I tuned into a WSGR conference today to see “what’s happening” in VC as they released their latest THE ENTREPRENEURS REPORT – Private Company Financing Trends.and I wanted to share some of the insights that grabbed my attention from both the report and conference.
- WSGR thought they would see more pay to play and more down rounds but not as much as they thought (although some).
- More Tranched closings – A total commitment is made, but startup gets some of the money up front, then more money at the completion of certain milestones.
- Some more liquidation preferences being imposed by investors (this is better for investors, not as good for entrepreneurs)
- The idea of sharing pro-rata in the sales proceeds (of acquired startups)
- What about corporate venture? A slowdown in corporate venture. They are typically the last ones to start investing at the peak of a market, and they tend to slow down more quickly when markets decline. NOw that the market is “steady” we are seeing corporate VCs quite active once again.
- It’s all about your relationships! Do your due diligence on potential investors.
All is well in the venture world. But there will be a downturn and how well you survive will depend upon your relationship with your investors.
Don’t focus too closely on the short term “COVID” issues – instead look at medium term and be able to explain how the short term will allow you to create a medium to long term strategy. How does COVID help open that opportunity.
Are you building a Built to Last company? It fundamentally comes down to the culture and the founders create the culture. Some key characteristics for successful founders: agility, empathy resilience, intellectual honesty and being willing to accept even hard feedback.
Can take 6-9 months to raise a round, even in a normal capital environment – so raise from a position of strength, don’t wait until the gas tank is empty.
Investing is such an emotional business. Do your due diligence – and make sure partners will have capital. More and more capital appears, and everyone wants to be a VC – but will they be around as it takes 5-7 years to build a company?
Find value minded investors who will be with you for the long run, not just for the short term.
What’s not working in pitching today?
- Being too tactical in the first or second meeting
- Lack of Authenticity – overly rehearsed falls flat. I don’t think you can really get to understand someones business in 30 minutes. Send a deck in advance. Flip through a few slides on the call – but not too rehearsed. VC’s are addicted to slides and can’t focus without slides. Follow up with the deck after. Continue to follow up with investors. Ask if you can put them on your investor follow up list.
- For big checks if someone hasn’t made a lot or progress yet or doesn’t have a strong track record, some VC’s are meeting in person in a socially distant manner. For smaller checks or someone with a lot of social proof, remote is fine.