Lifting the Venture
                     Capital Skirt
                       By Henk Kleynhans




Silver Sponsors
-   Henk Kleynhans
-      founder

-      CEO CTO
-              3 parts

-             - my past
-    - my (short) VC experience

-   - Venture Capital Aptitude Test
-   my past
-     student
-   financial aid

-      UCT
-   internet junkie
-   internet junkie
-   YouTube, I
-          2003

-          wifi
-          adsl

-   becoming mainstream
-   ADSL cost R1200 per month

-      Capped at 3GB usage
-   SHARE

-    adsl
-    wifi

-     $
-   looked far and wide
-   SHARE
-   the problem was
-   time
-   big problem
-    movies

-   slow down
-   hit my cap
-            only what they eat

-   NOT how much time they take to eat it
-   simply didn’t exist
-      So...
-   I decided to

-    build it!
-   scratch my own itch
-   solve a problem
-        laptop
-   broadband
                 -        cheap
-     share      -     convenient
-   neighbours   -    no m...
-   end-users
-   end-users == Skyrovers
-   start their own Skyrove hotspot
-               virally
-   spread affordable and convenient
             internet access
-   income
-   100s
-   1000s
-   small entrepreneurs
-   around the world
-   ?
-     who does NOT think

-   this was a brilliant idea?
-   just a BIG IDEA
-   competition

-    Big Ideas
-   National Innovation Competition
-     my buddy Al

-   marketing student
-   this thing called

-   a Business Plan!
-   Al was busy writing his thesis
-   “If you want something done...

-         ask a busy man!”
-   worked days and nights
-      this thing called:

-     Market Research!
-     & a thing called...

-   Financial Projections!
-   VERY CLEARLY
-   VERY CLEARLY
-       by Year 2

-   100 Million Dollars
-   Dr Evil Picture
-   i’m not joking!
-   business plan
-       brilliant

-    world-changing
-   earth-shattering

-   paradigm-shifting
-     business plan
-   fancy event
-   3rd place winners
-   2nd place winners
-   So...
-   clearing a path to the stage
-   ...
-   someone else won!
-     cried a little
-   hugged each other

-      moved on...
-   and on!
-    market research

-   financial projections
-   we were onto something big!
-    looking for funding

-      raised $20,000
-     overseas investor

-   hired first programmer
-      launched 2006

-   raised a million 2007
-   9500 20,000 customers

-     300 600 hotspots
-          8 employees

-   Honours or Masters Degrees
-   except for me...
-         community
-   largest Hotspot network

-         continent
-            2005
-    Top ICT Entrepreneur

-   Business Report / Enablis
-                 2006
-        TT100 Minister’s Award

-   Most Promising Emerging Enterprise
-            2008

-       Mail & Guardain
-   200 Young South Africans

-   You Must Take To Lunch
-   Department of Science and Technology
-   trip to Germany
-   (thank you Minister)
-   overseas investors
-          proved

-   young South Africans
-   leaders in innovation

-        technology
-    commercialization
-   but

-
-    Rotterdam

-      Berlin
-    Vancouver

-   Silicon Valley
-   part 2

-
-   My meandering VC experience
-   have raised SOME money
-   failed to raise MUCH more
-   first investor: Silicon Valley

-             $20,000
-   3 year period
-   but get shares upfront
-   upside
-   family member

-      R100k
-   venture capital
-   mentor capital
-   zero money
-   flirted with big VC
-   term sheet
-   pulled out last minute

-    when principal left
-   *phew*
-   got lucky
-   (or smart)
-    found investor
-   zero bullshiitake

-       “gets it”
-   one bar
-   WILLs and WON’Ts
-   will NOT accept an offer
-   gives majority board control
-   to minority shareholder
-   I know my market and my product
                better
-   I will NOT accept an offer
-   for more money than I need
-   especially in tranches

-      = stock options
-   I will not accept VC before
-   2-minute noodle profitable
-   I will
-     phone the founders
-           BEFORE

-   serious talks with any VC
-   I will
-   GRILL the VC at first presentation
-   portfolio companies
-       successes

