Sequoia’s Jess Lee explains how VCs take into consideration their offers

Jess Lee, a companion at Sequoia Capital, has sat on either side of the desk. The Hong Kong native, Stanford graduate and former Googler ran and sold the venture-backed outfit Polyvore earlier than being recruited into the world of enterprise capital, the place she’s spent the final six years.

As a result of she herself pitched many buyers (and, she has mentioned, was rejected many occasions), she understands the mindset of CEOs in fundraising mode and the angle of buyers who’re being pitched many firms each week. At a current TechCrunch Early Stage occasion in San Francisco, she shared a few of these insights to assist founders within the viewers obtain extra success once they pitch buyers. (She purposely averted plenty of the content material that’s already extensively accessible to founders, together with methods to run an public sale course of and methods to write a perfect pitch deck.)

For our bigger viewers, listed here are a few of the issues she urged that founders take note with regards to the VCs they’re approaching:

  • Some selections are reversible. A startup funding? Not a lot. “It’s virtually inconceivable to kick somebody off your cap desk,” she famous, so whereas individuals liken partner-founder relationships to a wedding, it’s price mentioning that divorce is commonly simpler.
  • Discover an investor who “will get you” and is aware of your gaps to allow them to both fill these holes or enable you to discover somebody who will. If that investor additionally shares your values, might help you together with your largest unknowns (like, say, methods to safe FDA clearance), and understands your area and your prospects and your core thesis, all the higher — although that’s a really tall order. “It’s truly actually laborious to search out somebody who has all 5 of this stuff,” mentioned Lee. “I’m not recommending that. I’d simply say discover at the very least one dimension of actually good match with buyers.”
  • Know your viewers. On this entrance, she urged, it’s important to grasp how VCs assume. We discovered this a part of her discuss probably the most fascinating as a result of it’s very straightforward to imagine that every one VCs have the same mindset — and likewise that their lives are comparatively stress-free — when that’s removed from the case.

She began first with a broad situation, noting {that a} 28- to 50-year-old companion at a enterprise agency would possibly make 15 to 25 investments over the subsequent 10 years of their profession. The VC, mentioned Lee, is aware of that enterprise capital has a power law distribution, that means a 3rd of their investments will most likely go to zero, a 3rd will break even and the final third must make up for the whole lot else in the event that they need to keep in enterprise.

“VCs are usually not within the enterprise of draw back minimization. We don’t desire a portfolio of 10 sort-of-OK outcomes.” Jess Lee

“It’s not like inventory selecting, the place many of the shares don’t ever go to zero,” Lee famous.

A lot can differ relying on the place a VC is of their profession, Lee famous. Veteran VCs have extra expertise and could be massively useful; they will also be very busy, have plenty of board seats, and, in some instances, “be very lazy as a result of they’ve already made a bunch of cash.”

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