Confessions of a VC 4: The Whip of the entrepreneur

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My hand is itching, I really want to borrow "Indiana Jones" of the whip to beat those whimsical, sky, self-righteous, lazy, ignorant entrepreneurs ... But this first whip, or let me first mercilessly smoke myself!

Before whipping, start by criticizing the entrepreneur's guilt, especially the founders who first started their business.

First-time entrepreneurs, there are courage, brain, technical, can not see the opportunity of others sometimes intuition to the big has floated from the sky, there are a lot of people. But, for some reason, the common lack of early entrepreneurs is their love of financial "numbers"-almost as if there is a common phenomenon of congenital calcium deficiency in the Chinese, or a Freudian "collective unconscious precipitate"!

The so-called "number" here is not to say that entrepreneurs do not want to earn it a millions what the number, nor when they read on the internet and who got to tens of millions of, a few billion and heartfelt blood boiling, elated those numbers ... The numbers here refer to the financial figures of an early start-up that are essential and interrelated. To be more specific, a start-up's financial plan is not a list of costs, not a stack of servers and computers, plus a two-year salary of dozens of people claiming it's your financial plan. The core of financial forecasts is to see how much money you have, how much money is flowing out, and when the company will make a profit. Since entrepreneurs are so confident can make money, you can 1+1=2,2+2=4, a penny is a penny, a piece of money is a piece of money, in black and white to calculate out for me to see? At least this can let me also confidently and confidently with you to bungee jumping, together to make a big fortune.

Begging for VC If you don't have convincing financial forecasts is hard to muddle through. In fact, the most headache for VC, is often the early entrepreneurial team's financial forecasting ability. On the other hand, there will always be a group of ignorant entrepreneurs, they are confident that they can make a lot of money, dream VC will boldly out of the cash to smash in and go with them, so try to find reasons to avoid doing homework, refuse to work hard on financial forecasts, as if they do not want to spend time to fix a girlfriend, rather indulge in masturbation all day , maybe it's the original sin of the founders.

Take a few of the "masturbation" emails I received today, although the sender is honest, but should have a few lashes:

"We are not yet able to measure revenue, but we can assure you that today's market share equals future income scale ..."

"Because I am not studying finance ... Financial statements (income forecasts, etc.), there is no way to write down, know can make a lot of money but can't ' nonsense ' these figures ...

"To tell the Truth (we) is not yet to make financial forecasts, we hope to be able to first melt one or two rounds of capital, first survive, accumulate a large number of users before talking about development." Please believe that we are in the industry need to have a large number of investment before the possible income ... To fight to the end is the biggest winner ...

"You are an expert in this field and suggest that after your fund comes in, you can help us do [financial projections] ..."

......

Come on, help me get my shirt pants off, and I'll smoke in the dead!

I can only lead by example, the first whip beat himself first, then I have the qualifications to curse, training people. If anyone wants to come up and peel off the clothes and be whipped, taste some keeled, and also get the right to speak. Otherwise, just listen carefully, watch, don't interrupt, no noise. In short, no one is suffering from a great misfortune, people will not dawned.

Well, start whipping Tatars myself: Many years ago, I first asked for money from VC. I thought at that time and you are exactly the same, I also thought, VC, VC, is not vitamin C, you want me to do those financial projections in the number of a bird with Ah, you do not give me money, I take what to ignition ah, fire not blazing, how can I know will not make money it ...

But I didn't have the guts to do it, at least I did better than you. I met my first financial advisor through a relationship (this person lives in Beijing) and asked him to help me with my financial projections. He is an MBA from a prestigious university, a job on Wall Street, the car is BMW, wearing Armani, signed with Montblanc ... Suit and suit, elegant, have taste, have insight, have knowledge, mouthful is the professional term that I heard for the first time, what "multiples", "forward Looking", "substituting curve" ... There's more to it than I know! His posture how many let me entrepreneur's shabby dwarf see humble, my sense of loss also arises spontaneously, alas, the next life no longer is this kind of begging the entrepreneur, or try to enter a good school to study hard, the future honest as a banker bar.

He asked me, how much money are you looking for? I don't even know how much I really need, I handed him a few pages of amateur business plan draft, tempted to ask: "Hundreds of thousands of, can you get it?" He was surprised, "only hundreds of thousands of?" What's the point? Wow, let's get a little more done, I think you get a 5 million first (then you plan to do more than 20 million). "Good heavens, in the end is the ability to engage in a professional!" I encounter, his every word has been to my heart to go, the world incredibly still so understanding and considerate of my people?! I immediately took a large chunk of the company's shares to reward him, under the rewarded must have Yong Fu, I understand this truth deeply.

Under rewarded, he worked hard, he has a list of listed companies that can be used as a reference, helping to boost my small start-up's revenue forecast by dozens of levels, straining to give me a few levels of salary in the budget, in addition to the company's investment capital and operating flow of money, He also specially designed for me a company's "Foreign investment department", so soon the amount of money raised from 5 million to more than 20 million ... I see in the eyes of music in the bottom of my heart, of course, the more money in the better, greed is human nature ... He also introduced the Carlyle Fund, the Texas Pacific Fund, such as huge fund friends to me, I thought, in so many money to make it a 20 million, it is not a piece of cake.

Until gotten, I understand, his grandmother, even if such a master, even under such a large dose, there is no medicine to die a VC, change is really not easy to drop. Whether you are blind with your eyes closed, or a self-righteous way to pack up, you will not necessarily be able to really cheat money. No VC will hit the money blindly, even if you mess up, you have to submit a logical and clear financial forecasts. This venture financing has undergone a tug of war, I took a thick stack of business plans and financial forecasts everywhere swagger, do not know how many VC, how many layers of skin, and almost capsized.

