Do venture capitalists have a lot of money? In the real society, not every company will make a profit in the course of operation, and there will be profit cooperation and losses in doing business, so depreciation tests the ability of operators. Are the following people who share venture capital rich?
Are venture capitalists rich? 1 Not necessarily. Because venture capital is a mass-driven industry, investors have to invest 4.5% capital to get 60% of the total income. Therefore, in the expected model of venture capital, most of the returns come from companies whose returns exceed 10 times, while most of other investment projects will lose money.
Most entrepreneurs also know this. But what they don't know is that in the eyes of investment analysts, slow-growing companies are not much better than bankrupt companies. Therefore, if there is any signal that your enterprise cannot achieve the greatest possible success, no investor will invest in you.
Six reasons for investors to reject "excellent" companies
In this regard, we have summarized six reasons why venture capitalists are unwilling to invest in "excellent" entrepreneurial projects:
1, low entry barrier.
Forerunners in many industries will be hurt by the "backstabbing" of rising stars. When you can't establish network effect, brand effect, patented technology and scale effect and combine them to create your own advantages, latecomers and competitors will have a better position in the market than you.
You may comfort yourself that if they want to have a better market share than us, it means that they have to buy us to enter the market faster. Although this is sometimes true, venture capitalists are usually not interested in this relatively moderate M&A plan.
2. Lack of meaningful differences
Overcrowded and low-profit markets do not necessarily mean that a large number of enterprises will quit. In the eyes of venture capitalists, competition is for losers. They are looking for companies that can do business that other companies can't do at all.
3. Unsustainable unit economic effect.
For startups, the biggest challenge in the early days is how to find the right channel, the right market and product positioning. Because inappropriate prices and complex product positioning will make startups go into a dead end in mass production. Therefore, we must determine the CAC/LTV ratio of the company at an early stage (that is, the user acquisition cost/user lifetime value ratio of paid marketing) and seriously consider how to continuously improve this ratio.
4. The explosive growth of niche market.
It is a good idea to pay attention to the key and difficult points of market segmentation in the initial stage. However, if you want to get financing from venture capital, you need to provide a credible story about how you will expand your product business and push your product to a bigger market based on your core competitiveness.
5. Unreasonable equity ratio
Most venture capitalists, good or bad, will affect the original shareholders. But when they do, what impact will it have on your portfolio return?
The answer depends on the value of the company when venture capitalists quit and how many shares investors hold. This is also why those venture capital companies are so obsessed with obtaining the expected share ratio and owning it for a long time. It is precisely because of this that the combination of founders with excessively diluted shares and investors with excessive distribution ratio will reduce the chances of the next round of financing for startups.
6, the founder's induction
Many founders are born with this "ability". They have a vision full of hope and passion, they know how to convey his ideas and concepts to them, and they also know clearly how to achieve this goal. This is actually the favorite founder type of venture capital.
If we listen to a founder telling his entrepreneurial story, we find that he has also participated in other different entrepreneurial projects and appointed others as the CEO of his own company. In fact, this does not bode well for venture capitalists. It is very difficult for any entrepreneur to succeed. Without a dedicated founder, investors will reconsider whether to invest.
Does your company's model conform to the model of venture capital?
In the venture capital model, the risks of success and bankruptcy are almost the same. So, when you are looking for financing, don't ignore the negative impact of these factors on you. If you stumble over these factors, you may miss the great opportunity of financing.
Are venture capitalists rich? According to my observation, most of the current venture capital courses are basically introductory literacy. I can say responsibly that there are no works that really involve investment logic, market judgment and valuation judgment.
Some paid courses, including the venture capital course I took when I was an MBA, are basically introductory and practical, such as teaching you to build a model, but I won't tell you how the core hypothesis is made, and according to my observation, most people who teach you to build a model don't know how the core hypothesis comes from.
To put it simply, I will tell you 1+ 1=2, but I won't tell you why it is 1 and 1, why it is not 0 and 2, why it is not 2 and 0, and why it is not 1.5 and 0.5. After completing these courses, you can have the basic technical ability to be a venture capital analyst.
However, on the one hand, investment is an industry where 5% people earn 95% profits. Since a person can earn another 95% profit, why should he tell you this skill? On the other hand, investing in the primary market is a matter of luck and experience. Luck determines how much money you can earn, and experience determines how much money you lose. Who dares to say that he is a venture capitalist who can still make money at a loss of $ 1 billion without a complete cycle?
Therefore, the bosses who really made money, such as Zhang Lei, Shen Nanpeng, Xiong Xiaoge and Allen Zhu, never taught anyone. On the contrary, some new funds and some so-called investment bosses who need public relations are willing to export so-called knowledge and experience.
Are venture capitalists rich? If the company goes bankrupt, will venture capitalists pay for it?