-       experience
-   I will not...
-   pay for Due Diligence costs
-   spending time with you...
-   is more expensive to me...
-   than it is to you!
-   I will not...
-   give shares to “Mentor Capitalists”
-    will work harder for you
-        give better advice

-   keep your interests at heart
-   if it puts its money

-   where its mouth is
-   part 3
-   the Venture Capital Aptitude Test
-   (credit to Guy Kawasaki)
-   “You know you’re in a bubble when
        young people get into VC”
-   “VC should be your last job, not your
                   first.”
-    “When you’re young, you should work
     80 hours a week to create a product or
       service that changes the world...
-   ‘You should partner with MySpace! I
    can also introduce you to some of the
           losers in our portfolio’
-   entrepreneurs
-   aspirant VCs

-   existing VCs
-   3.1 Work Background
-   Engineering

-   plus 5 points
-       understand technology

-   does it defy the laws of physics?
-      Sales

-   plus 5 points
-   introduce a product and

-           sell it
-   “sales fixes everything”
-   Management Consulting

-       minus 5 points
-   Investment Consulting

-      minus 5 points
-    Accounting

-   minus 5 points
-        3 worst backgrounds

-   Consulting, Banking, Accounting
-   Management Consulting
-   “implementation is easy,

-      insights are hard”
-   opposite is true in startups
-       Investment Banking
-   “everything can be reduced to

-      cells on a spreadsheet”
-                    P/Es
-   Build companies for JSE, not customers

-       do deals, don’t build companies
-           accounting
-   belief that history not only

-         repeats itself...
-   but it predicts the future
-     financial models are almost totally
    irrelevant because there’s no financial
      wizardry involved in making a go...
-       MBA

-   minus 5 points
-   upside
-   tools and knowledge may help
-   e.g. 25% of $1.6 billion

-      is $400 million
-   downside
-   hollow arrogance of someone

-     who’s never been tested
-     3.2 The Right Stuff

-   (First Hand Experience)
-   you may have been in the right places
-   but have you been
-        KICKED

-   in the right places?
-           kicked in the groin by
-   major, long-lasting economic downturn

-                plus 1 point
-   worked at a successful startup

-            plus 1 point
-   worked at a failed startup

-         plus 3 points
-       you’ll understand 3 things:

-   1. how hard it is to achieve success
-     2. world doesn’t owe you a thing

-   ...
-     worked at a public company
-             plus 1 point

-   (know the end goal, warts & all)
-   held a CEO position

-      plus 2 points
-   fantasy experience out of your system
-   won’t try and run startup from a board
                   position
-   been an angel investor...
-   with your OWN money

-       plus 2 points
-   understand the responsibility of
    investing other people’s money
-   3.3 Necessary Knowledge
-   Can you answer the following questions
             for entrepreneurs?
-               How do I...
-   introduce a product with no budget?

-              plus 2 points
-                How do I...

-   determine if there really is a market
         demand for my product?

-               p...
-             What do I do...
-   if customers hate our first product?

-              plus 1 point
-               How do I...
-   get Walt Mossberg to return my call?

-              plus 2 points
-             How do I...
-   get to the folks who run DEMO?

-            plus 1 point
-          How do I...
-   get a plug in TechCrunch?

-         plus 2 points
-                How do I...

-   dominate a segment with 5 competitors
      doing essentially the same thing?

-        ...
-              How much...

-          time, energy & money
-   should I spend on patent protection?

-               plus...
-            What do I do now...

-   if I bet on the wrong architecture for
                  our product?

-            ...
-             What kind of...

-          people should I hire?
-   Young, old, proven, unproven, cheap,
         expensiv...
-           How do I...

-   get them to leave their jobs
-    without throwing money

-          plus 2 points
-             How do I...

-    tell my friend that he cannot
-               be CFO

-   just because he’s a co-founder?
...
-             How do I get...

-   the Buyer at Incredible Connection
-           to return my call?

-              plus ...
-                How do I...

-   handle a customer who wants to send
     back his purchase for a full refund?

-        ...
-   How do I ...
-   fire people?

-   plus 2 points
-    How do I ...
-   lay people off?

