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Do you need VC ?


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  • 1. Introduction For more detail: /in/ ganeshrengaswamy B.Tech Student 92-96 PGDM Student Investor Founder EM Fund 97-99 Technology Delivery, BD, Sales 99-2004 MBA Student Consumer Founder 04-06 VC India Lead 06-08
  • 2. Venture Capital – Do VCs add value?
    • Advice and Strategy
    • Go-to-market
      • Refine use cases
      • Direct/Indirect
      • Business model
    • Hiring
      • Senior management
      • Sales
      • Advisory Board
    • Partnerships
    • Internationalisation
    • Trusted service provider relationships
      • Search / recruiting
      • Branding / PR
      • Finance, etc
    • Profile and PR
    • Exit optimisation
      • Knowledge / contacts with relevant buyers
    The good ones do!
  • 3. Venture Capital – Typical Deal Terms
    • Target 20-35% ownership
    • Board Representation
    • Liquidation Preference
    • Participation rights
      • Depending on round of funding and company stage
    • Certain control and veto rights (if needed)
    • Option Pool
      • for management/employees
    • Period of exclusivity to close legal/diligence
  • 4. Good reasons to raise VC Source: Ben Holmes VC presentation Large Potential Market Opportunity Unique Product Or Concept Passionate Founding Team Pre-conditions Intense competition likely Need to move rapidly Implications… Hiring Strategy VC funding supports Rapid Product Development Internationalisation Go to market Commercialisation
  • 5. When NOT to raise VC
    • Risk is not that you waste time unsuccessfully trying to raise finance …
    • … real danger is that you do succeed in raising VC funds
      • Lose opportunity for small exit which could be personally lucrative
      • Lose opportunity to run lifestyle business
      • Get bound in to 3+ yrs work you may not enjoy
    Application is a feature not a product Market size is too small Motivation is not financial Source: Ben Holmes VC presentation
  • 6. Identifying potential VC partners
    • Do create a shortlist
    • Do not over-expose to market
    Has funds to invest Match of Size/Stage/ Geography Relevant Focus/ability to help No directly competitive investments Team track record Shortlist
  • 7. Valuation should not be the decisive factor Value at exit Probability of getting there % share of business at exit Entrepreneur’s Equation
    • Revenues / Profitability
    • Growth rate
    • Team quality
    • Strategic fit with buyer community
    • Well managed exit process
    • Fewest strategic errors made
    • Hiring (quality & speed)
    • Partnerships
    • Product development
    • Valuation at initial round
    • Valuation and dilution at subsequent rounds
    • Option grants
    Source: Ben Holmes VC presentation
  • 8. Key things to consider Right partner at a fair price vs. Any partner at best price Relationship with to be Board Member & broader team Valuation and associated deal terms Stage/focus and bandwidth/ability to help