Venture Capital When You Need It When You Don’t Union Square Ventures 915 Broadway New York, NY 212-994-7880
What Is Venture Capital? <ul><li>High Risk Capital Seeking 50%+ Annual Rates of Return </li></ul><ul><li>Active Investors ...
The Venture Capital Process <ul><li>Find Deals </li></ul><ul><li>Research Deals – A 3-6 Month Process </li></ul><ul><li>St...
Some Statistics <ul><li>99%+ of All Startups Do Not Require Institutional Venture Capital </li></ul><ul><li>VCs average in...
When Is VC Good <ul><li>Heavy R&D Component of the business </li></ul><ul><ul><li>Seminconductors </li></ul></ul><ul><ul><...
The Cost of Venture Capital <ul><li>Dilution </li></ul><ul><ul><li>Average founder who uses VC owns less than 10% of the b...
When is VC Wrong For You <ul><li>Too Early – You Don’t Have Enough to Show Yet (Revenues, Product, Team) </li></ul><ul><li...
When Is VC Wrong For You  [continued] <ul><li>You Need to Move Fast </li></ul><ul><ul><li>Raising VC takes 3-6 months mini...
What Are The Alternatives? <ul><li>Bootstrap </li></ul><ul><li>Self-Finance </li></ul><ul><li>Friends and Family </li></ul...
Why Bootstrap? <ul><li>Get Going Fast – Don’t Wait For the VC </li></ul><ul><li>Stay Lean and Mean – Cash In The Bank Make...
Bootstrapping What Comes Next? <ul><li>Profitability – Happiness is Positive Cash Flow </li></ul><ul><li>Bankers – They’ve...
Self-Financing <ul><li>Entrepreneurship Is Risk Taking – If You Won’t Take the Risk, Why Should Anyone </li></ul><ul><li>G...
Friends And Family <ul><li>By Far, The Most Common Form of Startup Finance </li></ul><ul><li>If Anyone Will Believe In You...
Partners <ul><li>A Team Is Always Better Than A Lone Wolf </li></ul><ul><li>Misery Loves Company </li></ul><ul><li>Four Sa...
Summary <ul><li>VC money comes with a lot of strings attached.  Make sure you can live with them </li></ul><ul><li>Raising...
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  1. 1. Venture Capital When You Need It When You Don’t Union Square Ventures 915 Broadway New York, NY 212-994-7880
  2. 2. What Is Venture Capital? <ul><li>High Risk Capital Seeking 50%+ Annual Rates of Return </li></ul><ul><li>Active Investors Who Will Step In and Make Changes to Protect Their Investment </li></ul><ul><li>Experienced Investors Who Know How to Build Large Companies </li></ul>
  3. 3. The Venture Capital Process <ul><li>Find Deals </li></ul><ul><li>Research Deals – A 3-6 Month Process </li></ul><ul><li>Structure and Close Deals </li></ul><ul><li>Manage The Investment </li></ul><ul><li>Exit The Investment </li></ul>
  4. 4. Some Statistics <ul><li>99%+ of All Startups Do Not Require Institutional Venture Capital </li></ul><ul><li>VCs average initial investment is $3M+ </li></ul><ul><li>Average Dilution from Initial VC Investment is 40%+ </li></ul><ul><li>VCs look at over 100 business plans for every one they finance </li></ul>
  5. 5. When Is VC Good <ul><li>Heavy R&D Component of the business </li></ul><ul><ul><li>Seminconductors </li></ul></ul><ul><ul><li>Biotech </li></ul></ul><ul><ul><li>Datacomm Equipment </li></ul></ul><ul><li>Very Large Opportunity Requiring A Lot of Working Capital </li></ul><ul><ul><li>Federal Express </li></ul></ul><ul><ul><li>Amazon.com </li></ul></ul>
  6. 6. The Cost of Venture Capital <ul><li>Dilution </li></ul><ul><ul><li>Average founder who uses VC owns less than 10% of the business upon exit </li></ul></ul><ul><li>Liquidation Preference </li></ul><ul><ul><li>The VCs will want to take their money out first </li></ul></ul><ul><li>Control </li></ul><ul><ul><li>It is a marriage and divorce is messy. You don’t always get to take the kids </li></ul></ul>
  7. 7. When is VC Wrong For You <ul><li>Too Early – You Don’t Have Enough to Show Yet (Revenues, Product, Team) </li></ul><ul><li>Too Small – You Only Need A Couple Million to Get Profitable </li></ul><ul><li>Not Proprietary – Your Business Has No Barriers to Entry. It is Just An Execution Game. </li></ul>
  8. 8. When Is VC Wrong For You [continued] <ul><li>You Need to Move Fast </li></ul><ul><ul><li>Raising VC takes 3-6 months minimum </li></ul></ul><ul><li>You Are Dilution Sensitive </li></ul><ul><li>You Need To Be In Control </li></ul><ul><li>You Don’t Need It </li></ul>
  9. 9. What Are The Alternatives? <ul><li>Bootstrap </li></ul><ul><li>Self-Finance </li></ul><ul><li>Friends and Family </li></ul><ul><li>Find Partners To Share The Risk </li></ul><ul><li>Don’t Start A Business, Buy A Business </li></ul>
  10. 10. Why Bootstrap? <ul><li>Get Going Fast – Don’t Wait For the VC </li></ul><ul><li>Stay Lean and Mean – Cash In The Bank Makes You Soft </li></ul><ul><li>Sell, Sell, Sell – The Customer is Your Best VC </li></ul><ul><li>Learn On The Job </li></ul><ul><li>Let Your Customers Write Your Business Plan </li></ul>
  11. 11. Bootstrapping What Comes Next? <ul><li>Profitability – Happiness is Positive Cash Flow </li></ul><ul><li>Bankers – They’ve Got Cash and Are Willing To Lend </li></ul><ul><li>Venture Capital – On Terms You Can Accept </li></ul>
  12. 12. Self-Financing <ul><li>Entrepreneurship Is Risk Taking – If You Won’t Take the Risk, Why Should Anyone </li></ul><ul><li>Go Without A Salary </li></ul><ul><li>Close Out Your Savings Account </li></ul><ul><li>Mortgage Your House </li></ul><ul><li>Sell Your Car </li></ul>
  13. 13. Friends And Family <ul><li>By Far, The Most Common Form of Startup Finance </li></ul><ul><li>If Anyone Will Believe In You, They Will </li></ul><ul><li>Tell Them That There Is A Good Chance They’ll Lose Their Money </li></ul><ul><li>Try Your Hardest Not To </li></ul>
  14. 14. Partners <ul><li>A Team Is Always Better Than A Lone Wolf </li></ul><ul><li>Misery Loves Company </li></ul><ul><li>Four Savings Accounts, Mortages, and Cars Add Up To A Lot More </li></ul>
  15. 15. Summary <ul><li>VC money comes with a lot of strings attached. Make sure you can live with them </li></ul><ul><li>Raising VC money is not a guarantee of success </li></ul><ul><li>Seriously consider the alternatives to raising VC money </li></ul>

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