There's a secret term VCs use to insult some founders: 'not blue flame enough'

There's a term VCs use for their ideal investment candidate: "blue flame." It refers to young people, preferably in their 20s, with lots of energy and no kids.

A blue flame is a fire that is burning at its brightest. A blue flame founder is willing to do nothing but work, forgoing all else but the company.

On the flip side, it's also a secret way to describe someone they think is "too old" to get their investment, discovered AtScale CEO Dave Mariani.

Mariana is 51 today. When he was out trying to raise seed money in 2013, he met with nothing but frustration.

A friend of his, a recruiter for the VC firms finally explained: "They're saying you're not 'blue flame' enough," Mariana recounts to Business Insider.

It's long been known that VCs prefer young founders. ("Don't fund anyone over 30" has been the joke phrase used in the Valley for years.)

The blue flame thing explained a lot

Of the dozens of firms he met with only a few told him "no thanks" to his face, most of them saying that they didn't think his idea was "big" enough.

The others never said yes or no, just "strung him along," he felt, waiting to see if another VC bit so they could jump on.

Mariana had built some technology that solved a problem he had when he was an engineer at Yahoo and Klout working with a tech called Hadoop.

Hadoop lets companies use low-cost commodity computers and storage to house really huge amounts of data. It's become very popular and has already led to the rise of $1 billion startups like Cloudera.

But on its own, Hadoop is ridiculously hard to work with. Once you put the data in, it's not easy to turn it into charts or graphs, ask it questions. A whole crop of startups are working on that. AtScale does something different. It's an engine that slides right on top of Hadoop and let's companies use their favorite data crunching tool of choice: Excel, Tableau Software, Microstrategy.

"What's frustrating is that these young kids are coming out of business school and getting funded with a business plan they wrote in school," he says. "You would think the Valley would appreciate people who lived with the problem, versus people who had only read about the problem in school."

Burned during his own blue flame days

Having done a startup in his own "blue flame" days, he didn't really want to raise money from VCs at all.

"This is my second startup I founded. The first one was in '96, I was like 28, and I didn't know what the hell I was doing. I didn't knew what a term sheet was, or a liquidation preference. I signed up for a triple liquidation preference. That's when a VC gets three times their money when you sell before anyone sees a dime," he says.

The company was called MineShare and he sold it for $34.4 million in 2000. Given the terms, the sale did not set him up for life.

"I'm not independently wealthy. The only way to see this new idea through was to get enough startup capital," he says.

In the end, raising $9 million in seed and a series A turned out to be easier than he thought.

He showed his tech to some big names in the Hadoop industry to get their feedback and they loved it and invested. This includes Yahoo founder Jerry Yang, Cloudera founder Amr Awadallah, a director of UC Berkley's AmpLab Michael Franklin.

Revenge of the 'not blue flames'

With enough funding to allow it to build a sellable product, AtScale quickly landed some big customers like Comcast and YellowPages and others.

It was bringing in $2 million in revenue by its second quarter of selling the product, Mariana tells us. He had more prospects than his two salespeople could handle and he needed to hire more support people too.

So he crunched the numbers and decided that with another $4-$5 million, a very small investment by the Valley standards, he could be profitable (cash-flow positive) by 2017.

He approached Comcast Ventures first because Comcast was a customer. They loved the company and he had a term sheet within two months.

With one term sheet in, VCs were now piling on.

"This time around, it was completely different. They were like, you guys have revenue? They were shocked at our low burn rate, shocked at how we were managing our cash," he says

In the end, he took $11 million, because the competition between VCs allowed him to negotiate more money for less equity, he says. (although he would not share the valuation.).

"The terms were great. We got a great valuation with no wacky provisions," he says.

And thanks the nuclear winter in the Valley right now, with "blue flame" founders floundering, highly valued startups stuck or struggling, this time his age worked in his favor.

"Wow, you have experience," VCs told him.

And the best new term he heard was that his team was "seasoned," and would not be a "chemistry risk," that's another Valley term for when the VC plays matchmaker with cofounders, early employees and personalities clash.

It turns out, too many blue flames in one company are likely to explode.

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