I got an invite to attend a talk on “Essentials of VC funding” by Sequoia Capital’s VP, G V Ravishankar. It was a very candid and thoughtful talk by GV. The topic had created a lot of interest and we had to move from a classroom to the auditorium to accommodate the crowd. Signs of the growing interest in entrepreneurship I guess!
I have listed down some of the points (that I have noted down!) GV had mentioned during the course of his talk:
You can score some brownie points with VC when
- You have invested your personal savings in the venture (shows commitment)
- You have an incubation in a place of repute (shows the idea & team is already vetted)
Issue to consider while taking VC money–Affirmative rights (VC’s would exercise during senior mgmt hiring, selling etc)
Contrary to popular belief, VC’s are not in the business of taking risks but in the business of risk avoidance. They handle other people’s money and so would want to understand clearly what they are getting into and that’s why look for many filters and minimize the risk.
In India most VC’s rarely take concept risks. They only take execution risks (like transplant a successful idea/concept that worked in the US to India)
Fights between promoters can be handled by way of one person buying out the other or VC’s buying out one person or a new investor buying out one person.
80% of Sequoia’s investements are in pre-revenue companies or companies making very little by way of revenue.
Valuation, most of the times, is not done scientifically. It is arrived by mutual agreement
25% to 40% is what VC’s look for in early stage investments (the actual % depends on the risks like the execution capability of the team, the potential of the idea, the stage of the idea etc)
Idea is a commodity. Execution is the key. Therefore, the team behind the idea is critical.
What to do when an idea is ahead of the market? Conserve capital and remain in the market till it becomes the right time.
Early adoptors will buy the product. It is important to “cross the chasm” and reach out to others.
Meet a VC through a reference to add credibility and increasing the possibility of a response.
Seeking funding is like a sales process. You need to sell the “idea” to the VC (customer).
Team elements VC’s consider:
- Passion
- How much have they thought through the problem/idea
- Kind of Advisors
- Background (top school/company) is a positive but not having it is not a negative.
Posted by paddy 