Tuesday, February 9, 2010

Anthill Event - Venture Capital by Design



Tonight I went along to the Anthill event 'Venture Capital by Design'. They had 4 (very good) panelists along and the event was moderated by Anthill's founder, James Tuckerman, who did a brilliant job.

Following our discussions about venture capital and bootstrapping our startup we're not planning to raise capital for Shoes of Prey at the moment, but it was great to hear the thoughts from the panel in case we decide to go down that path. I took some notes using the #Anthill tag on twitter and I thought I'd share them here.

Do
  • VCs love 'domain experts' or people who know the industry their startup is in back to front. Domain experts know who the key players are, who to do deals with and even though it's a startup they aren't learning and doing everything from scratch.
  • VCs and Angel investors love to see founders who are passionate about their business. They want to see that people are in it for the long haul.
  • They want to see that you have lots of skin in the game. Bootstrapping a long way and putting plenty of your own money into the business helps show this.
  • The same goes for other investors. Don't give someone a stake in your business just for their advice or for professional services. If they're lazy and don't contribute you'll be stuck with them as an investor anyway. It's better to pay them instead, or have them contribute money as well as their services so they have skin in the game too.
  • IP protection is important, particularly if you're looking for a trade sale or similar exit.
  • Having runs on the board makes it much easier to find investors. Paying customers who have been on board for a few months and are giving you feedback is a massive plus.
  • Interview your potential investors as much as they're interviewing you. Investors aren't all created equal, different investors will be able to add value to your business in different ways.
  • Ensure there's a good cultural fit between you and your investors.
  • A strong vision for your business and a good idea of potential exits is important when taking on investors.
  • To determine potential exit strategies think through who your business could add value to. Once you work that out, that can help direct your business strategy.
  • One way we hadn't thought of using VC money - hiring sales people. That could be an option for us if we want to push a wholesale sales strategy to fashion boutiques.
  • James asked the panel, 'What's more important, marketing or the product?' The panel felt that both were important but if you have to pick between the two marketing is more important. Knowing your customers and being able to build and pitch you product correctly is crucial.
  • The VC industry has not been a profitable one. There are lots of baby boomers in Australia reaching retirement age. It might be worth thinking about angel investors ahead of venture capital firms.

Do Not

  • Statements like 'all we need to capture is 1% of the market' don't go down well. 1% can be huge and it may not be that easy to achieve.
  • Don't go into negotiations with angel investors or venture capital firms with a set valuation for your business. If you negotiate with a few investors the market will decide what that valuation will be.
  • Don't approach investors with the line, 'I have a great idea but it's so good I can't tell you about it'. They won't be interested. It's not the idea that has value, it's how you execute. (See our previous thoughts on this).

It's the first Anthill event I've been along to and I was impressed. In addition to the great panel discussion I met some fellow entrepreneurs who are doing some exciting things including Alfred and Jin who are working on a location based startup, Matt from The Loop which is a job site for people in the creative industries, Luke from the brand/creative agency The Sponge and Chris from GetPrice.com.au who was one of the panelists. I'll be going along to more of these events.

5 comments:

  1. I really enjoy the uk dragons den, gives you an insight into the process, even if it is a bit over-dramasiced (not sure if that is actually a word)

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  2. Yeah, I've seen a bit of that show. It's a good one and definitely entertaining!

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  3. Nice. I'm heading down next week to do the workshop in Melbourne, I did consider turning up to the Syd event though.

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  4. Mike,

    The book by Guy Kawasaki, "The Art of the Start", is an absolute bible when it comes to building a start up with venture capital. In the AGSM strategy year, they basically photocopy the first five chapters as compulsory reading. Worth reading or listing to. Also, his blog is good reading.

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  5. Seb - hope the Melbourne event is as good as the Sydney event!

    Erratio - yeah, I read those chapters in the AGSM materials prior to bailing in the exec year. They are awesome - got me so fired up that the idea for Shoes of Prey came into being a couple of days after that reading! Will check out his blog, cheers.

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