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VC exit, the beginning and the end reflect each other

2022-05-07 21:20:2336kr

01 Complete an investment ,VC Three rights are enough

02  Lean isn't just about quitting , More in the temperament of investment

03  Exit time planning , The beginning and the end guide each other

Entrepreneurs with financing experience are turning to VC pitch When you are alone , Exit strategies are often mentioned . Because they are eager to make a guarantee , Prove that you have reached out to a project that can bring returns .

But the interest of good venture capital institutions in the ultimate exit goal , It may not be as big as the founders thought . in fact , Venture capital is more like a strategy of getting rich slowly , well VC Usually have enough patience and concentration . They are willing to devote themselves to a long-term project 10 In the year of investment , Wait for the right opportunity , And believe in The founders who can build an enduring company , There is no shortage of opportunities and time for exit in the future . Then wait until the end of the life of the Fund , Make an exit choice .

therefore , With an enterprise from investment to exit ,VC There is not much information to absorb and do . This can be better reflected when it comes to quitting , Do things carefully , But not miscellaneous . Just like we have written many issues about VC Quit weekly , From microscopic mathematical calculation , To the macro strategy and attitude , The articles in this series eventually merged , About VC The conclusion of exit is less and less , Not more and more .

1 Complete an investment ,VC Three rights are enough

Angel investor Brad Feld Share , He once attended a Harvard Business School Forum , A wise old VC Said a word that moved him very much :

「 Venture capital , Three rights are enough : The upside 、 The downside 、 Know what happened .」

As the venture capitalist said ,VC And the founders 、LP Signed between term sheet Very meticulous , It may be four to eight pages long , The final document may have 100 Multi page , however VC There are only three things that really need to be clarified in each cooperation :

(1) The upside :pro-rata The right to . When the project goes well ,VC Hope to be able to continue to invest , Maintain your ownership .

(2) The downside : The right of priority liquidation . When the project is not going well ,VC Will prepare to take out the money first .

(3) Know what happened : Board Seat . Many people think that , Having a seat on the board brings great power and responsibility . actually , It is mainly to let people know what actually happened , Especially in a fast-growing start-up company .

As USV Of LP,Brad Go to Fred Wilson I searched my blog to find out if he has written similar topics , As a result, I found an article Fred 's post , The title is 「 Three conditions that must be met in venture capital 」, It coincides with the above three aspects .

Fred He owes his insights to his first venture capital mentor Milt Pappas,Milt Think , What VCs really care about is focusing on making things simple .

Fred Wilson writes , He 20 When I was a few years old , Managing partner of his first venture capital institution Milt Pappas Tell him , There are only three really important terms in venture capital ( Of course , In addition to the price ):

Priority in liquidation

The right to participate proportionally in the next few rounds

The right to board seats

after that Fred Wilson I've been watching Milt These three terms . For more than twenty years , Only very special times Fred Completed some... Without board seats deal, Other times basically follow Milt Give him advice .Fred Believe in Milt That's right. , These three things can save his investment more than anything else .

(1) Priority in liquidation : If you invest 100 Thousands of dollars , Buy a business 10% Shares of , The next day, the entrepreneur received another company 500 A $million acquisition offer, He may choose to accept it . Finally, the enterprise gets 450 Thousands of dollars , And you only get 50 Thousands of dollars .

Of course , You can negotiate to get a stop deal The right to , but Compromise between entrepreneurs and the exit they crave , It is not a good way for venture enterprises to succeed . Better say ,「 Give me a choice , So I can get my investment back , Or let me get the agreed ownership , Whichever is greater 」. This is liquidation priority , Simple and clear .

(2) Participate in the next several rounds of investment in proportion : Probably the most important clause . In the early stages of venture capital , A few investments usually bring the vast majority of the fund's returns . When you're involved in one of the projects that pays off tremendously , You need to be able to all in. In the next round of financing , The right to proportional participation is equally important , Can protect VC From being wiped out in highly diluted financing .

(3) Board Seat : This is not all VC All concerned about . But without it , You can't have a real impact on your investment . This is the best way to ensure that the investment goes smoothly , When the investment is not going well , The board seat gives you the right to decide how to solve investment problems .