Finally, 20 million did not melt, is a small part of it, and the financial forecast for the money is not the one he wrote, but my own later clumsy under the oil lamp to bite the bullet again.

But, God help me too! Forced to make a financial forecast by himself, I had an unexpected discovery and surprise, but tasted the sweetness. I suddenly take notice of their business, with a new understanding and grasp, such as a 1800-degree nearsighted people suddenly put on a new pair of glasses, everything suddenly become clear. I immediately realized that as an entrepreneur, must always firmly put the fate in their hands; do not know how to do the financial budget of the CEO is unqualified, VC investment is the biggest risk.

Financial projections have made me clear my direction, know oneself when must enter the money otherwise will capsize, knew when must tighten the belt, when may the extravagant to engage in the staff meal, when may secretly the music, when to secretly worry about, when may try the risk-taking, when will make the big money ...... Financial projections are the destiny Compass of the CEOs of startups (and in fact, mature companies).

Even now, my team has a professional financial master, I will still be like a illiterate old Red Army, before deciding to invest in any project, find a quiet corner, take out the most basic data in the project's financial budget, and do it again. You know I'm a man who's not afraid to die in a hail of bullets, but in numbers I'm a Conservative, Conservative and conservative coward, I will be you give me the cost of the budget doubled, and then your income forecast into 10 percent, to see if the project is still a chance of success, if there is, the brothers you and I confidently put on the rope bungee jumping!

Entrepreneurs, please do the exercise. You take a little bit of Kung fu, you will see your immediate round of the moon may be just a basin in the reflection, you carefully analysis and analysis, may suddenly find the end of the road, Vista.

For the stubborn founders, I kneel before you against the cross and accept the Whip Tatars, open your eyes and see, I have no better trick to make you realize the importance of financial forecasts and "cash flow" to startups. "The volunteer March" sounded, let me in flesh and blood to hiss the sound of exhaustion to shout: Wake up, entrepreneurial people, predict and plan your cash flow, seize your survival, financing, development of the lifeblood, financial "number" is an entrepreneur, a young CEO must always hold the steering wheel in hand ... Entrepreneurial road bumpy, the company if there is no money to come in, you still have expenses, rent monthly pay, a monthly salary can not be less, in the longer term, there will be some day to see the bottom of the price, the revolutionary ship is not aware of the situation. Believe it or not, it's not up to you to get to this step, I'm afraid even your personal secretary will be busy sending cover letters around the house at night.

To my surprise, the time has passed so long, I have been with the times so much, why today's entrepreneurs on the financial prediction of understanding and understanding still remain in the Paleolithic age? Why are you still as ignorant as I used to be?

Entrepreneurs, if you have money, you can start a business like a fool. The goal of the foolish is grand, and it is very clear: remove the two mountains in front of the house. But the fool is thick, so he doesn't have to raise money to get it right. Look at his determination, bond, every day with his two sons digging mountains more than ... He said, "I died after my son, son died and grandchildren, the wages of children and grandchildren I have been all ready, is never exhausted, there is no income is indifferent ..."

But you are not so rich, you have to Thing to find VC money to start a business, you have to do your homework, make your financial budget to, or you can not escape the face of VC's pressing work. VC all will be pressing work, each point in the entrepreneur's soft rib: financial budget.

Do not say this future you can't calculate, want us to break fingers to see? This process is very simple, you only have to do three things, it is not difficult:

1 hypothesis – Suppose you want to run a website where your revenue model is internet advertising

* How many employees you need, you know what you're talking about.

* Rent, utilities, travel, you do not say I can judge, even if it is my one times, or twice times?

* Computer, office equipment and other costs you say the number of employees I go to the Lenovo online to come out, you can find

* Advertising Case price list, do not have their own thinking, Google, Baidu, Alibaba Web site download after the fold

* Website promotion fee, good Wow, you hit my muzzle, tell you, I started the first company is advertising company, the world's largest brand promotion case I have done countless, now when VC, this is my industry resources. Flower Advertising and Flower VC money is not the same, VC money can be used to burn, advertising fee is to see the effect of the, do not have to stop. Tell me, how much do you cost per user? How much do you cost per active user? What is the cost of each of your paid users?

2 Income Forecast-If you talk about income in general, this is difficult, Buffett can not do it, if you stupid way to do, it is easy, the more specific easier, I do it every month, we also come to play a little kindergarten dolls to do House:

* Three months to build the site, three-month public test, the seventh month to start the official calculation of traffic sales advertising ... My God, I am too Summen, give three months more, the tenth month begins to calculate the flow to sell advertisement officially, this is OK?

* You just started selling ads in October, the means are not skilled, October income can be calculated as zero, enough to make sense? That November, December, next January, February, March ... Until the 36th month, the careful words can be

* Calculate the holiday period may be the ups and downs, careless words even if a reasonable monthly growth rate, this will always add it?

3 Cash Flow Statement – Add and subtract, this step I do not force you, let you read the first grade son, or read the third grade daughter, wife, girlfriend, your mother, your aunt, your uncle, your grandma and grandpa ... It's okay for anyone to do it for you.

* Put the cost of the "hypothetical"-staff wages, rent, telephone, travel, also monthly;

* Then lose the "income forecast" and finish the homework.

Believe it or not, after this course of the "number" will make your heartbeat, maybe really you found a cash cow, perhaps you will be ashamed, the project can not play at all!

Entrepreneurs, look at the face of your first venture, you don't have to do a balance sheet, you don't have to calculate the return on investment. Give me three of the simplest homework to do: 1 assumption; 2 income forecast table; 3 Cash flow statement, do not finish, do not sleep!

Homework done, wash the face, the mirror to take a picture, if you can face themselves, or confidence, you can knock on my door, I am waiting for you.