About this video

• Video Title: Venture Ready: Sharpening Your VC Appeal
• Channel: Leading Cities
• Speakers: Mike Lake, Daniel Weiper, Jay
• Duration: 00:24:53

Overview

This video features Daniel Weiper and Jay from QBE Ventures discussing the differences between Corporate Venture Capital (CVC) and traditional Venture Capital (VC), and providing advice for startups preparing for fundraising. They cover how to approach CVCs versus VCs, what startups should focus on when preparing their data rooms, understanding governance in regulated industries, and general do's and don'ts for a successful fundraising journey.

Key takeaways

• CVC vs. Traditional VC: Traditional VCs are primarily financially focused, aiming for financial returns for their Limited Partners (LPs). CVCs, like QBE Ventures, have a dual focus: financial returns and strategic value, aiming to bring tangible benefits (e.g., distribution, capacity, customer relationships) to both the startup and the parent corporation.
• QBE Ventures' Structure: QBE Ventures operates with distinct investment, technology/build, and partnerships teams, designed to integrate portfolio companies into the QBE business and provide specialized guidance.
• Fundraising Preparation: Key advice includes maintaining an organized and complete data room, identifying and engaging a "champion" within the CVC to help navigate internal processes, and understanding the regulatory landscape of your industry.
• Building Trust and Long-Term Relationships: Both CVCs and VCs seek long-term partnerships. Founders should be transparent, conservative with projections, and foster strong working relationships with investors, especially those who join the board.
• Strategic Pitching: It's crucial to research potential investors to understand their investment thesis and experience. Clearly articulate your fundraising goals, what you're looking for in an investor, and why they are a good fit for your company.

Here's a more detailed breakdown of the topics covered in the video:

I. Understanding Venture Capital Landscapes

• A. Traditional VC vs. Corporate Venture Capital (CVC):

  • Traditional VC Focus: Primarily driven by financial returns for LPs. Emphasis on scaling revenue and achieving significant growth multiples (e.g., 2-5x revenue annually).
  • CVC Focus (e.g., QBE Ventures):
    • Dual Objective: Combines financial returns with strategic value for the parent corporation.
    • Strategic Value Creation:
      • Capacity: Providing operational capacity.
      • Distribution: Leveraging existing distribution channels.
      • Customer Relationship: Acting as a potential customer.
      • Strategic Partnership: Enabling entry into new markets or industries (e.g., helping a tech company sell to the insurance sector).
    • Internal Structure: CVCs may have specialized teams (e.g., investment, technology/build, partnerships) to support portfolio companies.
  • Decision-Making Speed:
    • Traditional VC: Generally faster due to less complex internal structures and fewer stakeholders. Investment committees often comprise fund members.
    • CVC: Can be slower due to the need for alignment with internal business units, potential involvement of parent company executives on investment committees, and thorough due diligence processes.
  • Autonomy: Some CVCs operate with more autonomy (e.g., sitting "outside the walls" of the parent company), while others are more integrated.

• B. QBE Ventures Specifics:

  • Investment Stage: Primarily Series A and B, but also invests in Series C, seed, and later stages.
  • Check Size: Typically $3-5 million.
  • Geographic Focus: Primarily US and UK, but invests globally.
  • Investment Thesis: Website outlines their areas of interest.

II. Preparing for a Fundraising Round

• A. Data Room Essentials:

  • Completeness and Organization: A comprehensive and well-organized data room is crucial for a smooth process.
  • Quality: Invest time in making the data room high-quality upfront.
  • Balance: Strike a balance between oversharing and undersharing; be clear and transparent.
  • Proactive Information: Anticipate potential questions and provide answers within documents (e.g., footnotes explaining revenue projections, pilot transitions). This reduces follow-up requests and speeds up the process.

• B. Understanding Your Investor:

  • Targeting: Know who you are pitching to and tailor your approach.
  • CVC "Champion": Identify a key contact or business unit within a CVC who can advocate for your company and facilitate the process.
  • Strategic Alignment: Clearly articulate the strategic value proposition for the CVC and how your company aligns with their objectives.
  • Research: Understand the fund's investment thesis, previous investments, and areas of expertise.

• C. Financials and Projections:

  • Honesty and Conservatism: Be truthful and realistic in financial projections.
  • Clarity: Clearly distinguish between true revenue, pilot projects, and potential revenue.
  • Justification: Explain the basis for your projections to ensure they make sense.

• D. Governance and Regulatory Understanding:

  • Industry Specifics: Crucial for regulated industries (e.g., insurance, fintech, biotech).
  • Compliance: Demonstrate understanding of necessary regulations, licenses, and compliance requirements.
  • Roadmap: Have a clear plan for navigating regulatory hurdles, even if immediate licenses aren't required. This shows professionalism and foresight.

III. Building Investor Relationships

• A. Long-Term Partnership:

  • Trust: Establish trust from the outset.
  • Open Communication: Be prepared to discuss challenges (e.g., payroll, contracts, talent poaching) openly and respectfully.
  • Shared Vision: Ensure alignment on the company's trajectory and the market/vertical.

• B. Cap Table and Board Dynamics:

  • Investor Values: Consider the values and alignment of potential board members and investors.
  • Collaboration: Aim for a collaborative relationship, especially with board members who influence company decisions.

• C. Defining the "Ask":

  • Clear Objectives: State clearly what you are raising (amount of money), what it will achieve for the company, and what you are looking for in an investor (e.g., strategic expertise, financial backing).
  • Investor Fit: Determine if the investor's goals and capabilities align with your company's needs.
  • Avoid Premature Valuation Discussions: While expectations exist, focus initial pitches on the company's potential and the partnership opportunity, rather than locking into a specific valuation early on.

• D. Reciprocal Inquiry:

  • Two-Way Street: Fundraising is a dialogue. Ask investors why they are excited about your industry and their potential contribution. This helps gauge their genuine interest and strategic fit.