HackFwd Build 0.8 - Berlin December 2011
In this impassioned presentation, Roberto Bonanzinga from Balderton Capital asks whether VCs help or hurt entrepreneurs and offers some answers – some of which might come as a surprise.
According to Roberto, there are lots of ways in which a VC can damage or even kill a startup. This might be a message from an unexpected quarter, but he knows what it is to sit on both sides of the negotiating table. “[At Balderton] we have very strong entrepreneurial DNA. Not because we read about it in business school in a book called ‘Entrepreneurship’ but because all of us did it and have been working in the space,” he explains.
The most important lesson he learned as an entrepreneur was that the selection process should be symmetric: entrepreneurs should be as selective about their choice of VC as VCs are about their choice of investments. And it’s not as simple as deciding who are the good and the bad VCs. It’s all about assessing the fit. It’s more important to find a VC that you can build a relationship with than it is to play the statistical game of sending out 100 pitches in the hope of a one or two percent conversion rate. “If you do decide you need cash, step back and think who would be the right VC,” he says. “This is a business that is about people, it’s about interaction.”
He says that lack of alignment is the most common reason why VCs end up damaging their investments. Sometimes it’s a lack of alignment in the timescale that the VC and the entrepreneur want to work to. Sometimes it’s a lack of alignment over how much money is needed. Surprisingly, he says, over-investment is more likely to kill a startup than under-investment.
How can you know if a VC is right for you? Roberto suggests two easy tests. The first is to ask around. What do the other entrepreneurs in their portfolio think? The second is to assess the VC’s level of passion. Are they committed enough to use your product? Are they committed enough to want to sell your organisation, to help you recruit, to help you find other investors?
In this talk, Roberto also shares the key danger signs that tell you if a VC isn’t right for you and explains how best to approach the ones that are. He compares finding the right VC with the process of finding someone to spend the rest of your life with. In the end, he says, it comes down to three things: “personality, experience, and passion for your product. Get someone that is in love with what you do.” Watch Roberto’s presentation to find out how to meet your match.