Young Successful Entrepreneur

VCs are notariously known for being ruthless, brutal, and darn right blunt about the likely failure of your company.  To be perfectly honest, they have to be!  They’re managing a huge pool of money, and their job is to minimize risk as much as possible, and at the same time, go for the startups that have the best potential of turning into a $50 million+ sale.

I met with Peter Lee from Prism Ventures today.  I was prepared for the worst; I spent pretty much all day writing up my powerpoint presentation and going over it in my head.  If you think I prepared a lot for my presentation with Disney Interactive Media Group, go ahead and triple the preparation time and you’ll have an understanding about how much I prepared today.  Startups fail because they run out of money; my goal today was to position ourselves so that we can get that money.

Sandy walks me to the elevator and to the room with Peter Lee in it.  As we get there, two entrepreneurs walk out with the saddest faces you will ever see.  “How did it go?” I ask.  They look at me, and respond with absolutely no energy, “It was brutal man.  Good luck.”  Ok, I’m not usually a nervous person and I’d like to think I’m one of the most confident people that you will ever meet; however, that right there was enough to send me into a brief panic attack.  “Did I prepare enough?  Is my powerpoint complete?  What if I forget my pitch?” were some of the question that were flowing through my head.  Sandy walks me to the door and I walk in to meet Peter.

I walk in, shake Peter’s hand, and am ready for the worst.  In my head I’m thinking, “Ok Jun, compose yourself already, put a freaking smile on your face, and pitch this company as if it was your last pitch!”  To be honest, that self motivated kick in the butt worked!  Not to mention that Peter Lee was the nicest VC that I have ever met.  We kept it super casual; I didn’t even have to bring out my powerpoint presentation.  He offered some great advice and feedback that I would like to share iwth you now.

Advice from a VC:

1. The Management Team is King: The VCs goal is to minimize risk as much as possible.  One of the best ways to do this is to invest in a team with a proven trackrecord.  If you look at my face, you will see that I look 18 years old (it’s the asian side;  at least I’ll still look good when I’m 35).  I ask Peter if a great Board of Advisors is going to make of for a young management team with no proven trackrecord.  His answer is that Board of Advisors are there to make introductions, and to give advice during crucial moments in your startup.  A Board of Advisors however will never get you money. The advisors are there at most only part time, so the VC is investing in your team, not the advisors.

So what can we do to help us get funding?  Peter’s advice was to bootstrap the company, get traction to prove that you can create something that people will use, and leverage the board of advisors to get an introduction with an early stage VC firm.  I was happy because that’s exactly what we’re doing right now!  We created FD Career to brand Future Delivery, build traction, and to prove that we can actually build something that people will use.

2. Get an honest valuation: I originally had the same viewpoint that many of you do - get as much money as you can, while giving up as little equity in your company as possible.  So the goal was to get the best possible valuation, even if it’s not an accurate represenation of your company.  Peter advises against this because VCs know when a startup is inflated.

For example, lets say your company was over valued at $20M when it got seed funding.  Now that you’re ready for a Round A of funds, you go to a VC and say that your company was valued at $20M before, so now you feel that your company is worth $40M.  The VC firm will look at your company and they’ll say, “There is no way your company is worth $40M let alone $20M.  Your company is worth $15M right now.”  So what just happened?  The VC firm will have to devalue your company which leads to a lot of complications for the funding process.  This makes it extremely difficult to find future funding.  Therefore, Peter’s advice is to be honest with your valuation because it will make hitting milestones a whole lot easier.

Well, that was my experience with the nicest VC I have ever met.  Now I need to start building that traction, branding the company, and hopefully, perfectly set us up for Series A funding in January.  Wish me luck!!!