ask the vc
TRANSCRIPT
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Ask the VC!#AskTheVC
Sean FooteManaging DirectorCo=Creation=Capital
Gadiel MorantesPartnerEGFS
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• Who is the buyer and who is the seller?
• Picking a VC
• The VC mindset – how do these weirdos’ brains work?
• What do VCs look for?
• The VC process – why does it take so long?
• What makes for a great VC meeting?
• Lots of other questions you have…
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What do you want to talk about?
www.CoCreationCapital.com
Buyers and Sellers• A deal is a fundamental disagreement
about value – Buyers think things are worth less, and
tend to minimize price– Sellers think things are worth more, and
tend to maximize price
• But, Venture investing is not a zero sum game– A long-term relationship, like a marriage
• Pick investors that suit you, know your space, invest at your stage, etc.
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The VC mindset
• VCs are rational• VC is not “risk capital”– The idea is to minimize risk and
maximize outcomes of investments
• VCs particularly care about
your company if it:– Generates economic value– Provides good cocktail party
conversation– Allows them to raise another fund
5www.CoCreationCapital.com
VCs *need* homeruns
• VCs *need* homeruns– To return 18% annual net to our investors, we need
30% annual gross return– 30% gross return is 5x in 5 years for the entire portfolio
• Out of 10 companies– Half go bankrupt (5 * 0x)– 4 break even (4 * 1x)– 1 remainder must be 46x in 5 years
• If it takes 3 years longer, must be over 100x!
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What do VCs look for?• Typical answer: a laundry list of business school type issues:
– Great teams, defensible technology, market traction, large and growing markets, growth and revenues, limited competition, blah, blah, blah
• Each investor seems to have a hot button, which changes over time
• Each company has a hierarchy of risks from largest to smallest
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VC funding is hard…
• Currently, many momentum investors• And many angel investors– 20,000+ angel investments in 2014– 1,200 VC investments
• Implication: VC funding is still wicked hard, so…– Try to get VCs in seed rounds– Vet angels on their ability to do follow-on– Get to break even without VC investment
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The VC Process
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A great meeting is both an interview and a first date
• Personal: Be yourself, be engaging– How you answer matters as
much as what you answer
• Prep: Be prepared• Positioning: You are an
equal, not a buyer or a seller– Follow the lead– Ask questions
10www.CoCreationCapital.com
What you need to provide
• What pain we solve
• How we solve it
• Why we are the right team to solve it
• What we’ve done (so far) and will do (with your help)
• Why we win vs competitors
• The amount of revenue/profit/scale winning creates for our mutual benefit
11www.CoCreationCapital.com
Thank You and Q&A
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Gadiel Morantes
415-234-3437
www.earlygrowthfinancialservices.com
Follow us @EarlyGrowthFS
Sean Foote
650-255-4134
www.cocreationcapital.com