Posts Tagged "vc"

Tom Perkins is one of the founding members of the venerable venture capitalist firm Kleiner Perkins. He just had his Mitt Romney moment and his name will forever be etched in the collective consciousness of the tech community for this terribly insensitive and tone deaf letter to the Wall Street Journal.

The headline of Mr. Perkins letter to the WSJ?

Progressive Kristallnacht Coming?

“I would call attention to the parallels of Nazi Germany to its war on its “one percent,” namely its Jews, to the progressive war on the American one percent, namely the “rich.””

Um. Seriously?

People of middle or lower income families protesting the concentration of wealth in America is the same as a political party in Germany instituting a policy of systematically killing 6 million Jews and countless more who didn’t fit the model Aryan citizen?

It probably doesn’t take much more to explain how disconnected from reality Tom Perkins is. But let me try.

In this article about Tom Perkins in the WSJ you would have had a clue before his recent letter. He says – out loud apparently

“I’m called the king of Silicon Valley. “Why can’t I have a penthouse?”

This in response to his 5,500 2-bed penthouse in San Francisco where his construction budget alone was $9 million. Who says out loud that they are the king of anything?

I’m sorry, Mr. Perkins. You are now the bumbling dunce of Silicon Valley.

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This is a hot topic I’ve been asked a lot about recently.

You’re on a first date with a VC – how much should you tell them?
You’re heading into a full partner meeting and you’ve been asked for a full data pack before – should you give it?
When is it appropriate for a VC to call your customers?

There is no universal answer and my discussions with various VCs on these topics have yielded many differing opinions. Having been on both sides of this sensitive topic, the following is my personal advice.

The First Meeting
I have seen some entrepreneurs go into first meetings willing to share almost anything about their company. I have seen others who seem guarded and cloaked about what they’re working on. There is certainly a delicate balance between these two extremes.

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This article originally ran on PEHub. If you prefer the super short version – I’ve summarized the post in the final section.

Many observers of the venture capital industry have questioned whether its best days are behind it.  They are frustrated by the past decade of subpar returns for the sector.  The most recent report to weigh in on the troubles of the industry was produced by the esteemed Kauffman Foundation.

There are obvious reasons the industry has had less-than-desirable returns, including: massive over-funding of the sector, huge increases in inexperienced venture capitalists that took a decade to peter out, and the massive correction in the value of the public stock markets that closed many exit opportunities for half a decade.

I can’t help feel a bit of rear-view mirror analysis in all of “VC model is broken” bears in our industry.

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Yesterday I saw a Tweet from Chris Sacca fly by that prompted me to want to write a blog post helping entrepreneurs understand why they should push back against VCs asking for “super pro-rata” rights. I’ll explain what they are and why you should avoid them if you can.

A primer on “pro-rata” rights
Institutional investors will always insist on pro-rata rights. This is not something to be concerned about. All it says is that the VC has the right (but not obligation) to invest his/her proportional ownership in the next round of financing. Typically this means, for example, if the investor owns 20% of your company from the A round they have the right to take 20% of the next financing (and continue provided that this right survives the next financing).

There is a lot of confusion about how pro-rata rights are implemented as evidenced by 

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I had the privilege of keynoting at the Founder Showcase tonight in San Francisco.

Adeo asked me to speak about fund raising. I generally don’t like to speak about fund raising in a frothy market. If you’re bullish you seem like a Cramer-esque cheerleader and if you’re bearish you sound like a party pooper.

But Adeo asked so I obliged. I don’t know whether they shot video. If they do I’ll post it. I think you can get the gist of it from my presentation although some slides don’t quite tell the full story.

Enjoy. See you in the comments section for our debate.

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