-   plus 2 points
-   tally up...
-   40 points or more
-   start your own fund!
-   35 to 39 points
-   call Sequoia, Kleiner, Perkins
-   let them know you’re available...
-   25 to 34 points
-   send your resume to

-       2,000 VCs
-   and pray
-   24 points or less
-   work until you score more

-     and in the meantime
-   fly kulula
-   fly kulula
-   bottom line...
-   only become a VC
-   after having the shit kicked out of you
-        stand out from all the other
-            full-of-**it artists

-   who entered VC when they were young
-   you’ll be really able to help

-   your portfolio companies
-   which is what VC is all about
-   .
-      Henk Kleynhans

-      www.skyrove.com
-     henk@skyrove.com

-        0861 ROVERS
-   Blog: www.geekrebel.com
Henk Kleynhans - Lifting The Venture Capital Skirt - Net Prophet 2009
Henk Kleynhans - Lifting The Venture Capital Skirt - Net Prophet 2009
Henk Kleynhans - Lifting The Venture Capital Skirt - Net Prophet 2009
Henk Kleynhans - Lifting The Venture Capital Skirt - Net Prophet 2009
Henk Kleynhans - Lifting The Venture Capital Skirt - Net Prophet 2009
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Henk Kleynhans - Lifting The Venture Capital Skirt - Net Prophet 2009

