think differently big

Key Takeaways from Venture Capital Bootcamp

Here are my key takeaways from the Venture Capital Bootcamp event.

What is VC?

• When approaching VCs you should have prepared a set of questions. Examples: where is the VC in their fund lifecycle, what kind of timing is the VC expecting for an exit.
• Try to understand the VC’s stage, sector, geography fit
• The current economy status does not have a impact on early stage investors, but rather on late stage investors, as they are looking for exits in a shorter timeframe

Is VC Right for You?

• VC funding should not be the first resort. Probably not the last either.
• What VCs are looking for:
  1. strong management team (you have to be able to demonstrate that you are a leader; you should also be a good listener, to be able to understand and adapt)
  2. a large and growing market (don’t operate an a small niche; for some VCs having even 100% share in a $50mil market is not attractive, as the exit opportunities are limited)
  3. a viable model (not necessarily a viable revenue model)
• Optimally your product is addressing a real/obvious problem. But there might be cases when the problem is not really obvious, but you may come along with a solution or technology that unleashes some latent unexpected or unanticipated demand
• First time entrepreneurs are willing to take more risk than more experienced entrepreneurs.
• For a company money is like oxygen… and food
• The VCs may play the role of the coach helping with an action plan and attack strategy leveraging their experience in the industry
• VC funding usually brings credibility. Funded companies are VC’s credibility and vice versa.
• VC funding is a marriage and so while looking for funding you should make sure there is a fit
• VCs are not necessarily looking for teams that have covered all needed roles. Recognizing what the team is missing brings a lot of credibility.
• Do not tell VCs about ideas. VCs are investing into companies that picked an idea and transformed it in a technology (preferably at least a working prototype).
• What happens if you gave away to angels too much?

Forming the VC Backed Company

In case you haven’t incorporated a company before you must watch the video between 01:02 and 01:45. It is probably the quickest intro to LLC, C Corp, Pros and Cons, stock options and you’ll find quite a few interesting and helpful pieces of advise

You want to be a Delaware company. Delaware is the language of companies, is the language that lawyers understand, is very modern, easy system

• Clear arrangement between the founders. Use vesting schedules even on initial partners.
• Rights of first refusal/co-sale: important for maintaining control over the company
• Board of Directors: (maybe not on a day to day basis) the board of directors provides general overall guidance and directions. 1 or 2 founders/management (usually payed as salary/equity), 1-2 VCs (usually they do not take additional compensation), 1-2 industry experts (may take some equity, usually less than .5%)
• The alternative is having a board of advisors (and granting them equity should be an option as you want them really involved and interested)
• Q: Can an LLC be converted to a C-Corp? A: Quick answer is yes, but it may get complicated.
• Q: Why not more details about S-Corp? A: S-Corp is not really an option as it is closer to the LLC regulations/limitations
• There is a set of papers you’d like to have when incorporating and you should look for those able to guide you through the incorporation process and offer you these package of papers
• Q: Is there a specific moment you should have a board of directors? A: Legally you have to have the board right from moment 0. A formal board is more needed when you’ll be taking money.

Engaging the VC