Why Many Entrepreneurs "Miss The VC Boat" and What To Do About It - Supernova 2008

A Few Quick Observations on Why Many Entrepreneurs Keep “Missing the VC Boat” & What To Do About It Steve Barsh www.stevebarsh.com  blog.stevebarsh.com steve@barsh.com  +1.215.888.2101  twitter: sbarsh

Raising Capital Too Early “Premature Pitching”
Too early?
Too many assumptions
Chasing money rather than “ de-risking ”
Wasting time, energy & focus
Business is based on 3 – 7 key assumptions = risks (see CBE blog post)
Spend more time
Refining extremely compelling value proposition (see “Stop Coding, Start Marketing” blog post)
“ De-risking ” the business model, e.g.,
Market demand
Differentiators
Pricing
stevebarsh.com

Out-of-Box Ideas for “De-Risking” Using Very Little Cash!
Testing via cost-per-click advertising
Market demand is there (may have to use A/B Testing)
The right price (test multiple price points)
Positioning works / key messages (try variations)
Differentiation resonates with target market (is there “lift?”)
SWAT team / “Rent-A-Coder” product development approach
Build a “ good enough ” version -- get it in the hands of real users
Get “ in market ” to get feedback, results, adoption
Start collecting relevant metrics as soon as possible
Your OOB ideas / experiments ? NITMOI.
stevebarsh.com

Most Entrepreneurs Don’t Seem To Know The Implications Of The VC “Magic Ratios”
VC wants 7 – 10x in 3 – 5 years purchasing 30 - 40% @ early stage
Example
Entrepreneur wants to raise $2 million for their Series A
VC buys 40% and may assume they only own 20% at exit
Implication for entrepreneurs?
Just pegged exit @ $100+ million ($2 million @ 10x = $20 million, which is 20% of $100 million)
So entrepreneur needs to show a path to…
Traffic / customers / users (and what’s the value of each?)
Revenue (companies in that space acquired for what multiple?)
Profits (companies in that space acquired for what multiple?)
stevebarsh.com

A Few Quick Observations on Why Many Entrepreneurs Keep “Missing the VC Boat” & What To Do About It Steve Barsh www.stevebarsh.com  blog.stevebarsh.com steve@barsh.com  +1.215.888.2101  twitter: sbarsh

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Why Many Entrepreneurs "Miss The VC Boat" and What To Do About It - Supernova 2008

by Steve Barsh on Jun 17, 2008

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Why Many Entrepreneurs "Miss The VC Boat" and What To Do About It - Supernova 2008 — Presentation Transcript