Inside The Mind Of The Venture Capitalist: An Introduction to Venture Capital

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The was the first is a series of presentations by Inside the Mind of The Venture Capitalist, presenting the basic foundations of Venture Capital and what Venture Capitalists look for in companies.

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Inside The Mind Of The Venture Capitalist: An Introduction to Venture Capital

  1. 1. An Introduction to Venture Capital
  2. 2. About The VC J. Skyler Fernandes - VC @ Centripetal Capital Partners, invests $1-3M across industry sectors - VC Mentor @ ER Accelerator - Entrepreneur, co-founded a number of internet startups - Leads Missing Middle Initiative, launched at World Economic Forum Connect With J. Skyler Fernandes: 2
  3. 3. Why We’re Here I’m not here for you to pitch me your investment (unless you’re the next Google!) I’m here to: - Answer questions on Venture Capital - Help you be a more successful entrepreneur The VC world looks complicated and closed. Can seem scary and feel you’re in the dark. Purpose of event: To be very open with questions and answers with entrepreneurs Tonight, let me be your VC sherpa! 3
  4. 4. When To Seek Funding?It Depends…Ideal Time For VC CouldBe After Initial Testing &Proof Of ConceptOr Even After You’ve BeenAround For A Few Years! 4
  5. 5. Do You Need VC Funding?$14,000,000.00$12,000,000.00$10,000,000.00 $8,000,000.00 $6,000,000.00 $4,000,000.00 $2,000,000.00 $- Year 1 Year 2 Year 3 Year 4 Year 5$(2,000,000.00) Revenue Expenses EBITDA 5
  6. 6. Size Matters: Your Funding Options Private EquityCurrent Company Valuation: Angels: $1-5M ($50M-100M+) VC: $5-100M Venture Capital PE:100M+ ($3M-50M) Missing Middle ($1M-3M) Angel Capital (up to $1M) Friends & Family Know the type of capital you need to execute your plan: (up to $1M) Sources & Uses Debt Negative EBITDA vs. Cumulative Bootstrap Negative EBITDA Value of the $: Ownership (5-50%+) + Relationships + Experience 6
  7. 7. The Two Most Important Words IRR Angels: >50%+ VC: 30-50% PE: 10-30% Return Multiple Angels: 20x+ VCs: 5-20x PE: 2-5x 7
  8. 8. Value of the $ / Brand Raise more than you need …Takes Longer / Costs More Angels Advisors: 0.10%-1% Capital = 5-20%+ Ownership Intro to VCs Intro to Customers / Partners Operational Experience Test the demand 8
  9. 9. Value of the $ / Brand Raise more than you need …Takes Longer / Costs More VCs: Board Seat Capital = 10-50%+ Ability to do follow on rounds Intro to larger capital Intro to Customers / Partners Operational Experience Early Stage growth capital Scare Away Competition / Protect Company 9
  10. 10. How To Find The Right VC For You Do Your Research & Find A Fund That… - Invests in your sector - Invests at your stage - Not invested in a competitor - Invests your needed $ size - Is located in your area First Choice Is To Find A VC You Have Connections To! 10
  11. 11. Working With A VC It’s Like A Marriage… Keys To A Successful VC Relationship: - Compatibility - Honesty - Communication - Effort - Understanding - Faithfulness - Ability To Change 11
  12. 12. The Goal! …But unlike a successful marriage asuccessful VC relationship is temporary. Goal is to part ways in 3-5 years Assets are split 12
  13. 13. What Do VCs Really Invest In? Or 13
  14. 14. Pitching To A VC Key Elements For Success: • Be Introduced, Don’t E-mail/Call • You Are The Brand: so own that and be the “best you” you can be for your company • NDA: Not needed until 2nd/3rd meeting • Business Plan vs. Pitch Deck • A Way To Get Rich: Emphasize how to make a lot of money and quickly • Don’t Do Their Job: Don’t come to the table with your own term sheet • Know The Financial Return Potential • Capital Raise Strategy: Round 1, 2, 3 14
  15. 15. Common Missing Items Key Elements For Success: • General Market Size vs. Target Market Size • Large & Growing or Strong Niche / High $ • Market Gap: Why does gap exist? • We Have No Competition – Direct / Indirect Competition? • Reaction of entry into marketplace? • Proprietary = Patents & Relationships • These Are Conservative Projections – Show low case/ base case / high case 15
  16. 16. Dedication Key Elements For Success: • Personal Investment: Skin in the Game – Size doesn’t matter, but how meaningful to you • Full-Time Commitment: Don’t half ass – No side projects! • Don’t just be looking to create a job because you lost yours – Even after funded could be no salary • Not looking to stay forever – Desire to sell in 5 yr 16
  17. 17. Be Smart Key Elements For Success: • Be Respectful / Don’t Be Fearful – VCs see lots of business pitches • Don’t Be Overly Emotional / Be Passionate – Don’t take anything too personal • Don’t sell the house / all assets – Take care of family first • Spend time really vetting your idea • Gather the right team / Cut people quick 17
  18. 18. Advice:80/20 Rule – Don’t get bogged down in developmentFocus On Customer Not TechnologyTest Market Well To Find Your Achilles Heel Be Prepared to Pivot Pivoting Failure 18
  19. 19. Questions? 19

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