Posts Tagged ‘vc post of the day’

Go: Should You Meet With VC’s Early for Feedback?

Rob Go (NextView Ventures) has the VC post of the day titled Should You Meet With VC’s Early for Feedback? He adds additional perspective to the posts I highlighted last week from Allen Morgan and Mark Suster about meeting with VCs before you are ready to formally pitch them.

The VC blogging was pretty thin pickings this week. I wonder how many VCs are ignoring my suggestion to ignore the Dow? To all my VC friends out there – the next time you think about checking the value of your public company stocks, how about writing a blog post instead?

Shulman: Should Founders Personally Guaranty Bank Loans?

The VC post of the day is from Zack Shulman (Cayuga Venture Fund) titled Should Founders Personally Guaranty Bank Loans?

If, as an entrepreneur, you’ve raised any institution money, the answer should be – as Zack explains – a decisive NFW. In addition, your institutional investors are likely prohibited from doing this by their fund agreements.

I’ve explained publicly to many of my government friends why the SBA is totally ineffective around lending to high growth, venture backed companies. Their requirement for a personal guarantee from the founders and any owners (including investors) of over 20% of the company is another reason the SBA is a total fail when it comes to lending for high growth companies.

Fortunately, there are some great banks – like Silicon Valley Bank and Square 1 Bank – who understand how high growth companies work. However, the bilions that programs like the SBA theoretically allocate to high growth companies through programs like Startup America could be much better suited to simply giving to SVB and Square 1 to invest. But that’s a post for another day. In the mean time, if you are an entrepreneur in a high growth company, focus your energy on SVB and Square 1, not SBA lenders.

Brisbourne: Keeping Going Through The Turmoil

Many of the VC Bloggers are talking about macro economic chaos and the impact on startups. We’ll highlight a few of them today.

First up is Nic Brisbourne (DFJ Esprit) weighing in from the UK where, in addition to a falling stock market, there is fire in the streets. His post, Keep going through the turmoil, is a good reminder to all of us, not just entrepreneurs.

Roger Ehrenberg (IA Ventures) provides some Sound thinking for unsound times via his note to early-stage companies everywhere.

Albert Wegner (Union Square Ventures) ponders Double Dipping and I don’t think he’s talking about chips in guacamole.

Finally, Dan Primack has an awesome interview with Alan Patricof (Greycroft) about VC business (mostly) as usual.

Wilson: Financing Options – Capital Equipment Loans and Leases

Monday is a tough day to be a VC blogger because you are competing with Fred Wilson’s MBA Mondays series. Fred once again delivers with his post Financing Options: Capital Equipment Loans and Leases. In this post, he talks about ways to finance your capital equipment without using cash from your equity financing, which is usually your most expensive source of capital. Fred isn’t a fan of debt, so this is a well considered piece on when debt can be useful in an early stage startup.

As a runner up, Allen Morgan has a follow up to his blog from last week titled More on “Why Entrepreneurs Should Never Meet With VC’s Unless They’re Formally Pitching”. In it, Allen clarifies his perspective and expands his post from last week titled Why Entrepreneurs Should Never Meet VC’s Unless They’re Formally Pitching.

Remember, unless you trade stocks for a living, don’t watch the Dow this week. There’s nothing you can do about it. And if you watched it obsessively on Friday, here’s what you saw.

Yup – it ended where it started after a handful of wild swings. Pretty exciting, eh? Just think how much anxiety the commentators on CNBC generated talking about it while you were getting some real work done.

Dale: All The Bad Things VCs Want To Do To You!

Today’s VC Post of the Day is from Richard Dale (Sigma Partners) titled All the Bad Things VCs want to do to You! I don’t think this particular post needs much of an explanation.

Wegner: If You Need To Raise Money, Get Your Financing Done ASAP

Albert Wegner (Union Square Ventures) has today’s VC Post of the day titled If You Need To Raise Money, Get Your Financing Done ASAP. In it, Albert expresses his belief that given the current macro economic environment, companies should focus on getting their money raised quickly – as in right now. He’s conveying global / macro pessimism that many people are talking about. While there are obvious timing disconnects between the long term value of a startup (often much more than five years), there is often a sentiment shift in the funding environment – all the way through the funding supply chain – when the economy goes south.

While Albert’s advice is great, I actually feel this is advice that all entrepreneurs should heed all the time. Having been involved in plenty of companies that were flush with cash for a while and then woke up one day needing cash but finding the funding markets tight / dry / dismal, I’ve experienced the pain first hand of being an entrepreneur in a difficult funding environment. You can never predict when this is going to happen, so my point of view is raise the money when you can, make sure you know whether your existing investors can (or will be able to) fund you if the market dries up, and don’t optimize your timing in hope of a modestly better valuation.

Remember rule number 1 – never run out of cash.

