Comments on: How to raise money without lying to investors

By: Simeon Simeonov

Simeon Simeonov — Sun, 28 Feb 2010 01:31:21 +0000

I haven’t worked with many European VCs, only a few. On the positive side, the ones I worked with did not explicitly push entrepreneurs to over-promise. On the negative side, they had poor strategic and market insight and, therefore, couldn’t see when the team was over-promising.

By: Philip

Philip — Tue, 02 Feb 2010 12:56:12 +0000

Hi Simeon, Fascinating post and comment set. You mention a few firms in your post who take the “right” approach to early stage but they are U.S. based. Do you know of any in UK/Europe who fit the mold?

By: Simeon Simeonov

Simeon Simeonov — Mon, 01 Feb 2010 22:19:28 +0000

I was two down on the right.

By: Simeon Simeonov

Simeon Simeonov — Mon, 01 Feb 2010 22:18:29 +0000

The point about asking for a lot has to do with the business model of investors. A 10x return on so little invested that it doesn’t move the needle isn’t something most investors will go for.

You have to understand that you are not competing with an abstract notion of what a good investment is. You are competing with the other teams that saw the investor that week.

To an investor, it costs about the same in terms of time to make a big or a small investment. Given the same risk/return expectations, they’d prefer the large investment most of the time.

By: Francesco Giartosio

Francesco Giartosio — Mon, 25 Jan 2010 19:06:33 +0000

I like your point, Jeff. So you are saying that you don’t need to promise, you just show the possible upside and let the VC decide if they want to bet on it.

By: Kishore Jethanandani

Kishore Jethanandani — Mon, 25 Jan 2010 04:38:13 +0000

This is a great point. I find it pretty absurd that somebody even asked for five year financial projections. In all the interactions I have had with investors, financial projections is the least of their considerations. Market positioning and some way to verify that customers are buying the value proposition is mostly what they want. My hypothesis that these investors are some Ivy League greens who are clueless about venture investing. No wonder profits in the VC industry are an average of just zero.

By: Jules Pieri

Jules Pieri — Sun, 24 Jan 2010 04:16:14 +0000

Thanks Sim. A lot came together for us in Q4. Thanks for asking. I think 2010 will be our year to really soar. We spent 2009 taking so much risk out of the business, and proving the theories on how we will use capital.

By: Simeon Simeonov

Simeon Simeonov — Sun, 24 Jan 2010 00:56:45 +0000

Hey, Jules. I hope Daily Grommet is doing well. I mentioned in this comment that there is value is looking forward but only to do the type of assumption/gotcha/ballpark testing I think you are doing also. The cone of uncertainty is too wide that far into the future.

By: Simeon Simeonov

Simeon Simeonov — Sun, 24 Jan 2010 00:52:40 +0000

Thanks, Paul.

By: Kishore Jethanandani

Kishore Jethanandani — Sun, 24 Jan 2010 00:10:42 +0000

Seems like you are going to wrong kind of investors. If you have customers, you should be able to get an investor with relative ease. We are getting one with our IP. Did you try Keiretsu Forum? There are enough people around there who will listen to you even if you don’t want to incur the expense of getting your proposal examined by the Forum members.