Startup Game Changers will help you take your startup to the next level with actionable tips from insiders within the LA startup ecosystem. Collectively, our panelists — representing investment and professional service firms offering VC, legal, financial, HR, and business development — have supported thousands of startups worldwide from the ground up.
Venture Capital comes at the earliest stage of funding for a startup. VCs are looking for companies that have an idea, and a product or service that people want. This type of investment is often pre-product and pre-revenue.
Choosing the right investors as an entrepreneur is just as important as for a VC to partner with the right startup team. Most of the connects are internal, “there’s no application form,” said Peter Goldberg, Founder and Partner at PLG Ventures.
“Do we believe they can implement and execute the idea? As long as the market’s big enough to be successful, it’s the team,” said Goldberg.
“It’s about can I create a connection with that person. It’s not about how savvy they are, it’s about do I feel,” said Golberg. If he can connect with founders, it’s a sign they will be able to make the same connection with future partners and clients.
Simply put, “the product isn’t the most important, it’s your ability to kick ass,” said Goldberg.
“You have a finite amount of resources and you need to allocate in a certain way,” said Emily Levin, Managing Attorney at SBL Counsel. Making sure your company has full rights to its IP is also key, she said.
Tina Gentile, Consulting CFO with Early Growth Financial Services, said that one of the most important roles for her is to play the devil’s advocate. As startups are beginning to grow, strategic partnerships come into critical play. “[Startups] get very excited about this and they tend not to see the risks associated,” she said.
“Be careful with how much you give away in the early stage, even to the founders,” said Gentile. She stressed the importance to establish good stock options up front, and to stay within reason.
“I think 15% is a good sweet spot for dishing out [equity],” said Goldberg. He adds that anything less than 10% equity can hurt the company with not enough interest, and anything more than 20% is too much.
“It all depends on the skills of the individuals of the team…. they need to exploit these skills… and surround themselves with people who know what [they] don’t know,” said Goldberg.
Goldberg’s final advice for meeting with VCs is to be yourself. “If a VCs going to work with them, you’re going to be stuck with them for years,” he said.
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