Jeffrey Bussgang Flybridge Capital Partners

What Jeffrey Bussgang, Flybridge Capital Partners says about topics vital to entrepreneurs

Jeffrey Bussgang Posts – Titles

Jeffrey Bussgang  Posts  – Titles  (6 posts)

 

How to Select a Venture Capitalist

Considerations when Determining an Exit

Be Wary of Term Sheet Tactics

Relationship between Option Pool Size & Price

Why Twitter Picked Fred Wilson as its Lead Investor

What Drives Entrepreneurs

 

What Drives Entrepreneurs

Jeffrey Bussgang  venture capitalist and General Partner Flybridge Capital Partners and former entrepreneur

 In describing what drives an entrepreneur, Bussgang says that “it comes down to an essential character trait []: the entrepreneurial itch. When you have it, you just have to scratch it.  You really can’t help yourself.

Being an entrepreneur may be something deep in the genes. []

Genetic or not, there are certain classic characteristics of the entrepreneur.  The most important of these are a certain kind of visionary optimism; tremendous confidence in oneself that can inspire confidence in others; huge passion for an idea or phenomenon that drives them forward; and a desire to change the game, so much so that it changes the world.”  Jeffrey Bussgang, book Mastering the VC Game –A Venture Capital Insider Reveals How to get from Start-up to IPO on your Terms. copyright 2010, pg 14

Why Twitter Picked Fred Wilson as its Lead Investor

Jeffrey Bussgang venture capitalist and General Partner Flybridge Capital Partners and former entrepreneur

Bussgang discusses why Twitter founder Jack Dorsey picked Union Square Ventures VC Fred Wilson as his lead investor.  Below are story highlights.

Dorsey said, “[] We wanted to be questioned, we wanted to be challenged, and we wanted to see some of their thinking around actually developing this product. [] [Wilson] was very aggressive, in a good way, in a thinking way. [] he was a day-to-day user of our service and he obviously loved it.  He came [] with lots of questions about why we had done what we had done. That helped clarify our thinking [].  [Wilson] could contribute to the product’s vision and direction to help lead the company to success.”

“[]Wilson [] likes to think of himself as the entrepreneur’s consigliere [] with great pattern recognition. “I want to be the person they call when they need some advice. [] we’ve seen all these issues a lot [].[] I’ve observed enough to know what’s happening and interpret it appropriately.””  Jeffrey Bussgang, Mastering The VC Game,   pg  124  125, 114

Relationship between Option Pool Size & Price

Jeffrey Bussgang  venture capitalist and General Partner Flybridge Capital Partners and former entrepreneur 

 “This relationship between option pool size and price isn’t always understood by entrepreneurs, but is well understood by VCs.”  Bussgang lost a deal because the founder believed he got a better price (higher pre-money valuation) from a competing venture capitalist.  However because Bussgang’s competitor required a larger option pool, the founder received less stock than under Bussgang’s offer.  The founder took the competitor’s deal because he didn’t understand how the option pool calculation affected his ownership.

“[In response, Bussgang’s firm instituted a policy] to talk about the “promote” for the founding team rather than just the “pre”[-money valuation].  The “promote” [] is the founding team’s ownership percentage multiplied by the post-money valuation.”  The “promote” offers an “apples-to-apples” comparison of competing offers even if one offer has a lower pre-money valuation and  smaller option pool.  Jeffrey Bussgang, Mastering the VC Game –A VC Insider Reveals How to get from Start-up to IPO on your terms book, pg 131-133, copyright 2010

Be Wary of Term Sheet Tactics

Jeffrey Bussgang venture capitalist and General Partner Flybridge Capital Partners and former entrepreneur 

“The term sheet is essentially a preliminary, nonbinding document between the entrepreneur and the VC [summarizing key financing terms].  Some VCs issue a term sheet early [] to lock up the deal – and keep the entrepreneur from going elsewhere []. Entrepreneurs need to be wary of these situations and not be afraid to push the VC to define more clearly whether the term sheet  represents a real commitment or merely a discussion document. [] Most VCs issue a term sheet [] only when they have made a final decision []. [] [Be wary of] the “exploding term sheet” [expiring within 24 hours, which is a red flag].  [] Neither side should pressure the other [].” Jeffrey Bussgang, Mastering the VC Game –A VC Insider Reveals How to get from Start-up to IPO on your terms (book), copyright 2010, pg 127-128 

Considerations when Determining an Exit

Jeffrey Bussgang venture capitalist and General Partner Flybridge Capital Partners and former entrepreneur 

“Timing and [one’s] own personal commitment are both important factors [in determining an exit].  Twitter’s Jack Dorsey gets asked [] - when will Twitter exit?  [Dorsey] explained [] his views on this issue [] that [essentially] the best entrepreneurs don’t focus on the money, they focus on their passion and dream for the business.

“You always have to go back to the question, ‘Is exiting the right thing for the product?’” Jack explained. “There were many times in our history when, technology-wise, we weren’t up to snuff and we could have used more infrastructure. We could have used the resources of a Google or a Facebook or a Yahoo!  But until you feel like you’ve completed some aspects of the vision, it just doesn’t make sense to hand it over.  If you have that idea and you’ve more or less seen the end of it, and now you’re just racking your brain trying to figure out how to push it any further, the product might be better off in the hands of someone else, because you’ve done what you can. That’s basically what it comes down to for me. Are you done? If you are, then exit. If you’re not, keep going for it.”” Jeffrey Bussgang, book Mastering the VC Game –A Venture Capital Insider Reveals How to get from Start-up to IPO on your terms. copyright 2010, pg 195

 

How to Select a Venture Capitalist

Jeffrey Bussgang venture capitalist and General Partner Flybridge Capital Partners and former entrepreneur 

Entrepreneurs should consider the following when selecting a VC: “[] [industry knowledge], [] geographic presence and strategy], [] [the stage the VC specializes in],[fund size], [where the firm is in its fund life cycle] and [] willing[ness] to continue [] support [] in a follow-on round and [] [criteria for same].” 

The VC should provide entrepreneurs value in: “[] 1. strategy  2. recruiting  3. business development [ [] including introductions to prospective partners, customers and acquirers]; and  4. future financing.” 

Future financing issues include “[] whether the follow-on round should be an “inside round” [all current investors], or an “outside round” [] led by an outside investor [].”  An inside round might be easier to raise but an outside round provides another financing source and can validate a new valuation.  “[][Entrepreneurs should discuss with the VC the next round the day after closing the first round] including  “[] [if milestones are met, will VC support continue and if so, at what price (valuation) increase]; [if milestones are exceeded or missed by say 20%, respectively, then the impact thereof.]”  “[Normal tension exists around price]”, so entrepreneurs might check outside the investor group to substantiate market price and terms.

Chemistry with a VC is essential.  “[] the real emphasis on chemistry concerns the thinking styles, ways of working, enthusiasm for the business and a shared view of the future.  You want [] someone [] you can work with and [] trust.”   [ 239 words]  Jeffrey Bussgang, Jeffrey Bussgang’s book Mastering the VC Game –A VC Insider Reveals How to get from Start-up to IPO on your Terms. copyright 2010,   pg 111,113,118, 120, 122, 123