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©2009, Jason Mendelson.  All Stupidity contained within is his own and not that of Foundry Group Jason Mendelson Guest of ...
<ul><li>Today’s Agenda: </li></ul><ul><ul><li>What Makes VCs tick? </li></ul></ul><ul><ul><ul><li>How do VCs answer to? </...
About Me <ul><li>Co-Founder and Managing Director of Foundry Group </li></ul><ul><li>Managing Director, CAO and GC at Mobi...
What Makes VCs Tick ©2009, Jason Mendelson.  All Stupidity contained within is his own and not that of Foundry Group Fund ...
What Makes VCs Tick ©2009, Jason Mendelson.  All Stupidity contained within is his own and not that of Foundry Group Besid...
What Makes VCs Tick <ul><li>How Do You Impress? </li></ul><ul><ul><li>Know the “rules” beforehand </li></ul></ul><ul><ul><...
What Makes VCs Tick <ul><li>How Do You Know If You Are Talking To the Right VC? </li></ul><ul><ul><li>Do they invest in yo...
What Makes VCs Tick <ul><li>How Is the Economy Affecting VCs? </li></ul><ul><ul><li>Depends who you are: </li></ul></ul><u...
What’s Hot <ul><li>First before we go “there,” are you sure you want VC funding? </li></ul><ul><ul><li>Bootstrapping </li>...
What’s Hot <ul><li>How do I make my company more attractive? </li></ul><ul><ul><li>Do your homework </li></ul></ul><ul><ul...
What’s Not <ul><li>There are no exits </li></ul><ul><ul><li>IPO Market is gone </li></ul></ul><ul><ul><li>Mergers are scar...
What VCs Don’t Want To Tell You <ul><li>We aren’t valuation experts.  We don’t know your valuation, either </li></ul><ul><...
Questions and Answers <ul><li>Q&A </li></ul>©2009, Jason Mendelson.  All Stupidity contained within is his own and not tha...
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VC Crash Course - Feb 24 2009

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VC Crash Course - Feb 24 2009

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VC Crash Course - Feb 24 2009

  1. ©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group Jason Mendelson Guest of Silicon Flatirons February 24, 2009 Boulder, Colorado Venture Capital Crash Course - Everything that you wanted to know about VCs, but were afraid to ask
  2. <ul><li>Today’s Agenda: </li></ul><ul><ul><li>What Makes VCs tick? </li></ul></ul><ul><ul><ul><li>How do VCs answer to? </li></ul></ul></ul><ul><ul><ul><li>How do you impress them? </li></ul></ul></ul><ul><ul><ul><li>How do you know if you are talking to the right one? </li></ul></ul></ul><ul><ul><ul><li>How is today’s economy affecting them? </li></ul></ul></ul><ul><ul><li>What’s Hot? </li></ul></ul><ul><ul><ul><li>What companies are getting funded? </li></ul></ul></ul><ul><ul><ul><li>How do I make my company more attractive? </li></ul></ul></ul><ul><ul><ul><li>Do I need a team before I approach a VC? </li></ul></ul></ul><ul><ul><li>What’s Not? </li></ul></ul><ul><ul><ul><li>Exits and IPOs </li></ul></ul></ul><ul><ul><li>What’s VCs don’t want to tell you </li></ul></ul><ul><ul><ul><li>How they value your company </li></ul></ul></ul><ul><ul><ul><li>Failure isn’t always bad </li></ul></ul></ul><ul><ul><ul><li>Returns, Ownership and Fundraising </li></ul></ul></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  3. About Me <ul><li>Co-Founder and Managing Director of Foundry Group </li></ul><ul><li>Managing Director, CAO and GC at Mobius Venture Capital </li></ul><ul><li>Adjunct Professor at CU </li></ul><ul><li>Co-author of www.askthevc.com </li></ul><ul><li>Lawyer at Cooley Godward Kronish </li></ul><ul><li>Software Engineer at Accenture </li></ul><ul><li>Frustrated Musician </li></ul><ul><li>House-poor home remodeler </li></ul><ul><li>www.jasonmendelson.com </li></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  4. What Makes VCs Tick ©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group Fund Raising Cash Equity Returns Investors Venture Capitalists Firms ( aka Start-Ups; Portfolio Companies) Who Do VCs Answer to?
