This post will be the first in a series on how I think good entrepreneurs can become great entrepreneurs (at least from a VC's perspective). One of my earlier posts was a good starting point in that regard:
http://dawalibi.blogspot.com/2007/06/last-night-den.html
Here are a few more thoughts for this week:
- Know your weaknesses, and be able to admit them. In other words, know yourself. The best entrepreneurs are the ones who can recognize the exact holes they have to fill in their organizations. The faster you can recognize these weaknesses, the better. You'll more easily avoid a lot of the problems that plague early stage ventures (usually management issues shortfalls).
- Make sure you explain your business and industry clearly and concisely. VCs are notoriously uncomfortable when they don't know a business. Try to frame your business in words or in an analogy that the VC in front of you will know well and understand quickly.
- Passion will get you everywhere. Let's look at this from an economic perspective first. The reality is that VCs can't be satisfied with returning 5 or 6 percent to their limited partners. Venture capital funds must produce returns (IRR) or 30% or more over their lifetime. The consequence of that is that the average exit needs to be very big. A 10M-20M exit on a 4M investment just doesn't cut it unless the VC is holding 95% of the company. The reality is that VCs make their living on the homeruns. Therefore, we look for entrepreneurs who have the passion, drive and vision required to swing for the fences. Be realistic in your assumption and projections, but don't be afraid to think big.
If you have big ideas or think this business is easy, send an email to dawalibi@garagecanada.com.
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