Author Archives: Geoff Meyerson

Venture Capital Fundraising: Get the Right Team and Advisors in Place

Team meetingAn entrepreneur needs to have the right team in place, and this step must be done even before starting the venture fundraising process.   A fully formed management team is not always a requirement depending on the stage of the company in question.  Generally the later the stage of the company the more fully formed the management team expected.

In addition to the management team, the selection of advisors is critical to deal success.  Choosing the wrong banker or wrong attorney can cost a company significantly more money, end in a much lower valuation, take a lot more time, or a combination of all three.  Some items to consider:

 

Bankers:

  1. Number of deals.  Many people fixate on how many deals a banker has completed.  Doing a lot of deals likely means that they have a big team and often a large support system doing most of the execution.  When a banker is spread too thin, there is only so much time he/she can dedicate to your deal.  League tables are largely irrelevant.  Not completing enough deals is equally worrisome as it makes you wonder how effective they really are.
  2. Deal team.  The corollary to the number of deals is how involved the senior bankers are.  The most successful deals are led by experienced senior bankers who play an active and material role in the transaction.
  3. Network.  Any banker worth their salt has a good network and knows the investors/venture capitalists who might invest in your deal, sothis is rarely a differentiator.
  4. Cost.  Most bankers charge 6% for a capital raise depending on the size of the transaction and many get warrant coverage.  This should not be a differentiator, since if they do a good job, the cost will be offset by a better valuation.

 

Attorneys:

  1. Number of deals.  The number of transactions completed by an attorney is important; too many deals over too short a period of time makes you question how much time is dedicated to each deal; too few deals demonstrates a lack of experience.
  2. Fixed fee arrangement.  This is generally a good idea in many circumstances, since itallows the entrepreneur to know upfront what the costs for the transaction will be.  The firm’s willingness to offer a fixed costshould be a prerequisite.
  3. Relationships.  Familiarity with the potential investors, potential investors counsel, and the specific deal type in question are all important.  Working with a no-name might save money, but also might cost additional hours of negotiation frustration.
  4. Positive references.  Check references before you hire an attorney.  Make sure that you interview at least 3 prior to making a decision.

 

Please leave a comment or email me if you have any thoughts or things that we should include.  Have you had a different experience than this?

Venture Capital Fundraising Made Easy

For a first time entrepreneur or even a veteran of several startups, raising venture capital is one of the hardest tasks to do properly.  It is enormously time consuming and can be a major distraction from the execution of your business objectives.  It is often a necessary step in a company’s life cycle to accelerate development, improve sales, and realize a successful exit. Venture Capital Fundraising Made Easy Much has been written on this subject but there are few guides that work through the process, step-by-step from the perspective of a recovered investment banker.  So what are some things that can be done to improve this process and get the best deal possible?

This venture fundraising blog series will discuss the financing process, which if done properly, will ensure a well-run process and hopefully competitive term sheets for your company.

The process can easily be broken down into the following 10 steps:

  1. Kickoff Meeting and Division of Responsibilities
  2. Business Plan/Private Placement Memorandum and Management Presentation Preparation
  3. Due Diligence Preparation
  4. Initial Outreach
  5. Management Presentation
  6. Investor Follow-up and Due Diligence
  7. Receipt of Term Sheets
  8. Negotiation of Term Sheets and Build Syndicate
  9. Draft and Negotiate Legal Documents
  10. Deal Close

These steps are not discrete and are often represented differently or in a different order depending on someone’s perspective.  That said, all of these must be followed via a structured process to be successful.  We will go into greater depth on each of these in subsequent posts.  Please leave a comment or email me if you have any thoughts or things that we should include.  Have you had a different experience than this?

Introducing Evolved Capital

After two long years of development, I’m proud to announce the launch of the beta for Evolved Capital.  As a financial analytics and market data company, we have decided not to pursue any venture capital financing, which would have sped up our development timeline.  We did not want to have any hint of bias to our data or preferential treatment for some investors over others.  Unlike some of our competitors, we have no formal or informal ties to any investors, yet we maintain strong relationships with many venture funds to keep the development focus.

The idea for Evolved Capital originated during my time at UBS as an investment banker analyst.  I always wondered what could be done to automate much of what an analyst does.  Too many all-nighters convinced me to eventually pursue this opportunity.  The second stimulus was my time as a venture capitalist.  I created many tools necessary to help manage a venture fund in addition to a comprehensive MS Excel-based financial model.  I quickly realized that no one else could operate this model and that the tools I created were useful for all yet updated by none.  Ultimately they were too cumbersome, difficult to operate, and time consuming to update.  I started doing some financial modeling work for a few venture funds and companies and realized that simply creating more excel models that I also would be the only one to operate wasn’t the best solution.  The idea for Evolved Capital thus was born during my last semester in business school.

Our goal is nothing less than to evolve and improve the allocation of capital.  The first market we’re tackling is the private fundraising market.  We’ve designed a simple yet elegant system to help a VC/investor or a company with the practical aspects of raising money.  If you’d like to beta the system, please email sales@evolvedcapital.com.  I’ll explain more about the system and business model in future posts.