  5. What Makes VCs Tick ©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group Besides cash, What do we do?
  6. What Makes VCs Tick <ul><li>How Do You Impress? </li></ul><ul><ul><li>Know the “rules” beforehand </li></ul></ul><ul><ul><ul><li>Short communications, versus long. Emails versus phone calls, Executive Summaries versus Business Plans </li></ul></ul></ul><ul><ul><ul><li>Well crafted communications, just doesn’t save VC time, but shows quality of thought of the entrepreneur </li></ul></ul></ul><ul><ul><ul><li>Don’t make rookie mistakes like asking for a NDA </li></ul></ul></ul><ul><ul><li>Know your market, know you competitors and be original </li></ul></ul><ul><ul><ul><li>Being the 256 th social network is not original </li></ul></ul></ul><ul><ul><ul><li>Saying you have “no competition” is not believable </li></ul></ul></ul><ul><ul><ul><li>Not knowing the market is not wise (especially for you!) </li></ul></ul></ul><ul><ul><li>VCs need to invest in transformative companies, not “next best” </li></ul></ul><ul><ul><ul><li>It’s hard to sell stuff as a startup. Be compelling </li></ul></ul></ul><ul><ul><li>Be smart, but don’t be arrogant </li></ul></ul><ul><ul><ul><li>VCs have large egos and some even are smart </li></ul></ul></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  7. What Makes VCs Tick <ul><li>How Do You Know If You Are Talking To the Right VC? </li></ul><ul><ul><li>Do they invest in your similar companies? </li></ul></ul><ul><ul><ul><li>You don’t want a VC that’s invested in a competitor, but worry that the VC hasn’t a clue about what you are doing </li></ul></ul></ul><ul><ul><ul><li>Do they invest in your stage? </li></ul></ul></ul><ul><ul><li>Do they have money to invest? </li></ul></ul><ul><ul><ul><li>Don’t be afraid to ask about the status of their fund </li></ul></ul></ul><ul><ul><li>Do they have the power to get a deal done? </li></ul></ul><ul><ul><ul><li>Partner versus Associate </li></ul></ul></ul><ul><ul><ul><li>Lots of Associates go “fishing” </li></ul></ul></ul><ul><ul><li>Do you like them? </li></ul></ul><ul><ul><ul><li>Would you rather have a beer with your mother-in-law? </li></ul></ul></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  8. What Makes VCs Tick <ul><li>How Is the Economy Affecting VCs? </li></ul><ul><ul><li>Depends who you are: </li></ul></ul><ul><ul><ul><li>If you are an early stage fund with plenty of money, life is good </li></ul></ul></ul><ul><ul><ul><li>If you aren’t, life is less good </li></ul></ul></ul><ul><ul><ul><ul><li>Later stage investors don’t see exits </li></ul></ul></ul></ul><ul><ul><ul><ul><li>VCs without money are finding fundraising brutally hard </li></ul></ul></ul></ul><ul><ul><li>Limited Partners are cash constrained. Rumors of missed capital commitments abound </li></ul></ul><ul><ul><li>Boulder versus the rest of the U.S. versus the World </li></ul></ul><ul><ul><ul><li>All about the same – it’s tough all over </li></ul></ul></ul><ul><ul><ul><li>Interesting factoid: </li></ul></ul></ul><ul><ul><ul><ul><li>Most of Boulder VC money comes from out of state </li></ul></ul></ul></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  9. What’s Hot <ul><li>First before we go “there,” are you sure you want VC funding? </li></ul><ul><ul><li>Bootstrapping </li></ul></ul><ul><ul><li>How much do you want to raise? </li></ul></ul><ul><ul><ul><li>Many VCs need to invest substantial amount of cash </li></ul></ul></ul><ul><li>What companies are getting funded these days? </li></ul><ul><ul><li>Capital