Venture Capital 101 - I'm a VC, Who Are You?


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"Venture Capital 101 - I'm a VC, Who Are You?" walks you through the essentials of venture capital, early stage funding alternatives, and the difference between good and bad VC to an audience new to fundraising. I first gave this talk to Interactive Communication students at Berghs School of Communications in Stockholm, Sweden, March 2013.
Update Feb 3rd 2016: Updated version to reflect the changing investment scene, including additional recommended reading and founder resources.

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Venture Capital 101 - I'm a VC, Who Are You?

  1. 1. I’m A VC - Who Are You? Venture Capital 101 @paulamarttila
  2. 2. VENTURE CAPITAL - CHE? Business Model, Investment Stages And Criteria, Value Proposition EARLY STAGE FUNDING Angel Funding, Seed Funding, Accelerators, Equity Crowdfunding THE DATING GAME i.e. How To Get Married, The Good vs Bad VC, Due Diligence, The Pitch Agenda @paulamarttila
  3. 3. Invest Other People’s = LPs $$$ (LPs = Limited Partners, e.g. Pension Funds, Schools) Bet On Few Home Runs:10% Of Investments Expected To Drive Fund’s Entire Returns (Average 10-20X ROI per Investment) Average Investment Fund Life Time: 8 -10 Years => Raise New Funds To Invest With Invest During Company’s Different Growth Stages: Seed, Series A, B, C, D... => IPO / M&A Defined Investment Stages Or Stage Agnostic VC Defined Investment Thesis Or Follow Tech Trends Herd Mentality And FOMO: “We’re in if other big names are.” @paulamarttila Venture Capital - Che?
  4. 4. Venture Capital Continued: Firm Structure: Partner = Funding Decisions / Board Seats, Associate = Deal Sourcing / Due Diligence Often Co-Invest In Syndicates, As Lead Investor Or Follower. Lead Investor Sets The Investment Terms. Equity Stakes And Company Valuation Vary Depending On Stage & Growth Trajectory Expected Time To ROI: 5-8 Years YES to: High Growth Markets NO to: Lifestyle, Consulting Businesses Additional Value Propositions: Hiring, Network, Follow-On Funding, Platform Offering Incl. Back Office Expertise, e.g. @paulamarttila
  5. 5. Early Stage Funding @paulamarttila
  6. 6. “I Have An Idea” Minimum Viable Product (MVP) With Early Traction (Without Previous Track Record) - Bootstrapping - FFF: F(riends) F(amily) F(ools) - Accelerator Programs, Corporate Accelerator Programs - Equity Crowdfunding - Angel Investors & Early Stage VC @paulamarttila
  7. 7. PRO: Market Validation CON: No Lead Investor E.g. FundedByMe, Seedrs Obs! Make Sure VC Compatible Terms - Primary Task: Function As Filter For Investor Deal Flow - Offering: Visibility, Mentoring, Network, Validation (Follow-on Funding) - Individual Terms, Transparency Is Key. Talk To Alumni Companies! - E.g. TechStars (6% / $20K + $100K Convertible Note Option), Seedcamp (7% / €75K) - Corporate Accelerators Differ By Having Varying Offerings And Program Formats - Check: Track Record, Mentor List, If Program Format Follows Best Practise @paulamarttila Accelerator Programs Equity Crowdfunding
  8. 8. - Invest Private $$$. Usually Co-invest With Small Ticket Sizes - Preferably On AngelList And Well Connected. E.g. AngelList Syndicates - Primary Function: Smart $, i.e. Add Entrepreneurial Value. Help Raise Follow-on Funding - Terms & Equity Stake Must Support Follow-on Funding Terms - Rarely Follow-on Invest, But Can Do So With Discounted Price - Primary Function: Secure Funds To Validate Product/Market Fit, Approx. With 12-18 Months Runway - Often Co-invest, Don’t Usually Follow-on Invest Early Stage VCs Angel Investors @paulamarttila
  9. 9. What Do Investors Look For? @paulamarttila
  10. 10. #1 Stellar Team @paulamarttila
  11. 11. #2 Great Product With Traction @paulamarttila
  12. 12. @paulamarttila
  13. 13. Copyright: @gapingvoid “Startups’ biggest hurdle is to overcome indifference” @paulamarttila
  14. 14. #3 Growth Markets Unit Economics & Scale! @paulamarttila
  15. 15. The Dating Game @paulamarttila
  16. 16. “I usually know within 3 min if I want to fund you, within 10 min if I want to fund your business.”- @paulamarttila Fred Destin, Accel Partners
  17. 17. Storytelling Introductions Create Relationships @paulamarttila Required:
  18. 18. “After 10X on The Tonight Show people start to recognize you as someone who might have been on TV, but they have no idea who the hell you are.”- Steve Martin @paulamarttila
  19. 19. “Ask For $, You Get Advice - Ask For Advice, You Get $” - Jason Nazar, Docstoc @paulamarttila
  20. 20. Don’t Fall For Vanity Metrics @paulamarttila Keep Good Investors Updated Show Progress Startup To-do List
  21. 21. You’re being tracked: Stick to your story and metrics! @paulamarttila “Our CRM allows us to instantly see the number of employees, social traction, and progress in multiple distribution channels before speaking to a company, allowing us to be much more proactive in our approach.” James Wise, Balderton Capital
  22. 22. @paulamarttila The Good vs Bad VC
  23. 23. @paulamarttila
  24. 24. Tests & Uses Services Gets Fast To NO Not Your “Best” Buddy Available Helps Execute by Challenging You Doesn’t Micromanage: Founder Calls The Shots Doesn’t Get Sour During Hard Times The Good VC #MUSTLISTEN 2016/01/18/accels-fred- destin-on-why-startups- fail-and-founders-get-fired/ @paulamarttila
  25. 25. @paulamarttila
  26. 26. The Bad VC The banker The name dropper The dude on 20 boards The guy with a yacht club membership The generalist The celebrity The ‘non seed’ VC The outsider The penniless VC The opaque VC The blabbermouth Douchebags by @Startupcfo: @paulamarttila Only Lead To: Never-ending Follow Up Meetings Asshat Moves
  27. 27. When an investor suggests ways to become more viral, I’m like... @paulamarttila
  28. 28. @paulamarttila
  29. 29. Due Diligence Goes both ways. Things To Check: - Relevant to your business and market - Investor Portfolio for competitors, synergies - Capital left to invest in current fund - Track record of the firm and partners - Transparency in communications and terms - Talk to portfolio companies! @paulamarttila
  30. 30. Recommended Reading & Resources STEALTH MODE #mustread VENTURE CAPITAL your-friends/ FUNDRAISING HACKS video: DUE DILIGENCE DILUTION CALCULATOR FOUNDER & ACCELERATOR RESOURCES #Goodreads @paulamarttila
  31. 31. R E M E M B E R , S TA RT U P S A R E H A R D @paulamarttila
  32. 32. @paulamarttila Thank You
  33. 33. I M A G E C R E D I T S @paulamarttila (Nobody cares) (Good-bye Eyeball) (World's biggest hockey stick) (Friends) (You're Awesome) (My problem) (Hamilton Fans) (Wild horses) (Ducks) (Call me maybe) (Bs free) (Yes - ¥€$) (Good Advice for Hard Times) (Training Day) (Born Standing Up)