All I want for Xmas is venture capital…
Wednesday, December 10, 2008/
Here’s a VC wishlist for this silly season. Have you been naughty or nice? DORON BEN-MEIR
By Doron Ben-Meir
Christmas is around the corner and the global financial crisis is in full swing… so I thought it was time to deck the halls and address this vital request.
Much like the larger than life gift-wielding icon from the North Pole, many people question whether or not venture capital funding really exists… or is indeed a figment of over-excited entrepreneurial imagination?
Well I’ve made a list and checked it twice, so if you can satisfy the following core criteria, there may well be a surprise under your tree come Christmas Eve.
The venture capital Christmas checklist
- Compelling value proposition – target customers just feel they have to buy your product/service.
- A large, global, addressable market (>$1 billion revenue potential).
- Well crafted business plan that clearly explains the strategies and tactics required to achieve a dominant market position within three to five years.
- An experienced management team that knows exactly what needs to be done and what further resources must be added to the team to execute on the planned strategy.
- Strong protected (preferably patented) intellectual property and know-how (trade secret) presenting a substantial barrier to entry for those that dare compete.
- A powerful work ethic and a preparedness to do whatever it takes and travel wherever one must to get the job done.
- An impressive list of start-up customers evidencing the compelling nature of the value proposition and supporting management’s view of the most appropriate business model.
- In addition to all of the above, the founding team must understand that they need more than just money and value the insight and wisdom of an experienced VC who will mentor them through a minefield of both known and unknown unknowns.
- Last but not least, a convincing articulation of how between $5 million to $15 million may be invested in your business to yield an IRR of at least 60% with a liquidity event scheduled within three to five years to a competing field of at least three corporate gorillas desperate to acquire exactly your kind of business.
As you can see, it’s just not that difficult… I can’t for the life of me understand why I don’t see such prospects more often?
In any event, you still have a couple of weeks to submit applications… don’t miss this golden opportunity.
But be warned…some of my colleagues also subject their entrepreneurs to psychometric testing so, in the end, the final criterion may well be whether you’re naughty or nice.
Have a happy and safe holiday season and for the coming year let’s maintain our focus on the entrepreneurial silver lining.
Doron Ben-Meir has been an active venture capital manager for the last eight years. He founded Prescient Venture Capital and prior to that was a consulting investment director of Momentum Funds Management. He was a serial entrepreneur over a 12 year period, co-founding five new technology based businesses.
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