Venture capital returns
We came across these two good articles. Definately worth to read you want to understand venture capital:
Risk Exploding Problem With Venture Capital
and
Getting Funding is NOT a Strategy
Money is always a consequence, not the root cause. You work – you get paid. You sell – customer pays. You roll the dice and get lucky – you get rich. You have a business (plan) that works – you get funding.
But getting funding is not the end goal, not even for a startup. The end goal is to be able to pay all that funding back, and some more. To reach that you need to have a business that works. For getting there, you need the right strategy. The strategy should be all about your business: who is your customer, what is your offering, how you plan to win etc.
The journey from where you are today to where you need to be one day is typically so long that you may need to top up some fuel on the way. Funding is your fuel, helping you to get where you need to go. But it’s just a means to an end, not the reason your startup exists and definitely not your Northern Star. It should not be the driver for your thinking and activities, do not let “what do I need to do to get funded” to mislead you.
Are you the only VC type investor who has such a strategy?
No, but this is still more of an “exception” rather than “the norm”. Some investors who have a similar kind of basic philosophy (model is more of a “scalable Angel” rather than “VC”)
https://www.kimaventures.com/ (the only European on this list)
http://rightsidecapital.com/ (we owe a lot to these guys for setting up a role model we have taken full advantage of. Big thanks to Kevin & al for the inspiration and openly sharing their thinking)
https://svangel.com/ (building on the heritage of the original SuperAngel Ron Conway, they have the longest track record to demonstrate the strategy works)
https://500.co/ (the most vocal on this list. For them investing is just one of the things they do)
There certainly are more but most investors with this strategy tend to prefer a low public profile, they focus on their business rather than PR.
What do you mean with Startup/Investor fit ?
Similar to product/market fit, there needs to be a match between what the startup needs and the investor can offer. This applies first to all “visible” elements of the investor’s screening profile: fit against investment strategy, stage, ticket size, vertical focus etc vs the profile of the startup. And it goes beyond the “visible” – there needs to be a strong alignment in values, philosophies, ways of working etc for the relationship to last during the rough ride ahead. We are not the right investor for many, as what we believe in is rather different from the stereotypical thinking.
How do you differ from other VCs ?
Every investor should have a clear investment strategy, including an exit thesis. What we believe in is what professional Angel investors in the US have practiced for years and proven to work. Which results in a very different approach from the typical VC. So while we technically are a VC (=we make a living of investing 3rd party funds in startups), our philosophy is much closer to that of an Angel investor (who invest their own money, so the downside risk feels more real).
Will you help us get other investors?
Not really, we decide for ourselves only and expect the founders to reach out to other investors. It is also an acid test of the founder’s ability to sell – if you cannot sell yourself and your business to investors, you are likely to fail with customers as well.
What else besides your “OK” is needed to close the investment with payment?
Governance and Legal DD (Due Diligence) and Agreements. We have standardised processes and templates on both, there are no mandatory out of pocket expenses. The speed of the process is in your hands as you will do most of the work. We do not insist on our processes if there are better alternatives. We care about the end result, and are pragmatic about getting there. But we do need a proper DD and Agreements.
How long does your investment decision take ?
For us making the ”yes we’re in” decision is fast – can happen in days. Decision is made among the 3 of us, no committees needed. We work independently and our decision does not depend on what others do so we are often the first to commit.
But getting to the closing including payment totally depends on you. If you are well prepared and execute promptly on all formalities it can go through in a few weeks, but usually it takes longer – can be several months. Two most common reasons for that are:
- You do not have enough investors to close the round (we are never the only investor so you will need others)
- The DD brings up issues that need to be addressed prior to final closing (such as unfinished paperwork in share transfers).
How many companies will you invest in?
Our target is to have 100 companies in the portfolio. Our runrate is 20+ new investments per year. We are actively looking for new companies to invest in.
What kind of companies will you invest in?
Please read
- The investment criteria listed on our website
- “Gorilla” related articles on Knowledgebase
- “What Founders Say about Us” testimonials
Those 3 should give you a fairly good understanding of what we are like and what we are looking for.