Dear fellows entrepreneurs,
Please do your homework before raising funding with US VCs. This is also true with European ones by the way 🙃
They are going to conduct rigorous due diligence on your company and your team, so why don’t you investigate them as well before making any decision?
- 🏈 Build a list of their portfolio companies that ultimately failed or had an undesirable exit, such as an asset sale or an acquisition for less than the total funding raised by the company.
- 🏀 Reach out to the entrepreneurs and ask them how the fund managers behaved during the crisis.
- ⚾ Identify the life cycle and maturity with the fund. ( understand the date of their first deal with the fund)
🥊 Remember it’s always the toughest moments that reveal the true character of a person, like on the golf course after 3 bogeys in a row 🙂
I would say I’ve learned the hard truth over the years: for a startup, understanding VCs’ agenda is often as important as understanding the mindset of your customers.
The IRR is one of the most important VC performance metrics in the mid-term, which means your agenda could be misaligned. As an example, in the very inspiring podcast of Alexis Menard (Go Capital) with Julien Coulon, a repeat successful entrepreneur (now in the dark side of the force 🙂 had to sell his rocket star company to Citrix a bit too early (even if it was a desirable Exit of $m*00000000).
The reason why?
The maturity of the committed funds. It had been more than 6 years after the fund had made their first deal, so they needed to provide liquidity for their investors. The company would probably have been worth more than $M500 if they would have waited 2 or 3 more years 🤷🏽♂️🙈
The longer it takes to send money home, the higher the bar should be for return.
big bang factory offers a complete program combining a startup studio, a business accelerator and a sales factory designed for entrepreneurs by entrepreneurs.
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