ownyourventure.com

A great little tool:-

“The equity simulator makes understanding the impact of raising money for an early stage venture transparent and easy to grasp.

It is intended to take some of the confusion out of raising angel or venture money. The audience for this tool is broad, but we hope it will find its way into the hands of founders in particular, those who are just beginning to make decisions about how to finance their companies — simplifying the process so that they can focus on their big idea.” Check it out.

(Copy from: www.ownyourventure.com)

Niall O’Donnell, RiverVest Venture Partners - How (some) investors think

Niall O’Donnell, RiverVest Venture Partners - How (some) investors think

Some thoughts and comments from the recent session with Niall O’Donnell a VC from RiverVest Venture Partners:-

• Never accept “No”, there’s always room to wriggle.
• When talking to VC’s act quickly, hitting all their “checks-points”
• VC backed companies tend to do better, quicker. 5-6 year, “in and out”
• Most VC’s main interest apart form viable idea is the team and individuals involved.

If your venture doesn’t have an experienced CEO, perhaps look to bring in a CTO, CMO or COO with more experience to help

Answer these questions for the investor:

1. Track record - Is this your first time? Has the team had any success?
2. Do I like and trust them? - What if I were trapped in a blizzard at the airport with them?
3. Will the ideas work? - Technical risk
4. How quickly to exit? - Meaningful value inflection, can the investor get 3x in three years? even with another round?
5. Is it new? - Investor heard mentality - “yes” but then why hasn’t someone else thought of it?
“no” but then why are you better?

Customer herd mentality - “No one has ever got sacked for buying GE”

“Rockstar CEO” - CEO who can run or make the firm successful

Early stage CEO should and has to be able to role up their sleeves and get on with it. Be a good all-rounder.

Investment horizon? - Ask a VC what theirs is… when are they looking to get their money out (back)?

“Know of the secret sauce, but not the recipe (secret ingredients)”

Generally an entrepreneur on the board, the VC’s will want to be on the board and an outside mentor. Primarily an odd number of board members.

Term Sheet Red Flags

Full ratchet in an early-stage investment

• Board members with no industry experience or time - Lifestyle board members
• Big Board
• Only one Investor - lack of diversity and network, no leverage
• Lengthy no shop & T/S comes very early w/o DD - the investor is getting a free option on your company (30-45 days sufficient for most DD)
• Voting by class - Early investor can block exit or new investment
• Option pool - a good investor (with ops experience) will want a recharge options at each round

Become really good friends with an good I.P.  and a great lawyer from the start!

Starting Companies in Turbulent Times (pt 2)

Other things Dr Kurzina touch on were:

Be bold or be cautious, ITS ALL UP TO YOU, but now is the time, IF you know what to do! (Dr. Kurzina)

he talked about different strategies; Twitter strategy: Grow first, monetize later. Value is created bu increased number of users, and

Yammer strategy: Grow slower, Monetize immediately. Values is created by sales ($) and hopefully profits. Two very different approaches, neither wrong but he pointed out “Choose your strategy carefully”.

The VC World of Today (in the US)

IPO and M&A activity is dead

$ to start ups was down 30% in Q4, 2008

VC’s are “gun” shy

The VC’s are telling companies… cut expenses, lay people off, preserve cash.. get real or go home.

SURVIVAL IS THE NAME OF THE GAME

Attitude of some companies, is to push now, buy now and grow later. Reap the benefits on ‘the other side” of this down-turn.

NOW IS NOT A GOOD TIME TO SELL ( in the most case)

The Troubles ahead

Every technology company hits a wall, the good one work around it. Don’t over or under react.
Don’t be too optimistic, build and work on a “sales pipeline” of customers.
Start small, meet targets. Then build up. “don’t set your sell up for a big fall”

He also talked about using three different sales strategies.

official sales plan - 100%
sales budget - 115%
operating plan - 80-85%

An entrepreneur has to wear two hats; enthusiastic charismatic leader who “Sells the dream” and Stark Realist

Starting Companies in Turbulent Times

Today we attended a session ran by Peter Kurzina - Senior Lecturer at M.I.T. Sloan School of Management. In it he talked about a variety of things in and around starting companies in turbulent times. During he talked about the number one thing a CEO should do is manage “cash-flow”, in that he means make sure the business has a regular in-flow of cash. “Oh the mistakes you will make, the money you will waste, maybe you are moving, with much too much haste” (Dr. Kurzina).

Attackers and Defenders - building on from Bill Aulet’s session, Dr. Kurzina talked about the difference between the two. Small Firms (new tech, new ideas) vs Large Firms (stuck in their way).

He also touched on the pluses and minuses of starting a business in turbulent times:

+’s

Great time to recruit, takes two years to build produce anyway, if you can make it now, you’ll soar later! Defender companies cut back on R&D - will need to buy tech in a few years (great exist strategy for newer companies), “Cost effective” solutions resonate with careful buyers. less clutter - fewer competitors, defenders more ruled by “sales and marketing” than protecting franchise. Less employee turnover.

-’s

Tougher to raise money, angel investment dries up: VC rounds are harder, Valuations slip, buyers are more risk adverse, fewer restarts; no second chances. Financial risk, market risk, technology risk, all increase! Longer time to break even, technology advances have life cycles; longer time to develop possibly giving competitors opportunity to “leap-frog” you.