentration of intellect and skill around one company.” With too many startups today, great developers never end up working together and create interesting companies because they are all chasing their own ideas and working on their own companies.

Agreeing with Parker, Pishevar also noted that the startup business has massively changed over the last few years. “The world,” he said,”is a startup. Rather than having a bunch of small ideas, diluted by a bunch of teams, we have to concentrate the great talent out there to change the world.” Both he and Parker have been actively working with U.S. politicians to do just this. In his view, young entrepreneurs want to change and disrupt the current systems – and can do so.

Parker’s Investment Strategy: Complete Teams

Asked about his own investment strategy, Parker stressed that he looks for great, disruptive ideas, but also for startups with great teams. For him, a startup needs to have effective technical leaders who can hire and attract great engineering talent. Parker, while operationally involved in the companies he invests in, says he doesn’t want to be an activist investor who comes in and fires people. A complete team that can execute is his benchmark for investing in a company.

As for Gowalla’s exit, Parker argued that this company he invested in stayed to simple and was too similar to Foursquare. His product feedback, apparently, was ignored. “The company was tenaciously attached to its plan.” The superficial changes to the product weren’t – at least in Parkers view – not enough to differentiate the product.

For Menlo Venture’s Pishevar, teams, too, are a major factor in investing. To him, entrepreneurship is about “never giving up hope.” Gowalla tried, he said, and “Facebook will get a lot of talent out of this team.” Parker, too, agreed with this, noting that he is always happy when Facebook manages to attract a great team that can help the company develop products it couldn’t develop on its own.

Founders Have to “Look Death in the Face Multiple Times”

To Pishevar, founders have to be able to “look death in the face multiple times.” Once they have done this, in his view, entrepreneurs lose their fear and are able to get back on their feet when they fail.

Don’t Hire Parasitic Leeches

Asked about their greatest failures, Parker answered that he has experienced failure with regularity. Napster, for example, failed to build a licensing model, but his greatest failure at Napster was in building the right team. The “parasitic leeches” he mistakenly hired at Napster turned out to be incompetent executives that brought the company down in the long run. In his view, he was still to young and naive to avoid these problems at the time.