business-haroun/mba/ch18.org

#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../../../../_share/media/css/org-mode.css" />
#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/theme-business.css" />

#+title: Section 3| Lesson 18 - What is a VC / How to Raise Money

* Links
- [[./../mba-main.org][<Back to Main MBA]]
- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4282944#overview][S03:L18 - What is a VC / How to Raise Money / Get a Board of Advisors]]

* Notes

** Intro

| year | who              |
|------+------------------|
|  1-2 | angel investors  |
|  2-3 | equity investors |

*** angel investors
- people that fund early stage companies
- about 100k in general

*** banks
- never use them
- if you miss one payment they will seize everything
- they are blood suckers

*** equity investors
- high worth individuals
- venture capitalist firms
- want equity

*** "A" Round
- first round of venture capital money
- make sure to present correctly

** Equity Investors / Venture Capitalists

*** most important investment characteristic
- NOT "good business model"
- it is MANAGEMENT
  - business model is irrelevant
  - management team is the MOST important thing

*** how to find out if the team is good
- have they sold companies in the past
- their employees like them
  - glassdoor.com and do a search
  - search linkedin if you can find someone who can vet these guys
- past performance is VERY indicative of future performance
- they want to back someone who made a company

** How to Meet High Quality People
*** how to get a board of advisors
- go to linked in and do an advanced search
- enter the keywords that are relevant
  - keyword of interest
  - your university
  - your current zip code
- ask for help
  - send a short message
    "John hope all is well. I am also from Canada/ also went to NYU/ etc.  Please let me know if you have time for a coffee in the next few weeks. thanks"

*** in meeting
- first half
  - get to know them
    - business is about relationships
  - talk about what you have in common
    - city
    - university
- final part
  - thank you for your time
  - please let me know if I can ever call upon you as an advisor now and then
  - great, Ill call upon you every now and then thanks

*** follow up
- meet up every 3 to 6 months
  - remember something you talked about that was interesting to the person
  - follow up by sending them a message / email/ etc with something interesting on that topic
- add value by sending messages
  - in months ahead every now and then
  - that help them out with their business
  - based on something you talked about

** VC Capital Raising and Terms
*** Who are the Investors / LPs?
- high net worst investors
  - big endowments
  - pension funds

*** What are the Terms?  (2 and 20)
- generally 2% annual fee, this pays for maintanence
- 20% buyout when you sell

*** How do you harvest and investment?
- go public
- get sold (to another company)

*** returns
- 5 by 5
- 500% return within 500 years
- because most investments go belly up
  - most companies declare bankruptcy in 5 years

*** valuation
- in five years, is this company going to be more or less relevant than it is today
- long term vision
  - you actually prefer downturns so you can buy cheaper

** Investment Stages
*** initial | seed
- angel investors
- family

*** venture capital
- A Round
  - need to grow your business
  - hire more engineers
  - early stage vc firm
  - about a 1.5-2 years

- B round
  - second stage vc firm
  - another 1.5-2 years

- C round
  - final stage vc firm

*** final    | IPO - Initial Public Offering
- revenue grown slows
- still positive

** How to Pitch to a VC
*** prepare 3 pitches 30-5-30
- 30 second pitch
  - most important
  - simple to understand
  - understanding in one sentence
  - if people understand it, you'll get your first meeting

- 5 minute pitch
- 30 minute pitch

*** sell yourself
- you are what they are actually buying

*** discuss what is different about your product

*** be ABLE to discuss competition and market
- know the size of the TAM - Total Adjustable Market
- if you don't, they'll assume you don't know what you are talking about

*** have basic financials ready for discussion
- a few annual revenue expense line items

*** what are your partners, investors and advisors
- talk about them

*** show the product
- most people dont
- show it right away

*** keep it simple
- be passionate
- speak from the heart