Venture Capital Lessons of 2008

Some lessons from 2008 (not from a book)

• The purpose of this presentation is to share some real-life thoughts, lessons and insights from everyday work in the realm of venture capital that I’ve gathered in 2008

Books on Entrepreneurship

• Most books on entrepreneurship are poor

• They are outdated, filled with positive, elementary thoughts, and lack true-to-life insight

Tony Robbins Hungry

• If we get a sense that you’re hopped up on Tony Robbins, you probably won’t get funded

More on the last slide

• If you come in, bouncing off walls, jumping up and down, while selling your idea in a crazy, over-the-top fashion, you’re shooting yourself in the foot (believe me, it’s happened)

• Enthusiasm is okay…if it’s backed by a solid foundation.

• Be confident, be knowledgeable, alert and excited, but not annoying.

Parking Lot

• Don’t wait out in the parking lot for another chance to pitch (it’s weird)

• Win in the pitching room

Not all VC’s are Created Equal

• Some VC’s and Angels (even the famous ones), have the potential to kill your start-up (whether they mean to or now)

• Each VC/Angel should be analyzed as hard as they’re analyzing you (reverse due diligence)

How To Tell If a VC/Angel Is Right For Your Firm

• Do they specialize in your industry?• Do they ask advanced questions that

you can barely answer?• Are they lazy board members?• Does their blackberry control their

life?• What do they value more: you or

your idea?

Business Plans

• I’ve never looked at a business plan• At my firm, we have an “application”

that only asks questions critical to our investment thesis

• Business plans are good if you’re in a slow-moving industry

• If you’re in web/tech/mobile space, by the time you’ve completed a quality business plan, someone else has already created a company better than yours

• Don’t plan to innovate, innovate.

Old School Lesson

• "Someone, somewhere, is making a product that will make your product obsolete.”

- Georges Doriot, Father of VC

Beast

• You’ve got to:–Make money– To ask for money– To make more money– To then be removed from CEO position– To then fail or hit it big

That is the nature of the beast

Due Diligence is a Headache

• Don’t get frustrated by the due diligence process.– It’s grueling, intense, long, detailed and

specific– I’ve seen companies flip out in the due

diligence stage due to extensive requests, which resulted in $0 funding

Grocery Store

• Don’t go shopping if you can’t pick out the groceries.– Real life scenario: Entrepreneur isn’t

happy with the term sheet, leaves and shops other VC’s. After going 0 for 12, he returns to the initial VC—if getting the term sheet back (unlikely), he’ll probably get worse terms due to increased insight, and a further saturated competitive market (engendering more market risk)

Conference Calls

• If a VC is on a conference call with your team, and your team is getting grilled, flustered, etc. you’ll often hear the VC say, “I’ve gotta run. Someone is at my office door. Hold on for 10 minutes.” – This is not an accident. VC’s are usually

still on the phone. The purpose of this is to see what you talk about when we leave. This is where we find out just how dedicated and “close” your team is.

Don’t Lock Up

• Have fun pitching• Stop thinking about your chances of raising capital• Focus on why you love your company, why you’re

dedicating your life to it, and then clearly communicate this to potential investors

• Your goal is to create the feeling in the investor’s mind of, “I’m going to invest in this company regardless of the thoughts of others. Even if my partners don’t agree, I’m going to open my wallet and give them money.”

Final Thoughts

• Be confident, be knowledgeable, alert and excited, but not annoying

• Don’t camp out in the parking lot• Conduct reverse due-diligence• Don’t plan to innovate, innovate• "Someone, somewhere, is making a product that

will make your product obsolete.”• Understand the nature of the beast• Don’t go shopping if you can’t pick out the groceries• Keep your cool on conference calls• Don’t lock up

Best of Luck in 2009

Fin.