Eight taboos of risk financing

Eight companies are born every minute in China now, but there will be 90 in the future. There is a 6% probability of dying on the road to starting a business, and many of them accidentally touch the mines of starting a business and financing. Let's take a look at the eight taboos of venture capital financing with me, hoping to help!

The first taboo: not finding the right demand.

The first thing to say is that when starting a business, there is always a big dream at the beginning, but what problems should be solved? Is the problem you want to solve a real demand? If you don't think this clearly, it will be the biggest mistake that entrepreneurs are prone to make.

According to a survey conducted in the United States, 42% people think that their business failed because they were looking in the wrong direction and their needs were wrong. In other words, you think everyone has this demand, but users don't buy it, or don't want to buy it. This is the easiest and most important reason for entrepreneurial failure.

In methodology, it is essential to recognize a question: What do you think is representative or what you assume is universal?

Don't think that this problem will only happen to entrepreneurs, and investors sometimes make mistakes. For example, some people in our investor circle like to steal tall things and think that luxury things should be invested. As a result, I found that there are not many people in society who really need this.

So, can your hypothetical market demand stand up to sales promotion? Don't imagine that your personal needs or the needs of your small group are the general needs of the masses.

The second taboo: poor products and services.

This is not absolutely bad, but a relative concept: according to the scale you aim at, according to your own standards, have you done well enough?

As far as products are concerned, the selling point is nothing more than the products themselves and services.

But in terms of product positioning, it is either the ultimate product. For example, when Nokia was invincible, you launched the iPhone, which used to kill the product. The other is a cost-effective product. Under the same conditions, you are better and cheaper.

So generally speaking, these two ways can make your products and services have market and appeal. But for example, if you are aiming at an ultimate product, but the function of this product and the product itself can't actually do this, it is very bad and destroys your reputation.

The second way is cost performance. Originally, you also hoped to open the market through cost performance, but in the end, it failed, and the products and services failed to meet expectations, which would be more troublesome. Obviously, the direction is right, but in the end, the product is not well made.

Having said that, I would like to share a specific observation: I found that in many startups, the founders are not hands-on in the process of polishing products and services. I don't know that this kind of participation is actually extremely important.

I made a careful observation and comparison. Compared with those companies with average products and services, the biggest difference is whether the founder is a shopkeeper. Some founders think that the product can be solved by recruiting a VP.

But the problem here is very serious, and the pit is obvious. Because product direction, product service and quality are all things that need constant adjustment, what startups need is to make changes and make rapid progress. If you don't spend time on it, it's easy to get out of control. When your stall is large, it will cost a lot of money to change another one.

The second manifestation of not paying attention to the product is that he always thinks his model is magical and powerful, and then pays little attention to the product itself. He thinks the model is more important than the product. So some entrepreneurs said as soon as they came up: Mr. Wang, you see how good my model is, this one is good and that one is good. So I asked the product, but he couldn't answer the difference between the products, and he answered the model. Ladies and gentlemen, I have to admit that the model plays a great role, but it is more icing on the cake. If an entrepreneurial project has a poor foundation and poor products, no model can save it. A good model can't help you beat your competitors.

So when investigating the entrepreneurial team, I think who is polishing the product is more important than who is selling your product.

The third taboo: the team has problems.

The third taboo is that the team has problems. To tell the truth, after VC invested in the enterprise, we often can't sleep because of two things, one is being cheated, and the other is the team falling apart. For example, it was originally a good project, but in the end, these people split up, and VC will be very uncomfortable because it is difficult to get people. They have problems and it is difficult to get together again.

Specifically, the problems of the founding team are more costly than other problems. Especially when we invest, both the dollar structure and the RMB structure will be affected by the split of the founding team. Although all investment structures will have some designs, retaining the flexibility of individual team members to quit or join, the specific impact is that if you break up and don't sign here, or that buddy won't sign for you, you can't handle him, and it will be very painful.

So what are the common reasons for team discord? Based on past experience, I will give a general list. First, the mentality of working, especially in the early stage, we like to ask how much money the founding team invested. At this time, the founder will be very disgusted and ask: If I have money, why should I seek pleasure from you?

