ask the vc: raising venture capital

Ask the VC: Raising Venture

Capital

#AskTheVC

Sean FooteManaging DirectorCo=Creation=Capital

Gadiel MorantesPartnerEGFS

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What’s going on…

• Introductions

• Your questions

• What you need to know about VCs…

• 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 you need to know about VCs

www.CoCreationCapital.com

Buyers and Sellers

• A deal is a fundamental disagreement about value – Buyers think things are worth less, & tend to minimize price– Sellers think things are worth more & 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

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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

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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!

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

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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

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Thank You and Q&A

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Gadiel Morantes

415-234-3437

contact@earlygrowthfinancialservices.com

www.earlygrowthfinancialservices.com

Follow us @EarlyGrowthFS

Sean Foote

650-255-4134

sean@cocreationcap.com

www.cocreationcapital.com