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VC Funding for Geeks; or, How to Get Your Technology to Emerge the VC Way

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This was an etech talk by Marc Hedlund, Chief Product Officer, Wesabe

Geeks and venture capitalists often don't speak the same language. This talk provides a look at venture capital financing from the point of view of the technologist. If you have an idea for a technology company or a technology you'd like to make into a product, should you look for VC backing? What should your expectations be going into the process? What are some of the common pitfalls technologists encounter when they try to find VC funding? How can you talk about your technology and your company in a way that will appeal to potential venture backers?

We'll approach the topic of venture backing without getting bogged down in the finance terminology common to VC primers (though references for those topics will be provided). You'll be given a more informal set of advice; rules of thumb and cautions will predominate.

Published in: Business, Economy & Finance

VC Funding for Geeks; or, How to Get Your Technology to Emerge the VC Way

  1. vc funding for geeks [email_address]
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  10. okay
  11. #1: vc’s don’t start new companies
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  13. <ul><li>customers </li></ul><ul><li>a customer </li></ul><ul><li>consulting </li></ul><ul><li>angel investors </li></ul><ul><li>bank loans </li></ul><ul><li>government grants </li></ul>yourself
  14. #2: focus on the business first not the funding
  15. if ($vc->will_fund()) { $company->accelerate(); } // need an else {} statement!
  16. <ul><li>build the product </li></ul><ul><li>get users </li></ul><ul><li>make money </li></ul><ul><li>don’t spend it </li></ul><ul><li>get to break-even </li></ul><ul><li>then and only then </li></ul><ul><li>think about vc </li></ul>
  17. <ul><li>money, for a while </li></ul><ul><li>credibility (maybe) </li></ul><ul><li>guidance and review (maybe good) </li></ul><ul><li>some introductions (maybe) </li></ul><ul><li>advocates for the company </li></ul>
  18. <ul><li>the trick: </li></ul><ul><li>the best way to get vc </li></ul><ul><li>is not to need it </li></ul>
  19. <ul><li>millions in development costs </li></ul><ul><li>vc-backed competitors (sometimes) </li></ul><ul><li>need big partners </li></ul>
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  21. #3: no means maybe yes means maybe
  22. // pitch() returns an int, not a boolean int reaction = vc.pitch(); while (reaction <= 0) { Thread.sleep(MONTH); reaction = vc.update(progress); }
  23. if (reaction > 0) { }
  24. #4: funding is more than a full-time job
  25. <ul><li>“ i’m going to handle [ any job ] and fundraising” </li></ul>
  26. <ul><li>“ we’re going to do the </li></ul><ul><li>[ marketing, bizdev, sales ] </li></ul><ul><li>ourselves” </li></ul>
  27. <ul><li>on average </li></ul><ul><li>10 face-to-face pitches = 1 term sheet </li></ul><ul><li>(but it’s not even-flow) </li></ul><ul><li>3 term sheets = 1 financing </li></ul><ul><li>from pitch to term sheet: 2 months </li></ul><ul><li>(may be 10 or more meetings) </li></ul><ul><li>from term sheet to money: 1 month </li></ul><ul><li>total time: 6-12 months </li></ul>
  28. #5: some things about vcs
  29. <ul><li>vc is a business, too </li></ul><ul><li>see Tim Oren’s </li></ul><ul><li>“ No Exit: When Venture Capital Isn't Right” </li></ul><ul><li>http://due-diligence.typepad.com </li></ul>
  30. <ul><li>funders != founders </li></ul><ul><li>investors != inventors </li></ul>
  31. <ul><li>august and december </li></ul>
  32. okay
  33. what you need
  34. <ul><li>powerpoint presentation, 10-15 slides </li></ul><ul><li>executive summary, 2-3 pages </li></ul><ul><li>an introduction to a vc </li></ul>
  35. on pitches: Brad Feld: The Torturous World of PowerPoint http://www.feld.com/blog/ VentureBlog: Presenting Your Company http://www.ventureblog.com/
  36. the technologist’s trap
  37. <ul><li>will customers care about this product? </li></ul><ul><li>are they high-margin customers? </li></ul><ul><li>what has changed to allow a startup to grow? </li></ul><ul><li>are there enough customers willing to pay? </li></ul><ul><li>is there a sales channel that will be profitable? </li></ul>do I want to work with these people for five years? are the numbers believable? how much to get to profitability? do they know the competition? how well are they positioned? do I believe these people can win?
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  39. <ul><li>questions </li></ul>

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