article/kuan huang QiBaDian venture investment co., LTD. (Beijing)
meet between age, will talk about VC (venture capital). Especially young entrepreneurs, they usually have two kinds of extreme emotions to VC, a kind of like dad, mom feel a VC is like a milk to eat; Another extreme is very exclusive VC, the feeling is they seem to be blood sucking up his own company, and then take the money and run. Two ideas are more extreme. We first to get to know a VC firm how things back.
English name is venture capital risk investment, VC for short. This company specialized early fast-growing start-ups. VC didn’t have a lot of money on their own, they are from their father taking money. VC company’s dad called LP – Limited Partner. The LP is often very very, very rich fund company: can be a big private equity funds, investment funds can be insurance company, can be a big company of idle funds, and so on, anyway, is all some people with a lot of money. The pulse of VC company is by holding the LP. , from the perspective of LP can vote for their money in real estate, also can be cast for the stock market, also can cast for VC firms, the key see who returns is more high. Basically see a VC firm’s performance return on investment. General VC firms if the rate of return is 2 to 3 times, it’s performance is poorer; 5-6 times the average performance; Of more than 10 times; 20 times as it is rare. I can tell you, VC company ask LP want money more difficult than entrepreneurs ask the difficulty of the VC for money.
VC are willing to invest in your, it is because they think that your company has a huge growth potential. Here I say big not refers to the growth rate of 20% to 30% a year, but the rate of more than 100%. VC high expectations for you, that’s because the LP high expectations of them. For early stage companies, speed of growth was the first. You as entrepreneurs, if they also didn’t want to good how to maintain high-speed growth of the company, then you go to talk with VC, only have insulted.
VC hope your company do big, do not easily sell. For them, their biggest reward is owned by a company to become an industry of a big MAC. The birth of a gigantic without bully, bring VC investment returns are hundreds or even thousands of times. On behalf of the part and entrepreneurs will have a certain degree of conflict. For example: you took VC200 thousands of dollars of investment, the valuation at $5 million (VC accounted for 40% of the company, you and your team accounted for 60% of the shares). What did you do the results after 1 year, sina buy prepared to spend $10 million to you. For you and your team, only use the time you can cash out $6 million a year. Special like Internet early now, teams are small, all points a, is a considerable number. Take money, you can go on holiday to Hawaii beach, the sun for a month, and then come back for a second. Media rated you as serial entrepreneurs, and then a lot of young entrepreneurs to your idols. How scenery! But for your VC investment, their rate of return is only 2 times. The day of his have absolutely no you so smart! You in taste red wine, to invest in your VC could be in for the LP to be spanked, worried about their bonuses and not the end of the year.
VC role in the company have classification, a managing partner, as well as an ordinary partner, there are principal, below is seniorassociate again, and again the following is the associate. Generally the associate to do 2 years, their research is mainly responsible for the specific company. The Associate if rise will not come after 2 years, many will leave. The direction of a principal is responsible for research, finally couldn’t vote for, or a partner in charge. Some VC companies and the role of a great call EIR, Entrepreneur in Residence. EIR is used to VC company and entrepreneurs a good way to keep the relationship. EIR sometimes to help watch our portfolio, together with Due Dilligence, “bringing deals. The EIR basic it is with many people experience.
know this background knowledge before financing, in fact, a lot of help for entrepreneurs. Such as entrepreneurs, often receive a letter sent to you the associate said that to your company is very interested in, want to talk about. Received this letter, don’t have chicken. The associate to many of these signals in each month, your company is only one of them. Large VC company also has a political struggle. Generally more hard work belongs to the kind of person who have hope to become partner. These people want to become a partner, they must be “bringing to the company deals. The so-called “bringing deals, is to make the companies that have the potential to take their investment, then hope that one day the company has a good exit bought by big company (or listed). So if you and those who want to be a partner together to talk about, they help you to investment of power will be greater. Of course, if you talk with LP and partner directly, the chance of success is relatively higher.
many VC companies co – invest: is to several familiar companies invest in a startup. In this way, people have extra money to cast other direction at the same time, share the risk. When the entrepreneurs in search of the wind, the hardest part is finding that would take the VC. Before a few times some of the VC on the company and team is interested in, but do not want to get shot. Because the lead VC responsibility is larger. 2011-2012, there are a number of startups to melt to run out of money, but did not reach can melt into the next round of milestone, as a leading VC sometimes have to save a sum of money, as a bridge loan to help pull through investment company. VC is a social animal. You will often find for months no one willing to vote for you, and then all of a sudden have a willing to vote for you, others will come back again to you are interested.
the cycle of VC investment fund also has exquisite. General large funds are for a period of 5 to 10 years. Is the most depressed thing, sometimes when you don’t easy to find an exception for you are interested in VC, and feels he is quick to you termsheet, suddenly received his email said “brother, your product is very good, I also look good on you. But I don’t have money, is currently talking to LP, an estimated 70% of the possible three months after can get new a fund “… . . This time, you have to ‘criticisms in the heart, and very politely say, “keep me posted”, and then go on making Qian Zhilu.
think VC is also poor, every day someone will send email to say they see a new app or website. Lucky, they see innovative things from time to time, bad luck when looked at dozens of the same product, read it again, may be can’t eat rice. Have a good project, everyone come to steal; They also dare not general projects. Hand with hundreds of millions of money, go be afraid of losing money, don’t throw must lose money again.
I appreciate a lot of foreign VC, they pay attention to communication, many people have their own blog. They often on his blog update their investment philosophy, observation of the industry and to provide experiences and lessons from young age. After all, everyone is just like in the blind date. If both sides strengthen communication, it can save a lot of, hand in hand at an early date.