Thanks to everyone that came out yesterday morning for the SCV Entrepreneur's Breakfast. We have been running this for a few months now in Baltimore, Reston VA, Atlanta and a lot more regularly here at our office in Raleigh. Our goal is to provide a place for entrepreneurs to meet, but also the chance for entrepreneurs to get their startup or VC questions answered. To date, we have found some of the best answers come from other entrepreneurs in the room and not us. So, we have to know when to shut up and let the discussion take its course. In the end, we learn a lot too.
If you're local and you are an entrepreneur in the software, e-commerce or digital media space, you are welcome to attend for one of the future ones. More details and RSVP info here.
The format is always very simple. After we go around the room and everyone briefly introduces themselves, we open it up for Q&A. I thought I'd share some of the questions from today here and some of our responses. Hopefully it may help others that may be reading this.
What we like to see in business plans? The short answer is that we rarely (if ever) read business plans. Really. We prefer tighter, well put together powerpoint decks (12-15 slides). It is super important to us that the entrepreneur can show (through conversation and backup materials) that they have thought through all the elements of a business plan. But looking back over the past 9+ years of our firm's history, our least successful company had the best business plan.
Do we go to business plan competitions and have we invested in a company after meeting them there? Yep, we go to the ones we are invited to, but to date, we have not provided capital that we met through a business plan competition. I would say a lot of the companies we have funded have come through trusted referrals, like from other entrepreneurs at one of our portfolio companies. That has been the best source for us over the last couple of years.
Are founders allowed to take salary after an investment from SCV? Yes! Salaries have varied, but usually for the founder/CEO it has been around $90-100k (after a seed investment). It has scaled higher from there based on the size of the company with revenue and profitability being some key drivers. Of course, equity is a very big part of their compensation.
Apparently, some of the people in the room had spoken with some angel groups where they were told that if the angel group invested, the founder/CEO could not take a salary. Instead, 100% of the capital raised needed to go to other employees that they would hire. And the angel group was fine if the CEO found part time work. That wouldn't be acceptable for us! If we invest, we want an entrepreneur 100% focused on the business and not thinking about how to pay next month's mortgage.
Do VCs share their LP list? What about their own past returns? For us, we are pretty wide open so we're happy to share this kind of material with an entrepreneur when we're talking about investing in their company. We consider this part of the due diligence process that an entrepreneur may want to do on us. I think most VCs would also be fine with this.