Sabet: Always Be Recruiting

Bijan Sabet (Spark Capital) has the VC Post of the Day with Always be Recruiting. The best CEO’s I know are always recruiting, completely obsessed with building the best possible team, and tireless about meeting great new people that might some day be a fit for their company.

As a bookend to this, Eric Friedman (Union Square Ventures) has a great complimentary post titled How to get a job at a startup. In it he has some practical advice for anyone who wants to get a job at a startup.

As a special bonus today, Chris Dixon (Founders Collective) has an awesome post up titled What The NYC Startup World Needs (And Doesn’t Need). As someone who studies the idea of entrepreneurial communities and has worked hard at building one in Boulder as well as supporting other cities, I agree with everything Chris says in this post.

Morgan: Why Entrepreneurs Should Never Meet VC’s Unless They’re Formally Pitching

Today’s VC Post of the Day is from Allen Morgan (Idealab, Mayfield) and is titled Why Entrepreneurs Should Never Meet VC’s Unless They’re Formally Pitching. In it, Allen explains – well – why entrepreneurs should never meet VCs unless they’re formally pitching. It stands out in direct contrast to a recent post from Mark Suster titled Invest in Lines, not Dots in which Mark strongly recommends the opposite – meet with your potential investors regularly in advance of actually fundraising.

So, what should an entrepreneur do? Both Allen and Mark justify their positions well, although in the comments Allen says his advice is entrepreneur centric and Mark’s is VC centric. Allen also suggests that the benefits of meeting with a VC pre-fundraising may outweigh the costs:

“For a great VC like Mark, the costs may (just may) outweigh the benefits. If you have a hot deal, however, Mark will behave like any other smart, rational investor and react only to competitive pressures.”

I’m going to strongly agree with Mark and respectfully disagree with Allen. While I think his comments apply to some VCs, I don’t think they apply to all VCs. Early on in Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist we encourage entrepreneurs not to think of VCs as single type as there are many different styles and behaviors. So, if Allen’s title had been “Why Entrepreneurs Should Never Meet Some VCs …” I’d strongly agree with him.

Both Allen’s post and Mark’s post are well worth reading carefully if you are an entrepreneur considering raising money and trying to decide whether to spend any time with VCs in advance of starting a formal fundraising process. But recognize that some assertions don’t apply. For example, Allen states:

“And, finally, no self-respecting VC will make a pre-emptive offer (even to get a deal early) if he thinks that he’s got the inside track on a deal. … No entrepreneur ever got a VC to substantially increase his initial offer merely by presenting more data (even great, persuasive data), showing why the startup should be valued higher. “

Well, either at Foundry Group we aren’t self-respecting VCs or Allen is wrong, as we make pre-emptive offers all the time and will negotiate on price regardless of external competition. And many of the companies we invest in are ones that we’ve had a relationship with for a long time. We also find ourselves extremely bored by formal pitches as our first or early interaction. If an entrepreneur shows up, says “hi, I have a hot deal with a bunch of folks bidding on it, do you want to see my formal pitch” we often say “no thanks, we aren’t the right guys for you.”

The bottom line – that both Allen and Mark put forth – is know your the motivations of the potential VC you are talking to well. And, if you believe, like we do that there are many different types of VCs, adapt your behavior accordingly.

Raouf: Should You Care About Your VC’s Investors?

Firas Raouf from OpenView Partners has today’s VC Post of the day up titled Should You Care About Your VC’s Investors? In it he covers some fundamentals about how VC funds are structured and then lists three things that the nature of the LPs of a VC firm will tell you about that firm.

  1. VC firm credibility: The quality of a VC can often be judged by the quality of its LPs. High-quality LPs invest in high-quality VCs.
  2. VC firm stability: Is the LP base stable, or is there significant turnover in LPs from fund to fund? Is there LP concentration, which would increase the risk of turnover? Are the LP funds stable enough to continue funding the VC over time?
  3. Exit Pressure: Are the LPs pressuring the VC for exits? What is the hold period that LPs are pushing for and how does it vary from the VCs period? How does either period differ from yours?

We cover a lot of this stuff, and more, in Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist in Chapter 8: How Venture Capital Funds Work but are psyched to see other VCs blogging about this in an effort to demystify how VC firms are actually structured, VCs are compensated, and what impacts their motivations at different points in the life of a fund or a firm.

Today’s runner up post is from Fred Wilson at Union Square Ventures titled 30/10/10 where he explains a pattern to the metrics he sees across his portfolio for both web and mobile apps.

Levine: Beware of ASSHOLE VCs

I love a good rant, especially when it’s from one of my partners. Today, Seth Levine has the VC Post of the Day titled Beware of ASSHOLE VCs. He talks in detail about his frustration with an experience he’s just had with a company he invested in unrelated to Foundry Group. He reminds us all to “check out your investors before you go into business with them.”