Of venture capital term sheet There are many other provisions in the , Yes Time meeting Come in handy . Like the protection clause 、 Right of first refusal and right of CO sale 、 Anti dilution protection 、 Redemption rights, etc . Some of these Provisions did come in handy , They're also very useful . however , There are several common venture capital terms ,Fred Wilson stay 23 They have hardly been used in practice for years . That doesn't mean they're useless , There are not even best practices , But it does mean that some things are more important than others .

In negotiations , The key is to know what you have to have , What should you have , There's nothing you can still live .

2 Lean isn't just about quitting , More in the temperament of investment

This is not just applied to investment projects .Fred Wilson Think ,「 Lean 」 It is a mentality that the founder of the fund and his team need to have in all aspects of the business .

If lean can be applied to recruitment 、 marketing 、 Financial and all other aspects , Get a fast 、 Flexible companies , Especially when things are like this in many ways at full speed When it develops .

USV It is a capable venture capital institution .Brad and Fred That's because it's in the middle of nowhere 2003 Established at the end of the year USV When , They talked about the characteristics of all the venture capital institutions they didn't like , Finally, I found the law of lean .

In the process of discovering this Law ,Fred Before that Flatiron My experience is very enlightening . stay Flatiron In the first two or three years , It's basically just him and Jerry. They are deeply involved in all investments , Well done during that time .1999 In the middle of , They wantonly 「 carnival 」, Raised a sum of money 3.5 Billions of dollars , Moved into a huge office , Hired 25 Employees , They don't participate much in a lot of investments . As a result, in that period , They did a very unsatisfactory job , Become bloated .2001 year ,Flatiron Had to stop working ,Fred stay Jerry and Bob Took over the follow-up management of the investment project with the help of , Basically back to the early model , At that time, it returned to the previous range .

experienced Flatiron after ,Fred Think The size of the venture capital team is not important , He believes that what venture capital needs is a small team composed of highly involved partners , In addition to building good relationships with entrepreneurs , Nothing else .

2011 In the year ,USV There is a small team ,Dorsey In charge of the office ,Christina Responsible for investment ,Gary Handle portfolio business . That's it . To this day ,USV Still maintain a lean and flat team , So that they can Focus on the most important things , Respond quickly to opportunities , Focus more on the outside than on the inside .Fred Looking at most of the VCs he admires , I also see a similar lean law .

3 Exit time planning , The beginning and the end guide each other

stay VC There is a saying in the world of old guns ,“ Good companies are bought , Not sold ”. This is especially true for the best companies , The same is true for most other companies , For the worst companies, it's not at all .

Venture capital institutions are often a small number of investors , Have no right to unilaterally sell the company they invest in , They need the cooperation of other investors , what's more , The cooperation of the management team including the founder is required .

“ Buy a company ” yes inbound, The acquirer comes to the door by itself , but VC And the founders don't want to let go , Often have quite good bargaining power ;“ The company sold ” yes outbound,VC And founders need to talk to potential acquirers pitch own , Generally, in such cases , The board of directors should take the initiative to find the right banker To cooperation , Let the whole process be controlled , So that the company can sell at the right price .

「 At what time do mergers and acquisitions exit 」 There are no answers like manuals ,SaaS The founders Jason Lemkin Think , If your intuition tells you , It's time to take a step forward , Then go ahead . Even if the price is different from what you want , Also accept and complete the transaction . most important of all , If you need more time to think , Then speak up . Tell the acquirer truthfully , You need another week or two to discuss internally .

When one thing comes to an end , It can better show its whole picture . It's like quitting a project , It always reflects the climate of investment . Electronic signature company founded in EchoSign By Adobe After acquisition ,Jason Answered a question , About how and why you became a venture capitalist :

(1) Can take some great trips in the business world .

(2) Well done , You have a better chance of making money .

(3) Less ego, Less drama, Less greed and arrogance , A little more integrity and Zen .

These are the reasons to be a venture capitalist , At the same time, it's a 16-17 The promise of the year (10 Years of fund life ,3 Only fund , Apart, 3 year ).VC There is a time scale of ten years to lean yourself and invest , Then generate a complete answer when exiting .

This article is from WeChat official account. “ Tracing the yuan and cultivating the new ”(ID:EnvolveGroup), author : Tracing the yuan and cultivating the new ,36 Krypton authorized release .

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