Advice of Three Venture Capitalists to Entrepreneurs

Pitching VCs can be a fraught enterprise, especially for people who have never done it before. Today, we have some advice from leading venture capitalist at firms such as GE Ventures, FirstMark Capital, and Andreessen Horowitz.
Ask for feedback from various sources
According to Sue Siege,l CEO of GE Ventures, innovation is hard, particularly when an individual tries to do it alone. Therefore, when building your board and core team, look for people with various experiences and backgrounds. Looking for help from a wide range of expertise and personalities will help you think of almost everything, leaving no stone unturned.
Invest in quality salespeople.
Lars Dalgaard, General Partner of Andreessen Horowitz, believes that salespeople are people constantly in front of your customers. They visualize the market like no other person and can give you competitive insights for the overall strategy of the company. Therefore, every entrepreneur should invest in a quality salesperson.
Tell your own story convincingly
Whether you are fundraising, recruiting or interacting with customers, you are always selling. Therefore, you must be a master storyteller. Ensure you have a genuine and compelling company story that not only resonates with your audience emotionally but also intellectually.
References
https://www.entrepreneur.com/article/253899
https://www.inc.com/travis-wright/the-best-advice-these-7-successful-venture-capitalists-ever-received.html

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Reasons Start-ups Struggle to Raise Venture Capital

It’s great time to own a company. All over the world, the number of seed rounds is increasing. Despite an increase of people willing to invest in various companies, some entrepreneurs are still struggling to raise venture capital. Here are reasons why venture capitalists may be saying no to your company.
There are many reasons why venture capitalist decline to invest. Most of these reasons may have little to do with the quality of your products or services. Venture capitalists may feel they have enough investments in a given industry. They may also see the opportunity as too similar to an existing investment. Also, the opportunity may be outside of their expertise. Therefore, before you start looking for a venture capitalist, it is a good idea to do good research. Make sure that the venture capitalists you are targeting are well grounded in your field.
Many young companies believe that building a successful feature attract large companies. Although this can work, these types of projects do not attract venture capitalists who are interested in the potential of large outcomes.
Raising capital takes energy and time. They may be better ways to fund your company other than venture capital. Before you go for a certain type of funding, take the time to understand what a given venture capitalist considers before investing.
References
http://mashable.com/2015/01/29/raising-venture-capital/#XRu.cECCRZqX
http://blog.symbid.com/entrepreneur/10-reasons-why-investors-will-not-invest-in-your-startup/

Difference Between Corporate VC and Institutional VC

Financing that investors provide to small businesses and start-ups is known as venture capital. In other words, venture capital is an alternative source of support and funding for entrepreneurs raising capital. For entrepreneurs who want to raise capital through venture capital firms, it is important to differentiate between corporate VC and institutional VC.
Corporate venture capital is the investment of corporate funds in external start-up companies. On the other hand, Institutional venture capital is managed funds under management to invest in start-ups with high-growth potential. The goal of both Corporate VC and Institutional VC is to invest in high-growth businesses that drive value for the company.
Corporate VCs have strategic objectives. They invest in partners that drive tighter relationships to the company. Institutional VCs tend to invest for financial returns.
Corporate VCs prefer investing in early to mid-stage companies. In institutional VCs, investment stage preference varies, from idea to late stage companies. Institutional VCs can build strong teams for financial success in any stage.
Due to accounting implications and fiduciary responsibilities, Corporate VCs do not strive for tight control. Typically, they prefer a board observer role instead of a seating role with a vote. On the other hand, institutional VCs control over their portfolio investment.
References
https://www.cbinsights.com/research/corporate-venture-capital-institutional-venture-capital/
http://www.investopedia.com/terms/v/venturecapital.asp

The Difference Between the United States and Chinese Venture Capital Provisions

 

Chinese venture capital funds have started to tap into international markets. In China, VC had a relatively late start, and its key terms were mainly borrowed from the US. In the course of localization, however, the differences have emerged in some aspects where the Chinese venture capital practice differs from that of the United States.
Provisions in VC agreements in China tend to place stricter requirements on companies’ founders. When negotiating with startups in the US, the venture capitalists often discover that an American party may resist some investment provisions, especially those that require the founders to bear personal liability or place special restrictions on their rights. Knowing the difference helps Chinese to negotiate and communicate with the US founders and companies.
In the US, warranties and representations are made by the company. Generally, founders do not give warranties and representations in their personal capacity. However, the common practice in China is for the founders and the company to jointly give warranties and representations, and the founders of the companies may be held personally liable.
The right of redemption is a common venture capital provision in both the United States and China. The main difference, however, is that in the United States, the redemption obligation is put on the investee company, where the founders of the company bear the redemption obligation in China if the company is a domestic company.
References
https://www.vantageasia.com/know-the-differences-a-snapshot-of-chinese-and-us-venture-capital-provisions/
http://www.diva-portal.org/smash/get/diva2:320346/FULLTEXT02

