Tim: I will carry on to say that because we are a large fund that has to show a return to investors, that limits things. We can’t think about doing smaller investments because the returns we could make on that investment won’t move the needle for the larger fund’s return. That doesn’t mean that a lot of startups aren’t doing great things. They can make huge impacts for super angels or smaller funds or individual investors. But when you are talking about big funds, you have to keep that in mind. A lot of times, they are looking for massive outcomes. With that in mind, I look for these things. Number one is a good team. I’ve seen this save the day on exits. Even if the company is not working, if you have a killer team, a good company can be bought. When Playdom and Ngmoco were acquired, the acquirers fell in love with the management teams. They saw them as the next generation of management talent. Number two is traction. You have to get something out there and see how the numbers are cranking along. Number three is distribution muscle. If you talk about how you are going to build a farm game and a city game and copy that over and over, that’s not interesting. Now, if you tell me a story of how that grows distribution power over time, that’s cool because that gives you number four, which is defensibility. Namely, can Zynga copy your app tomorrow?  That’s why doing new genres and a new area of development such as geography, a new platform like tablets, or maybe a new genre like mental fitness gaming or music gaming or mid-core gaming is important. Zynga is not going to copy that tomorrow and put you out of business with its distribution.

...

Tim: Gamification is at the top of a hype phase and is about to enter the backlash phase. So it’s a fad in terms of the terminology they are using. That said, it is pretty much, I think, going to be meaningless in a year because it will be everywhere. Just like people thought social stuff was a separate market. Instead, I think people strive to understand social and then it is incorporated into everything. So rather than having gamification companies, you will just see game mechanics that play everywhere. Lightweight game mechanics is what has made Gilt Groupe and Groupon successful in commerce. I think we will see game mechanics entering even enterprise software, like customer support. SupportVille is not that crazy a concept, all right. We will see it entering health and wellness through startups like Basis. Nike is using it. It will be a layer of functionality that will go into everything just like social and mobile right now are part of the functionality of everything we experience.

Jeremy: I am not sure that I agree. I think that we will never see customer service that way. I think that with all of this game mechanics stuff, there is a reason that it started in games. People like to play games and so gamification helps people to do the things they like doing more. So when you talk about Gilt Groupe, for example, it turns out that people on Gilt really like to shop. So adding gamification to Gilt helps them to do more of the things that they really like to do. What gamification has not ever been successful at is getting people to do the things that they don’t like to do. I should eat less and work out more. I don’t like to eat less and I don’t like to work out more. And putting a score board against it is actually not going to get me to do even those things. So I think there are limits to the gamification. It just becomes good product management for the things that you like to do. But it also has its limitations and understanding where those limitations are is really important. It’s not this magical bullet.

...

Jeremy: I think one of the consequences is to raise funds. I think that is really smart. But you know one of my partners says if they are passing hors d’oeuvres, it is a good time to eat. People are passing hors d’oeuvres right now so eat and don’t just eat for now. Put some in your pocket and take them home. If you are trying to raising money now, then raise a lot at an attractive valuation. You should do that, and I am advising all companies to do.

Tim: And then be careful how you spend it. That is the smartest thing Slide did. They raised a lot of money and didn’t spend it. They would have been toast if they’d spent it. They got a good exit because they had a great team. Make sure there is gas in the tank to get to your next milestone. Remember too that whenever you raise money, it sets the high jump hurdle higher for yourself. It can be a double-edged sword if you raise money. Just don’t run out of gas.  It is frothy. In that environment, the market behaves on a greater fool principle. Can you find a greater fool than your current investors to put money in at a higher valuation? It goes on and on until it crashes down and repeats every ten years. Just be aware of where you are in the cycle and play that game well.

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Really fascinating talk. The whole thing.

I'm confused by this:

"If you are trying to raising money now, then raise a lot at an attractive valuation. You should do that, and I am advising all companies to do."

He's telling companies to raise a lot at an "attractive valuation".

Does he let companies raise from him at an "attractive valuation"?

Or is he just referring to the situation after he has invested in them?