Had a couple of very hectic weeks with TiECon and couple of our partners visiting India. The opportunity to go around, see 10 “shortlisted” companies with some of my partners last week gave a good sense of contrast between what is expected in a mature venture system like the valley, and what is available here. One of the things that stood out was the lack of detail on pitches. What is interesting is that most of the missing detail did not seem to be a function of articulation, but of ignorance – people who had missed the details had not thought about those aspects. Also, most of the people who had missed details had not operated in those markets before. Nine out of ten presentations had no competitive analysis whatsoever — some more mentioned competition but with a dismissive tone.
I have noticed some of the same contrast in my visits to valley pitches. And if I may draw a parallel, I have seen similar lack of detail in corporate environment here in India — VP level plans and presentations get approved often without sufficient level of detail and analysis.
In terms of our education process for entrepreneurs on venturewoods and elsewhere, we have long focussed on “what all to cover” which again leads to a shallow view of the plan — entrepreneurs look at a question, and answer it at a high level, and they are done. We need to start putting more emphasis on the level of detailing. Maybe if someone can share their pitches, we could do a critique. I have a lot of, what in our view are, good and bad pitches, but I dont have the right to share any of them… Any volunteers?
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Thanks a lot for the response Alok.
The one concept in the term sheet tht i have really started to fear is “Liquidation preference”. I have read that it varies from time to time.. I mean during boom period it was 10x and then it again came back to 1-2.
1. Can you give us some idea about the average these days (in internet business targetted at indians) ?
2. Can you explain, how important this concept is to VCs and how do they decide on the number ?
3. If the VCs are looking for 5x return on their investment of say 2 million dollars ( i am talking of early stage funding) would they look at a liquidation preference of 5 ?
Here are a couple of online resources that have lots of relevant material that can help entrepreneurs get educated. In the very least, they can point readers towards answering for themselves questions about their proposed business, a good first step before one might get to answer the questions of a proposed investor.
http://www.garage.com
http://www.hbs.edu/entrepreneurship/resources.html
How an entrepreneur gets to understanding the details of his/her business might involve studying the sector on one’s own, relying on third party research, attending industry conferences, talking to those employed in the industry, doing due diligence on the competition, putting some basic quantitative analysis on size of the market and the economics of the industry, how value gets captured and who captures it……and so on.
Finally, most VCs have a section on their websites that suggest the items/detail that they want entrepreneurs to have a good understanding of and the questions that everyone entrepreneur ought to be able to answer about his/her proposed business. Never hurts to visit the VCs website to get a feel for what they are looking for an entrepreneur to be prepared with (and incorporated in the the brief presentations that they receive).
Late night and I will make sure it reaches you.
Thanks,
Animesh
Entre, I assume you are referring to the valuation numbers (other numbers in a termsheet are not really interested!) — that is largely a function of competitiveness, potential and comparables… will be hard to justify any of those mathematically… There is a fair degree of subjectivity.
Hey Alok,
How about sharing some term-sheets (real ones)?
How about explaining some of the figures in there and the rationale behind them ? And i don’t mean the terms in the term sheet .. there are a lots of websites which do that..
Can you find some term sheet which no more under NDA ?