Ready for VC?
Q: How do you know when youre ready for venture capital?
- Rather than knowing when you are ready for venture capital, I think the first question
should be "do you need outside capital?" My advice would be to wait as long as
possible to get outside capital, because you want your valuation to be as high as
possible. And obviously, the longer youre in business doing well, the higher the
[Charles Heller, Director, Michael D. Dingman Center for Entrepreneurship,
University of Maryland]
- From day one the total amount of money we had in our company was a thousand dollars.
When we went public we had millions of dollars in the bank. If you dont need the
money, dont go for itunless its a way of getting a superb partner. When
we went out, we literally started with a thousand dollars, only because we had to clear
the books. There was no money invested in the firm. It was all bootstrap. In fact, the
only reason we went public was that we needed the currency to do acquisitions, we did not
need the cash.
[Mario Morino, Co-founder of Legent Corp. and Chairman of the Morino
- I think there are a couple of reasons why you might consider outside capital. BST, my
company, was similar to Marios in that we did not bring in venture capital for
working capital. The first VCs we brought in were to take their money to buy another
company. I would say that the reason to have venture capital is if youre constrained
in your growth, number one, or number two, if you find somebody that you really believe
can help you network and further your cause, and the cost to have them do that is a piece
of your company. I would suggest you merchandise yourself and look for money, and when you
need money, youll be ready. Youll have primed the pump, so to speak. But I
would not rush into it for the sake of having a VC on your board and their glamour.
[John Burton, Partner, Updata, Inc. and Former CEO, Legent Corporation]
- Dont wait too long. Dont go out looking for venture capital when you only
have $100,000 left in the bank, because you wont have a good negotiation point. If
you have a little money in the bank or you are about to run out when you try to negotiate
with venture capitalists, you dont have a very good stand. So you need to raise it a
little bit earlier than you need it.
[Suzanne Hooper, Partner, New Enterprise Associates]
- I have been to a couple of venture capital conferences recently, and have sat in on a
couple of planning meetings for the MAVA conference. Its clear that the companies
that get to present will usually be institutionally backed. So there is a positioning and
PR element at some point that people ought to consider.
[Esther Smith, Founder, Washington Technology]