VCs to entrepreneurs: Don't drink the technology Kool-Aid

Don't drink the Kool-Aid

Last week’s CIBC Presents Entrepreneurship 101 featured a funny, often brutally honest panel of VCs discussing how entrepreneurs can get money from VCs.  Peter Tolnai (Founder and President of the Orchard Capital Group) moderated a panel with two entrepreneurs-turned-VCs including Bryan Kerdman (Partner at EdgeStone Capital Partners) and Rick Segal (who was formerly a VC with JL Albright and the BlackBerry Partners Fund but has since returned to being an entrepreneur with his start-up Fixmo).  I loved hearing from those who have lived both sides of the VC-entrepreneur coin.

One of their most salient messages was that entrepreneurs shouldn’t drink their technology Kool-Aid and think that a fantastic technology will be the magic key to VC investment.  When asked about the top factors they looked at when evaluating a deal, technology wasn’t on the list.   The number one factor they look for? Great people:  a great team with deep domain expertise is essential.  Next in importance is the market opportunity: Is there an actual problem being solved?  Is it a really big problem?  Is it an international problem (i.e.  Is the market opportunity international?)  Basically, is there a real business there?

Rick went further: “Anyone who goes after technology for technology’s sake is going over a cliff financially.  What’s the business?  What’s the problem?  What’s the market size?…. Technology enables the business –” not the other way around.  For example, the technology for Twitter is hardly new as SMS technology has been around since the 1970s.  The innovation was the use of the technology, the new execution of it to create innovative user value.

Watch the video to hear:

• How should entrepreneurs pick a fund to approach?
• How should entrepreneurs approach a VC?
• Should an entrepreneur approach only one VC or can s/he approach many financing sources at a time?
• How do VCs view an entrepreneur’s forecasts?  (The same as Guy Kawasaki does — see his blog below).
• Do Canadian VCs push out the CEOs/CTOs of their companies like American VCs do?
• How do they view family members working together?
• And the most important question:  How do they view the state of VC in Canada?  (Hint:  it may not be as bad as you think because despite the “nuclear winter” in VC of late, Rick was recently profiled in the Financial Post in an article “VC Firms Wake Up to New Tech Deals” declaring that “Canada is the best place on the planet to start a business,” a point he reiterated on the panel.)

Candid thoughts from VCs

Want to hear what some other VCs out there think?  Don’t miss these blogs:

• Guy Kawasaki’s The Top Ten Lies from Entrepreneurs: A classic blog and must read to see how VCs really view what entrepreneurs say during their pitches.  He also wrote the view from the other direction:  The Top Ten Lies of Venture Capitalists.
• Mark Suster’s WTF is Traction? A 6-Step Relationship Guide to VC: Another successful entrepreneur-turned-VC writes about building relationships with VCs and what it really means when a VC tells you to “get more traction.”  He also has an excellent blog on Do You Really Even Need VC?

Downloads and resources

Weren’t able to attend the class? Need some notes or want to look something up? Click below for all of the goodies from the lecture. Watch the video and the slide presentation below.

• Class Summary: How to get money from a VC
• Video: How to get money from a VC
• Entrepreneur’s Toolkit – Workbook: Identifying, Targeting, and Engaging Potential Investors
• Entrepreneur’s Toolkit – Article: How to identify an investor for your business
• Entrepreneur’s Toolkit – Article: How to meet and engage an investor
• Entrepreneur’s Toolkit – Article: What do investors look for in a technology investment?
• Join the Facebook Group: CIBC Presents Entrepreneurship 101
• Register to get the weekly email updates

CIBC presents Entrepreneurship 101 2009/10 – Week 22 – How to Get Money From a VC from MaRS Discovery District on Vimeo.

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