I was having a great time when I realized the majority of the party had moved outside on the deck where they were attempting to teach my wife and her friends how to “Saber a Champagne Bottle” (or bottles – judging by my wife’s hangover the next day). I was cornered. Between me and fun was a young entrepreneur wanting to talk about his latest start up idea. It was okay, he was nice, energetic and motivated. I like talking about business since it’s a passion it’s just that this guy needed more time than I was willing to contribute at 1 am. He wanted advice and money. He needed start-up capital and he knew a small business loan from a traditional lender was not an option. He didn’t have a business plan (he was still in the advice stage) and wanted to know the cost when I did Venture Capital Investing. It being 1 am and taking into account all the champagne, I ask where the washrooms were and slipped by him with an “I’ll catch ya later”. It got me thinking about the cost of venture capital.
Last week’s Dragon’s Den on CBC was all over the board – 25% for $50,000 or $300,000 for 10%. I could spend a lot of time explaining different concepts and valuation ideas but you can (and should if you’re in the market) research on the net where there will be tons of professional advice. For what it’s worth I have had the most success with the following “Three Things To Know”:
1. know your partners and pick them carefully. I have been lucky to have worked and invested with some really great people. It’s important to look for “know how” and “fit” not just money.
2. know where you are going(and that doesn’t always mean having a business plan).
Stay Tunes for Part 2/2!