Do you need VC ?

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Do you need VC ?

  1. 1. Introduction For more detail: www.linkedin.com /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. 2. Venture Capital – Do VCs add value? <ul><li>Advice and Strategy </li></ul><ul><li>Go-to-market </li></ul><ul><ul><li>Refine use cases </li></ul></ul><ul><ul><li>Direct/Indirect </li></ul></ul><ul><ul><li>Business model </li></ul></ul><ul><li>Hiring </li></ul><ul><ul><li>Senior management </li></ul></ul><ul><ul><li>Sales </li></ul></ul><ul><ul><li>Advisory Board </li></ul></ul><ul><li>Partnerships </li></ul><ul><li>Internationalisation </li></ul><ul><li>Trusted service provider relationships </li></ul><ul><ul><li>Search / recruiting </li></ul></ul><ul><ul><li>Branding / PR </li></ul></ul><ul><ul><li>Finance, etc </li></ul></ul><ul><li>Profile and PR </li></ul><ul><li>Exit optimisation </li></ul><ul><ul><li>Knowledge / contacts with relevant buyers </li></ul></ul>The good ones do!
  3. 3. Venture Capital – Typical Deal Terms <ul><li>Target 20-35% ownership </li></ul><ul><li>Board Representation </li></ul><ul><li>Liquidation Preference </li></ul><ul><li>Participation rights </li></ul><ul><ul><li>Depending on round of funding and company stage </li></ul></ul><ul><li>Certain control and veto rights (if needed) </li></ul><ul><li>Option Pool </li></ul><ul><ul><li>for management/employees </li></ul></ul><ul><li>Period of exclusivity to close legal/diligence </li></ul>
  4. 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. 5. When NOT to raise VC <ul><li>Risk is not that you waste time unsuccessfully trying to raise finance … </li></ul><ul><li>… real danger is that you do succeed in raising VC funds </li></ul><ul><ul><li>Lose opportunity for small exit which could be personally lucrative </li></ul></ul><ul><ul><li>Lose opportunity to run lifestyle business </li></ul></ul><ul><ul><li>Get bound in to 3+ yrs work you may not enjoy </li></ul></ul>Application is a feature not a product Market size is too small Motivation is not financial Source: Ben Holmes VC presentation
  6. 6. Identifying potential VC partners <ul><li>Do create a shortlist </li></ul><ul><li>Do not over-expose to market </li></ul>Has funds to invest Match of Size/Stage/ Geography Relevant Focus/ability to help No directly competitive investments Team track record Shortlist
  7. 7. Valuation should not be the decisive factor Value at exit Probability of getting there % share of business at exit Entrepreneur’s Equation <ul><li>Revenues / Profitability </li></ul><ul><li>Growth rate </li></ul><ul><li>Team quality </li></ul><ul><li>Strategic fit with buyer community </li></ul><ul><li>Well managed exit process </li></ul><ul><li>Fewest strategic errors made </li></ul><ul><li>Hiring (quality & speed) </li></ul><ul><li>Partnerships </li></ul><ul><li>Product development </li></ul><ul><li>Valuation at initial round </li></ul><ul><li>Valuation and dilution at subsequent rounds </li></ul><ul><li>Option grants </li></ul>Source: Ben Holmes VC presentation
  8. 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

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