Southeast VC

Meet the VCs in RTP

Just as heads up, the quarterly PWC MoneyTree breakfast for RTP-based entrepreneurs and VCs is August 22. I wrote about all the benefits of this for entrepreneurs back in May - including contact info to register. Will Dunbar from Core Capital and Michael Ramich from Frontier Capital will both be panelists on 8/22.

If you go, let me know and let's make sure we meet there.

Go Big or Go Home - Read It

Wil Schroter, CEO of Go BIG Network recently sent me a copy of his book Go Big or Go Home. It is the only book I have ever recommended on my blog. I find that a lot of business books are really vague with the advice or the info doesn't apply. Go Big or Go Home is a real fast read, can help you rapidly scale your company and the advice can be applied to any kind of business - regardless of the size of the business or industry. So, before you head into the weekend, I would highly recommending buying a copy. You can also buy the book at Amazon.

Also, check out the interview I did with Wil for my monthly TechJournal South column. I talk more about why I think the book is a must read and we also cover other key areas in the interview like:

- What to focus on when starting a business

- How the costs of starting a business changed over the last few years

- What an entrepreneur should look for in their VC firm and what are some other ways a company can get $$

- When to pull the plug if a company isn't successful

Hope this helps and if you have read his book, please leave comments for others.

Due Diligence Fees by VCs - Don't Pay Them

A reader emailed me the other day, said he found a VC that was interested in his business and the VC wants to charge him $10k for "due diligence expenses." My immediate response with the info I have on this is no way.

First, for our own firm (and others that we work with), none of us charge a fee for our time spent on deciding whether or not there is a match between us and the company. Of course, at the same time, the company should be spending time deciding whether or not they want to work with the VC.

It is very important for us to see as much of our investment go right to the company's bank account. Sure, when a deal closes there will be legal expenses that the company will have to absorb, but that's where we draw the line. And we negotiate hard with the attorneys involved to keep their fees down.

I am hoping the due diligence expense in this case is just an uncommon charge by a very trustworthy VC and not someone out there trying to ring up a bunch of fees. But, to avoid a trap, if a firm is charging you, ask the following questions:

* Is the firm actively investing in companies with a fund that is in place?

* What is their ratio - due diligence to actually making an investment?

* Do you have to pay the fee whether or not they make the investment?

* Are they doing anything above and beyond to charge a fee for due diligence (unique travel here in the US or abroad)? Something way out of the ordinary might justify it partially. But the charge should be "reimbursement for reasonable and approved travel" in this case.

* Have you spoken with other entrepreneurs that they have funded? Were they charged? What has their experience been like working with the VC? Also, track down some companies that they charged the fee to and didn't fund. Ask a similar question.

If you've gone through these questions, feel comfortable with the VC, try negotiating out of the $10k due diligence fee. With the competitive nature of the market, that VC should be willing to waive the fee so that they can just focus their efforts on getting into a great company. If they pass because you wouldn't pay them $10k, they probably weren't serious in the first place, consider it a red flag and run.

UPDATE: Other VCs have answered the same question.

Running a Startup? Be Prepared - Most Employees Might Quit

Wil Schroter CEO of GoBigNetwork.com and author of Go Big or Go Home! wrote a very impactful article that I read this week on how most employees at a startup company will leave. I would put this on the must read list for executives either thinking of starting a company or even running one.

Some key points (and there are a lot more so please read in its entirety):

* For the absolute critical employees you do have, do whatever it takes to make sure they don't head for the door - give them more stock, a raise, a better title.

* Be really smart about recruiting. Frequently meet with new candidates so you can quickly replace people if they leave.

I agree with Wil. When your team is already small in size and you lose a few employees (for whatever reason), it can be a big blow - to the company's progress. Being prepared and having a game plan is essential - you can't afford to miss a beat.

Btw, Wil, you told me a few months ago that your article was going to be nationally syndicated across all the American Business Journals, but I was still amazed to open up the Triangle Business Journal last Friday and see this article on a full page. Nice work!