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May 17th, 2012 VCs are good at asking questions. They are unimplicated in your dumb decisions, unmoved by your original sense of mission and far less concerned than you that a blunder could bankrupt you. They re-imagine your business in terms of all the other businesses they’ve seen, pulling the arms off one doll and the head off another to create a perfect money-making Frankenstein. And since the stakes are high, the whole philosophical exercise tends to result in action.
Here are the questions VCs asked Redfin that changed how we think about our business.
1. What’s your deadly sin? Sequoia’s Roelof Botha
. . . → Read More: The Eight Best Questions We Got While Raising Venture Capital
May 16th, 2012 While vesting is a simple concept, it can have profound and unexpected implications. Typically, stock and options will vest over four years – which means that you have to be around for four years to own all of your stock or options (for the rest of this post, I’ll simply refer to the equity as “stock” although exactly the same logic applies to options.) If you leave the company earlier than the four year period, the vesting formula applies and you only get a percentage of your stock. As a result, many entrepreneurs view vesting as a way for VCs
. . . → Read More: Term Sheet — Vesting, Single and Double Trigger Acceleration
May 15th, 2012 Options and restricted stock in a startup are subject to vesting. This is done to associate the rewards of equity ownership with the time and effort put into creating value for the company.
Although vesting schedules can be infinitely flexible in theory, in practice they don’t vary that much. You’ll find that the majority of option plans and restricted stock agreements are identical in meaning and vary slightly with how vesting is structured. Most vesting schedules have the following parameters:
Vesting period. This is the expected period for full vesting. It is typically 4 years (48mos) in the case of
. . . → Read More: Vesting Calculator for Restricted Stock and Stock Options
May 15th, 2012 Every investor approaches due diligence differently. Some angel investors may request information in a detailed manner all at once, while others may simply request information at different times or stages. Regardless of an investor’s method to obtain information on a potential company, it is a proven fact that exercising thorough due diligence is indicative of more profitable returns. The following documents may be requested in due diligence.
General Corporate Materials These documents include:
The company’s articles of Incorporation (and all amendments) bylaws (and all amendments), minute book (including all minutes and resolutions of shareholders and directors, executive committees, and other
. . . → Read More: Due Diligence Checklist – Angel Investors
May 15th, 2012 Many VC websites have a tab that will tell you that you can submit your business plans to enquiries@vc_company.com or some similar generic email address. But does it really work?
Can you really send your business plan over the transom and expect to get a positive response? The short answer is “no” – don’t waste your time.
I know some VCs would take issue with this and somehow I’m sure that there are some success stories with this method but trust me this is worst way to approach a VC.
Why is it a bad idea? Most VC firms receive
. . . → Read More: Getting Access to the Old Boys’ Club (how to approach a VC)
May 10th, 2012 Venture capitalists, angel investors and start-up lawyers these days tend to be obsessed with “intellectual property,” or IP.
And for good reason: In the information economy, the core assets of a new venture are likely to be talented people, the IP they create, and little else.
To maximize future value, founders should try to lay a solid IP foundation even before a new start-up is incorporated. Here are five common mistakes to avoid:
1. “Contamination.”
Perhaps the single greatest source of IP anxiety in Silicon Valley stems from the fact that engineers and executives tend to build on what they
. . . → Read More: 5 ‘IP’ Mistakes Start-ups Should Avoid
May 2nd, 2012 Getting financing for your startup is rarely easy, but if you approach the wrong investor, you can make it even harder than it has to be. “How can there be a ‘wrong investor’?” you might be thinking. “Don’t I just go with whoever is willing to give me the money?”
It’s not quite that simple. Approaching the wrong investor is kind of like asking someone who’s married out on a date. Not only will they turn you down, but they’ll probably think you’re an idiot.
Many first-time entrepreneurs mistakenly lump angel investors and venture capitalists together. While these two types
. . . → Read More: Angel vs. VC: Which Investor Is Best for Your Startup?
May 2nd, 2012 AngelList has become a popular way for new startups to raise seed funding. In some ways related to the opening up of investing via the JOBS Act, AngelList is designed to level the playing field for entrepreneurs seeking funding.
The website enables any startup to raise funding by pitching to angel investors or requesting meetings, all online. Entrepreneurs in the past have needed a referral or connection to pitch a top angel. And for investors, they now have a more efficient way of meeting and learning about entrepreneurs and their startups. Investors also “follow” other investors, to see what deals they’re
. . . → Read More: The Most Influential Angel Investors On AngelList
April 24th, 2012 The short answer is “as much as you need”. The more tactical answer is “as much as you can raise cheaply”. The latter is a pragmatic view. Raise more than you need when times are good. Just because you raise it does not mean you need to spend it – capital efficiency is always good!
In this post I look at what VC are saying SaaS ventures need to raise to get to scale and profitability. But I’ll also look at what VC are doing – what SaaS deals they are funding currently. I look at the capital efficiency drivers,
. . . → Read More: How Much Venture Capital Should You Raise For Your SaaS Venture?
April 19th, 2012 Everyone knows who the most famous and influential people in Silicon Valley are: Mark Zuckerberg, Marc Andreessen. Ron Conway, Jack Dorsey, etc.
But who are the people that can introduce you to them? Who are the connectors, the master networkers, the people who can open doors?
. . . → Read More: The 10 People You Need To Know To Open Doors In Silicon Valley
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