Think Like a VC

Mohanjit Jolly
Mohanjit Jolly
Executive Director, 
Draper Fisher Jurvetson India

Here is the typical flow that I recommend: Problem (what problem are you solving); Solution (how are you solving it or what do you do?); Market (is it a big enough pain point and are people willing to pay for it); Competition (if it’s a big enough pain point, there are others doing it. How are you different?); Business model (how do you sell and make money?); Team (probably the most crucial point; Who is going to execute and make it happen); Financials (how big do you get over what period of time and what are the key metrics for growth); Capital (how much are you looking for and what milestones can you hit with that capital); Exit (do you get bought or go IPO, and when?); Summary (why you?).

7. TTTM:

The investment decision is really based on team, technology or differentiation, traction and validation, and market.

8. Cancer drug vs. vitamin:

VCs are looking for ‘must haves’ or cancer drugs rather than ‘nice to haves’ or vitamins. Think monumental, not incremental.

9. Definite maybe:

VCs are notorious for being in the bucket of ‘definite maybe’ when asked about the interest level in a given startup. We are often afraid of saying ‘no’ for fear of missing out on an interesting deal, yet we tend to fall into the trap of analysis paralysis in order to get to a ‘yes’. The one trigger that gets VCs move fast is a term sheet. As soon as another term sheet is on the table, then VCs get into higher gear to come up with a counter proposal and a potential bidding war can start for a
particular startup.

10. The optimum cash continuum, customers ® grants ® beg ® borrow ® steal ® VC:

Before approaching a VC, entrepreneurs should know two key facts – taking VC money means letting go of control (and if that’s an issue, then they shouldn’t approach VCs for capital) and VC money is probably the most expensive capital one can get. The best source of cash is high paying marquis customers (revenue), followed by grants. The beg-borrow-steal-VC continuum sounds a little tongue-in-cheek, but the point here is that VC money is not appropriate for most, and the expectations need to be in place as and when you approach the venture capitalists.

Bottom line:

When approaching customers, appropriate homework around who to approach, how to approach, what to say or present, and understanding of the process and timelines involved is necessary. Good news is that there is plenty of capital available for outstanding teams with great ideas. Follow the above rules, and you are bound to improve your chances of success.

The author of the article is Mohanjit Jolly, Executive Director, Draper Fisher Jurvetson India.
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Reader's comments(1)
1: Excellent info. Thanks for deep / systematic info.to get prepare.
Posted by:Dr J K Nigam - 21 Sep, 2012

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