  1. 1. Lifting the Venture Capital Skirt By Henk Kleynhans Silver Sponsors
  2. 2. - Henk Kleynhans - founder - CEO CTO
  3. 3. - 3 parts - - my past - - my (short) VC experience - - Venture Capital Aptitude Test
  4. 4. - my past
  5. 5. - student - financial aid - UCT
  6. 6. - internet junkie
  7. 7. - internet junkie
  8. 8. - YouTube, I
  9. 9. - 2003 - wifi - adsl - becoming mainstream
  10. 10. - ADSL cost R1200 per month - Capped at 3GB usage
  11. 11. - SHARE - adsl - wifi - $
  12. 12. - looked far and wide
  13. 13. - SHARE
  14. 14. - the problem was
  15. 15. - time
  16. 16. - big problem
  17. 17. - movies - slow down
  18. 18. - hit my cap
  19. 19. - only what they eat - NOT how much time they take to eat it
  20. 20. - simply didn’t exist
  21. 21. - So... - I decided to - build it!
  22. 22. - scratch my own itch
  23. 23. - solve a problem
  24. 24. - laptop - broadband - cheap - share - convenient - neighbours - no modems - no line rentals - $$$ - no contracts
  25. 25. - end-users
  26. 26. - end-users == Skyrovers
  27. 27. - start their own Skyrove hotspot
  28. 28. - virally - spread affordable and convenient internet access
  29. 29. - income
  30. 30. - 100s
  31. 31. - 1000s
  32. 32. - small entrepreneurs
  33. 33. - around the world
  34. 34. - ?
  35. 35. - who does NOT think - this was a brilliant idea?
  36. 36. - just a BIG IDEA
  37. 37. - competition - Big Ideas
  38. 38. - National Innovation Competition
  39. 39. - my buddy Al - marketing student
  40. 40. - this thing called - a Business Plan!
  41. 41. - Al was busy writing his thesis
  42. 42. - “If you want something done... - ask a busy man!”
  43. 43. - worked days and nights - this thing called: - Market Research!
  44. 44. - & a thing called... - Financial Projections!
  45. 45. - VERY CLEARLY
  46. 46. - VERY CLEARLY
  47. 47. - by Year 2 - 100 Million Dollars
  48. 48. - Dr Evil Picture
  49. 49. - i’m not joking!
  50. 50. - business plan
  51. 51. - brilliant - world-changing - earth-shattering - paradigm-shifting - business plan
  52. 52. - fancy event
  53. 53. - 3rd place winners
  54. 54. - 2nd place winners
  55. 55. - So...
  56. 56. - clearing a path to the stage
  57. 57. - ...
  58. 58. - someone else won!
  59. 59. - cried a little - hugged each other - moved on...
  60. 60. - and on!
  61. 61. - market research - financial projections
  62. 62. - we were onto something big!
  63. 63. - looking for funding - raised $20,000 - overseas investor - hired first programmer
  64. 64. - launched 2006 - raised a million 2007
  65. 65. - 9500 20,000 customers - 300 600 hotspots
  66. 66. - 8 employees - Honours or Masters Degrees
  67. 67. - except for me...
  68. 68. - community - largest Hotspot network - continent
  69. 69. - 2005 - Top ICT Entrepreneur - Business Report / Enablis
  70. 70. - 2006 - TT100 Minister’s Award - Most Promising Emerging Enterprise
  71. 71. - 2008 - Mail & Guardain - 200 Young South Africans - You Must Take To Lunch
  72. 72. - Department of Science and Technology
  73. 73. - trip to Germany
  74. 74. - (thank you Minister)
  75. 75. - overseas investors
  76. 76. - proved - young South Africans - leaders in innovation - technology - commercialization
  77. 77. - but -
  78. 78. - Rotterdam - Berlin - Vancouver - Silicon Valley
  79. 79. - part 2 -
  80. 80. - My meandering VC experience
  81. 81. - have raised SOME money
  82. 82. - failed to raise MUCH more
  83. 83. - first investor: Silicon Valley - $20,000
  84. 84. - 3 year period
  85. 85. - but get shares upfront
  86. 86. - upside
  87. 87. - family member - R100k
  88. 88. - venture capital
  89. 89. - mentor capital
  90. 90. - zero money
  91. 91. - flirted with big VC
  92. 92. - term sheet
  93. 93. - pulled out last minute - when principal left
  94. 94. - *phew*
  95. 95. - got lucky
  96. 96. - (or smart)
  97. 97. - found investor - zero bullshiitake - “gets it”
  98. 98. - one bar
  99. 99. - WILLs and WON’Ts
  100. 100. - will NOT accept an offer
  101. 101. - gives majority board control
  102. 102. - to minority shareholder
  103. 103. - I know my market and my product better
  104. 104. - I will NOT accept an offer
  105. 105. - for more money than I need
  106. 106. - especially in tranches - = stock options
  107. 107. - I will not accept VC before
  108. 108. - 2-minute noodle profitable
  109. 109. - I will
  110. 110. - phone the founders - BEFORE - serious talks with any VC
  111. 111. - I will
  112. 112. - GRILL the VC at first presentation
  113. 113. - portfolio companies - successes - experience
  114. 114. - I will not...
  115. 115. - pay for Due Diligence costs
  116. 116. - spending time with you...
  117. 117. - is more expensive to me...
  118. 118. - than it is to you!
  119. 119. - I will not...
  120. 120. - give shares to “Mentor Capitalists”
  121. 121. - will work harder for you - give better advice - keep your interests at heart
  122. 122. - if it puts its money - where its mouth is
  123. 123. - part 3
  124. 124. - the Venture Capital Aptitude Test
  125. 125. - (credit to Guy Kawasaki)
  126. 126. - “You know you’re in a bubble when young people get into VC”
  127. 127. - “VC should be your last job, not your first.”
