VC is loving parents or heartless vampires?

Entrepreneurs meet, unavoidable to talk about VC (venture capital). In particular, young entrepreneurs, they often have two extreme emotions on VC, a kind of like parents, feel a VC as if there is milk to eat; another extreme is the very rejection of VC, it seems that they will be their company pumping blood dry, and then take the money to leave. Both ideas are more extreme. Let's take a look at the VC company in the end what is going on.

VC English is called venture capital, for short. Such companies specialize in early-growth start-ups. VC don't have a lot of money, they are from their dad to get money. VC Company's dad called Lp-limited Partner. These LP is often very very very very rich fund company: can be big private equity, can be the insurance company's investment fund, can be the big company's idle fund and so on, anyway are some people with a lot of money. VC Company's Mengmen is the LP pinch. From the LP's Point of view, their money can be cast to real estate, can also be cast to the stock market, but also to VC companies, the key to see who returns higher. Measurement of a VC company's performance mainly look at the return on investment. General VC Company if the rate of return is 2-3 times, that is poor performance, 5-6 times performance generally, 10 times times above is good; 20 times times more than that is rare. I can tell you, VC company asked LP to money is much more difficult than entrepreneurs ask VC money difficulty.

VC is willing to invest in you because they think your company has huge growth potential. What I'm talking about here is not the growth rate of one year 20%-30%, but the speed of more than 100%. VC high expectations for you, that is because the LP to their expectations high. For early companies, the growth rate was the first. You as an entrepreneur, if you have not thought how to maintain the company's high-speed growth, then you go to talk with VC, only to be humiliated.

VC Hope you make the company bigger, do not sell easily. For them, their biggest reward is that they have a company that can become a Big Mac in one industry. The birth of a Big Mac, the return on investment to VC is hundreds of or even thousands of thousand. There is a certain degree of conflict between this and some of the founders ' interests. For example: You take a VC200 million dollar investment, valued at 5 million dollars (VC 40% of the shares, you and your team accounted for 60% of the shares). After 1 years of your results, Sina is ready to spend 10 million dollars to buy you. For you and your team, it takes only a year for you to cover 6 million dollars. Especially in the early days of the Internet companies, the team is very small, everyone divided into a significant sum. With the money, you can go on a beach vacation in Hawaii, sunbathe for one months, and then come back and be a second company. The media rated you as a serial entrepreneur, and then many young entrepreneurs saw you as an idol. How beautiful! But to invest in your VC, their return is only twice times. Their days are definitely not as beautiful as you! When you taste red wine, invest your VC may be in the LP spanking, worry about their year-end bonuses or not.

VC company role also has a classification, there are managing partner, there are ordinary partner, there are principal below, and then the following is Seniorassociate, and then the following is associate. General associate for 2 years, they are mainly responsible for the study of specific companies. Associate 2 years later, if not up, a lot of leave. Principal is mainly responsible for the study of a direction, the final vote does not vote, or partner the boss. Some VC companies also have a wonderful role called eir,entrepreneur in Thrive. EIR is a good way for VC companies to maintain relationships with entrepreneurs. Eir sometimes help to see investment cases, do due dilligence, Bring deals. These eir are basically people with many entrepreneurial experiences.

Before the financing to know these background knowledge, actually to the entrepreneur has a lot of help. For instance, the entrepreneur often receives the letter which associate sends to you, said to your company very interested, hoped to talk about. If you receive such a letter, you needn't move the chicken. Associate a lot of these letters every month, and your company is just one of them. Big VC companies also have political struggles. The general work of the more hard belong to the kind of people who have the hope of becoming partner. These people want to be partner, they have to bring deals for the company. The so-called bring deals, is to let those who have the potential to take their investment, and then hope that one day these companies have a good exit (by large companies to buy or listing). So if you talk to people who want to be partner, they will drive you to invest more. Of course, if you talk directly to LP and partner, the chances of success are also relatively higher.

Many VC companies are co-invest: is a few familiar companies together to invest in a start-up company. In this way, we all have money to invest in other directions while sharing risk. When the entrepreneur is looking for a venture, the hardest thing is to find the VC who is willing to take it. Several times before encountered some VC to the company and the team are interested, but not willing to lead. Because the leading VC bear the responsibility is relatively large. 2011-2012 a lot of start-up companies to put the money used up, but did not reach the next round of milestone, as the lead VC sometimes have to leave a sum of money, as bridge loan help investment companies to tide over the difficulties. VC are gregarious animals. You often find that no one is willing to vote for a few months in a row, and then suddenly have a willingness to vote for you, and others will come back to be interested in you.

VC Investment fund cycle is also fastidious. Generally large funds are 5-10 years of the first issue. Sometimes the most depressing thing is when you finally find an unusual interest in your VC, and feel he will soon give you termsheet, suddenly received his email said "Brother Ah, your product is a cow fork, I am very optimistic about you." But I have no money in hand at present, talking with LP, it is estimated that 70% of the possible three months after the new fund will be available "... this time, you have to criticisms in the heart, and then very polite to say" keep me posted ", and then continue on the road to find money.

Think of the VC people are really poor, every day will be emailed to tell them to see the new app or website. Good luck, they often see the creative things, bad luck when they saw dozens of of the same products, and then look down, may not eat food. There are good projects, everyone to Rob, the general project they do not dare to vote. The hands of hundreds of millions of funds, cast out afraid to lose money, not to vote and must lose money.

I appreciate a lot of foreign VC, they are very focused on communication, many people have their own blog. They often update their investment philosophies on their blogs, observe the industry and provide lessons for young entrepreneurs. In the final analysis, everyone is like a blind date. If the two sides strengthen communication, in fact, can save a lot of effort, early hand.