Entrepreneurs: Does Anyone Have Experience W/corp Venture Capital (vc) Groups Of Tech Companies? Need Advice!?
By admin on Feb 07, 2010 with Comments 5
Need to know what their engagement process is, should you go in signing their forms and trust or be skeptical of their motives?
Do you know anything about reputation of certain corporate firms such as MSFT, Intel, Cisco, Motorola, Qualcomm, etc. and what the word on the street is about them?
Any help from fellow successful and bruised/battered entrepreneurs is appreciated!
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I must say that I do not have any experience on the subject however my brother does and we have had extensive conversions on the subject of VCs and acquiring funding. The only reason I am answering this is because I see you did not get much help so far. My brother is Harvard Educated. He has been involved in a couple of start-ups there were funded by VC companies. His general opinion was that they obviously want to find projects with potential and help them succeed however, the underlying motivation is control of the company.
Again my brother’s (Harvard Graduate) opinion…. find an “angel” a private venture capitalist with deep pockets. They will devour less of your company
Firstly, let me preface by saying that both groups, VC firms and Corporate VC departments have completed many successful deals and have provided necessary capital to many firms. Having said that my advice is to be very wary. Many VC firms will try to get you to commit to an exclusive relationship, meaning they only want you dealing with them and no one else. Once you do this, you lose some of your bargaining power and they will most likely ask you to agree to some onerous terms. One of their favorites is the anti-dilution clauses (meaning future share sales come out of your share of the equity, not theirs–there is a reason they earned the name “vulture capitalists”). As for corporate VC departments, be wary of last minute concessions–they have strong bargaining power, since if word gets out that “Microsoft did due diligence and walked away” your firm will be tainted and it will make it harder to get a deal done with someone else. Also make sure there is a performance clause so make sure they promote your technology/firm. the last thing you want is to have your firm tied up with a major company and have them put it on the shelf to eliminate you from the competition. My advice is to examine all options, including IPO, private placement, joint ventures, bank loans, friends and family financings, etc before comitting. These can be very profitable mutually beneficial partnerships but make sure you have lots of horsepower on your side so you don’t get taken advantage of. one last piece of advice, “when someone passes the tray, take the cookies”, meaning that the cost of not taking money when it’s offered can often be greater than the cost of taking it. you never know when that financing window will slam shut and everyone who got capital suddenly has a competitive advantage over everyone who held out for a better deal!
not sure
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