Do’s and Don’ts with Venture Capitalists – Dave McGinn – CFO Agilix Labs, Inc.

Do’s

Do 1: Good presentation that addresses
- Market Risk – The TAM (Total Addressable Market) should be at least 1 billion for VCs to pay any attention to you.
- Product Risk – Why your product has the qualities to capture the market share you claim it will.
- Execution Risk – Why your team can execute.
- Financial Risk – That’s what the VCs are for.
Do 2: Have firm grasp on valuation
- DCF – discounted cash flows
- Training 12 month revenue – In technology, 1 million revenue trail makes the company worth 3-5 million.
- Projected revenues 1-2X value.
- Acquisitions – In the same industry with similar characteristics and revenue capabilities.
- It’s best to ues a triangular approach to valuation – Use 3 of the possibilities.
Do 3: Nail the revenue! Understand your business projections because your reputation is on the line. You have to deliver or you lose credibility.
Do 4: Smart Money – If I win, who else wins? Go for money from the companies that will benefit as you are successful.
Do 5: VCs have two motives (Greed and Fear) – Use one or both. Always work with more than one VC firm at the same time and let the other know that you have options.

Don’t’s and Common Mistakes

Don’t resist managment changes. “If someone can make me money better than I can make me money, why should I complain?”
Not understanding valuation. You don’t want to lose more than 20-30 percent on the 1st or 2nd round. – “Pigs get fat, but hogs get slaughtered”
Not paying attention to the capital table. “If cash is King, equity is Queen.”
Not growing/hiring the right team.
- Know when the founder should step down
- A players hire other A players and B players hires C and D players so that they aren’t challenged.

Comments

Comments are closed.