Interpreting VC Code Speak
I’ve spent years on both the entrepreneur and venture capital sides of the table and one the things that makes the fund raising process so tough is untangling the code speak and body language used by the venture capitalists.
Even simple facts about what industries the VC is interested in, the stages they are willing to invest in, and traction metrics they are looking for, are difficult to determine if you don’t understand the code words.
So here below I’m going to offer a handy guide to interpreting VC code speak into plain English.
VC to English Translations:
VC word / phase in bold then the English translation.
- Space = Industry; Example: We only invest in the fin tech “space”.
2. We recently closed our new fund = We have capital to invest right now.
3. We raising our next fund = We do NOT have capital to invest right now, our last fund’s capital has already been deployed.
4. We invest in companies that have solid and well defined revenue growth = We investment in later stage companies.
5. We like to be he first money into a startup = We invest very early.
6. What is your burn rate? = How much money does your startup need every month?
7. Have you discovered product market fit? = Show me the proof that customers really need your product. Or you know who they are.
8. What is your exit strategy? = Which big company is going to buy your small company, once its captured market share and has proven traction?
9. We have a stage agnostic strategy = If your startup is hot enough we will invest early, if not we will wait and see at a later stage.
10. We are learning about the space your startup is in = Come spend an hour educating our team on the industry you are an expert in. But as for investment, we aren’t ready for that. Nice to meet you though, thanks for the free knowledge.
Bonus hint: Read up about the venture capital group before you meet with them. Know the basics of their strategy, areas of interest, backgrounds of their general, venture and limited partners. This will tell you a lot about how to approach them and if your startup is a good fit for them to invest in, or if you are just spending your time to educate them, check off the meetings box for a venture partner.
Great article on Venture Capital Metrics
http://techcrunch.com/2014/01/31/the-complete-quantitative-guide-to-judging-your-startup/
