how to approach vc's and angels
Post on 13-Jan-2015
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} 1. They want to make money.
} 2. Their most precious asset is their time.
} Proof of concept (POC)
} Market validation } Regulatory path } Reimbursement plan } IP including FTO } Customer economics } Payer economics } Believable plan } Team to get there } Exits / comparables
} Answers to their objections • Address their biggest objections up front
} Be ready for diligence • Advisors / prospective customers to call. • Details of POC • Detailed financial plan • Detailed development plan • FTO analysis • License / option agreements…
} Because you need >$10 MM
} Or >$3 MM in any round
} The good • Deep pockets, networked to other investors • Sophisticated board members (sometimes)
} The bad and the ugly • Bad board members (sometimes) • They like to spend money. • They may replace you. • They may wipe you out.
• They want it nearly done before they give you money
} Make sure they are appropriate: • Have money • No conflicts • Similar portfolio companies • Right sized
} Get a warm introduction • CEO of current / former portfolio company • Any former CEO, other VC, other entrepreneur…
} Write small email description.
} Bring your team, dress well, arrive early, ask how much time you have
} Stand up. Present in 20 minutes.
} Have answers / back-up slides • OK to schedule a follow up meeting for deep dive
} Ask for when you should follow up } Respond immediately to diligence requests.
} If they are not doing work, they have passed.
} You only need 1-3 rounds of <$3 MM each
} You want to make some money at the exit.
} The good • Straightforward terms (1x pref., non-participating…) • Rolling closes • Follow-on rounds are easy • No VC games, no forced CEO replacements • You own more at exit
} The bad and the ugly • No deep pockets • Herding cats • Don’t expect a big salary
} Gust.com to find groups } Find a sponsor } Go to a meeting or two
} Start small (<$2 MM) } Pre money <<$5 MM
} Make sure you have the right sponsor } Prepare, apply, present
} Bring your team, dress well, arrive early, } Present in allotted time. } Have answers / back-up slides for all
questions. • OK to refer things to diligence meeting
} Respond immediately to set up diligence meetings
} Don’t ask a group to sign an NDA } Don’t use more than a handful of words on a
slide and do not use any small font sizes } Don’t claim you have no competitors } Don’t think that you will grow by “social
media” or “going viral”
} What if you need $1 MM now and then $10+ MM and too early for VC’s
} Most angel groups will not do it. } Need super angels, early VC’s, Angel friendly
VC’s, friends and family, SBIR
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