Victoria VC Roundtable Liveblogging

(04/21/2008)

8:13

Good morning from Victoria! Rick Segal of JLA Ventures is doing his intro. We did the round the room intro ... lots of the same faces around the room. This is a nice thing about Victoria.

Monday April 21, 2008 8:13

8:18

JLA Ventures (and I didn't know this) the three partners have their own money in the fund. So as Rick said when they say "it's our money" ... it is. The banks are in the fund as is IBM.
The basic idea is taking $1 and making $10.
The JLA funds have finite lifetimes. The funds have about 10 years on them. 75% invested in the first 3 yrs, investment payout in 5-7 years.

Monday April 21, 2008 8:18

8:19

If you have a lifestyle business, Rick isn't interested, the goal is investment in an idea and make it into a company that can then be sold, acquired, taken public, etc.

Monday April 21, 2008 8:19

8:22

Important points:
How much is needed to get this off the ground
How much revenue is needed and how will it be generated
What does the exit look like?

Examples: Tungle and b5media. Both are science experiments.

Monday April 21, 2008 8:22

8:24

While b5 is an experiment, it is making money and Rick considers their investment is safe in b5media (hear that TechCrunch).

IPO? No. That isn't the plan. Sell it for $20 million? Rick says he could do that in his sleep.

Monday April 21, 2008 8:24

8:28

Tungle (I've covered this here on ML2) ... who would buy Tungle?
Calendar guys, Service guys (Like Salesforce.com) ... MSFT ... maybe.

Monday April 21, 2008 8:28

8:29

The point is that they have plans they know at the outset where the exit is. This is key in taking the money, the how much, is how much is needed vs how much can be gotten out of it.

Monday April 21, 2008 8:29

8:32

Term sheet: how much money and here are the criteria. That's it.
Shares: common shares, priority shares. By giving shares to friends and family, you have now set a value for the company. This might be a problem,.

Monday April 21, 2008 8:32

8:38

Rick company example: Why can't a Blackberry mute itself when you are in a meeting? Chat over a few beers, whip up some code. Test it out. Code doesn't blow up phone ... people see the idea .... code a little more ... give to a few people ... more coding. Go to friends and family for money. If you take $50K from them and give them stock .. the stock now has value.

More money you take, privately, and give out shares in exchange.

Monday April 21, 2008 8:38

8:38	[Standby] BRB

8:43

On the giving away equity ... don't. Rick would rather you talk with him before you take Angel money so that you can do something give a note instead of shares. The note gives value to an Angel, but not bumping up your value.

Monday April 21, 2008 8:43

8:45

Also give Angels "penny warrents" ... buy shares for a penny ... however many they want.

As the investment increases ... the Angel's stake is being dillueted.

Monday April 21, 2008 8:45

8:47

When a company is formed you should set aside a block of shares as options to be excercised later. So the shares are there, but they have no value. (If I got this wrong, please correct me)

Monday April 21, 2008 8:47

8:49

Never take the title of CEO, VC fire CEOs, they don't fire founders.

Monday April 21, 2008 8:49

8:50

Jeremy is an outside guy. Salim Teja is the inside guy. This marriage is great. Balance your strengths and weaknesses with hiring good people. People smarter than you.

Monday April 21, 2008 8:50

8:51

JLA turns down folks because the people can't take it across the finish line. If you get tied up in the titles, you will lose.

Monday April 21, 2008 8:51

8:53

Rick's example Chapters. Everyone got jackets with titles on the back. His is Valet Parking. A reminder of what his job was...take the company across the finish line.

Monday April 21, 2008 8:53

8:54

Are you hiring people smarter than you?
This isn't a personal ego thing, this is about making the company rock.

Monday April 21, 2008 8:54

8:56

Sending Rick a link to your website with the idea ... good, simple.
Know your VC ... what to they fund? JLA ... no drugs, chips etc. Software! Rock on!

Monday April 21, 2008 8:56

8:57	Do you have a hot idea brewing? Yes ( 0% ) No ( 0% ) I could tell you, but I'd have to kill you. ( 100% ) Monday April 21, 2008 8:57

9:00

It takes six months to raise venture capital. Period. One meeting and get a term sheet ... so rare.
Take enough money to last 18 months. Give you enough money to get the traction you need. For the next round you start showing what you've done over the last year. Really, what Rick is saying, is take money for 18 months, have solid one year plan. Financials beyond three years are bunk.

Monday April 21, 2008 9:00

9:01

24-36 months of expenses. Those should be knowns. Know your fixed, lights on cost. These are basics are key. The founder needs to know these things cold. Know. This. Cold.

Monday April 21, 2008 9:01

9:04

In the 30 min "no harm, no foul" ... what is the idea and what problem that it solves. This isn't a about making the ultimate powerpoint deck. Or having all the documents. It's what is the problem, what is the solution, who will buy it.

