Saturday, July 21, 2012

First Steps in Raising Capital (Part 3)


The third article in a special 4-part series.

4th Advice – Know your VCs like you know your family:

Do your homework on the VC firms, including the individual partners you will be working with:
  • Research the companies they have invested in, and learn if and why founders or CEOs have left their positions.
  • Which of their portfolio companies has had successful exits and why?
  • Speak with founders from the VCs current portfolio of companies and listen carefully to what they don’t say.  Are they pleased with the VC?  Founders won’t say everything they think or feel about current investors.  It’s like marriage; there are some things they will not  talk about.
  • Ask the partners for references, it’s expected and very important. They will all have fancy resumes. Scratch below the surface to know what they’ve really done.
  • Get to know the partner you will be working with.  They will have a lot of influence on the quality of your life for the next few years. Don’t cut corners on this one!

5th Advice – Making presentations to VCs (A few tips):

·      When you meet with people at the firm, find the opportunity to ask who they are and learn a bit about their background.  To them, it’s an important gesture and it helps with the dynamics of the meeting.

·       If you haven’t presented to a VC before, practice presenting to other VCs that are less likely to invest in your business. Ask for feedback and listen!  Also, practice in front of others who have already raised money from VCs.

·        Be yourself, even if it seems a little awkward.  Over half of the decision to move forward is based on the founder’s genuineness.  Any disparity between your real personality and how you dress or present will be noticed.  It will reduce their ability to read you, and will reduce your credibility.  So if you’re a flip-flop-wearing kind of guy, don’t bring a tie; if you are a techno-geek, don’t focus on gross margins.  Be true to yourself and show your strengths. Deliver your points very thoughtfully.

·       Make the presentation straightforward, but interesting.  Don’t deliver a monologue; leave more time for discussion and questions.  Allow the audience to ask questions while you present, but don’t lose the control over the presentation. You must control the room!

·       If you have a prototype, live Web site or something similar, show it at the start of the presentation.

·      Don’t try too hard to please them. Don’t take things like the five-year revenue plan too seriously. Don’t spend too much time on financials.  The VCs will need to work these things out with you in the first round.

·     Do master the technology.  Do understand the core assets and commercial elements of the business model.  Know the markets you plan to play in, and know them well.

·      If you are presenting with your partner(s) or others people, practice as a team.  Avoid public conflict during the meeting.  If you argue with each other during the presentation you will surely lose points.

·     One of the things that I keep hearing from VCs is about founders integrity, so:   NEVER lie about facts, your bio or your customers.  It may sound obvious, but it seems to happens. I guess It’s tempting to tweak reality in the process of getting VCs engaged, but just don’t do it.  As a founder, you are expected to be overly optimistic. Yet there’s a very big different between rounding up market estimates or revenues projections and downright lying.  The due diligence process will be thorough, and they are likely to discover any  inaccuracies .  Not only will you have wasted time, money and perhaps the deal, you will also face credibility issues with the VC community. I typically try to be  forefront and direct about the challenges and the risks. It saves time if it’s a killer and it built trust.   

·    Don’t say that you are weeks away from getting a deal with Microsoft, Amazon, Google or some other “whales” unless you’ve already signed the contract!  Many founders believe that they’re “a few weeks away” from a big deal that never happens.

·     When the presentation is over, ask for feedback and listen carefully.  Don’t refute their points on the spot.  Ponder their concerns later and address them during the next presentation or in the follow up email

·    They will likely give you follow-up tasks or other homework.  Be attentive and use your intuition: Is this homework a genuine request to help the process forward, or a polite way to push discussion off until a later phase?

·       Be professional when following-up.  Accept a “No” with a smile and respect.  Take the time ask and to try and understand the no Business is a long term endeavor, so, ”No” may only mean “not now.” And knowing the reason will help with next investor

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I founded and ran 2 companies, www.fiftyone.com and www.payoneer.com . Between both companies we have raised US$41million in 16 rounds from 9 VCs and 40 angels. Both companies are now profitable with revenues that exceed $100MM USD

15 comments:

  1. wow, great nice and useful information is give here.
    thanks to share.
    looking forward to learn more.

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  2. Very nice article about raising capital. The advice given above is worth trying. Thanks for sharing.

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  3. Good advices in the article. Mastering the technology is very important, Google, Amazon etc are changing everytime.

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  4. You have shared some excellent tips for those looking to raise capital with VCs. I especially like what you said about practicing on VCs that you don't think would invest anyway. This is a great idea and would be a good way to get comfortable making a presentation.

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  5. Very informative article.

    I'm trying to pursue a career in the IT field (currently in school )and also planning to work with business partners.

    Also, thanks for the presentation tips. This should be useful for anyone wanting to work in VC firms.

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  6. Saving your jobs & getting promotions is not easy these days. But this blog is going to save lots of jobs for sure.

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  7. Another great blog from Yuval Tal. I like the step by step explanation in this blog. I shared it with my friends

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  8. Very important article on VC firms. Also help us to learn many things.

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  9. Presentations are my weakness. This blog helped me a lot about presentation. At least it gave me a little bit more courage.

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  10. It always scares me to do presentations. Reading this article really helped me add up some courage ;) thanks

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  11. Nice Blog. I agree with most of you points.

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  12. It is indeed so informative to be reading this article. One gets to learns so much in the enrichment of his own knowledge base hen he encounters such a healthy article like this.

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  13. All the part of this series is brilliantly written. It invocate the ideas and gave much of the informations to those who read the articles. As a reader i feel this is very good blog to get information about the finance and the payment systems.

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  14. Great information! There's a lot detail here.

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  15. Such a very great article.. As I follow all of it, I eventually got to know all the things to consider on raising capital and handling business.. Thanks

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