One of the least understood parts of the venture capital industry and venture capital firms is how investment decisions actually get made. The truth is that each firm is different and there isn’t one standard but over the years I’ve talked with enough of my peers to get sense of how many firms work.
Often if it’s a bigger firm (say 4 partners or more) and it’s a super small investment for their fund size (let’s say $250-500k when they normally invest $5-7 million) they will just require 1 or 2 partners to decide. For anything that would be considered a normal investment for the partnership most firms try to make sure every partner has seen the deal and has a chance to weigh in. That’s why the investment process begins with a partner meeting and if they really believe in your business then they “champion you” by inviting you to a full partner meeting.
What happens next feels like a black box to outsiders. They only know if they get a yes, no or “I need to do more work” after that process. Some firms have formal voting structures but in my experience most don’t. If a deal has a lot of support and no strong detractors it will often but up to the sponsoring partner to know what he or she wants to do with the deal. The sponsoring partner will be given feedback on what some partners don’t like about the team, the market, the product, the competition or the deal terms and that partner may have to answer back on those topics at the next partner meeting or maybe even just later that day (depending on time sensitivity of the deal).
If you have a strong-minded sponsoring partner who has a high degree of influence at his or her firm they will often be able to overcome any objections and will just report back what they found to answer the doubters.
When most people think of John Shahidi two words come to mind. Bieber & Mayweather. Yes, that Bieber (67 million Twitter followers, 73 million on FB) & that Mayweather (6.4 million Twitter followers, 12 million on FB). The reason being – John Shahidi counts both as investors and friends.
You’re probably thinking, “slick talking, super confident, tall, extroverted, arrogant, LA kinda dude.” You’d be dead wrong. As I’ve gotten to know John Shahidi he has broken every stereotype that one may have of somebody who spends the day driving around in an SUV with Justin and landing famous investors. And I’ve learned a lot of things in the process.
Shahidi’s inspiration for building Shots was that he was picked on growing up. He knew first hand what it was like for people to bully or make you feel self conscious due to your weight or looks or physical abilities. So when he built shots it was with the goal of protecting younger people from this sort of intimidation.
My partner Greg Bettinelli is an avid sports fan who throughout his career has developed an expert understanding in online ticketing (at eBay has was a champion of the StubHub acquisition) and online marketing.
Greg knows consumer businesses and customers, which has added tremendously to our team where I admittedly have more of a background in enterprise software, data and online video. If you’re interested in sports tech (or want to argue with a 49ers fan) you should definitely follow Greg.
I mention this because Greg led our investment in a company that I have personally become addicted to called Draft. If you want to read more about our investment you can follow its launch today on ProductHunt, which has become my favorite place now to launch new applications and companies. The Draft team will answer questions there and so will Greg and I if you have anything for us. They just announced their Android app (you can
Technology. It has been a hobby of mine since 1981 when I fell in love with programming, applications and online games. My brain is wired for logic and for problem solving and computers have always helped me fill this compulsion.
And since I was 13 years old I have been accustomed to the debate about the limitations of technology or rather the downsides of being overly obsessed with gadgets, devices, software or applications. Every hour of Zork was an hour not on the soccer field or basketball court and every chat in Prodigy or CompuServe was an in-person chat not happening. I was blessed with a healthy extraverted side to accompany my inner computer geek so the balance never had negative consequences.
Last night I wrote a post about how the fall in the stock market over a 3-day period may affect the venture capital markets. If you’re an entrepreneur or VC who wants somebody else’s view on that you should read it. This morning the US stock markets are rallying. So now what?
Let me give you the quick summary of what I said yesterday:
Public markets affect venture funding. Full stop. When they’re bullish venture valuations go up, LPs put more money into VCs, more angels want to get involved, new entrants (hedge funds, mutual funds) feel they’re missing out and the overall venture market goes us.
In a period of “uncertainty” about the future venture capital rounds take longer – particularly later-stage deals. Mostly because VCs want to wait to see if a “new reality” has set in.
If markets pick back up venture funding will return as it was before the 3-day, 10% correction but if the VIX goes up (a measure of expected volatility in the stock market) then expect rounds to take longer. If the markets continue to go down expect less funding.