Axel Schmiegelow

Musings on how to do the VC Round

I promised to blog my reflections on the 18-hour stint – well, here goes:

1) Provided you can choose from equal VC quality, choose a VC with an Office in your country -

2) or calculate three extra weeks on legal hassle because they just won’t understand your legal system (unless, of course, you share legal systems)

3) Be ready to bypass the lawyer of your VC at any moment (incl. @ 03h00 AM – myke sure you have a contact who will comply) – remember there may be a Principal-Agent-Problem between Vc and his Lawyer – the VC wants the deal @ good terms and low cost, but he wants the deal. A Bad Lawyer often raises his profile by being excruciating and blaming a bummed deal on you.

4) Align your Business Angels, if you have any, into your interest. If need be, point out that you can always gang up with the VC. But it is best if you don’t have to go there – that depends on the mentality of your BAs. I’ve seen both.

5) Don’t succomb to the enticements of the new. The nice great VCs who now are a tremendous success may just be your worst nightmare two years down the road, so remember to balance control power in your company. In the best of all worlds, as an entrepreneur, you get to pick who you work with on which issue because you gang up with the Business Angels if the VCs get unreasonable and you gang up with the VCs if the BAs get unprofessional or greedy. Make it clear that, while alle share the risk, you are the entrepreneur who is going to make it happen – or not.

6) Don’t overestimate yourself and consider – in your inner fort – the scenario if the company outgrows you or you get boreed. Few Entrepreneurs are as good in the 0 – 100 employees periods as the are in the 100 – 1000 or beyond periods. That was not an issue in my recent experience, but it is always worth remembering.

7) Don’t bind yourself to milestones. Business Plans are a process, not a bible. Focus on the metrics and never tie your investment capital to that. There is only one 100% sure fact about your business plan: it is not going to happen. The story will always be different, for better or for worse. So while building the structure of the company for the VC phase, make sure you have a tight-knit communication, frequent consultation infrastructure (Board) – share decision responsability. Stop selling your venture the minute the money is in the bank and all covenants are through (that’s why milestones are unwise for a VC too, because then reporting focuses on showing how milestones are met, not on the actual problems and necessary adjustments of and to the business model). Make sure you have VCs you are comfortable sharing your worse problems with.

In this sense, there is no real “stupid money” – you should always keep that communication line open so noone will feel thumped and try to get back at you (of that, the stupidest money sources are always capable). And sometimes even the worst moron will see something that you, in the Hamster wheel, won’t.

That’s a first – discussions welcome.

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