How does venture capital say "no"?

Many people know that the sweetness of investing is like love, but what they usually don't know is that, just as ending a complex relationship between men and women, if VCs don't want to cause unintended consequences from a simple and abusive behavior, then the "denial of the skill" is as deep as learning.

"This, often overlooked by outsiders," Puxin, a senior vice president of venture capital Wang Xiu, is standing in the horseshoe room of Stanford University, said, "In fact, how to more than 90% of the business plan ' Say No ' is the most common and most headaches in the investment community. ”

He admits it has been a pain for him, especially when it comes to "a few dinners with entrepreneurs and a growing sense of affection".

Wang Xiujun said, caused a flurry of Chinese entrepreneurs under the stage. They were surprised--often thought VCs were sensible, wily, smart turtles, and had no idea they had such a humane, sentimental side.

Next, they hear more secrets: is the conference room the real place for the wind-and-new entrepreneurs? What are the usual research tricks of VCs? What are some of the details that should be paid attention to?

This is a section of the Stanford series of investment courses on the theme "from industry to capital", launched by the International Institute of Innovation, Zhejiang University, at the end of July. The Zhu Ming of the project proponent is to let Chinese enterprises that need to break through traditional industrial operation understand Silicon Valley's innovation ecosystem and capital management model.

"Eric Wang basically ' naked ' 99%," later, the fellow human, local private VC Red Tripod VC Chairman Liu Xiaoshen This summary, "This class is simply investors and entrepreneurs between the subtle and complex relationship between the disclosure." ”

　　The troubles of "Say No"

It may be appropriate to describe a venture capitalist's work with "too much sail." Their investment program is such a standard funnel:

From the gathering of snow-like business plans, the business opportunities for the project and the management team to do due diligence, until the investment decision-making committee, the large number of entrepreneurial teams need to "Say No".

"Finally, only about 2% of the project will be funded. "Wang Xiujun revealed, that is, the elimination rate is as high as 98%.

Wang Xiu, one of Silicon Valley's most experienced investors, has served as Vice President of ABN AMRO Bank and global director of semiconductor Investment Research, with over 15 years of asset research, investment banking and venture capital experience. Puxin is currently managing the U.S. investment operations, leading more than 10 companies to invest.

He cautioned that every entrepreneur has great courage, and venture capitalists are also flesh and blood, and it is impossible not to consider "a simple and rude remark or will affect those young entrepreneurs for the rest of their lives".

Liu Xiaoshen also said: "He still can not forget the magazine read his news directly after flying to Hangzhou, Wuhan entrepreneurs." Liu happened to be in Beijing: "He waited a full week and refused to go back." ”

Just imagine, a person really want to do something, also think oneself consider very thoughtful: "But the result is a 0 duck egg!" Liu Xiaoshen said, this "no" uncomfortable, nothing to describe.

But "care" is only on one hand, the wind in the "Say No" in the maneuver of the operation, there are very realistic considerations.

"The project that the entrepreneur takes out today is not good, may also make another excellent project tomorrow, and the circle so small, how can not worry about an inadvertent mistake is spread by word of mouth?" "Chen Kai, vice president of Cybernaut Ventures, said.

No one wants to miss a good marriage today in the increasingly networked relationship and increasingly competitive. All these, the decision of the VCs must be familiar with skills.

If the two sides really "disagree", then they usually believe simplicity is the best. They tell each other that we don't understand the industry, or that companies are not able to invest in the industry, or that the project is suitable for the portfolio to diversify the risk, and that "we tend to make independent investments", or "too relevant", "We've done a lot of similar projects in the past".

If there is a problem with the project itself, then things are interesting. For example, the first thing anyone who wants to build a plane to hear might be: "I like your ambitious young man."

But investment is a decision, like you do not mean to vote you, VCs will then ask: "Your plane and Boeing what is different?" "In the end," said the aircraft manufacturer, "the answer may be" If you can find a good project, you will certainly succeed! ”

"How ' Say No ' is ever-changing," Wang Xiu stressed that the different stages of the evaluation project may also be in different ways, but one purpose is trite, that is-"always answer in a positive way."

　　Wine table inspection and "human flesh search"

The product, business model, intangible assets, legal and financial data of the project are important in determining the many elements of the entrepreneur's joys and sorrows, but they are not the longest and most subtle and stimulating of their relationship with VCs.

A large number of complex stories took place in the due diligence of VCs on CEOs. The VCS call it "good interaction", which is often the case: straight-through contact, a poker-eye test, a P.I.-like investigation, and a variety of techniques.

"In the first interview, you should say your motives. "This is important because it's the only way the VCs can tell where the entrepreneur is going to grow," Wang Xiujun said.

Next, some lucky people may receive some invitations to attend a private party. But they have to be careful, when the VCs are not playing with you romantic.

To reduce the cost of hidden information and hidden behavior, this group of readers knows very well when and where a person is most likely to reveal his nature, "the office is clearly not that place".

