Lift10 notes on Hacking Venture Capital - Fred Destin

Lift10 took place in Geneva from May 5-7. The group of students that won free passes offered by the City of Geneva to participate in Lift are blogging their notes and insights from Lift10...

Alexander Gnoyke shares her thoughts about the workshop of Hacking Venture Capital by Fred Destin (edited by Sachin Gaur)

Fred Destin is a venture capitalist and one of the seven partners at Atlas Venture where he focuses primarily on early-stage investments in disruptive consumer-facing innovation. Fred is also a regulator contributor to Seedcamp, which Atlas has been supporting since the outset, and one of the board members of Seedcamp.

His 2h workshop was attended by an audience of 47 people aged between 30 and 40 years, under which you could find people like the Business Model Generation book editor Alexander Osterwalder and Tom Hume, who is a mobile phone software expert.

Fred began his workshop on how to do a 5min Pitch in front of potential Venture Capitalists and used ERPLY, a recently VC-backed company, as a base case. After 15min of preparation 2 teams, each having 4 members, pitched in front of the audience and got some very constructive and honest feedback by Fred. Then, for the second part of the workshop, negotiation, the 4 members of each team were split up into 2 entrepreneurs and 2 venture capitalists to simulate the fundraising negotiation process.

The most important and partly surprising learning outcomes for me were:

For a successful pitch you need a very strong intro, e.g. “ERPLY will be the “Skype for business software”.”

You should be able to “summarize your business on the back of one business card” by Sequoia Capital.

During a pitch do not include that you want to sell, e.g. 30% of company’s equity for 2mn, because you may sell it too cheap and limit room for negotiation. Since VCs like to do valuations, you should let them do their work.

To address big markets is not only important for haveing great exits. If a company changes its strategy, it will be much easier to do it if being in a niche.

Do not waste too much time on talking about clients and suppliers, instead sell your own story.

Finish your presentation with a strong conclusion.

Do not write any business plan, because no one will ever read it. But a one pager or a short presentation of around 15 slides will be much better.

Tell the VC on what you will spend the money for the next 12 to 18 months and set up clear mile-stones, because an entrepreneur will need money again after this period.

Have around 10 to 15 Key-Point-Indicators (KPIs) that measure your companies’ success. A good source of inspiration is Dave McClure's Startup Metrics for Pirates.

You should also tell the VC about your concerns e.g. on how to scale, how to brand, how to expand etc. This will involve the VC much more and might get him on the boat because he feels to be needed and can add real value to the business.

Since the stock option pool (SOP), which is need to incentivize future employees, lowers a company’s effective valuation, instead you should always keep an eye on Price-per-Share and forget about the pre-money valuation.

Find people who can really help as members of the board. It is different if someone has a big network but is not sharing it, especially Seniors might not have so much time as Juniors.

Legal things down-size any risk, an entrepreneur should not take it too personal, it will protect every stake holder including one’s self.

To have a founder who stays over the whole life-span as a CEO in his company is rare to happen. It is just a different game to work for a SME or a bigger corporate. Self-awareness and anticipation is quite important to make sure the management team will also be capable in the future.

Regarding my opinion these are the most important issues that were raised throughout the workshop. But is only an excerpt of which you have to consider when you will pitch and negotiate with VCs. To ensure your success you must have a look on the fantastic Prezi presentations on Fred’s blog-post: LIFT10: Workshop on Hacking Venture Capital