Corporate Venture Capital, or CVC, is a form of investment where corporate funds are directly invested in external private companies. CVC funds are managed and invested by specialized divisions of a larger company, such as GV for Google and M12 for Microsoft.
The recent rise in Corporate Venture Capital deal activities has made CVC a more promising source of funds for entrepreneurs and founders than before. According to Pitchbook Venture Monitor Q1 2019 report, "CVC activity as a share of overall VC activity set a new high, increasing from 52.7% of deal value in 2018 to 59.6% in 1Q 2019." In Q1 2019, Corporate Venture Capital invested over $19B and in 316 deals. That is all great news, especially if you are a later-stage startup. CVCs similar to independent Venture Capital firms are showing a keener interest in startups that are later in their lifecycle and require larger investment checks. To be exact, about 92% of the investment dollars from...
A while back, myself and a couple of other investors were talking about creating a monthly breakfast meeting and inviting entrepreneurs and founders to come join us for breakfast. One of the investors said: "This should not be an effing pitch-fest!" I couldn't agree more!
When I was a cofounder, I really loved pitch-fests. It is very exciting to present to a large audience, brag about your startup and receive enthusiastic cheers and support. Now, as an investor and startup advisor, I find pitch-fest events inefficient and somewhat ineffective.
In fact I try to avoid them as much as I can!
When I evaluate a company to invest in, amongst everything else, I pay very close attention to the founder him/herself. I try to build a relationship with the founder and get to know them as a person. I try to understand their level of zest and zeal and their story; their personal journey to where they are now. For me, investing in a company is more than...
I was recently approached by two different founders, both wanting to get my advice about raising capital and my perspective about their company.
Somewhere in the conversation, the dreaded question popped up: "Do you think this is a good idea?"
I really hate it when a founder asks me that question. It doesn't matter to me if they view me as a mentor, advisor or a potential investor when they pose it, it is one of the worst questions a founder can ask, period.
That question shows that the founder's doubts are so considerable that they can't even hide it. I expect a founder to have done their homework and know the answer, unequivocally. Even when and if the odds are not in their favor, a founder should be such strong believer in his/her own idea to leave little doubt for others that if they don't jump onboard now, it will be too late.
I am willing to bet you money that Mark Zuckerberg, Steve Jobs or Jeff Bezos did not ask a prospect investor if their idea was sound,...
I was creating the content for the Startup Fundraising Academy curriculum and sharing the top 10 mistakes that entrepreneurs make when they go about fundraising. No spoilers here by the way. Sign up for the course to get the scoop.
As I put the finishing touches on the slide, I got a text from my GP. He was asking if I knew a guy who had recently completed an accelerator program. I did! I asked him why?! He said the guy was wanting to meet with him and get funding.
Innocent enough, right?!
I had met with this chap a month ago and after hearing his pitch, I told him that we (myself and my GP, our firm) are not interested. His idea was good but I had a number of concerns that dissuaded me from committing our firm as an investor at that time. He obviously was disappointed…
What did he try to do a month later? Try the backdoor! Maybe, he thought, he could persuade the other GP!…Bad move on his part! Very bad move…
So, could he, for the sake of...
The topic of Equity is always a sticky point between founders and investors. Founders want to give as little equity to investors as possible. Investors, on the other hand, want to get as much equity for their money as possible. Regardless of the deal structure, equity is one of the most important elements that needs to be thought through.
CapShare has recently published the 2018 Private Company Equity Statistics Report which has a lot of cool data about the investment landscape this past year. One of the most useful pieces in that report is a graph that shows Investor versus Employee Equity by fundraising stage in 2018.
As you see, founders don't lose any equity until the SEED stage and at that time, on average, they give away 25% of their company. A big jump by 15 percentage points at Series A, the founder still controls majority share of the company.
At Series B, the founder is no longer in control as the investors are now in control of 55% of the...
I see bright founders all the time. I look for them and they look for me. I meet with most of them quite enthusiastically, eager to learn about them, their team and their startup. However, more often that I would like, I leave disappointed...My disappointment usually stems not from the idea or the company but about the approach that the founder took towards fundraising. Here is my top five turn off list.
1.0 Founder is desperate and shows it
Don't get me wrong, I have been in the situation that most founders face. Need money to make the payroll, to scale the business, to finish the prototype, to travel for business, you name it. I get desperation. I just don't like it when a founder shows it.
Showing desperation means that the founder is willing to do almost anything to survive. It means that the founder is losing control and as an investor, the last thing I want in my portfolio is a company that is being run by someone who is not in control.
How does a founder show...
I was asked this question by a young founder a couple of days ago. In her case, she was too early to raise a seed round, yet she considerable funding to make progress. She was contemplating raising a pre-seed round of much lower amount, followed in less than a year, by a legitimate seed round of relevant size. However, she was concerned (rightly) about equity dilution. She believed back to back fundraising is a bad idea.
Here is what I would say: back to back fundraising is tough but it can actually be a good strategy. Note the word STRATEGY. If you choose to open your new round within a year of your last round, you have to be prepared to not only answer tough questions, but show how this was a part of the plan.
Back to back fundraising can give the investors the impression that you were undisciplined about cash-burn or you just didn't plan well. Neither of them are helpful to you. It can also make you look desperate, which is just as bad as being undisciplined...
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