Homework due for today
Legend: : Participation | : Early | : PDF | : Team | : Zipped
- Read: Different Kinds of Investors
- Listen To one of the podcasts from Angel - Hosted by Jason Calacanis. Write an informal summary of key lessons you learned from that podcast. Include the name of the entrepreneur(s) who are interviewed and the date of the podcast so we can refer back to it. Deliverable: Key lessons learned. 1 page, pdf
- Term Project Stage 2 Complete Look at the Term Project Outline and make sure you have completed all the deliverables stated there. Team Deliverable: Term project Stage 2 Deliverable
Interesting, but not required reading
Guest Lecturer
We are lucky today to have Andy Payne lead the discussion. We’ve known each other from some years, back when I worked at Lotus Development Corporation and Andy worked at Open Market. Andy and Open Market were at the forefront of inventing many of the concepts and technologies that underly a lot of the commercial ecommerce world today.
Andy Payne | LinkedIn
Discussion: With your next door neigbor: what you want know about How Startups Get Financed
How Startups get Money
- Friends and Family
- Consulting/Work on the side
- Angels - Individuals or in groups (e.g. Walnut or Common Angels)
- Venture Capital - Organized as funds - two sided (e.g. North Bridge or NEA)
- Incubators/Seed funding companies (e.g. Y-Combinator or TechStars)
- Crowdfunding (e.g. KickStarter)
- (Banks)
Venture Capital
What is a VC firm?
- A “firm” that stands between two constituencies
- “Limited Partners”
- Organizations like Universities or Pention Plans
- Who need to “manage” a large sum of money
- They allocate portions of their funds to different investment types
- One of the investment types is “venture capital”
- Considered high risk and very long term
- Startups and other businesses who need money
- New teams looking to raise capital
- Previously funded teams who need more capital
- Existing companies who are established and need more capital.
- “Value add” of VC firm
- Locating the best investments into a portfolio of investments
- Managing the portfolio companies for best outcome
- Over 7 years goal is
- 10% companies are 100+x successes
- 40% companies do “ok”
- 40% fail outright
- VC pools “Limited Partner” funds into numbered Funds
- Each VC will choose an appropriate size fund.
What is the process?
- Rounds of investment
- How valuation changes
- Term sheets
- Liquidation preferences will turn your hair grey.
- Ideal First Round Funding Terms
- Founders have an idea - investors have money
- It’s a contract between founders and investors
Rounds of financing
What you negotiate over
- Valuation and Investment amount are the key parameters
- How term sheets turn into “deals”
- What’s a seed deal?
- Should you or shouldn’t you?
- What are VC firms really?
- General and Limited Partners
- Why do people love/hate vcs?
Next Class