But the main meaning of my question is: how sure are you of this matter? How much investment do you have yourself? If you invest all your money and you are no longer a part-time job, then VC will feel very relieved.

Similarly, if you want to ask yourself: Although you work hard, do your co-founders and executives have a serious working attitude? Therefore, when VC inspects the entrepreneurial team, it will also focus on whether there is a migrant mentality. The entrepreneurial team should avoid the mentality of migrant workers from the beginning, even if you dig a little lower, it is better than working with a mentality.

The second common cause of team disharmony is poor ability, which is a common barrel effect. At this time, the team is prone to quarrel. My market is ready, and your product is not strong, or the product is very good, but your market can't be sold, which leads to internal quarrels and discord within the team.

So at this time, the ability of the founding team leader will be particularly tested. How did you mediate?

So VC will ask you before investing, how did your team meet? How long have you known him? How did you get together? If you two meet on a bus or in a coffee shop, say it's a good idea. Let's do it together. As a VC, I will be more afraid, and many experiences also show that the final team problem has been foreshadowed from the beginning.

The fourth taboo: deceive investors.

This point talks about another thing that has just kept investors awake-fear of being cheated. There is always a package for entrepreneurial projects, especially when financing. Everyone should pack himself, and it is understandable to pack properly.

But this kind of packaging must have a scale, and there must be no deception on several major issues:

The first is that the data is false. An entrepreneurial team should not think that only you know the data, so you can tell investors directly. Because we will do a competition survey and scrutinize your data from all aspects and angles, don't think that VC will only talk to you and your team, and we will also talk to your opponent and your past boss, so once you exaggerate your data, we can find out.

The second is that the early team will expand the fictional team members. For example, if you are a big data project, there may be few people in the team, or few people know about big data, but you need a brand, so you call a university professor and say that this is your co-founder. But once VC finds out the actual situation, it will greatly discount your project.

The third common problem is to create an exaggerated resume. The past performance is obviously not so good, but I exaggerated a lot of things about financing or PR.

The other is about the game show. VC usually asks who your competitors are, and then 30% of entrepreneurs may say that they have no competitors, or only list a few minor competitors. In fact, investors all know that you are talking nonsense. At this stage of commercial economic development, almost everything you want to do, or everything you think of, will come to mind, but you haven't found it, so it is not a very clever answer to say that you have no opponent or your opponent is very strong.

Well, if you really didn't do your homework, for example, you did it in Beijing, but there is a similar one in Guangzhou that you really don't know, which is normal. However, if you know something, you still say nothing, or you just talk big, thinking that I am doing better than him, and he is not my opponent, deliberately avoiding competition. I think the topic is stupid.

From the perspective of capital, the industry is still very cautious about competition. I suggest you look at Michael Porter's five competitive forces model, saying that you should not only look at the present, but in the long run, it may pose some threats to you. Are you ready?

Fifth bogey: improper use of funds

I talked about some things before investment. Now let's talk about the problems after investment.

After the investment, VC came with money. What problems do startups often have? The first is improper use of funds. When you have no money, you spend half a penny and live very cautiously. But once you get the money and start to be extravagant, it is easy to face danger.

The problem of improper use of funds has been reported by the media before. Sometimes, it is often the capital that drives the founders out, but from the perspective of capital, most of them are because they took the money from the capital, but they didn't make a good plan and finally didn't make the original promise.

For example, your product was not polished well at first, but after you got the financing, you quickly expanded the product line, stretched the front line very, very long, or recruited a lot of people, making your team bloated and spending a lot of money at once. Another point is the expansion in different places, and the rhythm is not well mastered. Even if you get $5 million at once, you will burn $2 million a month and have no money after one year. If the market is good, you may meet a follower, but if the market is bad, you can't find anyone to connect with. What should you do?

Some enterprises will tighten their belts or lay off employees, but even so, it will have a great impact on the morale and confidence of your company.