How about having dinner together and chatting? Or bring a close lover to the family reunion. They said. This is the most usual way for VCs to dig into each other's true personalities. They need to know: in front of the SAT people drink a few more cups will be what it is, the ball is not good when it will drop the pole?

Meanwhile, other covert operations are also under progress. In addition to the references provided by the founders, VCs will use their extensive contacts to got. This is "private investigator", also "human flesh search".

"Usually a CEO, I'll make 10 calls." "Wang Xiujun said. For example--

How long have you worked together? What was your position and what position was he? How was your interaction? Is it one months, a week, or is it a daily meeting? How many projects has he completed in your hand? What role does he play? Did you find him or did he volunteer? Did he ever make any mistakes in the past? What was his reaction when he made a mistake? ......

These questions are pretty nuanced, but the Silicon Valley VCs say they do due diligence, not asking what standards they have to meet, but just hoping to get to know each other.

"Business growth is full of bitterness. So just like marriage, both sides need to have the spirit to tide over time. "What they are worried about is not sharing wealth, but what happens when companies suddenly get into extreme situations," Wang Xiujun said. "A lot of times we don't choose a project, not what's wrong with the other, but not the tacit understanding of the two sides." ”

Generally speaking, entrepreneurs who do not listen to VCs or listen to all of them will be Wang Xiu worried. However, they are also very clear: what kind of advantages of people will have what kind of shortcomings.

As a result, they do not bother to do due diligence to ensure that they know the other side of the station, so as to target the "flower arrangement."

For example, a CEO who is liked by everyone but doesn't make a decision makes a very functional board of directors; if the CEO has strong leadership but does not know how to beat around the bush, they will put on a man who can help him smooth and lubricate his relationships.

And this is the coordinate of the self evaluation of the VCS.

"If I invest because of his personality, and he fails because of his personality, then I have not made mistakes," Wang Xiujun said: "But if he is clearly unable to make the decision of the person, I decided to think that he is not so, then I was wrong, because I fell in a place I do not know.

In addition, the style of due diligence of VCs may reveal some secrets of their future involvement in the operation of the business. When entrepreneurs do reverse due diligence, they also need to consider their needs, such as whether you are suitable for the style of not disturbing the team in addition to the proper contact, or the investors who often call the CEO to chat at home on weekends.

"At present, domestic VCs mainly look at the founder's resume or face-to-face access to information, there will be no such detailed private investigation." "After class, place has gumbo, general manager of the local government investor Hangzhou Taibon Venture Capital Co., Ltd. told reporters:" However, these techniques illustrate what we can do if needed. ”

　"Mentality is proportional to earnings."

Place has gumbo that, in general, domestic VCs are more likely to gain rights and benefits by controlling equity and betting agreements, rather than doing a lot of risk control upstream of the project like the Silicon Valley venture. Part of the reason is that Silicon Valley entrepreneurs don't have to pay to get risky money, and local entrepreneurs often get "putting".

Of course, there are many other differences between the Silicon Valley venture and the local VCs.

Silicon Valley people are very cautious when making recommendations, don't say the other side is bad boy or the best person in the sky, they will only say "I will not be his referral", the local may not be the case, as well as Silicon Valley funds to invest more in the start-up projects, and the local VC is concentrated in the back-end.

"I have decided to adjust my funds to make some early investments," he said. "August 2, just finished the course returned to the home of the Penn Industry chairman Fangchao Rong told reporters."

As the third class representative of the students, Fangchao Rong is one of the representatives of private entrepreneurs who have turned to capital in the past two years, because of the appreciation of RMB, raw materials, manpower and other costs, "traditional manufacturing is unsustainable", he set up a static valley investment in the beginning of this year, hoping to "make

"The investment mentality is in direct proportion to the investment income". Fangchao Rong said, the Stanford trip made him understand this, and the adjustment of its funds is a kind of dispel, "before domestic funds are busy looting projects, not only irregular competition from time to time, and will blindly raise the project valuation, for us, this may be a higher risk." ”

The Silicon Valley experience does deserve attention. As the birthplace of global venture capital, it is still one of the most frequently invested regions in the world. and US venture capital financing is further extended to China.

According to the Zero2ipo of the China Venture capital research and consultancy firm, 58 new funds were set up in 2007, setting a high growth record for Chinese venture capitalists, and foreign venture capital invested $2.566 billion in the total investment of $3.247 billion, which accounted for 79% of the total investment. China has completed 440 venture capital transactions throughout the year, with the exception of 15 not disclosed, 297 of the remaining 425 were injected by foreign venture capital.

And most of the money is still in the expansion period. Because each market is different, the traditional venture capital is very geographical, but now, foreign venture capital is breaking the original "one Mile Rule" rules (the investment project cannot leave the investor more than 1 miles), starts to do the globalization project. This means there will be more flirting between Chinese entrepreneurs and venture capitalists.

"It's a big challenge," Wang Xiujun said, "for example, for investors and entrepreneurs, it's hard to do due diligence in a global environment." ”