When should you get on the VC train?

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I think we can all agree that the startup industry pays too much attention to VC. Our conferences, press, and tweets are dominated by VC-related news. Which fund just raised more capital? Who got funded? Who’s the latest unicorn? I contribute to that fixation in this blog all the time. 

With the rise of accelerators, the holy grail for young startups these days seems to be to get into YC as early as possible and then go on to immediately raise from VCs post demo day. 

There are certainly some massive successes that have followed this hype-laden path: Airbnb, Dropbox and Gusto are some of the biggest winners that come to mind. Closer to home, YC grad Vidyard is crushing it. But they passed on the hype in the Valley. They came back to Canada and took their time. Continue reading When should you get on the VC train?

Managing Investor Protections: What you need to know

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All VC deals come with features and provisions that are designed to  help investors get comfortable making a multi-year, completely illiquid investment into your highly risky startup.

Typical protective provisions include things like:

Liquidation preference: On exit, the investor has the choice of getting their capital back or converting their pref shares into common and just getting their portion of the exit price.

Redemption: Some kind of mechanism to enable the investor to get their capital back after some period from time. This could range from the benign (you agree to convene a committee of the board X years from now to determine – with no obligation to act – whether it’s time to sell the company), to the non-trivial (the investor can force the company to buy back their shares, likely triggering a variety of unnatural events up to and including the sale of your company). Continue reading Managing Investor Protections: What you need to know

Raise enough to screw up!

I have been reading up on some of software’s great founders recently. Currently working my way through the mammoth biography on Steve Jobs. There are many take aways from this reading, but one of them is that these legendary CEOs made a great many mistakes along the way. Especially early on.

Continue reading Raise enough to screw up!

Getting Due Diligence Ready

We’re getting into that time of the year where VCs stereotypically head for their yachts. From where I stand, there’s still a ton of deal activity, but late July and definitely August are still not great times to begin new funding discussions. So, now’s the perfect time to get your ship in order so you can start fundraising hard come Labour Day.

I’ve said this before, and I’ll say it again: the decision to give an entrepreneur cold hard cash is all about trust. I trust you to take my $1 and make it $5 or $10. One important datapoint in forming my trust thesis as an investor is how organized you and your company are. No matter what your company size, your key documents should be organized and readily available. And you should know what’s in them. Continue reading Getting Due Diligence Ready