Ask the VC

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Ask the VC!#AskTheVC

Sean FooteManaging DirectorCo=Creation=Capital

Gadiel MorantesPartnerEGFS

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• Who is the buyer and who is the seller?

• Picking a VC

• The VC mindset – how do these weirdos’ brains work?

• What do VCs look for?

• The VC process – why does it take so long?

• What makes for a great VC meeting?

• Lots of other questions you have…

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What do you want to talk about?

www.CoCreationCapital.com

Buyers and Sellers• A deal is a fundamental disagreement

about value – Buyers think things are worth less, and

tend to minimize price– Sellers think things are worth more, and

tend to maximize price

• But, Venture investing is not a zero sum game– A long-term relationship, like a marriage

• Pick investors that suit you, know your space, invest at your stage, etc.

4www.CoCreationCapital.com

The VC mindset

• VCs are rational• VC is not “risk capital”– The idea is to minimize risk and

maximize outcomes of investments

• VCs particularly care about

your company if it:– Generates economic value– Provides good cocktail party

conversation– Allows them to raise another fund


VCs *need* homeruns

• VCs *need* homeruns– To return 18% annual net to our investors, we need

30% annual gross return– 30% gross return is 5x in 5 years for the entire portfolio

• Out of 10 companies– Half go bankrupt (5 * 0x)– 4 break even (4 * 1x)– 1 remainder must be 46x in 5 years

• If it takes 3 years longer, must be over 100x!


What do VCs look for?• Typical answer: a laundry list of business school type issues:

– Great teams, defensible technology, market traction, large and growing markets, growth and revenues, limited competition, blah, blah, blah

• Each investor seems to have a hot button, which changes over time

• Each company has a hierarchy of risks from largest to smallest


VC funding is hard…

• Currently, many momentum investors• And many angel investors– 20,000+ angel investments in 2014– 1,200 VC investments

• Implication: VC funding is still wicked hard, so…– Try to get VCs in seed rounds– Vet angels on their ability to do follow-on– Get to break even without VC investment


The VC Process


A great meeting is both an interview and a first date

• Personal: Be yourself, be engaging– How you answer matters as

much as what you answer

• Prep: Be prepared• Positioning: You are an

equal, not a buyer or a seller– Follow the lead– Ask questions


What you need to provide

• What pain we solve

• How we solve it

• Why we are the right team to solve it

• What we’ve done (so far) and will do (with your help)

• Why we win vs competitors

• The amount of revenue/profit/scale winning creates for our mutual benefit


Thank You and Q&A

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Gadiel Morantes

415-234-3437

[email protected]

www.earlygrowthfinancialservices.com

Follow us @EarlyGrowthFS

Sean Foote

650-255-4134

[email protected]

www.cocreationcapital.com

http://www.cocreationcapital.com/

Date post:	15-Jul-2015
Category:	Business
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Ask the VC

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