Ottawa VC Roundtable Recap

April 16, 2008 – 10:46 pm

Rick Segal of JLA Ventures was in town today, along with Scott Pelton of GrowthWorks Capital, for the Ottawa VC Roundtable session. Overall, it was a very informative session. The mystery surrounding why they pick certain companies to invest in has been lifted for me. Rick is awesome, and should definitely be on every software tech startup’s VCs list. The rest are my notes from the session.

VCs operate by high risk & high reward. Generally for less than $1M in funding, look for Angels. For larger sums, look for VCs.

The best time to talk to him is right after the napkins stage. Plan for 6 months, no shorter than that, to close a VC deal. The 6 months include legals, due diligence, background checks, etc. This is another reason why you need to talk to them as soon as possible.

They want “exits”; they do not want “lifestyle” companies.

Ask the VC what stage do they fund at, and what they do/don’t do.

Most VCs would like to partner with other firms. They’ll get you in front of other people. Besides, it’s also important for you to have diversified capital.

If you want VC money, set 18 months of milestones, like product in beta, a thousand customers, etc. and so that there’s a likely scenario for the company to be worth, say, $10 million.

2 types of VCs:

1. term sheet first: they’ll give you a term sheet almost immediately, but bait & switch later; essentially rip the company from you.

2. check list first: it takes longer to get a term sheet, but they move fast once the term sheet is offered.

JLA Ventures is actively involved in companies that they invest in.

They generally don’t invest in companies heavy with professional services; they like “shrink wrap” product companies for scalability and IP.

Because it’s so cheap to start a business today, there’s a lot of “noise” for similar product offerings. Anybody can have great ideas, but only the successful ones will be able to execute scale, sustainability and promotion.

Patents: process patents like Amazon’s “one-click” do not interest them; true IP patents have value, though they are not the only thing they base on.

For the future, they believe the localization is going to be huge.

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