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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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An Introduction to Venture Capital
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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:
3
Why We’re HereI’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!
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When To Seek Funding?It Depends…
Ideal Time For VC Could Be After Initial Testing & Proof Of Concept
Or Even After You’ve Been Around For A Few Years!
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Do You Need VC Funding?
$(2,000,000.00)
$-
$2,000,000.00
$4,000,000.00
$6,000,000.00
$8,000,000.00
$10,000,000.00
$12,000,000.00
$14,000,000.00
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue Expenses EBITDA
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Size Matters: Your Funding Options
Friends & Family
Debt
Bootstrap
Angel Capital
Venture Capital
Private Equity($50M-100M+)
($3M-50M)
Missing Middle($1M-3M)
(up to $1M)
(up to $1M)
Current Company Valuation:Angels: $1-5M VC: $5-100M
PE:100M+
Know the type of capital you need to execute your plan:
Sources & Uses
Negative EBITDA vs. Cumulative Negative EBITDA
Value of the $: Ownership (5-50%+) + Relationships + Experience
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The Two Most Important Words
IRRAngels: >50%+
VC: 30-50%PE: 10-30%
Return MultipleAngels: 20x+
VCs: 5-20xPE: 2-5x
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Value of the $ / BrandRaise more than you need
…Takes Longer / Costs More
Angels Advisors: 0.10%-1%
Capital = 5-20%+ OwnershipIntro to VCs
Intro to Customers / PartnersOperational Experience
Test the demand
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Value of the $ / BrandRaise more than you need
…Takes Longer / Costs More
VCs: Board Seat
Capital = 10-50%+Ability to do follow on rounds
Intro to larger capitalIntro to Customers / Partners
Operational ExperienceEarly Stage growth capital
Scare Away Competition / Protect Company
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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!
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Working With A VC
It’s Like A Marriage…
Keys To A Successful VC Relationship:
- Compatibility- Honesty - Communication- Effort- Understanding- Faithfulness- Ability To Change
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The Goal!…But unlike a successful marriage a
successful VC relationship is temporary.
Goal is to part ways in 3-5 years
Assets are split
Entrepreneur Investor
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What Do VCs Really Invest In?
Or
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Pitching To A VCKey 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
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Common Missing ItemsKey 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
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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
Dedication
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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
Be Smart
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Advice:80/20 Rule – Don’t get bogged down in development
Focus On Customer Not Technology
Test Market Well To Find
Your Achilles Heel
Be Prepared to PivotPivoting Failure
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Questions?
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