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Venture Capital and Velocity: 11 (seeingbothsides.com)
28 points by johncosch 11 days ago | hide | past | favorite | 17 comments

The increase in capital deployed is interesting. I wonder about the location of founders taking capital though.

Was the deployed capital still concentrated in major startup areas like SF, or more globalized given that video calls significantly reduce the friction of international communication.


> I am a 2x entrepreneur

Smh, not even 10x.

I'm assuming you're joking but in case you're not... He means he's started a company twice.

I am indeed joking :D.

"Hold twenty to thirty Zoom meetings, each in 30-minute increments, over the course of a handful of days to meet prospective investors."

Where does one find 20-30 prospective investors of quality?

If you have the network it's easy. The hard truth is VC is not a meritocracy -- it's privilege-based.

To elaborate a little further, investors of quality tend to network and pass deals around to each other. Getting enough money round the table in early stages requires these kinds of relationships and so if you meet a few VCs who like you it will turn into dozens of meetings in short order.

Investors don't pass around deals 'because buddies' - they pass around deals because they're think they're good. A VC's currency is mostly founded upon the quality of 'what they pass around' so they're using filters, which means it's a 'meritocracy' to the extent investors are investing 'merit' which they definitely believe they are doing.

Of course, getting to the first stage/level is also rather challenging, somewhat less meritocratic.

When I said "because they like you" I didn't mean as a person. Hopefully people don't misinterpret.

In my experience, investors (especially at the seed stage) don't just pass deals around because they're "good". Most of the deals investors pass around haven't been through enough diligence yet to determine whether or not they're good.

Investors like to get second opinions from other investors, however, and they'll especially value your perspective if you've invested in a similar deal in the past, or founded a company in a related space. I've seen this from both sides of the table, and I would observe that the "filter" early stage VCs employ is more about whether the founders are engaging, and less about the fitness of a deal.

One alternative is to hire a banker and say you want to run a broad process. Your banker may advise otherwise, but it's generally having that conversation and developing a strategy.

Disclaimer / shameless self-promotion: I'm an investment banker and happy to talk to see if I can help.

Only works at later stages, as far as I know (as an early stage investor). I don't know any early stage VCs who would take a company intro from a banker.

Edit: Not that early stage companies don't hire bankers. Checking my email, I have received 43 "investment opportunity" emails from bankers in the past week. Due to the sheer volume I never take cold intros, ever. Nearly 100% of the intros I take come from other VCs, angel investors, board members, and founders I have relationships with. The ONE exception is when a founder who has done their research contacts me with a concise, relevant message.

Every company is different, which is why I worded my comment as "happy to see if I can help".

I interpreted GP's case to mean he is a founder looking to find 20-30 investors, which would require a banker that probably already has at least half of those contacts.

I'm not suggesting that as a banker I'd be making cold calls into investors – although we might, depending on the opportunity. The more likely approach is to call those funds that I or my colleagues have relationships with from previous transactions.

I think GP is just referencing the article because it seems daunting to many founders to "know" 20-30 quality investors. The investor who wrote this piece is a well known seed stage investor, so when he says "meet with 20-30 investors" he's talking about a seed stage raise of around $2-7MM.

In my experience the reality is you need probably 4-5 solid intros to get to 20-30 meetings, because investors love to pass deals around to other investors.

Out of curiosity: how much would an investment banker charge to a company to get 20-30 intros to quality investors, assuming it's bankers who have relationships with investors established through M&A or as LPs? I've never seen it, but I also realize that doesn't mean it doesn't happen :).

You're exactly right. I'm afraid I'm guilty of commenting before even reading the article, sorry.

Bankers aren't usually involved at the very early / seed rounds.

I have traditionally worked on M&A transactions rather than capital raises, but to answer your question fees are usually determined as a % of the amount raised, subject to a minimum—which again is why it only makes it economical to hire a banker at later stages. Generally we look to precedent fees as a general guideline and then negotiate from there with the client depending on specifics.

Out of curiosity, how does that process work from a practical standpoint? How does an early stage company find you? Do they pitch you, the same way they would pitch VCs? Why not then spend your time directly pitching VCs, instead of pitching bankers who then have to go out and successfully pitch VCs?

Sorry, I'm probably coming across as attacking, but really am not. I just have never heard of this role before, and am asking out of genuine curiosity.

(Also as a sidetone, is there a specific name for this type of deal facilitator besides the generically overloaded "banker"?)

It's usually the other way around – bankers will pitch companies they come across if they think there's an opportunity, but not usually for super early stage capital because the economics don't really work. Pre-COVID, we'd all go to industry conferences and mingle, set up a meeting and see if we click after a conversation or two. That was how my team met a Series B company a couple years ago which later received an unsolicited bid from a strategic acquirer and we helped them through that. The process was very successful and actually a pleasure to work through for all parties involved - investors, management and buyer all walked away very happy with the outcome.

As for your side comment, I don't think there's a more specific name rather than "banker", but in my experience the big banks on Wall Street are not traditionally structured in a way that incentivizes relationships with earlier stage / smaller companies.

Since you're asking for differentiators, I don't meant to sound like an ad, but I work at Evercore, which is "the premier global independent investment banking advisory firm", as our website would put it. We're "independent" because we don't lend any money despite being a "bank". Admittedly, M&A advisory is the lion's share of what we do, but we're also hired by clients to help them secure financing or go public. We just don't have any skin in the game. The value we bring is the quality of our advice. We're more nimble and flexible, but we have the same depth of relationships as a big bank, which is what differentiates us.

Thanks! Very interesting to learn.

I think you mean speed, not velocity.

SPACs look like free money for the promoter.

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