"YC Business class" Silicon Valley old and new generation investment Godfather appearance

Raising money is a very important part of entrepreneurship, how to get the favor of VC, to persuade them to raise funds for the project, it is worth the entrepreneurs to think seriously. The Nineth lesson of YC Entrepreneurship class is to go to Ron Conway (the founder of SV Angel, the Angel Wheel of Google), Marc Andreessen (Andreessen Horowitz Fund partner) and Parker Conrad (Zenefits co-founder), in the form of a colloquium to talk to entrepreneurs about how to Raise.

What does VC see when investing?

Ron shared that he would think a lot of things when he talked to entrepreneurs. First he will consider whether the person is upright and, above all, whether he is focused enough on the product. He expects the idea of the product to come from personal problems that the founder has personally experienced and this product can solve the problem. The next step is to look at the entrepreneurial communication skills and leadership skills that are important in the company's subsequent development. First, when you meet with an investor, be sure to be prepared with a strong persuasive phrase that you have rehearsed repeatedly, and go to them to describe your product and let them know immediately what your product is going to do. Secondly, you have to be decisive. Be resolute and quick to make decisions so that you can keep running efficiently.

Marc mentioned two points: first, financing is a game of the fittest, only a very outstanding team to melt round the funds and grow into a VC can bring returns to the company. He then shared an idea within their team to invest in companies with exceptional advantages rather than without them. The inertia thinking of the VC industry is often an item to see the conditions of the team---good founders, good ideas, good products, good first batch of users. We're all satisfied, OK? This approach works, but you often find that these teams don't have a particularly good place. So VC want to invest in those who have a very great advantage, and have a certain amount of space to tolerate a certain disadvantage of the start-up companies.

Parker has shared some of his own entrepreneurial finance experiences. Before Zenefits, he also founded a company, but ran 60 VCs company's road performance, and eventually was rejected. Another VC said to him: "If your product is Twitter, then you just need to tell the product and we'll give you money." But if you are not, then you should make the product simple and easy to understand and all the materials ready. Parker has learned the opposite-that it's a way to make a successful product like Twitter. So in doing zenefits, he simply does not care about financing. You can't expect someone to vote for you, and if everything goes well with your project, it looks like you're doing well without an investment, and it's a project that's favored by investors, so it's quite easy to raise money.

Marc agrees that he quotes the comedian Steve Martin as saying the key to success are being so and tightly can ' t ignore you. Financing, he adds, is probably the easiest thing an entrepreneur needs to do. Recruiting engineers, selling your products to big companies, gaining user growth, and getting ad revenue is harder than financing. For startups, financial integration is not a success, it's not a milestone in a company's development, it just takes you to a place where you can do other things that are harder to do.

(b) VC expected entrepreneurs to do

Marc mentions the "Onion theory" of venture capitalists. Start-up companies are faced with a lot of risk at the start-the founder can be efficient cooperation, product can not be developed, technical bottlenecks can break through and so on. Running a start-up and financing process is like stripping off these risks at a level. Each time you peel off a layer of risk, you reach a milestone, and as you move forward you have the cornerstone to raise more money. So suppose you are in the B-round financing, VC want you to tell them you get the seed money, what to do, eliminate the risks. After you get a round, what goals you have achieved and what risks you have eliminated. Now I'm doing a B-round financing, what my goals are and what my risks are. This allows VC to systematically understand how your money is raised and how it is used.

Ron shares some strategic advice. 1, do not require the signing of NDA, it is a manifestation of distrust. 2, do not indulge in it, financing is only a small step in entrepreneurship, not immersed in the joy of financing, fast forward. 3, get the promise of VC, remember in the first time to the agreed content to send VC,VC mostly busy, to avoid them forget the agreed details.

Ron and Marc talked about some of the processes in which their respective institutions were investing. One important point is that the networks of VCs are so wide that they basically choose startups from their own networks. So the recommendation (referrals) is very important. So the role of an incubator such as YC can help you invest in the most suitable seed wheel, and it has information about investors to help you decide if it's appropriate for your project. A good seed-round financing will lay the groundwork for subsequent financing. Good angel investors will take you to a good round, a good referral (introduction) will make a huge difference in the progress of financing.

(c) How to bargain with investors on the valuation of the company

Parker's experience of financing the company tells us that there is a subtle tipping point when considering how much to melt the company. Low you can not get enough money to support the development of the company, high VC will think you are a madman. With his experience this tipping point is at 1 million dollars. And this range is fluctuating, his advice is to raise the money you need is good, the specific amount is not so important.

(d) The amount of shares to be sold at the time of financing

When a wheel is usually this number is between 20% and 30%, if too low, VC will expect more ownership so that they even do not hesitate to invest more money. Too high will have no space to attract more VC with the vote. One important question you need to think about is: how much does it take to make my own equity start to lower my motivation?

(v) q&a

The questions section three spoke a lot about the importance of choosing a good investor partner. Marc says that the partnership between investors and entrepreneurs can be as long as 10 or 20 years, and that you and your company will grow together, so choosing an investor is as important as choosing a spouse. Ron and Parker mentioned some criteria for choosing the right VC: have enough expertise and insight into your product, help you get referrals to more people who can help, and not just VC that wants to make money.

Please see the course video and discussion for other questions and content.