What do I have to believe to make this work?

Monday April 21, 2008 9:04

9:11

Xobni ... textbook case of a plan. Build something that something fixes a glaring omission go ...
High, high risk. Only one logical exit, Msft. The gamble paid off.

There is a process. Go through all the questions...

Monday April 21, 2008 9:11

9:18

There is VC money in Canada.
You can get to all the VCs easily
All the VCs are pretty transparent.

Call portfolio companies seek advice
Go to the VC firm's website. Do you research
If you can demo it ... demo it.
Ask other VCs about the VCs. The insight is helpful.

The first and last point can help you build buzz.

Know how much money you need, for what, and why.

With x, I shall do a, b, c, and d ...

Answer to the "what is the value of the company?" The value of the last round or "open to negotiation".

Seed round should be deventure (oy I wish I took econ).

Monday April 21, 2008 9:18

9:21

Who is running the company? Rick's trick question. Answer "Today I'm the founder looking at hiring the best people." It's the ego test. Write this down. Use it.

Monday April 21, 2008 9:21

9:23

Questions: IP. If you talk about in public, without paper to sign. Trouble. Before you talk with people, talk with your attorney to note that it is a unique idea etc. Now it is recorded so documents given to Rick can just be stamped "Confidential" or "Proprietary".

Hardware is a place where the IP is key.

Monday April 21, 2008 9:23

9:26

Question: Heard that you shouldn't tell VCs how much you need. Rick feels you should. Shows you know you have a pan.

Monday April 21, 2008 9:26

9:28

JLA did four deals last year.
How low do you go? Lowest has been $50k, highest is $19 million.

Monday April 21, 2008 9:28

9:33

GroceryGateway ... wrote off after a few rounds. Good idea, but customers didn't want it.

Have to love the Tungle and b5media examples. Rick, if nothing else, is passionate about the companies he funds.

For Tungle, Rick wanted the pre-Techcrunch uptake. Why? The bump. TC will give you a huge bump, but will it last? Generally no. It's just too huge.

Monday April 21, 2008 9:33

9:35

Comments on Garage Canada: No problem with them, because Canada is a great place to work and startup up a biz. We just need more capital to do it with!

In Canada we don't do the "stock double dip".

VC franchises: Rick doesn't have an opinion. What does the brand name do for you?

Monday April 21, 2008 9:35

9:37

Question: When is the right time to take Angel or VC?

No right answer.

PlanetEye was Rick's idea. On a napkin. Rick took interesting tech from MSFT and made a new kind of travel site (Disclosure: I know Rick, clearly, and Mark Evans).

Monday April 21, 2008 9:37

9:38

The key to the investment: what is it being used for.

Monday April 21, 2008 9:38

9:42

Yes, you can bring an idea back to Rick after your first meeting. You can keep coming back with improvements and taking his advice. Rick might rarely funds companies that he has turned down, but it has happened and it is worth it to try.

Remember: Luck favours the bold.

Monday April 21, 2008 9:42

9:44

Is JLA still looking for deals. Yes.

Monday April 21, 2008 9:44

9:45

Early Tungle builds totally took out Rick's machine. Several times. See you can blow up your VC's machine and live!

Monday April 21, 2008 9:45

9:47

Venture Capital in Canada is on life support. Yep, every time Rick says it, he gets in trouble, but it is still true.

So much potential, not enough money to do it.

Monday April 21, 2008 9:47

9:49

It's about pulling together the right team to pull the company across the finish line.

Monday April 21, 2008 9:49

9:54

What's on Rick's radar: Nothing right now.

The next Facebook ... well. Needs to solve a problem better.

Next things ... look at the keyboard on the Blackberry, More non-business people have them. Why? The keyboard. So, now that we have it, what's next.

Location based stuff ... now on the radar.

Monday April 21, 2008 9:54

9:56

Examples of PlanetEye: You look at pictures of Hopewell Rocks in NB. If you say you'd like to go there ... and something comes up saying here is a cheap flight from Toronto to Moncton ... is that really an ad or information you want when you want it?

Monday April 21, 2008 9:56

10:01

Y Combinator ... stealing JLA's company. You don't have to move to the Valley to launch your company.

Monday April 21, 2008 10:01

10:03

Wow. Rick, an American like I am, is so pro Canada it's refreshing. The benefits to staying in Canada are huge, however the money is harder to get.

Pixpo as an example ... if Rick had done the deal you might not be saying "Pixpo who?".

Monday April 21, 2008 10:03

10:06

How can we change it? Give updates to VCs on what is coming up. Be more open, say no more --- teaching people what is good and not.

Monday April 21, 2008 10:06

10:10

At the end of the session we had a great debate about doing business in Canada. This was the best part I think.

Great session with Rick ... and that's all folks.

Monday April 21, 2008 10:10

10:10

Thank you for reading today.

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