Many people don't understand the difference between financing and borrowing.
Financing itself is a kind of financial investment behavior, which is simply to spend money to buy the equity of a startup company.
However, loans are different. This kind of loan relationship must be repaid. Even in bankruptcy liquidation, creditors' assets are given priority.
So in general, if you take the money from a venture capital company, you don't have to pay it back because of bankruptcy caused by poor management.
If there are still funds after liquidation, the venture capital company can get a part of the response according to the shareholding ratio.
However, there are two special cases. Venture capitalists have the right to get back the financing money and even claim compensation.
Situation 1. This company has serious financial problems.
The financial problems referred to here are mainly misappropriation, corruption and transfer of venture capital company financing by the founders.
This happens occasionally, and the founder has moral hazard, which leads to the company's loss.
As one of the shareholders, the venture capital company has the right to resort to law, investigate the criminal responsibility of the founder team and demand compensation.
There may be two related charges here, one is suspected of misappropriating funds, and the other is suspected of embezzlement, both of which will face 3- 10 years in prison.
At the same time, we should also bear joint responsibility and return all the money misappropriated or occupied.
Therefore, advise those creators not to envy the financing of venture capital. After all, money is for your business, not for individuals to get rich.
A moment of greed may lead to destruction.
Situation 2: A gambling agreement was signed when financing.
This situation also happens from time to time. After all, venture capital is not so easy to get, and many times there will be performance gambling.
In the case that the performance bet is not completed, the funds raised before can be repaid as agreed.
Moreover, the performance gambling is not necessarily between the company and the venture capital, and it is possible that the founder of the enterprise will bear joint and several liability.
The specific situation depends on the gambling agreement signed when financing.
Generally speaking, most common gambling agreements are equity pledge. If the performance is not completed, the other party will generally be given more equity, and a small part will involve compensation.
Therefore, when financing, the founders of enterprises still need to negotiate carefully to avoid extreme risks.
Many people may misunderstand that startups will develop healthily when they get financing from venture capital companies until they go public.
In fact, even if it is a company that has taken the angel round or the A round of financing, it is still a narrow escape.
There are countless companies that have fallen in rounds B and C.
Many people don't know much about this round of financing. Let's popularize it for everyone.
Seed wheel.
Generally speaking, the seed round is mainly based on the internal investment of the founder. There may be only one idea at this time, and there is no finished product yet.
There are few seed rounds of external financing, and most of them are invested by internal shareholders.
The wheel of angels.
Angel round investment, the general products have been formed, the most initial appearance.
The business model has been relatively clear, and the market positioning has been roughly divided.
The seed wheel has internal financing and external financing, and the amount is generally several million yuan, rarely exceeding 6.5438+million yuan.
A round of financing.
At this stage, the company's products are basically finalized, its business model is basically mature, and it may be profitable or still losing money.
At this time, the main purpose of financing is to expand market share.
Because in the A round of financing, even if the enterprise is profitable, it is also small-scale. Once expanded, it may still lose money.
Therefore, there are still a large number of companies that have fallen in the A round of financing.
B round of financing.
Generally speaking, after the A-round financing expansion, by the time of the B-round financing, the enterprise has already started to make profits.
Most of the B round of financing is to consolidate the market position and attack competitors at the same time, so it may still be necessary to burn money.
Many enterprises failed after the B round of financing because of their lack of market competitiveness, and eventually died.
C round of financing.
In principle, companies that have raised funds in Series C already have stable cash flow and profits.
Because there are many successful listings in C-round companies.
Generally speaking, the enterprises that got the C-round financing have passed the narrow escape period and are trying to sprint the IPO.
The C-round financing itself is to supplement part of the cash flow before the company goes public to help enhance the overall operational stability of the company.
D, E and F rounds, strategic financing, etc.
Many companies will continue financing after the C round of financing.
At this time, the purpose of most non-public financing is basically to further seize the market, so it needs continuous capital replenishment.
These rounds of financing are basically strategic needs, that's all.
Therefore, the C round of financing is generally the watershed of the whole financing, which determines the life and death of the enterprise.
In fact, not all enterprises have to burn money in financing, and many enterprises have come out step by step by relying on their own profits.
It's just that financing seems to give many enterprises a short-term shortcut, but it also leads many enterprises to the point of no return.
Money is a double-edged sword, so is financing.
For the founder of an enterprise, the sudden appearance of the wheel is a very test of the enterprise's operational ability, execution ability and adaptability.
Every industry is actually an industry in which the fittest survive.
Only by continuous efforts can enterprises develop healthily.
Financing is fire. If used well, you can warm yourself. If you don't make good use of it, it may even set you on fire.
The success or failure of starting a business never lies in money, but in the business itself and whether there is demand in the market. Money is just an expansion tool to help you meet the market demand more quickly.