What would you like to know about venture capital?

By November 25, 2009Venture Capital

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I’m giving a talk on venture capital to a class of MBA students at the Cass Business School on Friday.  I suspect some of them will be there to learn about venture capital as a career option and some of them will be there because they are (or plan to be) entrepreneurs.  That is a pretty good match with how I think about the readers of TheEquityKicker, so I thought I you might have some good ideas about what I should cover.

I’m currently planning to structure my talk as follows:

  • Introduction – 5 minutes
  • Limited partners and the venture capital value chain – 5 minutes
  • Making investments – 20 minutes
    • Approaches to finding new deals
    • Deciding to make an investment
    • Investment execution
  • Exiting investments (aka portfolio management) – 10 minutes
    • Helping companies to succeed
    • Making the fund a success
  • How a VC fund manages itself – 5 minutes

Please respond in the comments with any ideas.  E.g. things you would have loved to know before you started, things you would love to know now, common misconceptions I should dispel, things that irritate you about venture capital, things that you love, in fact anything!

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  • Does the common practice of requiring warm introductions promote inbreeding and reduce meritocracy?

  • 🙂 Only for the lazy….

  • How a VC approaches sizing the market opportunity would be a key takeaway. Short speech. Ask for more time 🙂

  • The potted history of a real life example from sourcing/negotiation through to exit

  • Helping people understand the difference in approaches between angel/seed and series A/B. Both can be early stage investors, but they still have very different things that they are looking for.

  • The biggest insights for me came from hearing Josh Koppelman speak (and write) about VC math. It's critical for entrepreneurs to understand exactly what expectations come with raising $1 million in a Series A from a giant (>$500M) VC fund. It doesn't sound like much money, but once you multiply out ROI the firm's LPs demand over time + interest and factor in the 20% stake the VC firm has in your startup, you start to see that they need you to exit at $70-$100 million to get the return they need. I think there are many entrepreneurs that can appreciate a $20 million exit (a life-changing amount of money for many) and will be very frustrated when their VC blocks a sale because the exit is too small. Of course, great VCs will say they support the entrepreneur because they are investing in the person in the long-term, but not all VCs are so entrepreneur-friendly, especially these days when many VCs realize how overcapitalized they are and how little capital IT startups need thanks to cloud computing and APIs.

  • Dimitri Inglezos

    As a future entrepreneur it would be useful to know the following :

    1) How to prepare your business to attract VC funding
    2) How to present to a VC about your business and what information do the VC's are interested.
    3) What sort of stage should a company be to attract VC funding ? I think many people have the impression that you can start a business with a VC but I think it is unlikely. A company will need to build some value in the business before they can get VC funding.

  • Thanks Dimitri. Very useful – and you are right, VC is rarely to start companies. It is rather to accelerate success at businesses that have already gotten off to a good start.

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  • Thanks David. You are spot on that exit expectations should be agreed up front and that what a VC needs doesn't make sense for a lot of companie/entrepreneurs

  • Thanks David. You are spot on that exit expectations should be agreed up front and that what a VC needs doesn't make sense for a lot of companie/entrepreneurs