Experience is the name everyone gives to their mistakes. Oscar Wilde (1854 - 1900), Lady Windermere's Fan, 1892, Act III
According to Windmill Reports survey there were 148 wireless-related companies receiving VC funding in Europe in 2002. The average deal size was €6,6m breaking down to the average seed of €400.000, 1st round of €3,2m and 2nd round of €6,4m.
I was visiting a seminar where a marketing director of an insurance company was presenting their marketing strategy. The lady was in her 40's and was as enthusiasitic about her presentation as I would be while reading the terms and conditions of an insurance. A question was bounced from the audience asking about the differentiating factors of their new positioning and visual appearence since it appeared to be almost identical to one of their competitors. I was expecting to get something like "we're the company who listens to our customers and care, the other is offering their products and putting them in the spotlight". Something one could feel, smell, associate oneself with. Nope, she told that even though both company's have the same main colour as their visual outlook the supporting colors differ. Also some other technical details of their internal policies and guidelines was given... Auts.
Some VCs are having trouble of not getting enough technical details out of entrepreneurs' presentations. My experience is that it's damn difficult to get the VCs to understand even the basics of their (invested) portfolio companies technologies. This sounds very frightening and thus many VCs are also in deep trouble nowadays. The promised smart money has actually proven to been pretty stupid after all. Pure numbers and bankers. Risk management and stress tests with volatilities. No business substance and value building.
A VC was drawing me a nice picture about agent problems and different agendas even in the same board room. Imagine a situation where there are four VCs with approximately same size private placements for a high tech company. The investments have been made in various rounds with different valuations, terms and sequences. This results that each VC has a bit different point of view, risk position and own hidden agenda depending on their own situation. No obvious lead investor can be pointed either. So, who has the most to lose? For those four investors this is just one investment of their overall exposure, i.e. their portfolio. Things turn interesting if the four VCs are sharing the same limited partner. Just one of the many point of view suddenly turns into a major risk exposure of one target company via four different funds...Who should be sitting in the board of the high tech company?
Posted at April 16, 2003 08:22 PM