2. Why this topic matters to me
As an ex-entrepreneur, I wish I had known that!
As a VC, I want entrepreneurs to understand us.
As a person, I believe it can help entrepreneurs.
Understanding VCs – @Boris_Golden – Partech Ventures
3. Preliminaries
Don’t take all this for granted!
Focused on seed & early stage only,
Based on European (esp. French) experience,
Only my opinion (but probably mostly shared),
Content is work in progress, always evolving.
Understanding VCs – @Boris_Golden – Partech Ventures
4. Preliminaries
My story: been on both sides of the table.
I’m an ex-entrepreneur & mentor,
now early-stage VC @ Partech Ventures.
Same ecosystem but different perspectives!
Understanding VCs – @Boris_Golden – Partech Ventures
5. Preliminaries
Many founders don’t understand VCs: what
they do, how they think, what they want...
I experienced it myself as an entrepreneur
& can now see it on a daily basis as a VC.
And guides on Fundraising / Pitching / VC funds don’t really help.
Understanding VCs – @Boris_Golden – Partech Ventures
6. Preliminaries
But you need to understand VCs before fundraising!
This presentation intends to help you do so.
Providing accessible & “no bullshit” insights to
understand VCs & the implicit rules of the game.
Understanding VCs – @Boris_Golden – Partech Ventures
7. Summary
1. An introduction to VCs
2. How VCs typically think
3. Entrepreneurs’ disappointments
4. Why (not) go with a VC
5. What VCs are looking for
6. Building a relationship with a VC
7. Pitching to VCs
8. Fundraising with a VC
Understanding VCs – @Boris_Golden – Partech Ventures
8. An introduction to VCs
Understanding VCs – @Boris_Golden – Partech Ventures
9. An introduction to VCs
Venture Capitalists (VCs) spot, fund & support
very specific companies: high potential startups
= [innovative & unproven]1
[“young” ~tech]2
companies,
needing money for [ambitious but credible growth plans]3
Thus, only a small % of companies can potentially get funded by VCs.
BAs are different: not their job (but their money!) & often less ROI-driven.
Understanding VCs – @Boris_Golden – Partech Ventures
10. An introduction to VCs
Business model of VCs = raise money, get fees on it,
invest the rest, sell with a ROI, get a % of the returns:
Share of returns
LPs’ money* Investments (equity)
ROI (power law)
1
4
2
3
* LP = Limited Partner (the ones investing money in VC funds) Understanding VCs – @Boris_Golden – Partech Ventures
Fees1’
€
11. An introduction to VCs
But early-stage VC is not really a finance job...
• Raise & manage funds, on behalf of LPs (a VC firm often has several funds)
• Take an active role & build a network in the startup ecosystem
• Source great startups & build relationships with entrepreneurs
• Assess startups & strive to invest in the most promising ones
• Bring value to entrepreneurs & help build global success stories
• Facilitate the sale of companies at the right time / right price
• Learn, build & share knowledge, vision, insights, expertise...
Understanding VCs – @Boris_Golden – Partech Ventures
12. An introduction to VCs
A “paradox” in the VC lifecycle: a very long time horizon & overall feedback loop (~10 years!),
but at the same time a fast-paced, rich daily work with continuous experiencing & learning.
Understanding VCs – @Boris_Golden – Partech Ventures
Support portfolio
Raise a VC fund Source startups
Assess them
1 2
36
45 Win & make deals
Exit with a ROI
Reputation,
Brand, Network
+
Experience, Skills,
Knowledge
13. An introduction to VCs
Sourcing is key to identify & meet promising startups.
It relies on network, brand/reputation & hunting:
• Referrals (entrepreneurs, accelerators, VCs, schools, ecosystem, friends, etc)
• Cold inbound (entrepreneurs reaching out directly to VCs without an intro)
• On the ground (talks, jurys, events, networking, media presence, gossip, etc)
• Proactive (market analysis, press/social networks monitoring, startups lists, etc)
• Entrepreneurs “pool” (that VCs already know, follow & ping regularly)
• Fundraisers (but not usual & rather not too positive at very early stage)
Understanding VCs – @Boris_Golden – Partech Ventures
14. An introduction to VCs
VCs strive to understand & assess which innovative
“idea”/vision/project/team could succeed (no hard truth).
Takes insights & judgement on: market & trends / people /
product / business model / traction. Network. Luck. Time...
And then, VCs must also convince their colleagues internally.
Early-stage VCs hardly agree with each other, this is quite subjective!
Understanding VCs – @Boris_Golden – Partech Ventures
15. An introduction to VCs
VCs often also strive to win the opportunity to invest
in the “best” startups, at a “reasonable” price.
It typically relies on personal fit, reputation,
brand, value-add, and negotiation & sales skills.
