Mobius Venture Capital: Advice for Entrepreneurs Working with VC's

Course Description

Lectures

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   Lecture 1 - Introduction: Mobius Venture Capital

   Heidi Roizen, managing director for Mobius Venture Capital, explains that Mobius Venture Capital has $1.5 B under management in current fund, $1 B in prior fund, and 100 active portfolio companies. There are ten VCs at Mobius who invest mostly in software, communication, wireless, next generation and web services, she says.

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   Lecture 2 - Investing Climate in 2002

   In an interview with Forbes magazine, Roizen projects what will happen in 2002. Mobius Venture Capital is excited to move forward. Since the bubble of 2001, companies that should have died have died, and those that are struggling are beginning to gain some traction.

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   Lecture 3 - Why Be an Entrepreneur Now?

   Roizen notes some of the opportunities available for up-and-coming entrepreneurs:
   
   
   1) There is still a tremendous amount of capital. Mobius, in 2002, had $500 M - $8 M left to invest in one fund,
   
   2) There is rationality for the market with respect to hiring, office space and expectations of people to work with,
   
   3) Company valuations are still pretty high,
   
   4) Collaborative efforts between entrepreneurs and VCs, and VCs with other VCs, are strong
   
   5) Working with a VC is the one time in your life you have someone working for you and paying you at the same time.

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   Lecture 4 - Working with Venture Capitalists

   Roizen talks about what she would look for in a VC. From her perspective, acquiring a VC is the only time you're getting someone to work for you and pay you at the same time. She recommends people populate their investor pool with VCs who will add value to their company.

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   Lecture 5 - What Has Changed in Today's Investment Culture?

   Previously, Roizen says it used to take three years for startups to reach liquidity; now the time frame is five to seven years. As a result, she recommends startups get to know the VC well and trust them because they will be working with the VC for many years. Now as an entrepreneur, she says, you have to work for a living!

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   Lecture 6 - An Attractive Team Has Youth AND Grey Hair

   It is important that the startup team have experience - a combination of grey hair and youth is good, says Roizen. VC's have learned that it is not wise to fund a team with only college students, but older people cannot get funding without youth. VC's are looking for a technology to exploit with a team of individuals comprised of young and experienced members.

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   Lecture 7 - Bootstrapping: Still a Great Way to Raise Money

   Roizen talks about the importance of bootstrapping and maintaining control of the company in the early stages. Not only do entrepreneurs have to work for a living, they also have to make the money raised last for a longer time. When capital became easily available, Roizen notes that people stop making money the old fashion way: by working. If you make profit, you don't need other people to invest in your company, she says.

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   Lecture 8 - The Advantages of Profit

   Roizen believes profit is nature's way of showing your startup's value. With bootstrapping, a startup is not beholden to anyone. VC funding is important too, but at the appropriate time, she says.

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   Lecture 9 - Raising Venture Capital Today: Barbell Syndrome

   Roizen believes startups should have venture capital, but at the right time and used judiciously. She talks about the Barbell syndrome, where startups raise money for the first and last rounds, but not the rounds in between. It is very difficult to raise these middle rounds, which allow startups to treat money better.

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    Lecture 10 - A Common Mistake: Treating VC money as Your Own

    Roizen thinks that one of the biggest mistakes companies made in their hayday was considering VC money as their own. Entrepreneurs forgot they had to pay back their investments. If there is any value that gets created as a result of the entrepreneurs sweat and VC money, she says, then the VC's get the money back first.

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    Lecture 11 - Pay Back Time

    Roizen believes terms are more important than a startup's valuation. One of the biggest mistakes entrepreneurs can make is to sell part of the company, think they've made a few million dollars, and then forget to factor in the investment from VCs, she says.

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    Lecture 12 - VC's Are Open For Business

    Roizen gives an inside glance at what VCs hopes to invest in. Her company, Mobius, is looking to invest in various fields from nanotechnology to component level architecture, to systems and wireless space.

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    Lecture 13 - VC Startup Relationship

    Roizen makes it clear that VCs will not give all the money up front. It is important for startups to set milestones, and develop a relationship with a VC, she says. At Mobius, VCs collect data on all portfolio companies on a weekly basis to best understand their companies. They do so to improve their companies' performance.

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    Lecture 14 - Small and Large Funds

    Roizen talks about performance and limited partners in venture capital. Smaller funds on the most part are suffering. A large funds success depends on what a startup's past performance has been.

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    Lecture 15 - Watching How People Handled the Downturn

    Roizen says VCs look at how companies behaved during the downturn. Mobius was upfront with their LPs about where they stood and this paid back. Entrepreneurs that were gracious and upfront will be backed again, she notes.

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    Lecture 16 - What Do the LP's Believe?

    Roizen reveals how much limited partners believe in their investment plans. LPs invest in VCs like VCs invest in entepreneurs. Market performance alone is not the only criteria, but she recommends not messing up two funds!

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    Lecture 17 - Timing is Everything

    Timing is everything when starting a company, Roizen says. Mobius raised their money in a good time and now have a lot of gas in the tank, she notes. Some companies needed money in June 2001 when people were not answering phone calls. She considers this an example of bad timing.

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    Lecture 18 - Why Take Venture Capital?

    Roizen talks about her experience in taking venture capital. She learned that if one can use venture funds judiciously to raise the inflection point, then it makes sense to do it. For her, it was an economic decision. Other reasons to take VC money involve credibility issues. Customers want to see that you have partners and money in the bank to prove that you will be around, she says.

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    Lecture 19 - Venture Capital vs. Corporate Funding

    VCs give entrepreneurs money and want to get a lot more of it back sometime in the future, Roizen says. Unlike VCs, corporate investors generally want an early view into the technology and sweet deals from a business development perspective. If you are taking money from corporate investors, Roizen cautions, make sure you know what they want and what you want.

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    Lecture 20 - The M&A Market

    Roizen believes the M&A market has always been a primary source of liquidity. She explains why big companies examine burn rate and ways to cut cost before they purchase smaller companies who may not be breaking even.

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    Lecture 21 - Picking vs. Running

    Roizen believes the biggest impact VCs can have is recruiting. At Mobius, she says, they have four fulltime recruiters to find the right people for all their companies. VCs also call the issues, and thus play a very critical role.

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    Lecture 22 - Successful Teams and Ventures

    The most successful teams and ventures demonstrate passion and the ability to solve problems and create solid business plans, Roizen says. Yet, they were not in it to get wealthy. The strength of the team was their cohesiveness, she says.

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    Lecture 23 - The Best Money: Customer Money

    Roizen talks about the importance of customers. She shares a story where an entrepreneur identified a problem, took time to develop a solution, and got real customers to pay him to make the product.

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    Lecture 24 - What Numbers Do VC's Look At?

    Roizen believes that in the VC business, most companies fail. Therefore, the rare successes of their portfolio companies has to be big. Often you hear 10X, i.e. you should see 10 times your capital coming back, she says. It is also calculated as dollars in, dollars out, or internaI rate of return (IRR). The Mobius fund today has an IRR of 90%. Roizen notes you will almost never hear a VC use IRR.

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    Lecture 25 - Tips For a Good Pitch

    Roizen provides tips for giving good pitches. First, focus on getting to the next step. The day you come in for an hour-long meeting, she says, plan on a 20 min. presentation (no more); get to the value proposition in 5 minutes; be articulate; manage the meeting; show experience and establish credibility.