Real-time venture capitalism

Once upon a time, very few entrepreneurs expected to tap into formal venture capital to help their businesses grow.

They knew it would be expensive. They knew the VCs would write all the covenants in their own favor. They knew they would be forced to perform on schedule – or else.

Then came the Internet bubble, and suddenly there were billions in venture capital money available, and everyone started writing VCs into their business plans. Just one problem: the VCs are still expensive, still hard to please, still as demanding as an incontinent doberman.

Of course, the VCs claim it’s the entrepreneurs who don’t get it – that they don’t understand the shoot-the-moon economics of venture investing, and are rarely prepared for the VCs’ in-depth inquiries. Talk about a failure to communicate.

If you’re interested in the VC scene, check out the weblog of Toronto VC Rick Segal. The former president of Chapters Online and Microforum, Segal now gets to judge other entrepreneurs. Yes, he’s smug, but at least he talks in detail about what entrepreneurs do wrong when it comes to pitching VCs, and what you have to do to get his attention.

Here are some useful insights from a recent post “VC in Canada = Excellent”, April 17, 2005. http://ricksegal.typepad.com/pmv/2005/04/vc_in_canada_ex.html

“Calvin is the kinda guy that comes into your office and heads for MARS. He tells you all about the amazing, next generation things this software could do along with 5 other ideas that have sprung up while in the elevator. We've all seen it. The slide deck that never actually tells you what the company does, the unfocused almost random approach to vision, etc, etc.

“But Calvin has a quality most of us, me included, don't often use enough. He sucks up feedback and works it. Works it hard. The message Cal was getting from our firm (and others) was that everything but what I described above was being talked about and nobody gave a rats butt about geo-whatever or space-time coordinates of yadda yadda.. What's the darn business in here.

I’ll skip to the end: Cal got help from people with experience, who helped him solidify the opportunity. The happy result: “Cal was in on Friday and nailed it.”

Follow the adventures of real-time venture capitalism at http://ricksegal.typepad.com/