VCs too often have to “beat” the competition to succeed!
Understanding VCs – @Boris_Golden – Partech Ventures
16. Understanding VCs – @Boris_Golden – Partech Ventures
Beyond $$: VCs support & enable!
• Advisor (inform, guide, share experience/intuition/opinion/feedback/advice/ideas...)
• Facilitator & challenger (discuss, elicit, reformulate, reframe, ask questions...)
• Supporter & coach (support, listen, empower, educate & help you grow)
• Methodologist (provide & help to implement methods, tools, best practices...)
• Curator (share relevant content, stories, patterns, comparables, news, info...)
• Investment banker (help define, prepare & execute next fundraisings, M&A, exit)
• Network (connect you with the right people for: bizdev, hiring, advice, networking...)
• Platform (provide in-house/external hands-on expertise, e.g. HR, PR, tech, sales...)
• Board member (direct, validate, monitor... but entrepreneurs mostly decide & do)
17. How VCs typically think
Understanding VCs – @Boris_Golden – Partech Ventures
18. How VCs typically think
VCs bet on companies
with high risk / high reward.
Ok to lose money on a deal,
but wins should be really “big”.
→ Indeed: returns follow ~ a “power law” (i.e. most come from few),
+ 1 win is expected to have a significant impact on the overall fund.
Understanding VCs – @Boris_Golden – Partech Ventures
19. How VCs typically think
VCs know they will often be “wrong”.
They must deal with uncertainty & risks.
E.g. miss the winner in a space,
dismiss ultimately great startups,
bet on ultimately bad startups...
VCs are never 100% confident, esp. when saying “no”!
Understanding VCs – @Boris_Golden – Partech Ventures
20. How VCs typically think
Scarcest resource of VCs is time, not money!
They are thus very careful on how they spend it.
VCs typically receive dozens of requests a week
(or even a day) and sadly can’t engage with everyone.
→ VCs prioritize & filter requests, and make decisions,
often based on limited information (like recruiters!).
Understanding VCs – @Boris_Golden – Partech Ventures
22. Entrepreneurs’ disappointments
VCs decline to invest 99% of the time, and
often do so quickly & without digging a lot:
Not convinced Too early Out of scope
Don’t believe Too intricate No team-fit
Don’t get it Too risky No project-fit
Understanding VCs – @Boris_Golden – Partech Ventures
23. Entrepreneurs’ disappointments
Most VCs invest when you have already ~proven
“something”, and can “grow” quickly from there!
Because: they take “reasonable” risks / other startups
have done so / it proves you’re resourceful & can execute.
So probably later than you think (and hardly at ‘idea’ stage!).
Understanding VCs – @Boris_Golden – Partech Ventures
24. Entrepreneurs’ disappointments
VCs see a lot of startups & have very high standards.
For instance, many achievements that are huge for
a startup are just "Ok" (or “What’s next?”) for a VC.
Also, VCs assess the past but invest on the future.
Understanding VCs – @Boris_Golden – Partech Ventures
25. Entrepreneurs’ disappointments
VCs benchmark similar startups
& try to pick the “best” one!
Choosing you = “No” to others! Probably dozens of
startups similar to yours. Most VCs will only bet on 1!
A VC thus needs to be really convinced to bet on you! Also,
VCs won’t steal your idea (but beware of existing portfolio)
Understanding VCs – @Boris_Golden – Partech Ventures
26. Why (not) go with a VC
Understanding VCs – @Boris_Golden – Partech Ventures
27. Why (not) go with a VC
A relevant VC is an “unfair advantage”
to grow fast & outsmart competition.
Brings: value add, credibility, more $$ next...
But: don’t need it to stay in business,
don’t consider it as a key milestone.
Understanding VCs – @Boris_Golden – Partech Ventures
28. Why (not) go with a VC
However, VC money has a “cost”:
Give away a minority stake
Growth, ROI & liquidity expectations
A bit less freedom
Time spent on fundraising
Understanding VCs – @Boris_Golden – Partech Ventures
29. Why (not) go with a VC
Most companies shouldn’t & can’t raise with a VC.
But it’s OK & there are other ways to find the money:
Public grants BA / Family office Customers
Debts / Banks Love money Crowdfunding
→ before fundraising, assess if “VC” makes sense for you
Understanding VCs – @Boris_Golden – Partech Ventures
30. What VCs are looking for
Understanding VCs – @Boris_Golden – Partech Ventures
31. What VCs are looking for
Future market leaders, bringing big financial returns .
Thus “big” exits. E.g. in seed: > 100M€ (not “only” 10).
Is it really your ambition & potential?
Considering the risks, very good VC funds will target e.g. ~3x in < 10y.
