January 6, 2004 - Quick VC Thoughts
and 31 VC-Related
Lessons From 2003
by
Bill Snow
CHICAGO – VentureWire recently
reported that 2003 venture capital investment in the U.S. was about $15.3
billion, which is more than 25 percent lower than 2002’s figure of $20.6
billion. Compared to the salad days of 2000, venture capital investment has
fallen by more than 80 percent.
But do not worry, little buckaroo,
because 2003’s figure is still larger than 1998’s $13.5 billion figure. Things
are never as dark as they seem.
The Nasdaq is up more than 50
percent for 2003. A trickle of IPOs started. If the market continues it upswing
through 2004 (it will), the IPO market will pick up and guess what this means?
It means VCs will begin to see exit scenarios and 2004 will see an increased
amount of venture investment – that is, only for very qualified companies. The
same rules apply.
31 VC-Related Lessons, Thoughts
From 2003
- Early stage, wannabe and
otherwise clueless entrepreneurs still call me, and believe it or not, people
still believe VCs will invest in idea-stage, pre-revenue companies.
- While the phone does still ring,
now it is a VoIP (voice over Internet protocol) phone.
- There is a competitive
disadvantage to technology. It’s better to utilize cutting-edge technology
than it is to create it.
- My friends don’t read my columns
so they won’t know if I mock them. Nice job going 0-14 in fantasy football,
Geek.
- Even though they do not read my
columns, old friends send the occasional e-mail. Regrettably, instead of
invitations to swank new year’s eve parties, I get the “you gotta talk to this
guy because he has a great company” e-mails. See No. 1.
- It’s a thin line between
persistence and harassment. Know if a VC actually invests in your industry
before you contact him.
- In the immortal words of Dean
Wormer: “Fat, drunk and stupid is no way to go through life, son.” Translated
to VC speak, if you aren’t prepared and if you don’t understand how the game
is played, you are wasting your time and the time of anyone you contact. Stop
it.
- Trying to sell services to
people and companies lacking money is a poor strategy.
- Ron May has the table manners of
a Bolshevik.
- Congratulations to my buddy,
John, for becoming a Chicago cop at age 37. When do I get to shoot the gun?
- If you say: “I will quit my job
upon funding,” you might as well say: “I will not get funding.”
- If you say: “Seasoned management
will be hired upon funding,” you might as well say: “I will not get funding.”
- If you say: “We face no
competition,” you might as well say: “I am a moron and I haven’t done my
homework.”
- If you say: “We only need 10
percent of this $50 billion market and we’ll have a $5 billion company,” you
might as well say: “This is true for us and the 6 billion other people in the
world.”
- Despite what my parents told me
when I was a child, streets designated “snow route” are not designed solely
for me.
- I know of many Chicago-area
entrepreneurs and “managers” who should watch The School of Rock, which,
contrary to its reputation as a formulaic music movie, actually is a
first-rate primer in Shackleton-esque managerial and motivational techniques.
I’m dead serious.
- There are no entitlement
programs in venture capital. You won’t get funded because you exist (unless
your mom is a VC).
- Those with the money hold power:
Entrepreneurs need VCs more than VCs need entrepreneurs.
- Do not talk about what you’re
about to do. Talk about what has been accomplished. VCs are not impressed with
“we’re about to sign a contract with Cisco.”
- Create financial projections
from the bottom up and the top down.
- Solutions looking for problems
are poor venture capital candidates.
- Scale means the cost of selling
one widget is the same as selling 100 widgets.
- Recurring revenue is a beautiful
thing.
- I didn’t know there was a system
to count years until I was in second grade and the girl in front of me
explained what “1974” meant. That was the last time numbers baffled me. Now,
names and faces confuse me.
- Watching my dog try to drink
Lake Michigan, I realized there’s a thin line between thirst and stupidity.
- My favorite Chicago VC turn down
of all time is: “Apparently you’ve confused me with someone who cares.”
- My favorite west coast VC turn
down of all time is: “For your protection, the business plan you submitted has
been professionally destroyed.”
- Don’t confuse activity with
accomplishment.
- No matter what you do in life
and business, you’re going to irritate someone. Don’t worry about it.
- Venture capital financing is the
most difficult method there is to funding a company. You’ll pull your hair
out, you’ll develop ulcers, your spouse will leave you, you’ll have to give up
way too much of the company and it will probably take a year or more. There
are companies in Chicago that refer to their days of venture capital hunting
as “that year without revenue” because the hunt for venture capital often
becomes an all-consuming-end-unto-itself search for validation. Nascent
companies focusing on sales is a far better strategy.
- 2004 will be the year for the
Cubs.
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