Finally the last session of the day! Sean Wise and Sutha Kamal hold a workshop to discuss what to expect from a VC
- VC says: "Entrepreneurs are unrealistic." Entrepreneurs think they can easily change the status quo in the market. Typically, the market already has something that is good enough.
- Entrepreneurs says: "VCs are lemmings." There are certainly bad VCs out there. Just stay away from them.
- VC says: "Entrepreneurs are blowfish." Sometimes entrepreneurs think they can overcome problems by sheer force of will. Blind faith isn't enough.
- Entrepreneurs say: "But, what about valuation?" What you learn at school is all made up. In practice, it is very different.
- VCs say: "Entrepreneurs obsess over valuation." Never show your cards when you negotiate.
- Your first investment should be enough to last 18-24 months and to hit your key milestones.
- There are two ways to project finance. Top down (there are 6 billion people in the world and if..) or bottom up (This is what my customer values, this is how many people we need on sales to get these numbers, my sale cycle is this fast..). Bottom up tends to be more realistic.
- There are many exit strategies not just being bought out or IPO. There are buy back options (Once you can pay me 10 times the amount I invested, you have to buy me out).
- What is the Canadian way of exiting? Audience member: Bankruptcy? *boos* haha
- You don't have to own 51% of a company to control a company. You can control a company with just one share if written in the agreement.
- Sometimes angel investors are as knowlegeable as the entrepreneurs regarding valuation. Too high of a valuation can be as bad as too low of a valuation. If they give too high of a valuation, this might prevent a VC from coming in in the future.
- Time to find investment: 3-6 months for Angel Investor, 6-9 months for VCs and usually takes 10-25% of your time.
- VC's that have a button on the website to submit your business plan, chances are it goes straight to the recycle bin. Finding investment is all about creating relationships.
- 60% of the weight of deciding investment is management.
- What to do: Get one of your customers to talk to your investor. What not to do: Be careful of underestimating how much time and money it will take.
- Traction is king. It isbetter to spend 300 hours with 3 VC's than 3 hours with 300 VC's.
mesh06 mesh conference investor entrepreneur funding venture capital