But most of the returns come from e.g. top 15% startups (power law).
Multiple required thus 3x/15% = 20x. If 5M€ seed valuation, exit ~100M€.
Understanding VCs – @Boris_Golden – Partech Ventures
32. What VCs are looking for
To potentially achieve such a performance,
startups must meet very selective criteria:
1. Large market (taking a small pie will still make a big business)
2. Disruption (disrupting the rules & incumbents of this market)
3. Unique strengths (making it credible that you will scale & win)
4. Capital-efficient model (reasonable capital needs to grow fast)
5. Strong exit potential (multiple, credible & attractive exit paths)
Understanding VCs – @Boris_Golden – Partech Ventures
33. MARKET = big market opportunity
1. Specific people with real needs
2. Clear competitive positioning
3. Large & attractive market
4. Favorable trends & timing
4Ms: a framework for early-stage startups
MANAGEMENT = best team to execute
1. Smart, skilled & cohesive team
2. Strong ability to deliver & learn quickly
3. Ready to go big whatever it takes
4. Unique insights, vision & project-fit
Check also a more visual 4Ms infography here
MODEL = disruptive & virtuous model
1. Valuable & Differentiated Product
2. Efficient Go-to-Market / Growth channels
3. Profitable Monetization
4. Scalability / Defensibility
MOMENTUM = ability to grow very fast
1. Cracked something / Traction
2. Ambitious but credible growth plan
3. Capital-efficient growth model
4. Clear strategy to scale & win
Understanding VCs – @Boris_Golden – Partech Ventures
34. MARKET = big market opportunity
1. Specific people with real needs
2. Clear competitive positioning
3. Large & attractive market
4. Favorable trends & timing
A depiction of the startups VCs look for
MANAGEMENT = best team to execute
1. Smart, skilled & cohesive team
2. Strong ability to deliver & learn quickly
3. Ready to go big whatever it takes
4. Unique insights, vision & project-fit
MODEL = disruptive & virtuous model
1. Valuable & Differentiated Product
2. Efficient Go-to-Market / Growth channels
3. Profitable Monetization
4. Scalability / Defensibility
MOMENTUM = ability to grow very fast
1. Cracked something / Traction
2. Ambitious but credible growth plan
3. Capital-efficient growth model
4. Clear strategy to scale & win
Understanding VCs – @Boris_Golden – Partech Ventures
Exit
Traction
TimeCurrent fundraising
Next fundraising
1. Vision that could turn
into a valuable company
2. Credible & efficient
way to achieve it
3. Unique reasons to
bet on you, today
35. What VCs are looking for
There must be a real fit between
the VC and {you + your startup}.
It’s a mutual choice! You’ll be together
for years, for the best and the worst…
It’s like in recruiting: cultural & personal fit, shared vision
and trust are key to build a great story together!
Understanding VCs – @Boris_Golden – Partech Ventures
37. Building a relationship with a VC
VCs are human above all.
Demystify them: they’re just people.
They’re often wrong & have their moods.
You deal with a person, not a VC firm.
VCs can be vastly different from each other.
Understanding VCs – @Boris_Golden – Partech Ventures
38. Building a relationship with a VC
STAND OUT and impress VCs!
You need to win their attention &
make them spend time with you.
E.g. catchy referral/approach, very well articulated teaser,
easy/pleasant to deal with, impressive/passionate...
Understanding VCs – @Boris_Golden – Partech Ventures
39. Building a relationship with a VC
Build a personal, valuable, trustful relationship.
Ask them for advice first, before fundraising.
If you’re good but too early, they’ll say “later”,
not "no". It’s relational, not transactional!
But VCs’ answers can be fuzzy & hard to interpret, ~ on purpose…
(allegedly preserve entrepreneurs & VC optionality → wrong imho)
Understanding VCs – @Boris_Golden – Partech Ventures
41. Pitching to VCs
VCs like when it is easy & fast to:
understand + feel excited + believe.
Keep in mind that VCs usually form an
opinion quickly, with limited data.
Outcome depends as much on the pitch as on the startup!
Understanding VCs – @Boris_Golden – Partech Ventures
42. Pitching to VCs
VCs want both relevant storytelling
& a clear demonstration (of 4Ms).
A data-driven business plan story,
with clear logic & assumptions.
