The Next Web conference that I am moderating in Amsterdam just kicked off, and the first speaker was Adeo Ressi, the founder of TheFunded
,
the invite-only community for venture-funded CEOs to compare notes
about building startups and bitch about VCs. (VCs are not allowed on
the site, which inspired a mock site, the Unfunded,
for them to bitch about entrepreneurs). I met him last night at a
dinner for the keynote speakers (he’s the tall one in the photo).
Ressi is a font of knowledge about the startup world.
Despite the broader economic rumblings, it’ s never been
cheaper to start a company and there’s still a ton of venture
money out there. In fact, Ressi told me that there is so much money out
there for startups that VCs are now offering to partially buy out
founders’ personal stakes to get deals. In effect, they are
paying off the founders to pick them. Below is some of his advice for
entrepreneurs from his presentation that he just finished onstage:
The only time your lawyers will be honest with you
in the venture raising process is when you interview them. After that
don’t trust anything they say because their motivation is to
close the deal and get the fee.Everyone needs to go and pitch a VC first and expect it to fail.
That first pitch will suck no matter what. Bring a business partner who
is silent. Have him or her watch the interaction. Every time the VC
falls asleep or makes a derogatory statement, your partner writes that
down, and you go and fix it.All you need is a PowerPoint. Make it 20 minutes. Do not throw
in detailed financial statements. You are basically throwing a giant
hunk of steak into a lion’s den and rolling around in it. Numbers
is their business. They will tear you apart.VCs talk amongst themselves. Most entrepreneurs fall into the
classic mistake of pitching serially. There is no such thing as
confidentiality. Your materials will be seen by dozens of VCs the
second you pitch. It gets worse, if a VC likes you, they will tell the
other VCs that you suck. You want to hit as many funds as you can,. I
recommend trying to hit 30 funds in two weeks. Typically, you will get
one term sheet per 10 pitches.I guarantee you your first term sheet will be bad. They will
lowball you, then they will pressure you to sign it quickly. Hold off.
Your goal now is to get the second or third term sheet. Without other
offers there is no market.VCs say we will co-invest. They are trying to share the offer.
Tell them, “No. Why don’t you make me an offer? I will
evaluate the offer separately.” Do not let them syndicate the
deal or merge the term sheets.There is no confidentiality. Everything you send out will be seen by your competitors.
Some good advice. If readers have more to add, please tell us in comments.
(Photo by Ernst-Jan).
| Website: | thefunded.com |
| Location: | United States |
| Founded: | March 1, 2007 |
The Funded, a controversial site focused on
revealing the inside of the Venture Capital world, is out to find the
truth about how Venture Capital firms treat entrepreneurs. Like Avvo, a service that allows users… Learn More
Would love to be there. When is the next big conference comming up?
YouYap.com
great advice . Thanks. Business is business.
Wow, that is MY livingroom there!
@YouYap.com: Next Conference is on April 2 and 3, 2009.
@youtap April 2 and 3, 2009
Thanks Adeo for your interesting speech
Hey That is me on the back of that picture!
Eric,
I was watching the live stream of his speech (which was great BTW); any
chance you can get hold of a copy and share with the TC readers?
gr8 post !
Really good insights you gave here.
Thanks for sharing.
Okay, here is something to add:
- practice your presentation. Especially if you are a shy tech geek.
Try to feel like an actor who has to play the role of a salesman.
Exaggerate. Push yourself. Watch Steve Ballmer Videos on Youtube. Tell
yourself, that your product/idea is great. Even if it feels silly in
the beginning.
- always keep in mind: There is much more capital than good ideas.
You don’t need this VC in particular. But they need you.
- if they are telling you, that your idea is okay, average, nice but
too risky, too early, to late, etc.. AND try to stay in contact with
you: they really love your idea.
- if they ask you to evaluate your company, pick a very high but not ridicilous number.
- “Do not throw in detailed financial statements. “:
that’s right. Try not to use numbers at all, especially if you
are making a contract. BUT: show concrete ways, how to make money with
the idea. Tell them, that you want to be cashflow postive asap (even if
that’s a lie). Give them the feeling, that you are not just an
idealist and really care about earning money.
- Last but not least: if you have the chance, talk to someone
entrepreneur you trust (NOT your lawyer), before you make a decision.
Even if the person has no clue about internet.
I guess there is much more to add….