Therefore, generally speaking, when we enter the company's board of directors after investing, we will require the company to be recognized by investors as much as possible in terms of spending money and capital budget. But some entrepreneurs can't understand and can't accept it. They think that when investing, there is this clause, that clause, this veto and that veto. Why do you interfere with me like this? In fact, he didn't know that I was helping him, and he was always ready to save his life. For example, if I don't ask entrepreneurs for monthly financial statements, you will probably spend money. When the money is gone, you will know that the money in your account is not enough to support the company's next development, and it may be too late to adjust the pace.

So I usually look at the statements on the board of directors and know where every large sum of money goes. In fact, it is also to help you see the strategy, because the strategy can be reflected in resources and money.

Another problem of improper expenditure, which may be less now, is that public and private are not divided. In the past, the funds of the older generation of entrepreneurs in China were often personal and private. When the company was short of money, I used my family's money to make up for it. When the family is short of money, I use the company's money to make up for it. Anyway, that's my own pocket. But if you have such a habit now, it will be bad.

Especially when there is capital participation, this money belongs to the company according to the company law and cannot be used indiscriminately. In case you sometimes have personal difficulties, such as your wife needs surgery, it is normal to use it, but you should tell the company and investors, then make an iou, pay interest, and return it as agreed. Don't distinguish between public and private, there will be misappropriation. In the end, it will end badly because of this problem.

The sixth taboo: ignoring communication with investors.

The "taboo" I mentioned this time is the communication between entrepreneurs and investors. If there are contradictions between entrepreneurs and capitalists in general, it is mostly because of poor communication.

How can there be problems with communication? Experience and experience, first of all, the mentality is not good, and it is annoying to be asked this and that before financing, so it is inevitable that there will be a little revenge in my heart. After the financing is in place, I want you capitalists to leave me alone and do what I want.

In fact, VC can imagine the background of this mentality, but as an entrepreneur, you should also think about this issue from the perspective of investors. The reason why he finally gave you money does not mean that all the previous efforts and doubts were intentional. This is what a good investor must do. If this person doesn't do this, do you dare to accept his investment casually? Check you out, and I'll give you money to cooperate with you, which means I recognize you.

In fact, when making an early investment, no entrepreneur or anything is perfect, but in imperfection, we still have to pull the trigger. Sometimes we know it's hard to hit the target, but we still have to pull. Therefore, before due diligence, he actually had a certain understanding of this matter and all the pros and cons of your team, but he decided to pull the trigger, indicating that he was psychologically prepared: you may not be able to do this project well, or you may not be able to do something well.

After voting for you, if he finds you really have that problem, he will kindly remind you. For example, your company is expanding a little fast now, or your direction seems a little crooked. The original direction has become a bit crooked. I know you are making adjustments, but this adjustment is wrong. Let me talk to you. This is a kind reminder. Entrepreneurs must not become emotional, thinking about "why do you care so much", "I am right", "you don't understand, you are telling me what to do" and so on. You need to overcome this mentality. This is the first communication I talked about. Need to put your mind right.

The second communication problem is to report good news instead of bad news, which is understandable. For example, when you were a child, you didn't do well in the exam and didn't want to show it to your parents.

But the investors are not your parents. When investors find that you have a problem, their first thought is often how to help you do it well, because helping you is helping VC itself. So don't worry about being unwilling to communicate with investors because the company has problems.

What are the benefits of communication? First of all, the investor's ability and resources will be stronger than yours, which can help you solve some problems more or less, or help you consult as a third of Zhuge Liang. Secondly, when you encounter difficulties, it is not very convenient for you to disclose and communicate with your team and your family, but you need an outlet, and investors may be the most suitable object at this time. So once you have some uncertainty, uncertain direction, or feel that the elbows of the three shareholders have turned outward recently, you can talk to investors first, even if you discuss it, you can help you see if you can find problems and solutions. But if a person is bored as a whole and carries it by himself, it is easy to have an accident. Therefore, investors can actually help you, and don't have the psychology of reporting good news but not worrying.

Of course, in addition to the above two situations, the most common way to communicate with investors is that they can't stand criticism and are sensitive and emotional.

