Chris Sloan’s Blog

I just found Mark Suster’s blog Both Sides of the Table. It’s really good information and I’ve added it to my blogroll. This post on common start-up mistakes is particularly good, especially the advice he gives on addressing founder vesting at the beginning as opposed to when the VCs enter the picture.

Great post here from Mark Cuban on how NOT to pitch a prospective investor. Bottom line: be simple, be direct, be on point, and no grandiose puffery bullshit.

Here’s a great article from Venture Hacks on how to put together an effective slide presentation for investors. The key link in the article is to a classic post from David Cowan entitled “How Not to Write a Business Plan“.

Mega VC firm Sequoia Capital also has some good info (similar to Venture Hacks above) about slide decks here.

Back on the blog horse again…

Fred Wilson posted a great summary of the terms that venture capital investors will care about the most, and why, here. They are:

1. Liquidation Preference. This simply means that, when the money comes out, the VCs get their money out first, plus any accrued preferred returns. In the post-bubble era, this frequently was a multiple of the investment (I saw as high as 3x). Today, the typical deal is just 1x. A related term that is very important to the founders is whether the preference is participating. A participating preference means the VCs get their preference, PLUS whatever they would receive on an as-converted basis. Most deals these days are non-participating, meaning that the VC must choose between either taking their preference OR converting to common and participating with the common. Hopefully (for both sides), they will want to convert, because that means their return is much bigger than 1x.

2. Participation rights in future rounds. Fred notes that, typically, a few early rounds deliver the vast majority of the returns, so the VC will want to be able to participate in those rounds after the initial investment. Secondly, this right helps the investor avoid being crammed down by a highly-dilutive down round, if one occurs.

3. Board seat. This is the most direct way that a VC can influence the company, and thus protect their investment.

The FastPitch final event was awesome; I really enjoyed it and was proud to have our firm sponsor it. Congratulations to Vintage Graphs for winning the Grand Prize. Also congrats to Lifetime Reel, HouseLens, and GPS Assassins (in that order) for taking the other three top prizes.

The main event of FastPitch is tonight at 5:30 PM at Belmont’s Curb Event Center. FastPitch is a seed funding competition where the finalists (selected through several preliminary rounds) each give 60 second pitches to the audience and a panel of judges. The judges give comments, and the audience votes by text message for the winners.

Our firm is proud to sponsor the second place prize for this event. As a sponsor, I will be there to do my own FastPitch on behalf of the firm, and I’ll also present one of those giant oversized checks to the second place winner (I’ve always wanted to do that).

I’m looking forward to it.

Wilson Sonsini’s Winter 2008 Entrepreneurs Report is out, and two items in particular are worth a read for entrepreneurs, and both are by bloggers in my blogroll.

The first is “Perfecting Your Pitch” by noted early-stage investor and Foundry Group co-founder Brad Feld. The second is “How Do I Get Meetings With Investors?” by Babak Nivi and Naval Ravikant, who are the guys behind Venture Hacks.

Two more related thoughts while I’m on the subject. First, the Venture Hacks guys recently published a book called Pitching Hacks; I have read a number of excerpts and it looks like good stuff, so I plan to pick up a copy soon.

Second, VC big boy Sequoia Capital has a good overview of what should be in your business plan and your slide deck (and, by inference, what should not be). This is a good reference for understanding precisely what information investors want to know about your company. Less, and you are not getting the job done. More, and the good stuff gets lost in the weeds, and you look like you don’t know how to focus on what is important.

Fred Wilson (one of my favorite bloggers) just published this blog post about right and wrong ways to implement cash bonus plans for management in emerging businesses. A couple of my takeways: (1) equity incentives should still comprise the bulk of the total incentive package, since equity incentives more closely align the interests of management with investors, and (2) cash bonuses must be carefully crafted to create the proper long term incentives (and Fred suggests a multi-year plan tied to incremental EBITDA growth as a good option).

If you are an angel investor or might be interested in becoming one, go read this great article by Paul Graham on “How to Be an Angel Investor.” I added “Good” to my post title because he talks about how to be “good” in two important ways: (1) choosing investments, and (2) how to help your portfolio companies.