I visited one of the top venture capitalists in Silicon Valley (Hollywood of Geeks). It doesn’t hurt their “surplus of talent” to have Stanford University nearby. Here are a few highlights of our conversation…
- Purpose of a VC is to accelerate the time to market for portfolio companies.
- They typically invest in people and culture instead of a process or products. They look for passion, purpose, fight and traction.
- The business case has to go beyond the product or service. It needs “feet on the street” discovery…Why you? Why now?
- The best time to get money is when you don’t need it.
- Specify an inflection point for profitability, considering your cash burn rate, growth, and run rate.
- 3X is the usual return, and 20X are homeruns!
- One leader said, “You don’t know how good a company is going to be when you buy it. 95% or more of the projections of what you’re going to hear are wrong.” Make certain your due diligence numbers are accurate!
- Conduct internal lessons learned on what we did wrong: the deals we should have done that we didn’t do, or the deals we shouldn’t have done that we did do (averaged 30% gross internal rate of return on money invested…$60B over 23 years).
- In more mature buyouts, you look for efficiency more than innovation…know the management, the competitors, the customers.
Does your company have a business case with “feet on the street?”
