At this year’s Mass TLC unConference, WilmerHale hosted a panel of three venture capitalists to discuss trends in venture capital investing.
The panelists weighed in on various topics as part of a dynamic discussion with an audience of entrepreneurs. The following represents just a snapshot of the full conversation.
Q: How early is “too early” for you and your firm to invest?
A: There is no rule. We make our investment decisions based on the team, the market and the technology. We might invest in a company that is very early in its development and business operations because we believe in the potential for the team, the market and the technology.
Q: How small an investment are you willing to make?
A: We make very small investments, in addition to larger ones. Dollar amounts can be as low as $50,000 to $100,000.
Q: How are your early-stage seed investments structured?
A: The smaller investments are often structured as convertible debt.
Q: When you structure an investment as convertible debt, do you negotiate for a cap on the company’s valuation with respect to the conversion of that debt into stock?
A: Yes, we typically ask for a cap.
Q: How can a founder pick the right VC?
A: Choose based on the prior investments of the venture capital firm and particular partner. Determine how the VC can add value. Make sure that the firm has experience in your space. Research whether the VC has invested in a direct competitor of yours.
Q: How can an entrepreneur communicate openly with a VC when he or she wants to remain in stealth mode? Will you sign an NDA?
A: We won’t sign a confidentiality agreement. However, we are not in the business of starting companies in order to compete with a founder who pitches their idea to us. We are in the business of investing in companies and listen to general descriptions of businesses routinely. You can also carefully select the VCs to talk to, not contacting VCs that have invested in a direct competitor.
Each of the VCs provided his own answers to the above questions, and many others, based on personal experience and perspective. The above is only a brief summary of what was discussed and highlights some of the varying viewpoints of the VCs and those in the audience. It should not be attributed to any one person or entity. Any questions about the above, feel free to contact Josh Fox at email@example.com