"Paul, what is the first thing a VC like you looks for in an entrepreneur?"So much can go wrong in a startup - problems with technology, customer, market, execution etc... And in adherence with Murphy's Law, if something can go wrong, it will go wrong. Successful entrepreneurs are able to navigate those issues, often with different backgrounds and skillsets. The common thread is always the passion that they bring to the table, to get through the hard times, and supercharge a company's growth when times are good.
Thus, when a first-time entrepreneur walks through the door, VCs are looking for a little romance. They are looking for someone who loves what they do, who is passionate about their business. VCs are actively judging you on this. Be respectful and polite, but if a VC doesn't feel like you even care, then why should he? The passion for your business should ooze out of every pore, and affect not only what you say, but how you say it. If you are passionate about your business, there is a much greater chance the VC will become passionate about it as well.
To hammer the point home, let's look at this from an economic perspective. The reality is that VCs can't be satisfied with returning 5 or 6 percent to their limited partners. Venture capital funds must produce returns (IRR) of 30% or more over their lifetime. The consequence of that is that the average exit needs to be very big. A 10M-20M exit on a 4M investment just doesn't cut it unless the VC is holding 95% of the company. The reality is that VCs make their living on the homeruns. Therefore, we look for entrepreneurs who have the passion, drive and vision required to swing for the fences.
Be realistic in your assumptions and projections, but don't be afraid to think big. Passion will get you everywhere, and most importantly, it is contagious. Passionate CEOs create a culture that not only attracts the best people, but imbues them with a passion of their own. Prove to the VCs you meet that romance isn't dead.
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