Whisperings of a VC
“Let’s face it, most of us are mediocre!” Perhaps not the exact words our guest lecturer uttered, but none the less his point is clear. We had another wonderful opportunity to be educated by a seasoned venture capital big wig. I use the term big wig in the most respectful sense because he has lacks cocky-ness or abrasive sharklike attitude you would expect from someone of his success. He is real, genuine and kind. After all you would hope they all were like him since he deals with people’s hopes, dreams and their egos. I am not going to use his name directly or the firm he works for but I wish I could because the things that he educated our class on are really all about the inside of the VC game.
VCs are in it to win. Their goals are inline with the goals of your company. They want to see your idea happen and make money in the process. They anticipate that most of their investments are going to be dogs but they, like the rest of us, can’t tell what the future holds. So they look for part opportunity, part smarts and hope for part luck.
VCs are not experts. It’s impossible! Don’t expect your potential investors to even know a third of what you do. You are the expert. If you know your product well and know how to convey that, it won’t be a problem in getting your idea across.
VCs want your business. Some people equate it with selling your soul to the devil but just remember that by accepting money from a VC you are really selling controlling interest in your own company. Don’t expect to be the CEO of your own company in a year down the road if you accept that VC money.
Get a Lawyer! If you are deciding to get VC funding, have a lawyer look over your contract. Like anything there are good deals and bad deals and many VCs are not like the honest one we met in our class.
Get as Much Money as Possible! If you are doing the deal and part of the deal is the controlling interest in your company then you might as well ask for the most money you can get. Don’t be shy.
Angel Seems Like a Funny Word. Angel investors are perfect if you need under a million dollars (at least that is the ball-park figure that was relayed to us). However, there are problems with dealing with Angel investors instead of a VC. Angel investors are, not all but have a reputation for, being difficult to get to write the check. After all they are individuals and not really structured as an investment firm would be. They are typically too involved in the product development. They also tend to be more outspoken and interfere with progress. So be aware.
Two in a Thousand (Per Year). That’s right! What a sobering figure that is. This firm and more specifically, this VC representative, told us that this is realistically how many deals actually get done by him.
Stand Out. Those ideas that aren’t “HOT” are what this investor looks for. It makes sense. If you are looking to make serious money at a race track you don’t bet on the favorite pony! To maximize your profit you look for more of a long shot and are motivated by noting that the payoff would be well worth it.
Entertain. When presenting to VCs or any prospective buyers, entertain them. Have personality and even though you can’t predict the future – TRY! They want to hear something different so make it up if you have to! Also remember that part of the product is YOU. They fully admit that part of their investment decision is the X-Factor and your confidence level.
Think Big. Investors are looking for scaleable ideas. Don’t think small. If you product isn’t something that has the ability to be huge then you might want to look for an angel investor to get your dream built.
These are just a few of the tips that stuck out to me and it really helped to put this whole process in perspective. Something that I noticed is there never an “in between.” When people talk about Internet success they talk of either a million-dollar success or failure. There is never any “in between.” How bad would it be to have some success and work at a company that you built? Maybe that is what the speaker meant by mediocre. If that is the case, then maybe mediocre is not that bad.