Efficient Businesses </li></ul></ul><ul><ul><ul><li>Much hard for VCs to get their deals funded by others </li></ul></ul></ul><ul><ul><ul><li>Bank financing is harder to come by </li></ul></ul></ul><ul><ul><li>Experienced management teams </li></ul></ul><ul><ul><li>Early Stage versus Later Stage </li></ul></ul><ul><ul><li>Sector Review: </li></ul></ul><ul><ul><ul><li>Cleantech, Software / IT, Medical / Bio, Mobile, Gaming, Retail, Sustainable Markets </li></ul></ul></ul><ul><ul><li>Experience Entrepreneurs who lived through tough times before </li></ul></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  10. What’s Hot <ul><li>How do I make my company more attractive? </li></ul><ul><ul><li>Do your homework </li></ul></ul><ul><ul><li>Talk to people – even VCs! </li></ul></ul><ul><ul><ul><li>Informal conversations are good </li></ul></ul></ul><ul><ul><ul><li>Fundraising conversations before ready are bad </li></ul></ul></ul><ul><ul><li>Do all that YOU can do / don’t sweat what you can’t </li></ul></ul><ul><li>Be crisp </li></ul><ul><ul><li>VCs have two limited resources – time and money </li></ul></ul><ul><li>Do I need a team? </li></ul><ul><ul><li>You need at least one partner </li></ul></ul><ul><ul><li>No one person knows everything </li></ul></ul><ul><ul><li>Also proves that someone else believes in what you are doing </li></ul></ul><ul><ul><li>A good management team has comprehensive experience and great self awareness </li></ul></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  11. What’s Not <ul><li>There are no exits </li></ul><ul><ul><li>IPO Market is gone </li></ul></ul><ul><ul><li>Mergers are scarce </li></ul></ul><ul><li>What is the affect on VCs and your fundraising? </li></ul><ul><ul><li>Going to scare some VCs </li></ul></ul><ul><ul><li>Going to really scare late stage investors </li></ul></ul><ul><li>What normally are VC expectations of exits? </li></ul><ul><ul><li>50% of companies return zero </li></ul></ul><ul><ul><li>70% probably don’t return that “much” </li></ul></ul><ul><ul><li>Really need big returns on the rest (5x? 10x? 100x?) </li></ul></ul><ul><ul><li>Old days and exit was around 5 years, now more like 7 years </li></ul></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  12. What VCs Don’t Want To Tell You <ul><li>We aren’t valuation experts. We don’t know your valuation, either </li></ul><ul><ul><li>It’s part art and part science. Okay, it’s mostly art </li></ul></ul><ul><li>We don’t know the right amount of money for you to raise as well as you do. We have past experience as our largest guide </li></ul><ul><ul><li>Get to a milestone. Don’t get stranded </li></ul></ul><ul><ul><li>Raise an amount appropriate to the particular VC </li></ul></ul><ul><li>You can know everything we know about negotiating term sheets </li></ul><ul><ul><li>www.feld.com (Term Sheet Series) </li></ul></ul><ul><li>VCs have certain ideas regarding ownership </li></ul><ul><ul><li>10% / 20% / 30% - more? </li></ul></ul><ul><li>Nothing is better than an intro from a VC’s friend / trusted source </li></ul><ul><ul><li>However, an introduction from another VC who is not investing in your company is usually bad </li></ul></ul><ul><li>Failure is not always Failure. It can be attractive </li></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group
  13. Questions and Answers <ul><li>Q&A </li></ul>©2009, Jason Mendelson. All Stupidity contained within is his own and not that of Foundry Group

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