We had a guest lecturer today in my Introduction to Venturing* - Bob Higgins, founder and managing partner of VC firm Highland Capital Partners, Harvard Business School professor, and supporting "actor" in the documentary movie startup.com.
While it would be inappropriate to share with you the full contents of his presentation, there were a few key observations / comments that I found interesting:
- When evalutating an opportunity, VCs primarily look at the experience of the proposed management team. The market, product, and economics of the deal are obviously also considered, but the management team is essential.
- For around 80% of deals, VCs actually seek out entrepreneurs (by attending conferences and networking) rather than waiting for business plans to land on their doorstep.
- Virtually no new VC money is being raised at the moment, but there's about US$50 billion in existing funds waiting to be invested in ventures.
- For most deals, VC's like to take around 25% - 50% of the equity in a company, but it's important to ensure that the management team still end up with a decent share of the company (around 20%).
- A 'good' entrepreneur should be selective about which VC firms to approach. A VC will be making more than just a financial investment in your firm; they'll be on the board, will probably be involved in recruiting members of the management team, and may even be in a position to fire you if you don't perform (although this is rare).
* (full review of the course coming this weekend, I promise ;-)
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