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The Helpful Purple Polka Dot
VC How to Position Your Unique “Value-Added” Superpowers for Better Branding, Marketing, Fundraising & Dealflow Dave McClure Dec 2018
Dave McClure: Nerd, Hillbilly VC
Geek, Engineer, Marketing, Blogger, Entrepreneur, Angel Investor, VC ● Born in WV (‘66): Hillbilly & WVU Mountaineer football fan ● Johns Hopkins (‘88): Applied Mathematics / Engineering, CS ● Silicon Valley (‘89): Programmer & SQL Databases, Intel / MSFT ● Founder/CEO Aslan Computing (‘92-‘99), Internet + Ecom Consulting (small exit) ● Director Marketing @ PayPal (‘01-‘04), Simply Hired (‘05-‘06) ● Angel Investor/Advisor (‘04-‘09): Mint, Slideshare, Mashery, Twilio, WePay ● Founders Fund (‘08-‘10): Lyft, Credit Karma, Twilio ($TWLO), SendGrid ($SEND) ● 500 Startups (‘10-‘17): $400M / 2000 companies / 50 countries / 10 Unicorns
How You Help -> Brand
+ Competitive Positioning YOU (THE AWESOME VC) ● What you can do (well) ● What you do better / different ● What you promote / promise (your brand value) TARGET PORTFOLIO COMPANIES ● What they want ● What they need ● What makes a difference COMPETING INVESTORS ● What they say they can/will do ● What they actually can/will do (well) ● What they do that really matters
Investment Thesis ● What Kind
of VC do you want to be? ○ Stage, Geography, Industry Vertical ○ Fund Size, Check size, Follow-on ○ Lead rounds? Board seats? ● Why You? Are you sure you can do this? (3X / 20%) ○ 1) can you raise money? ○ 2) can you get dealflow? ○ 3) can you help companies? how? Q: Are there competitors with a similar thesis? Why are you different / better? Why will great companies come to *you* instead of other competitors?
VC Dealflow Funnel ● Thesis:
what/how you plan to invest ● Brand: use your value-add to attract companies ● Marketing: activities that generate dealflow ● Evaluation: filter dealflow *before* taking mtgs ● Meetings: in-person evaluation & DD Qs ● Deal Memo: document deals you want to do & why ● Negotiation: specify terms and make / close offer ● Investment: wire the money! ● … ● … (then wait 7-15 years) ... ● … ● OMG UNICORNS! BRAND + MARKETING DEALFLOW EVALUATION MEETING DEAL MEMO TERM SHEET INVEST! THESIS “VALUE-ADD” UNICORNS! (hopefully)
Branding & Marketing: How to
Generate Dealflow ● Brand: what’s your name / logo / soundbite / unique value proposition? ○ What’s the story you’re going to tell the market? ● Superpower: what makes you special / why are you different? ○ Is there something you can do that will make companies come to you? ● Marketing: activities / communications to LPs, founders, press, etc ○ Content: writing/blogging, speaking, training ○ Services: are there services you can provide to startups to generate interest? ○ Founders: where do the founders you want to invest in hangout? FIND THEM! ○ Networking: who do you need to know in the industry? VCs? Scientists? Partners? ○ PR strategy: who can help generate news about you / your firm / your strategy? ○ Events & Conferences: should you speak / attend industry events? Should you run events? ○ Online Platforms / Other Investors
Help Framework: Why, Who, When,
What, How? ● Why Help Companies? ○ Just help them win! (goodwill) ○ Help them with something you’re good at ○ Find out how they are doing (metrics) ○ Build your reputation -> better dealflow ○ Earn right to participate in future rounds ● Who Should You Help? For How Long? ○ Only Winners? Everyone? Even Losers? ○ Until next round? Forever? ○ Until they “win” (or FAIL to win...) ○ Board Seats / Advisor seats? ○ Define when / how you will pull the ripcord ● Define your “Help Framework.” ○ What will you do? ○ Who will you help? ○ For how long? ○ Until something happens? Or forever? ○ Tell them what you expect to get back ● What is Your Unique Help Superpower? ○ Product Development ○ Marketing/Sales ○ People/Recruiting/Hiring ○ Operations/Process ○ Raise More Capital (*not unique)
Fundraising: Key Slides in Your
Pitch Deck Core Deck (10 slides) ● Cover: Name / Brand / Image ● Thesis: Basic Fund Concept + Goals ● Team: Bios / Academic / Work Experience ● Track Record: Prev Portfolio / Top 3 Deals ● Superpower: Services / Value-Add ● Competition: Differentiation / SWOT analysis ● Dealflow: Marketing / How to Get Deals ● Selection: Criteria / DD / Process ● Fund Model: [spreadsheet] ● Capital: AUM / Current LPs / Fundraising Appendix Slides ● Investment Thesis / More Details ● Winners / Case Studies (1 slide per win) ● Team Bios (1 slide per GP) ● Advisors / Mentor Network profiles ● Examples of dealflow-generating activity ● Sample Deal Memo ● Fund Terms / Legal * emphasize items in blue if you have “hot” thesis, pedigree, experience, track record * emphasize items in red if you don’t
EXAMPLE: Wingnut Investment Fund Wingnut
Ventures ($20M seed fund) ● Stage: seed investments + some follow-on at Series A/B ● Vertical: internet-connected hardware/software devices ● Geo: US-centric (mostly US tech metros, some non-US) ● Allocation: 40 seed checks @ ~$250K + 10 Series A/B @ ~$1M ● Lifecycle: 10 yr fund + 2 x 1yr extensions; 5 yr initial investment period ● Reserves/Recycle: 50% 1st checks + 50% follow-on; recycle up to 120% ● Fees/Carry: 2% avg mgmt fees, 20% carry (after 1X returned) ● Team: 1-2 partners + 1-2 associates + 0-1 admin
Limited Partner Profiles/Issues Types of
LPs ● Institutional ○ Pension Funds ○ Foundations / Endowments ○ Financial / Insurance Companies / Banks ○ Corporates ○ Government / Community ● Private ○ HNW Individuals (“High Net Worth”) ○ Family offices (SFO, MFO) ○ FFF (Friends, Family, Fools) ○ You, Your Dog, Your Cat. Issues for Potential LPs ● Asset Allocation ○ Equities, Bonds, Cash, Real Estate, “Alternatives” ○ Alternatives = Hedge Fudns, PE, VC, etc ● Time-horizon / Liquidity needs (short vs. long) ● Investing Motivations ○ Pure Economic Returns (perception vs reality) ○ Strategic (innovation/IP, M&A, people, product) ○ Access to Dealflow (industry vertical focus?) ○ Economic Development (Jobs, Ecosystem) ○ Marketing/PR (“It’s cool to invest in VC/tech”) ● Have they invested in VC funds before? ● Have they invested in startups before? ● Interest in Emerging Managers / Early-Stage?