Venture Capital When You Need It When You Don’t Union Square Ventures 915 Broadway New York, NY

What Is Venture Capital? High Risk Capital Seeking 50%+ Annual Rates of Return Active Investors Who Will Step In and Make Changes to Protect Their Investment Experienced Investors Who Know How to Build Large Companies

The Venture Capital Process Find Deals Research Deals – A 3-6 Month Process Structure and Close Deals Manage The Investment Exit The Investment

Some Statistics 99%+ of All Startups Do Not Require Institutional Venture Capital VCs average initial investment is $3M+ Average Dilution from Initial VC Investment is 40%+ VCs look at over 100 business plans for every one they finance

When Is VC Good Heavy R&D Component of the business –Seminconductors –Biotech –Datacomm Equipment Very Large Opportunity Requiring A Lot of Working Capital –Federal Express –Amazon.com

The Cost of Venture Capital Dilution –Average founder who uses VC owns less than 10% of the business upon exit Liquidation Preference –The VCs will want to take their money out first Control –It is a marriage and divorce is messy. You don’t always get to take the kids

When is VC Wrong For You Too Early – You Don’t Have Enough to Show Yet (Revenues, Product, Team) Too Small – You Only Need A Couple Million to Get Profitable Not Proprietary – Your Business Has No Barriers to Entry. It is Just An Execution Game.

When Is VC Wrong For You [continued] You Need to Move Fast –Raising VC takes 3-6 months minimum You Are Dilution Sensitive You Need To Be In Control You Don’t Need It

What Are The Alternatives? Bootstrap Self-Finance Friends and Family Find Partners To Share The Risk Don’t Start A Business, Buy A Business

Why Bootstrap? Get Going Fast – Don’t Wait For the VC Stay Lean and Mean – Cash In The Bank Makes You Soft Sell, Sell, Sell – The Customer is Your Best VC Learn On The Job Let Your Customers Write Your Business Plan

Bootstrapping What Comes Next? Profitability – Happiness is Positive Cash Flow Bankers – They’ve Got Cash and Are Willing To Lend Venture Capital – On Terms You Can Accept

Self-Financing Entrepreneurship Is Risk Taking – If You Won’t Take the Risk, Why Should Anyone Go Without A Salary Close Out Your Savings Account Mortgage Your House Sell Your Car

Friends And Family By Far, The Most Common Form of Startup Finance If Anyone Will Believe In You, They Will Tell Them That There Is A Good Chance They’ll Lose Their Money Try Your Hardest Not To

Partners A Team Is Always Better Than A Lone Wolf Misery Loves Company Four Savings Accounts, Mortages, and Cars Add Up To A Lot More

Summary VC money comes with a lot of strings attached. Make sure you can live with them Raising VC money is not a guarantee of success Seriously consider the alternatives to raising VC money