I think when the direction is different, the discussion is very intense, and it's okay to strike the table, but it must be about things and not people. As an investor, although I have all kinds of veto power, you are the leader of this project. If you insist on doing it, I will still be forced to let you do it, but I must analyze the pros and cons for you. But we can't treat it as prejudice or anything, and we can't be too sensitive and emotional about opposition.

The best way is to have a fixed or unfixed time point, so that we can review each other and sum up what we should do, so as to ensure smooth communication, criticize each other and express our opinions.

The above is what I think is more practical and operational. However, I think the following four "training articles" may have to be understood by myself. How far an enterprise can go may be mainly in training articles.

The seventh taboo: over-packaging.

The first training article is over-packaging. The most common is excessive public relations. It is ok to maintain good relations with the media, but it can be properly exposed. Don't go out intensively and deliberately every day and forget the products and services you really want to polish.

Excessive public relations also includes going out to brag about how many users you have, hoping to make competitors feel pressure, improve morale and scare competitors from potential energy, but it is useless. Or if you don't make a false report, it is of little significance to simply scare the participating teams through data. These data are of little significance until your users are active or generate economic value. Therefore, starting a business is sometimes to be able to withstand loneliness. Don't be afraid to lose the opportunity in the spotlight. You'll have it when it's done. Furthermore, if you are not very large, you will start public relations by investing. When others listen to where you take Safran, some opponents don't want to do it. Now you will start to transform and do it, virtually creating opponents for yourself. In short, it is not good.

Another excess is to falsely report the amount of financing, because the investment circle is actually very small, and everyone knows how much money you have taken. You exaggerate the amount of financing for public relations, and you will make yourself miserable in the end.

Sometimes because of media public relations, it's not an exaggeration not to say it. For example, if you invest $3 million, you can't talk about $1 million, let alone take $6.5438+0.2 million or nearly $10 million. If the gap is too big, you will hurt yourself. First, you lied about the amount of financing, which embarrassed investors in my circle. Second, when you raise the next round of financing, you have to explain it to others for a long time. Otherwise, people say that you raised $6.5438+0.2 million last time, and this time you want $30 million, but you want $6.5438+0.5 million, and everyone will be worried. Explain that you are bragging, and that's the last impression.

The eighth taboo: covet false reputation

If you covet a false reputation, VC and entrepreneurs may face it. For example, there are many lists in recent circles, such as young investors' lists, young entrepreneurs' lists, and so-and-so lists of how old they are, and a bunch of lists, which I think are actually meaningless.

For investors, investing in a good company will naturally pay off. But if Wang Qiule can't find a good company, it's no use coming to Sina to brag every day.

Regarding rankings, entrepreneurs here correspond to various entrepreneurial competitions, rankings and the like. Sometimes we investors are invited to go. In fact, we often have a lot of guest appearances, and we don't want every venue to join in the fun, because I don't believe how many valuable companies can be found in the entrepreneurial competition. It is better to study at home. Therefore, entrepreneurs should not hope that things like competitions can help you succeed in starting a business or even financing. Making a good product is more important than anything else.

Another coveted name is that you like to mix activities, and then meet someone at this activity, take a photo with this celebrity, and send a circle of friends with a different business card, but in fact, the relationship between the two of you is basically a passerby. For your enterprise, the most scarce resources are money, people and market. You can find money and people with basic efforts, but the market is a very headache. You need to spend a lot of time here to polish your product and let it continue to exert its strength in the market.

In a word, don't have the unrealistic idea that you can get investment or hold the thigh of a big company by having mixed activities. Finally, it depends on your strength. If your products are not good and the market is not good, who will invest in you? In addition, even if you have cooperation with BAT, you should be cautious about "strategic cooperation with someone". After all, if you are an unknown small company and engage in strategic cooperation with a giant, everyone will have a little joke. In fact, it doesn't mean much to you. Be careful.

In short, successful financing does not mean successful entrepreneurship, and getting money can't prove how you are. As an entrepreneur, you need to be wary of the idea of "proving yourself by getting money". After all, your company is proved by products and markets.

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