I attended a couple SVASE venture events this week. The SVASE CEO is Chris Gill, and he was on hand for helpful advice. The first one was called "First Impressions" in Palo Alto chaired by Chad Salinas of Najdorf, where start-ups pitch their company to a panel of venture fund investors. The second event’s theme was "Closing the Deal: Terms and Valuations" in Danville, CA.
Panelists from both events included:
- David Epstein, Venture Partner, Crosslink Capital.
- Anurag Nigam, Board Director, Sand Hill Angels
- Roy Thiele-Sardina, Managing Partner, HighBAR Ventures
- Cynthia B. Padnos, Outlook Ventures and has just founded Illuminate Ventures (sp?)
- Andrew Williamson, PhD, Physic Ventures
- Dana H. Shultz, Attorney at Law
- Brian O’Malley, Senior Associate, Battery Ventures
I gleaned nuggets from each event, some of which I will share here:
- How is the valuation determined in a first round? The first step is for investors to understand your next milestone to hit, whether it is to build an alpha product, release a v1.0 GA product, win one or more customers, perfect a sales model, etc. How much cash is required to get there?
- For investors, their stake is more about risk than the money. There is that old investor’s rule “the first step to make money is not to lose money.” They want to understand how solid your team is primarily, how great of an idea you have, how well you can execute on the idea, whether you have done it before, what your segment is doing, what the barriers to entry are, who the potential competitors are, etc.
- Terms are typically standard and published by the big law firms such as Wilson Sonsini
- Venture funds who did not invest during the dot.com aftermath in 2002-2004 were hammered. Funds like Mayfield that invested big won big.
I get 3-4 emails per day from various start-up and venture networking organizations. All the meetings are well stocked with venture fund members. And all the venture investors continue to remind entrepreneurs that cash is there for companies with great teams and great products, and they are ready to invest. All great to know.
PS: and then there is always what Guy says...