10 More Things I Learned From VCs
Here is an excerpt from the Article I wrote:
The investment landscape may have changed over the years I've been coaching entrepreneurs in the Silicon Valley, but the way VCs invest really has not. I’m sharing some learned information with you that may help you in your fundraising this summer and beyond.
When a VC asks you a question you don’t have an answer for today, it’s ok to say that you will be able to do the necessary research upon funding. For example, pricing future premium services require research that you may not be able to afford today, but will be able to jump on it upon funding.
You're probably not in an ideal position if you have to "convince" a VC of your market opportunity. Having said that, if you are disrupting the market, and there is no report available defining the new market opportunity, you still need to quantify the market size in dollars and make sure that your supporting math is in your appendix that show your intelligent assumptions.
When a VC asks you what your company’s value proposition is, s/he is asking: how much faster, better and cheaper are you than your closest competitors? They want to thoroughly understand your differentiation. This is not the time to tell them what IRR they can expect from investing in your company. In fact, there is no appropriate time for this conversation. I’ve overheard VCs say: “let us do our job, and you do yours.”
I’ve personally observed that the Series A today is anywhere from sprout stage to growth stage. If you are disrupting a huge untapped market and changing how they do business in a “no brainer” way, sprout stage funding is possible. But, if you are disrupting a market which the investors have bet on before and lost a ton of money in (e.g. supply chain, physical assets management, BI etc.) - a.k.a saturated market - you will need to show huge traction, month-over-month hockey stick momentum and low churn.
When you have a 50/50 syndication opportunity with two VCs, both VCs typically want 20%. Generally speaking, this typically means 20% for VC 1, 20% for VC 2, 10% angel, 20% future employees and 30% entrepreneurs at the Series A.
You can read another 5 things I learned from VCs here: https://www.linkedin.com/pulse/20140814154012-17664-10-more-things-i-learned-from-vcs/.
Happy fundraising!