How VC’s Get to “Yes”

40 points by daveambrose 12 years ago | 13 comments

jey 12 years ago |

> fundraising is about “searching for true believers, not convincing skeptics.”

Interesting and well said. Makes sense, but I hadn't thought of it in those terms.

mathattack 12 years ago | |

This is a Sales truism too. It's much easier to convince people who believe than people whose job it is to say "No". Early stage funding requires shared optimism between the funder and funded.

syllogism 12 years ago |

> For example, there is sort of a magic number for SaaS businesses to achieve $100K MRR, which is usually a good benchmark for being able to raise a decent VC-led series A or B.

Wait, what? If you have $100k MRR, why do you need any venture capital at all?

diziet 12 years ago | |

100k MRR does not mean that much if you've got staff costs. Let's break down super simple costs:

Office - 5-10k/mo Employees - 10k/mo ea Servers - 5k/mo Legal/accounting/etc - 5k/mo Misc - 10k/mo

All of a sudden with 10 employees you're losing 20-30k/mo. Want to hire 5 new amazing engineers? Now you're losing 80+k/mo.

100k mrr is great if it is you by yourself or a tiny team, but to scale you need a lot more.

crapshoot101 12 years ago | |

For a whole bunch of reasons, ie to pick a few:

- you may have a NWC situation where cash isn't paid up front - you may want to continue to invest in R&D / tech development on newer projects that aren't currently generating revenue - you may simply want to grow faster / hire more than your current financials can support

It seems pretty logical to me - at that point, you probably have a solid stepping stone, and want to decide what to do next.

sanswork 12 years ago | |

First two reasons I can think of.

Imagine you're doing that on an expensive cloud hosting setup and your expenses are really high. An infusion of capital could allow you the opportunity to build out your own server infrastructure(or pay annually on the cloud infrastructure) and dramatically lower your expenses and push your margins up a lot.

It would also offer you the flexibility in your funnel to offer back loaded deals to get larger clients onboard.

syllogism 12 years ago | | |

An extra large EC2 instance is $360-$3311 per month. Maybe I have an imagination failure, but I can't see how cloud costs could be past 10k per month. So, how much could the infrastructure cost, and still be worth the investment?

Maybe I just don't understand the costs.

suhail 12 years ago | |

Building a large sales team to go to market is initially expensive or your burn rate relative to the capital in the bank is growing despite your profitability (you may not want to risk your limited run way if the economy goes bad).

eru 12 years ago | |

You might want capital, but perhaps a cheaper form of capital than VC?

ninh 12 years ago | |

Because revenue != profits.

tiquorsj 12 years ago | |

Because you want 10m MRR?

lowglow 12 years ago |

Relevant: http://www.techendo.co/posts/what-venture-capital-companies-...