Originally Posted by
alvaranz
Here are my questions:
1. Where can you find them to display to them your proyect?
2. Which is the best way to persuade them?
3. If the proyect is selected as a winner, Will I have to leave the company's management dutties after any period? How do they work at this point?
4. How many company stock share % would belong to the founders and how many to the vc company?
5. Which are the beneficts and the risks If you are being supported by a vc company?
6. How may profits are they thinking to achieve with the company they are supporting, and when are they measuring these profits? in the first year, the second year..the third....
1. I'd say networking is your friend. Here in Southern CA, there's an association called SoCalTech which lists the VC deals locally, who funded them, etc. It lists any conferences, presentations, get togethers and so on that an entrepreneur can use to generate contacts. Additionally, there are various directories containing the names of VC in your area. Do not send in a business plan blind. You can use these sites however to determine a VCs criteria, their geographic region, at what stage they invest, etc.
Your best bet is to get an introduction through someone familiar to the VC. That could be someone who recently received funding, an analyst friend, or even the screener; anyone with whom they have a relationship, otherwise you could have the next best thing since sliced bread and it's just going to sit in a pile.
2. As simple as it sounds, assuming you have all the T's crossed and I's dotted: Passion.
3. Typically a VC is investing in you, as much if not more than, your plan. In fact, some claim business plans are useless. I like to think of them in terms of a necessary evil. That being the case, a VC doesn't want to run your business, they want you to generate a return. However, you are now accountable to someone who likely has board control. If you dont perform you will be gone.
4. How much equity you give up depends on a number of factors including your pre and post money valuations and your negotiation skills. Typically the goal of the VC is to get the lowest valuation possible so that thier infusion of capital gets a larger equity stake. If you get to this point you better have a good attorney to review the term sheets. Get as much stock vested for time served as possible.
5. The main benefit in my opinion is that you now have a professional team to assist the company in achieving its goals. The VC wants to make money; they will take far more steps than you would be able to on your own to make things work. Secondary rounds, IPOs, and additional financing, which will be needed at some point, is now much more accessible.
The flip side to that of course is that you've given up a large percentage of your company, you're accountable, and you're dispensable.
6. It really depends on the VC. In general, you won’t find firms looking at deals that provide less than a minimum 10:1return; this figure is often much higher, but I'd say don’t even think about it if you're less. Some don’t want anything to do with companies that cannot scale to a minimum $50 million a year in revenue. These are just broad guidelines and as was suggested in number one, you need to get out there and talk with people in your industry that went the VC route.
Dealing with VCs or sophisticated investors is never black and white although there are some general things that do apply.
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A thinker sees his own actions as experiments and questions--as attempts to find out something. Success and failure are for him answers above all.
Friedrich Nietzsche
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