Fred Wilson is providing a lot of insight into the percentage that VCs need to take for a deal to work. I had always heard that VCs need to get 20-30% of a company in order to be interested in a deal. I admit that this idea of 20-30% had influenced my thinking as we try and get statzen funded. Fred is saying that 20% is not the minimum.
Here is what I find interesting:
Don’t get me wrong, I would love to own 25% of a company or more. But we don’t make it a requirement. Our requirement is being able to get into the best deals, work with the best entrepreneurs, and be able to generate $40-50mm in proceeds when a deal works and return the fund, $125mm in our case, on the very best deal in the fund.
Of course, he doesn’t share how much they typically invest. From what little I know about investing, I would think that they were shooting for a certain percentage return on their investment, or at least a percentage in relation to an index. I seriously doubt they are looking for a $40mm return from a $20mm investment (since the return has to carry the risk of the investments that did not return well).
I looked on The Funded and on the Union Square Ventures website looking for information about their typical investment range. I was hoping to get some gauge on the kind of return successful VCs are looking for and maybe a little insight into how they do valuations.
One thing is for sure, I do appreciate Fred and others like him sharing tidbits and advice. We know how to build web applications. We know how to run a business. We even know how to fund a business through a bank. VC / Angel funding is different.
