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Showing posts from May, 2005

What Microsoft looks for in an potential acquiree

Will Price reports from Microsoft's VC Summit in Mountain View on what MSFT - according to its CEO Steve Ballmer - looks for when it considers acquiring a company:

* technical innovation with impact
* protected IP (patent portfolio)
* market understanding
* engineering excellence
* alignment with sales capacity (can you sell it?, do you know how to sell it?)
* timing and tenaciousness
* understanding of value chain and how to partner to win

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Don't ignore celebrating your accomplishments

Jeff Cornwall points out quite rightly that "in the rush of meeting orders and collecting enough cash for payroll, many entrepreneurs don't take enough time to celebrate accomplishments."

But why is celebrating important?
Celebrating on-going accomplishments is a way of building a positive, growth-oriented, and hopefully 'fun' culture within your business.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.

Being prepared for getting acquired

Advice from a recent panel discussion organized by IBD Network on prepating your company for M&A: * Don't...
o ... run your company without contemplation of a sale
o ... sell from weakness, not from strength
o ... be piggy: don't expect to double the initial bid
o ... tip your toes in the M&A pond: be in or be out

* Issues that make buyers walk away from a deal: the buyer's lack of comfort that may not stem from anything as dramatic as fraud or misrepresentation, but from a feeling that the seller's processes are not solid

* Valuation
o Sellers tend to use public market comparables or deal comparables: they are easily obtained and tend to increase the valuation
o Buyers prefer to use multi-year discounted cash flow (DCF) analyses

* Structuring deals
o Buyers do small deals for cash, not for shares; if they want IP or a team, they will structure the deal as an asset purchase
o I…

Want VC? Go get some peacock feathers

Wonder why VCs place more emphasis "on the secondary stuff" - like what you and your other team members have done before - rather than your actual product or service? Kevin Laws has an interesting explanation and analogy - to the mating behavior of peackocks!:Are you really worth $2 million more the day your first two customers write $10,000 checks? No, you’re worth $20,000 more. However, both a bad company and a good company can claim that they will sign up two paying customers in the next month. Only the good company can actually show you the checks a month later. Before you had the check, you were facing the “uncertainty discount” – you might be a bad company (or more likely, a well intended but overconfident company).

That’s why VCs pattern match on credibility factors when deciding to spend more time with a company rather than diving directly into the details. When having such a wide selection of available mates, sorting out the good from the bad can be a matter of looki…

Get to know your VC before taking their funds

VCs ask entrepreneurs a ton of questions - including proof - about their business before cutting a cheque. Jeff Bussgang provides entrepreneurs a list of things that they need to find out about a VC firm before taking money. Obviously, entrepreneurs who are about to miss payroll a couple of months down the line cannot afford this luxury. It pays to follow the rule: raise VC money only when you don't really need the money.
So, if you find yourself pitching a VC firm and wondering how they'll make their decision, there are a few important questions to get answers to while you're fundraising:

1) Who is the partner who would serve as the deal champion? Associates and Principals don't typically have carry, so they can't make investment decisions without a partner's support. Junior partners with small slivers of carry may need senior partners to closely oversee the diligence and decision-making process.

2) How long has that partner been with the VC firm? Are they on …