NGEF Monaco, day 2

I've just returned from the morning session of the Next Generation Entrepreneur Forum in Monaco and it was great. We heard from 3 speakers who all had something thought provoking and useful to say to entrepreneurs. Here are the highlights from my notes.

Heidi Roizen, Mobius Venture Capital

The title of Heidi's talk was "10 things I've learned as a venture capitalist that I wish I'd known as an entrepreneur". And here are the 10 things, as noted down by me:

  1. Venture capital is a "hits" business - there are only a few successful projects that will support the many failures. Heidi shared some statistics with us to the effect that 60% of entrepreneurial ventures return less than the capital invested in them, and the top 3% of ventures return over 50% of the capital invested.
  2. Venture capitalists are portfolio managers.
  3. Venture capitalists often turn down good companies. VCs are looking for "hits", but they're also looking for an exit strategy, or a specific sector, a certain size of fund or stage of fund.
  4. Due diligence is gut + homework + time. Early stage investors often bet on people, especially if they don't recognize the target market in themselves.
  5. If you don't trust someone, don't invest.
  6. The best entrepreneurs don't hide the ball. In other words, don't keep the bad news to yourself.
  7. Entrepreneurial startups are not always great CEOs. As an entrepreneur, you should take the role to which you're best suited, and hire in the best team you can for the other jobs.
  8. Virtually all startups change course.
  9. Be prepared to invest more.... or not.
  10. Venture capitalists need to find exits.

A final comment on my notepad says "venture capitalists take preferred shares and then sell your company. You will lose control."

David Brophy, University of Michigan

Dr. Brophy blinded me with financial data, but I got the underlying message, which was that as an entrepreneur, you need to ask yourself "do you want to eat, or sleep?" The actual title of the talk was "How much cash do you need and when do you need it?", and he took us through a hypothetical company valuation, with formulas that could help us work out how much equity to give up, at which stage of financing, and for how much, depending on our final return. I'll be able to explain a bit better when I have a copy of the slides. Needless to say tho', this was extremely useful to those present who wanted some investment for their ideas.

Professor Jay Mitra, University of Essex

Prof Mitra appealed to my social conscience. The title of his talk was "You, I, & our entrepreneurial selves & the wider community of creative practice: the value of social entrepreneurship." I was so interested in his talk that I didn't take many notes, so here's what I came away with (apologies to Prof Mitra if it wasn't the intention of his talk). Social entrepreneurship is not just about sales and profits, but about giving something of value to the community. Hence, there's a need for social capital, perhaps a need for investors to measure the return on their investment in more than monetary terms.