4.3 KiB
4.3 KiB
Section 3| Lesson 18 - What is a VC / How to Raise Money
- Links
- Notes
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