main menu Sponsor Banner
page menu

In a word, venture capitalism
is about MONEY & nothing else

Read Also: Drinking With Geeks

Army tank I'm just back from a harrowing encounter with the VC. Those out of the loop should note that the acronym currently applies to "venture capitalists" and not the "Viet Cong". I'd prefer not to be ambushed by either.

A bunch of us technology entrepreneur types attended the well-organized e-Coast Venture Summit in Portsmouth, NH. A former military hospital there has been transformed into a comfortable corporate training center. We got a bounteous continental breakfast, a tasty boxed lunch, some free wooden pens, a notepad and one hell of a reality check - all for $25.

The word "summit" is a tad strong for what actually took place. I'd suggest the word "submit" instead, since most of us came to beg for cash. Still, big money types are notorious for trampling on the English language in their rush to riches. I didn't come back with any dough, and probably just as well, since these "investors" expect a return of at least "ten X" or ten times the amount kicked in. There were just too many zeroes floating around for my brain. One speaker said a recent company received $100 million in its first round of fundraising. Multiply that times ten to get the estimated VC return. I came home, instead, with a bunch of new terms that I pass along to you all for free.

Credit is no longer good enough for high-speed investors. They have a proto-currency that relates to the estimated value of stock before it goes public. You can have stacks of pre-money today, but the vault may be empty tomorrow. And yes, there is also "post money" which has value beyond the green stuff.

A form of fuzzy math, this term describes the indicators used to value the non-dollar pre-money assets of a company. Has the management team succeeded before? Who is on the team?

Spring, Summer, Winter, Fall are not related to months, but rather to the ages of an idea. VCs want to buy into projects before they've ever been heard of. Think wireless communication projects are hot? Nah, that's a Summer concept, already well into adolescence on its way to sudden dotage.

A few months ago it was a great thing to use your company name or brand to build name recognition. Now we're told it's a bad thing to go after money based on name recognition. Things change faster than you can say "dot-com."

Dot-coms have their ups and their downs. Some parts of the cycle are more frothy than others. To identify a frothy sector, watch for a lot of uncharacteristic ratcheting. Don't ask me what that means.

This is one scary phrase. It sounds like what Midas got when he rubbed his wife the wrong way. We all know American workers are merely a means to end, but to come right out and say it seems chilling. A military synonym might be "collateral damage."

These are "pools of value" according to the capitalist I asked. When I explained that it is not acceptable to use the same words in the definition, I got a blank stare. For a VC, anything is acceptable.

Before you get into bed with a VC, you want to be sure you both know where the door is. That's all spelled out in the paperwork from the very beginning.

This has nothing to do with how high your voice gets while rising in a skyscraper. It pertains to the 20-60 seconds you will get to pitch your idea to a VC, if you are lucky enough to catch one in an elevator.

The path to profitability, not to be mistaken for B2B (business to business) or B2C (business to consumer). Those lacking the killer instinct should stay at the B&B (bed and breakfast).

Should not be confused with the "punctuation table" which - sorry, I just made that up. Seriously, this is the chart of value that tells the VC how much the company is worth on the road to becoming an IPO or publicly offered stock. That is the finish line of the venture capital cycle.

Lots of money terms are borrowed from the military, or vice versa. Hi-tech people do plenty of "deploying" and "marshaling" and the like. This term refers to the price of getting out of a bad deal where the invested company is not making massive profits. A company that is just paying salaries, growing slowly and keeping customers happy is a loser. Rising value is the only visible indicator of success, whether real or imagined.

Despite what people say, according to the VC, investors want company managers to stay on board for the full money cycle. To that end, they should be offered financial incentives. If that requires turning a noun into an adjective, the VC are up to the task.

The people who start the company may not make it through the entire VC money cycle. Founders, entrepreneurs, CEOs and others may suffer "dilution" as more and more investors get a finger in the pie. For the original company owners to hang onto 15-20 percent of a company, we're told, is an accomplishment.

You hear this phrase a lot. To make it perfectly clear, this definition comes directly from a printed VC glossary: "The investigation and evaluation of a management team's characteristics, investment philosophy, and terms and conditions prior to committing capital to the fund." Did you get that?

Nothing last long in the pump-it-up-and-sell-it business. Investors expect big profits in cycles of only months or a very few years. A product that is not on its selling cycle and "on plan" quickly becomes a liability. Companies that simply make a small profit are not worth hanging on to.

This is the very short synopsis of key points in a business plan. We were told that, because business plans rarely get read, the whole deal may hinge on getting the Executive Summary read by the VC.

This is what VCs call raising money without a VC. It sounds like a lot of hard creative work. This word I liked.

That's just a sample of the jargon we heard at the meeting that was attended by about 120 men and only half a dozen women. Females, it seems, have a hard time with VC-speak. "Women just don't get it," one lecturer explained bluntly. They tend not to focus on the money above all else. They get distracted by the product or service they are selling. They focus on people or care too much. They don't have the killer instinct. They blink.

"It all comes down to -- Would you rather be rich or would you rather be king?" a VC speaker said, quoting a popular investment maxim. The hard-core capitalist would never trade power for cash.

"I'd rather be neither," a woman beside me mumbled, "if this is what it takes."

I didn't need a dictionary to know I agreed. VC is not for me. Time to get those boots out and strap them on. My killer instinct just doesn't kick in over web sites -- or money.

© 2000 All rights reserved.

spacer top of page

[ New | Site Map | Talk | Store | Mail ]

line rule


Site label
Portsmouth, New Hampshire 03801 Email:

line rule