Sorting Out the VC Puzzle
More businesspeople use Excel spreadsheets everyday than drink Coca-Cola, wear Nike shoes, or drive a car from General Motors. You’d never expect a principal in a Venture firm (who uses spreadsheets every day himself) to tell you the Excel market wasn’t big enough to justify investment. But he did. That’s why raising money to finance a business is so, well…interesting.
Financially, we were fortunate in that eXpresso was part of an existing (yet technologically unrelated) company with customers and a revenue stream. We still needed more money for the eXpresso project and CTO Huy Nguyen and I both had separate, but good, histories with the VCs. We had a big – can’t miss – idea and thought getting money would be a piece of cake.
I’m not a newbie at raising financing, but it had been a while since the last time I went out with hat-in-hand. Most of the products I was involved with in the past were big software applications or enterprise sales of the $100k and up variety. I thought a product involved around improving Excel would be an easy sale – I’m just a casual user and I have a hundred horror stories myself. I tested my VC pitch on 25 or so friends who unanimously responded, “When can I start using it”. We gathered our presentation demo and hit the road to make the VC rounds.
My first jolt came after a Partner in a VC firm said they liked the presentation and the prototype is slick, but the Excel market is too small. Then another investor insisted that if ours was such a good idea, Microsoft would already have done it. My favorite was the group that just loved eXpresso, was sure it was a winner, but has a firm policy that investments under $7 million aren’t considered. When you need $10 million to expand, then come back and see us.
What? 150 million Excel business users isn’t a small market. The guys in
I just had to bite my lip and move on. According to
This experience with VCs refreshed memory of some truths I learned some time ago.
· You can’t take rejection of you or your idea personally. Investors blow hundreds of millions of dollars in bad judgments every year – they aren’t infallible. Just persist and move on.
· Be flexible in your expectations. What seems logical and straightforward to you, well…
· Finally, some VCs gave us some great tips about marketing the product and refining our presentation. Listen to what they say. Debrief yourself after each meeting to see if you can glean some wisdom to use tomorrow.