(true at very early stage, more financial at later stage)
Understanding VCs – @Boris_Golden – Partech Ventures
43. It’s hard to craft a great pitch!
1. Make your pitch really clear, smooth & obvious
2. Provide only specific & easy-to-digest content
3. One clear, relevant, impactful message per slide
4. Explain the market & context, before what you do
5. Show unique insights & a clear differentiation
6. Make it understandable to “non experts”
7. Help assess how good your achievements are
8. Be ambitious, and give reasons to believe in you
9. Put yourself in VCs’ shoes & use their language
Understanding VCs – @Boris_Golden – Partech Ventures
44. An example of what to pitch (1/2)
1. Teaser (vision & what you do in a clear/impactful way, key achievements, ambition/goals)
2. Team (who you are, your story: how you met/got the idea, why you are the best at it)
3. Company (birth date, location, history, cap table, money spent, # of employees...)
4. Problem (people & situations, the way it works today, key problems/needs they have)
5. Market (the market you’re in, key things to know about it, current & future trends)
6. Opportunity (where existing alternatives fail, why solve it now, how big it could be)
7. Approach (strategic & market positioning, place in the value chain, value proposition)
Understanding VCs – @Boris_Golden – Partech Ventures
45. An example of what to pitch (2/2)
8. Product (key principles & features, use cases + demo, user love & engagement metrics)
9. Secret sauce (how it works & scales, what is unique/hard, potential virtuous effects)
10. Growth-to-market (your GTM strategy, how you target & acquire users, how it scales)
11. Monetization (who pays, for what & how much, the unit economics & profitability)
12. Competition (who is in the space, who is a competitor, how you differentiate & win)
13. Status (where you stand now, significant achievements so far, traction & momentum)
14. What’s next (goals & plan for next years, money needed, structured financial plan)
Understanding VCs – @Boris_Golden – Partech Ventures
46. Pitching to VCs
It's a conversation, not a speech.
VCs ask questions on key points of your startup
to find answers & understand how you think.
So don’t expect to talk for 30 minutes without interruptions.
Understanding VCs – @Boris_Golden – Partech Ventures
47. Pitching to VCs
VCs assess both form & content:
The heart of your project
+ the way you convey it
+ all weak signals!
Understanding VCs – @Boris_Golden – Partech Ventures
48. Fundraising with a VC
Understanding VCs – @Boris_Golden – Partech Ventures
49. Fundraising with a VC
It is usually demanding to raise VC money:
it takes time & success rate is very low.
Many VCs will reject you. A “yes” from a VC firm takes
several meetings & requires to convince several people.
E.g. of VC funnel: 200 startups > 40 meetings > 5 digs > 1 invest.
But if you're "hot", you have the power to filter & choose your VC!
Understanding VCs – @Boris_Golden – Partech Ventures
50. Fundraising with a VC
Momentum is a key psychological factor.
It can make or break a deal with VCs.
E.g.: VCs can lose interest if it takes too long.
They are often more excited when others are.
They usually don’t like to invest if you struggle.
Understanding VCs – @Boris_Golden – Partech Ventures
51. Fundraising with a VC
An interested, excited or even “in” VC
≠ actually closing the deal.
A deal can fail at any stage of the process.
Until money is actually wired, it’s not over!
Understanding VCs – @Boris_Golden – Partech Ventures
52. Fundraising with a VC
At early stage, valuation is not “what you’re worth”.
It just means: you give X% in exchange for Y€.
Balance between founders’ dilution & VC ownership.
Valuation is ~ an “art” & depends on: round size, market standards,
business’ potential & risks, VC competition, fundraising momentum.
Understanding VCs – @Boris_Golden – Partech Ventures
53. Thank You!
I’d love to hear your feedback
(and about your startup too )
bgolden@partechventures.com
@Boris_Golden
54. PS: How do I spend my days?
• Supporting portfolio (updates, discussions, workshops, boards, biz dev...)
• Sourcing & ecosystem networking (events, jurys, talks, hunting...)
• Managing emails & dealflow (filter & answer to everyone! [except ‘spam’])
• Meeting entrepreneurs (pitchs, updates, open discussions...)
• Analysing & closing deals (deepdive & memo, negotiations, due dill, legal...)
• Reading & curating (articles, news & co about startups/tech/VC...)
• Learning & growing (formalizing ideas, learnings, analysis, best practices...)
• Firm work (others’ deals, biz dev, team mngt, fundraising, LPs, reporting, events...)
Understanding VCs – @Boris_Golden – Partech Ventures
55. Pictures Credits
Reinventing Your Exit
by Will Foster
Tragedy
by Johnathan Nightingale
Brainy vs. Brain
by JD Hancock
Brains!
by Hey Paul Studios
Synchronized climbing
by Ruth Hartnup
Dice
by Daniel Dionne
Lego Men 5
by Sprout_labs
Lost in Translation
by Focus Features
Suessian megaphone
by Michael
Between fog and tress
by Robert Couse-Baker
SpaceX CRS-1 Blastoff
by Steve Jurvetson
Design by Benoît Laurent
benoit@worders.net
Understanding VCs – @Boris_Golden – Partech Ventures