Is VC Right for You?

August 3, 2009

suster foxI recently appeared on Fox Business News covering the topic of raising Venture Capital.  If you’re in the market or thinking about VC in the future the following video may be of interest to you – click here to view.  Video is about 7 minutes.  If you want to learn more about “Pitching a VC” make sure to check out the entire series here.

The main summary of my interview is that VC may only right for you IF:

1. You can achive revenue of at least $50-100 million within a 5-7 year time horizon

2. You’re prepared for “home run” only exits (e.g. not a business in which you have profits of $1-2 million / year paid in dividends)

3. You’re ready for rocket fuel … if you’re business isn’t pointing in the right direction now – imagine once a VC invests.  The expectation is that they need to exit 7-10 years after investing.  This adds some pressure to speed things up.

4. You’re prepare to share control.  VC’s don’t want to run your business but they do want a say in the major decisions you might make including executive hires, compensation, M&A, major expenditures, etc.

I then covered how to access a VC including:

Most VC’s have a “submit your business plan” place on their website.  Don’t.  Instead you should get intro’s as follows

1. Start-up lawyers – we do deals with them constantly.  They know us, we know them.

2. Other entrerpeneurs – look around in the community at who’s raised money in the last year.  Good bet they can give you the most recent and practical advice.

3. Portfolio companies – All VC’s list their portf0lio companies.  Easier to start by networking with some of our investments.  Don’t bombard them but respectfully approach for relationships.  Best not to approach the larger investments.  I’m guessing it’s easier to get a meeting these days from Fred Wilson at Union Square Ventures than from Evan Williams at Twitter.

4. Social networks – When I raised capital in 1999 it was hard to know who knew the VCs.  Now it is spelled out for you in black & white.  Check LinkedIn, Facebook and Twitter.  There’s a good bet that the people I’m following know me.

5. Other VCs – Great advice from Jason Spievak of RingRevenue.  Most VC’s will pass on your investment just by sheer numbers.  They might be wrong stage, wrong industry, wrong geography or maybe just plain old wrong timing.  So respectfully ask the VC for an intro to other VCs.  I provide them all the time.