  128. 128. - “When you’re young, you should work 80 hours a week to create a product or service that changes the world. You should not sit in board meetings listening to an entrepreneur explaining why she missed her numbers while you read mail on a Blackberry and intermittently spew forth gems like:
  129. 129. - ‘You should partner with MySpace! I can also introduce you to some of the losers in our portfolio’
  130. 130. - entrepreneurs - aspirant VCs - existing VCs
  131. 131. - 3.1 Work Background
  132. 132. - Engineering - plus 5 points
  133. 133. - understand technology - does it defy the laws of physics?
  134. 134. - Sales - plus 5 points
  135. 135. - introduce a product and - sell it
  136. 136. - “sales fixes everything”
  137. 137. - Management Consulting - minus 5 points
  138. 138. - Investment Consulting - minus 5 points
  139. 139. - Accounting - minus 5 points
  140. 140. - 3 worst backgrounds - Consulting, Banking, Accounting
  141. 141. - Management Consulting - “implementation is easy, - insights are hard”
  142. 142. - opposite is true in startups
  143. 143. - Investment Banking - “everything can be reduced to - cells on a spreadsheet”
  144. 144. - P/Es - Build companies for JSE, not customers - do deals, don’t build companies
  145. 145. - accounting - belief that history not only - repeats itself...
  146. 146. - but it predicts the future
  147. 147. - financial models are almost totally irrelevant because there’s no financial wizardry involved in making a good product and selling the heck out of it.
  148. 148. - MBA - minus 5 points
  149. 149. - upside
  150. 150. - tools and knowledge may help
  151. 151. - e.g. 25% of $1.6 billion - is $400 million
  152. 152. - downside
  153. 153. - hollow arrogance of someone - who’s never been tested
  154. 154. - 3.2 The Right Stuff - (First Hand Experience)
  155. 155. - you may have been in the right places
  156. 156. - but have you been - KICKED - in the right places?
  157. 157. - kicked in the groin by - major, long-lasting economic downturn - plus 1 point
  158. 158. - worked at a successful startup - plus 1 point
  159. 159. - worked at a failed startup - plus 3 points
  160. 160. - you’ll understand 3 things: - 1. how hard it is to achieve success - 2. world doesn’t owe you a thing - 3. what it’s like to be fired or laid off
  161. 161. - worked at a public company - plus 1 point - (know the end goal, warts & all)
  162. 162. - held a CEO position - plus 2 points
  163. 163. - fantasy experience out of your system - won’t try and run startup from a board position
  164. 164. - been an angel investor...
  165. 165. - with your OWN money - plus 2 points
  166. 166. - understand the responsibility of investing other people’s money
  167. 167. - 3.3 Necessary Knowledge
  168. 168. - Can you answer the following questions for entrepreneurs?
  169. 169. - How do I... - introduce a product with no budget? - plus 2 points
  170. 170. - How do I... - determine if there really is a market demand for my product? - plus 1 point
  171. 171. - What do I do... - if customers hate our first product? - plus 1 point
  172. 172. - How do I... - get Walt Mossberg to return my call? - plus 2 points
  173. 173. - How do I... - get to the folks who run DEMO? - plus 1 point
  174. 174. - How do I... - get a plug in TechCrunch? - plus 2 points
  175. 175. - How do I... - dominate a segment with 5 competitors doing essentially the same thing? - plus 2 points
  176. 176. - How much... - time, energy & money - should I spend on patent protection? - plus 1 point
  177. 177. - What do I do now... - if I bet on the wrong architecture for our product? - plus 2 points
  178. 178. - What kind of... - people should I hire? - Young, old, proven, unproven, cheap, expensive, local, remote? - plus 1 point
  179. 179. - How do I... - get them to leave their jobs - without throwing money - plus 2 points
  180. 180. - How do I... - tell my friend that he cannot - be CFO - just because he’s a co-founder? - plus 2 points
  181. 181. - How do I get... - the Buyer at Incredible Connection - to return my call? - plus 1 point
  182. 182. - How do I... - handle a customer who wants to send back his purchase for a full refund? - plus 1 point -
  183. 183. - How do I ... - fire people? - plus 2 points
  184. 184. - How do I ... - lay people off? - plus 2 points
  185. 185. - tally up...
  186. 186. - 40 points or more
  187. 187. - start your own fund!
  188. 188. - 35 to 39 points
  189. 189. - call Sequoia, Kleiner, Perkins
  190. 190. - let them know you’re available...
  191. 191. - 25 to 34 points
  192. 192. - send your resume to - 2,000 VCs
  193. 193. - and pray
  194. 194. - 24 points or less
  195. 195. - work until you score more - and in the meantime
  196. 196. - fly kulula
  197. 197. - fly kulula
  198. 198. - bottom line...
  199. 199. - only become a VC
  200. 200. - after having the shit kicked out of you
  201. 201. - stand out from all the other - full-of-**it artists - who entered VC when they were young
  202. 202. - you’ll be really able to help - your portfolio companies
  203. 203. - which is what VC is all about
  204. 204. - .
  205. 205. - Henk Kleynhans - www.skyrove.com - henk@skyrove.com - 0861 ROVERS - Blog: www.geekrebel.com

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