Section 4 | Lesson 24 - What Investors You Should Target + How Investord do Due Dilligence on You

Notes

Nasa was created to compete with sputnik.

Fairchild was financed by Nasa to figure out how to put transistors into the Apollo rocket.

Fairchild got too big to innovate, and people quit.

These people went on to create other companies

Founder wants to change the world
The company gets big
The executives either want to change the world or just get a paycheck
If they want a paycheck they won't take risks3
If they want to change the world they can't stand the culture and start their own company

VC's love backing the same executives
top VC firms get all the great deals
Sequoia is the best investor in CA
Most VC's are in the bay area
Industry is cyclical
- not as bad lately
- businsesses are easier to start and run because of all the innovations in software and hardware

things to know:

stage focus
- stages are: a, b, c, d, e
- waht stage of a business do they prefer to focus on
- some businesses focus on earlier stage, some later
sector focus
- what industries do they tend to work with
reputation
- NEVER do business with bad people
- once they are on your board you are STUCK with them
target return date
- make sure the company understands where you are focused on getting results
are they founder friendly?
- do they tend to fire founders?
- do they like working with founders?
- are they here to help, or here to be a pain in the ass?
growth or value?
1. growth
  - growing fast
  - they dont' care about valuation
  - good at investing in tech companies
2. value
  - buy low sell high
  - bad at investing in tech companies
do you enjoy their company
- you will be spending a LOT of time with them
- life is too short to spend on jerks
do you trust them?
- first 20 min your gut will tell you
- trust your gut

capital calls
- they call you for the capital when they need it
- you agree to make an investment
- when they need part of it, they will call for part of it
20% left over to avoid dilution
- they avoid using 20% of what you agreed to invest to avoid getting diluted

analyze competitive market
a report can take up to 400 pages
- linked in
- call people who know people
- size up market and create in depth financial model

all venture capital deals will have one lead investor and a bunch of smaller investors

strong management team
- they know what they are doing, had a good exit
- good board of advisors
- ok if they failed before
huge tam
- (total adjustable market)
- should be at least 20 billion usd
strong syndicate
- the other investors before you are high quality
disruptive business model
- something that will change the world