This document provides an introduction to venture capital from J. Skyler Fernandes, a VC at Centripetal Capital Partners. Fernandes explains that the purpose of the event is to openly answer questions from entrepreneurs and help them better understand the VC world. Fernandes states they will act as a "sherpa" to guide entrepreneurs. The document then discusses factors such as when entrepreneurs should seek VC funding, the different funding options available depending on company valuation, what VCs really invest in such as large market opportunities, and advice for pitching to VCs successfully.
2. About The VC
J. Skyler Fernandes
- VC @ Centripetal Capital Partners,
invests $1-3M across industry sectors
- VC Mentor @ ER Accelerator
- Entrepreneur, co-founded a number of
internet startups
- Leads Missing Middle Initiative,
launched at World Economic Forum
Connect With
J. Skyler Fernandes:
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3. Why We’re Here
I’m not here for you to pitch me your
investment (unless you’re the next Google!)
I’m here to:
- Answer questions on Venture Capital
- Help you be a more successful entrepreneur
The VC world looks complicated and closed.
Can seem scary and feel you’re in the dark.
Purpose of event: To be very open with
questions and answers with entrepreneurs
Tonight, let me be your VC sherpa!
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4. When To Seek Funding?
It Depends…
Ideal Time For VC Could
Be After Initial Testing &
Proof Of Concept
Or Even After You’ve Been
Around For A Few Years!
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5. Do You Need VC Funding?
$14,000,000.00
$12,000,000.00
$10,000,000.00
$8,000,000.00
$6,000,000.00
$4,000,000.00
$2,000,000.00
$-
Year 1 Year 2 Year 3 Year 4 Year 5
$(2,000,000.00)
Revenue Expenses EBITDA
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6. Size Matters: Your Funding Options
Private Equity
Current Company Valuation:
Angels: $1-5M ($50M-100M+)
VC: $5-100M Venture Capital
PE:100M+
($3M-50M)
Missing Middle
($1M-3M)
Angel Capital
(up to $1M)
Friends & Family Know the type of capital you need
to execute your plan:
(up to $1M)
Sources & Uses
Debt Negative EBITDA vs. Cumulative
Bootstrap Negative EBITDA
Value of the $: Ownership (5-50%+)
+ Relationships + Experience 6
7. The Two Most Important Words
IRR
Angels: >50%+
VC: 30-50%
PE: 10-30%
Return Multiple
Angels: 20x+
VCs: 5-20x
PE: 2-5x
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8. Value of the $ / Brand
Raise more than you need
…Takes Longer / Costs More
Angels
Advisors: 0.10%-1%
Capital = 5-20%+ Ownership
Intro to VCs
Intro to Customers / Partners
Operational Experience
Test the demand
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9. Value of the $ / Brand
Raise more than you need
…Takes Longer / Costs More
VCs:
Board Seat
Capital = 10-50%+
Ability to do follow on rounds
Intro to larger capital
Intro to Customers / Partners
Operational Experience
Early Stage growth capital
Scare Away Competition / Protect Company
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10. How To Find The Right VC For You
Do Your Research & Find
A Fund That…
- Invests in your sector
- Invests at your stage
- Not invested in a competitor
- Invests your needed $ size
- Is located in your area
First Choice Is To Find A VC You Have Connections To!
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11. Working With A VC
It’s Like A Marriage…
Keys To A Successful VC
Relationship:
- Compatibility
- Honesty
- Communication
- Effort
- Understanding
- Faithfulness
- Ability To Change
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12. The Goal!
…But unlike a successful marriage a
successful VC relationship is temporary.
Goal is to part ways
in 3-5 years
Assets are split
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14. Pitching To A VC
Key Elements For Success:
• Be Introduced, Don’t E-mail/Call
• You Are The Brand: so own that and be the
“best you” you can be for your company
• NDA: Not needed until 2nd/3rd meeting
• Business Plan vs. Pitch Deck
• A Way To Get Rich: Emphasize how to make
a lot of money and quickly
• Don’t Do Their Job: Don’t come to the table
with your own term sheet
• Know The Financial Return Potential
• Capital Raise Strategy: Round 1, 2, 3
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15. Common Missing Items
Key Elements For Success:
• General Market Size vs. Target Market Size
• Large & Growing or Strong Niche / High $
• Market Gap: Why does gap exist?
• We Have No Competition
– Direct / Indirect Competition?
• Reaction of entry into marketplace?
• Proprietary = Patents & Relationships
• These Are Conservative Projections
– Show low case/ base case / high case
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16. Dedication
Key Elements For Success:
• Personal Investment: Skin in the Game
– Size doesn’t matter, but how meaningful to you
• Full-Time Commitment: Don’t half ass
– No side projects!
• Don’t just be looking to create a job
because you lost yours
– Even after funded could be no salary
• Not looking to stay forever
– Desire to sell in 5 yr
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17. Be Smart
Key Elements For Success:
• Be Respectful / Don’t Be Fearful
– VCs see lots of business pitches
• Don’t Be Overly Emotional / Be Passionate
– Don’t take anything too personal
• Don’t sell the house / all assets
– Take care of family first
• Spend time really vetting your idea
• Gather the right team / Cut people quick
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18. Advice:
80/20 Rule – Don’t get bogged down in development
Focus On Customer Not Technology
Test Market Well To Find
Your Achilles Heel
Be Prepared to Pivot
Pivoting Failure
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