Copyright © 2008 by Steve Barsh. All Rights Reserved.
A Few Quick Observations on Why Many
Entrepreneurs Keep “Missing the VC Boat”
& What To Do About It
Steve Barshwww.stevebarsh.com [email protected] +1.215.888.2101 twitter: sbarsh
Copyright © 2008 by Steve Barsh. All Rights Reserved.
Raising Capital Too Early“Premature Pitching”
Too early? Too many assumptions Chasing money rather than “de-risking”
Wasting time, energy & focus Business is based on 3 – 7 key assumptions = risks
(see CBE blog post) Spend more time
Refining extremely compelling value proposition(see “Stop Coding, Start Marketing” blog post)
“De-risking” the business model, e.g., Market demand Differentiators Pricing
2 stevebarsh.com
Copyright © 2008 by Steve Barsh. All Rights Reserved.
Out-of-Box Ideas for “De-Risking”
Using Very Little Cash!
Testing via cost-per-click advertising Market demand is there (may have to use A/B Testing) The right price (test multiple price points) Positioning works / key messages (try variations) Differentiation resonates with target market (is there
“lift?”)
SWAT team / “Rent-A-Coder” product development approach Build a “good enough” version -- get it in the hands of real
users Get “in market” to get feedback, results, adoption Start collecting relevant metrics as soon as possible
Your OOB ideas / experiments? NITMOI.
stevebarsh.com3
Copyright © 2008 by Steve Barsh. All Rights Reserved.
Most Entrepreneurs Don’t Seem To Know The Implications Of The VC
“Magic Ratios”
VC wants 7 – 10x in 3 – 5 years purchasing 30 - 40% @ early stage
Example Entrepreneur wants to raise $2 million for their Series A VC buys 40% and may assume they only own 20% at exit
Implication for entrepreneurs?
Just pegged exit @ $100+ million ($2 million @ 10x = $20 million, which is 20% of $100 million)
So entrepreneur needs to show a path to… Traffic / customers / users (and what’s the value of each?) Revenue (companies in that space acquired for what
multiple?) Profits (companies in that space acquired for what multiple?)4 stevebarsh.com
Copyright © 2008 by Steve Barsh. All Rights Reserved.
A Few Quick Observations on Why Many
Entrepreneurs Keep “Missing the VC Boat”
& What To Do About It
Steve Barshwww.stevebarsh.com [email protected] +1.215.888.2101 twitter: sbarsh
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