Only 1 Percent of Female Entrepreneurs Have Used Venture Capital to Fund Their Business

Female founders do many things to get their business running. They take loans, raid their life savings, hit up family and friends, and even rely on credit cards. According to a new study from the Women Presidents’ Organization (WPO) and Ernst & Young (EY), only one percent ends up using venture capital.
The study looks at how 430 businesses established by women were funded over their lifetime. It included a mix of established and young companies; about 51 percent of businesses surveyed were founded 21 or more years ago.
The 1 percent should not shock you. Women got just 2.19 percent of all venture capital funding in 2016. Historically, the number of women-owned business funded by venture capitalists has been even worse. From 1991 to 1996, of 362 businesses that received venture funding, only 31 deals were with women-led ventures.
If women are not using venture capital, where are the funds coming from? 68 percent of those surveyed by WPO and EY says they used personal savings to fund their businesses. At 27 percent, a line of credit was among the most common responses. About 22 percent incurred personal debt, and about 18 percent received a loan from a friend or family members.
More than 75 percent of the entrepreneurs surveyed reported that they generated between $1 M and $20M in annual revenues, with 14 percent reporting more than $20 million.
References
http://fortune.com/2017/04/26/women-venture-capital-funding/
https://republic.co/exclusive-only-1-of-female-founders-have-used-vc-money-to-fund-their-business

What are Alternatives to Venture Capital?

Growing businesses need funding and entrepreneurs find themselves raising funds from venture capitalists. In my view, there is much emphasis on raising funds from venture capital firms, instead of finding the right type of capital to match the specific needs of the business. Before raising equity capital, there are some other sources of funding that you should explore.
Cash flow from operations
An entrepreneur can decide to invest profits in areas that create high returns on investment. You should first maximize cash flow, and then use that cash flow to finance high-value investments.
Founder’s equity
You should invest any outside funds you have in the business. However, you should be careful not to put yourself in a very risky financial position. Investing in your own business allow you to retain ownership and avoid dilution that is caused by other capital providers.
Family and Friends
Like founder’s equity, getting funds from family and friends shows that you and your advisor believe in the business. Funds from family and friends also help you to avoid giving up control to people with potentially conflicting interests.
Bank loans
Bank loans are often the best source of funding. Typically, these must be backed by accounts receivable or inventory. Bank loans often require a personal guarantee.
References
https://www.inc.com/karl-and-bill/5-alternatives-to-venture-capital.html

The University Venture Fund: The Largest Student-run Venture Capital

With $18.1 million under management, the University Venture Fund (UVF) is the world’s largest student-run venture capital. UVF is a fund generalist with students from the University of Utah, Westminster College, Wharton School of Business and Brigham Young University. The fund has invested in around 18 companies with three exists and is continuing to look for new opportunities. UVF does not only invest in startup companies but also conducts value add projects for its portfolio companies.
Formed in 2001, UVF was the first experiential student venture fund in the United States. Supported by investors like Tim Draper, Geoff Wolley, and James Lee Sorenson and managed by professionals like Peter Harris Jared Hutchens, and Tom Stringham, UVF has proven the model that students can execute alongside industry top investors.
At UVF, best students come together to run a bona fide investment fund, doing what students do best—debate and research on investment deals that make a social impact.
UVF hosts an annual University Private Equity Summit. The event allows top VCs and investment experts to offer best practices and wisdom to about 300 attendees. Some of the speakers in the past events are Jeremy Andrus of SkullCandy and David Hornick of August Capital.
References
https://www.linkedin.com/company-beta/19374/
https://www.forbes.com/sites/cherylsnappconner/2013/01/19/students-running-a-vc-fund-the-university-venture-fund-says-yes/#6bf6a05f71c9
These Utah College Students Have Millions Of Dollars To Invest In Your Startup