This week in NY, J. Skyler Fernandes, a venture capitalist at Centripetal Capital Partners, gave a room full of entrepreneurs a glimpse into what VC’s are looking for and that would be people. “We’re investing in people, not companies. We’re not investing in ideas – people always think if you have a great idea you can always raise venture capital. In the end we are investing in people that can execute.”
He discussed how the relationship between VCs and founders is important. He listed seven elements that are needed to make it work: Compatibility, Honesty, Communication, Effort, Understanding, Faithfulness and the Ability to Change. Commitment is also key, “We look for entrepreneurs that are dedicated to their company, have a personal investment in the company and are willing to go full-time – not half ass.”
He had five crucial tips for budding entrepreneurs looking for investment, the first being the 80/20 rule. “Only focus on what 80% of the people really care about within your product. Don’t try to perfect your product, you will spend too much time developing and you’ll never actually get to market. Try to be a lean entrepreneur – just do what you have to.”
The second goes back to the people rule, “Make sure you have the right team – surround yourself with great technologists and advisors and angels. Angel investors are great advisors and they come with a lot of experience. They can really open up doors for you for customers.” The third is about knowing the customer, “Be realistic about who your target market is. Focus on who the customer is and what you are solving. You have to be solving some problem for it to be of any value to someone. Narrow down on your target market size.”
His fourth essential tip involves honesty, “Be honest with yourself and be honest with investors. You’re entering into a marriage, but it’s a marriage that you’re hoping will actually end in three to five years and you’ll both split with a lot of assets. Honesty has to be from the beginning – you don’t want to be pitching someone unrealistic projections.
The last tip involves testing, “Really try to test your products with your market before you raise capital,” he said. “Show that the dog is willing to eat the dog food before you waste your own money or other people’s.