Forums: Discussions for entrepreneurs and small business.

I know entrepreneurs like us often rant about VCs. But come to think of it, they are not really bad guys. They are just investing under a certain criteria. If our business doesn't meet their criteria then why should they invest? I have blogged about this in more detail:

http://www.lostjobstartbusiness.com/blog/vcs-are-not-the-bad-guys/

What do you think? Am I a little too nice to VCs?

First of all, the term VC contributes to the issue. From my experience, those that are in the venture capital business don't want to take over the companies they invest in. They would be delighted if the company and the management team took the capital, executed the plan and increased the valuation while preparing for a liquidity event - without them being involved. However, they're not naive enough to assume that is going to happen. So when things aren't happening and the management team isn't performing - they may choose to make a change to salvage their investment. 

On the other hand, there are folks out there who call themselves Venture Capitalists- but their primary objective is to "get a bargain" or a "steal".  These are not professional venture capitalists and should be avoided. 

First of all, if you're smart enough BEFORE you get into a business with some other party, you might avoid many problems. You can always construct proper investment contract with your lawyers and thus ensure you will always control the situation.

To be honest, adding VC funding to your business can be blessing or a curse. Watch this interview to learn what VCs are looking for to see if you fit the bill.

http://www.thestartupslingshot.com/williams-favorites/looking-to-raise-money-start-here-pitching-and-business-plan-tips-and-tactics-from-andrew-bouldin-of-clayton-associates/

Cheers --

William

Мы в России покупаем акции Газпрома и Сбербанка через РТС и ММВБ. Доход до 60 %

Venture Capitalists will have to look into the pros and cons before providing seed money. The return- worthiness of the project has to e checked by them otherwise it is a waste of their time and resources. What i mean to say is, they might look evil but as the cliche goes, "they are just doing their job"! 

Venture Capitalist firms have a hierarchy,  the lower-level people are often used as "screeners" to filter and identify those projects which may be of interest to the firm.  These are the people you talk to first (unless you have an "in" with a managing partner).  Unfortunately, these screeners have a heavy work load and can have short attention spans (and can be very abrupt and to the point), with many plans coming across their desks for review.

If you can successfully get past this person, and present a compelling and concise plan, then you will find the people at the partner level to be helpful.  Your success is their success.

Once funded, VCs expect you to execute on the plan you presented.  If you cannot, then VCs will often take measures (however unpleasant) to rectify the issues and put execution back on track. 

For me you have to choose the right VC for your company. Venture capitalists both have good and bad sides. Aside from funding your company, they give expert advice and mentoring, networking, credibility, get you to focus on the goal and look at everything in a bigger picture. These are things that startups critically need to succeed. Just be careful though, some VCs may be bad for you, they will have control over you. If you’re not careful, they can fire you and your management, you may lose your independence, cause conflicts and many more issues.

Venture capitalists is a changable job, hard to handle it.

What is "get to choose" ?? I have heart this tone a few times, "speak only with managing partners, not low-executive" ... "demand term sheet in the same day"... "don't agree to dilution" and the likes.

Truth here, most entrepreneurs who are in internet forums like in here, are not in the position to pick out of many investments, they struggle to get the first one.

So I would say "go bootstrap".

Usually, when you prove that your startup is good and users like it, VC are chasing you, and they anyway competing one against the other, so the best conditions are being provided naturally.