Risk Seed + Series A • Productize • Build product • Product/market ﬁt • Early traction Series B • Operationalize • Management team • Grow distribution • Reliable results Series C • Strategize • Product portfolio • Revenue models • Leadership
Not status meetings ◦ Operationalize metrics, no weather reporting. Make the news, don’t just report it. ◦ Convene board for strategic help and governance • Send board report 2-3 days in advance ◦ Plans, progress, problems - company overview, and then 3-5 paragraphs per dept ◦ Google Doc with comments enabled • Board meeting every 6 weeks until $10m ARR ◦ Then quarterly meetings, and mid-quarter calls - but still a board report before each • Agenda: ◦ Prior quarter review ◦ Next quarter plan ◦ 2-3 Strategic topics ◦ Board business
First rule of venture capital: there are no rules • The most dilution you will ever take is from a cofounder • Average venture-backed software company exit: $30m (from Early Exits by Basil Peters - exits.com) • VCs invest in exits, not companies • Build a great company, and the rest follows
Goals • Align company expectations and investor return proﬁle ◦ 10x early - e.g. raise $1m on $3m pre-money, sell for $40m ◦ 2-3x is angel-level return - but also growth / late stage ◦ Exit potential should be the size of the fund investing in you • Expect ~15-25% target ownership in any equity round ◦ % is based on fund strategy; this is avg representation to LPs ◦ No intrinsic value - priced by competitive/market dynamic ◦ But later, revenue multiple as a sanity check • Raise enough for 18-24 months • But grow into your post-money valuation in 12 months!
More about the partner than the ﬁrm ◦ Partner with you for many years, ﬁnd folks who know the struggle ◦ Also know the partnership; the best ﬁrms oﬀer more than money ◦ Grocery store test: if you saw them, would you run up to them? • Must understand your industry and/or business model ◦ Look for relevant portfolio companies ◦ Call those CEOs and ask for a conﬁdential blind reference ◦ Do not waste time teaching lay investors about your space