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Main reason startups get rejected by venture capital: "Crappy teams"

Main reason startups get rejected by venture capital: "Crappy teams" | Pitch it! | Scoop.it

The biggest reason startups get turned down by venture capital is they've got "crappy teams," said Peter Thompson, a private equity partner at OrbiMed one of the largest healthcare investment firms in the country.

Thompson spoke with some candor at a recent Q&A sponsored by J-Labs San Diego. Here’s what he said, edited for clarity:

Is there a sweet spot for deal size? 

We usually stay within the $10 million mark, but some of the companies we’ve seed financed for much less than $1 million. The earlier stage a company is, the more exciting it has to be to generate investor interest from anyone.

Say we like your progress, or what’s going on in your company. If we feel like we can write a $100 million check, we can.

Regarding early stage companies, how important is IP? 

It depends. Sometimes we’re betting on the IP that makes a company’s work proprietary, but sometimes it’s more about the intellectual capital.

There are not a lot of medical device companies left standing right now. Why did that happen, and what’s next? 

The easy answer: The returns have been horrible. You have to wonder – are we in the midst of some sort of Machiavellian exercise, the design of which to stamp out medical device innovation? It’s been brutally effective so far.

In part it’s because the regulatory and reimbursement environments have changed. But one of the interesting things: When there was communication from the Institute of Medicine that asked, what if we figured out – in the clinic – whether these devices actually worked?

The device industry went batshit. “This is going to kill innovation,” they said. I’m a humble country doctor, and I look at the data out of some of these marketed devices – and I don’t know if they work.

As we look at devices, we have tended to go after the later-stage ones. We’re still not sure what getting on the market for a device in Europe even means. It’s better than not, I guess. If we go after earlier stage companies, we challenge and work with them, and figure out if what they’re doing actually works out for patients.

The VC model seems to be declining in therapeutic development. What are your thoughts? 

I think it’s been a case of the strong getting stronger. We just raised a $740 million fund, but we’re turning lots of people away. I think there was an expansion that admitted a bunch of folks that generated a lot of capital in the sector, generating core returns, leading to LPs becoming very selective about where they put their money. But I haven’t found a significant challenge in syndicating our deals.

This is a special, special sector. You can always look at folks building the next great Instagram, but it’s in our sector that you have to do something with tangible, demonstrable benefits to patients to see a return. That ain’t bad.

What are the different steps required to present to your board? 

As you think about getting in front of our board, bear in mind that there pretty much isn’t anything OrbiMed hasn’t seen. So there’s no question that teams and individuals are very important. No question that a serial entrepreneur that has already made money is more appealing to the venture community. So, at least find mentors that are serial successful entrepreneurs. Network.

People always say, “don’t take NO for an answer.” But sometimes “no” is the answer. So you have to think about why that is – and adapt.

What’s the biggest reason venture capitalists don’t invest in a healthcare startup?

If a startup hasn’t thought through the clinical aspects, or doesn’t think through the competition or regulatory landscape. A lot of startups just haven’t really examined what a project should look like – and generally don’t have insight into the realities of a commercial situation.

This is the consequence of not reaching outside of the skill of those at the bench. Startups pay inadequate attention to drivers beyond what should shape the next experiment.

But the biggest problem, I find, is that they’ve got a crappy team.

Most of you won’t get to the clinic. Most of you will fail. The entire process is a learning exercise: It becomes all about the people that are hands-on when it comes to data and business, and can respond and adapt.



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Why Venture Capital Investors Should Want to See Your Five Year Financial Proforma - Rockies Venture Club

Why Venture Capital Investors Should Want to See Your Five Year Financial Proforma - Rockies Venture Club | Pitch it! | Scoop.it
A good venture capital proforma should show all years from present through exit to demonstrate your ability to SCALE, justify VALUATION, and plan for EXIT.

Many entrepreneurs and VCs alike are hesitant to produce a proforma for more than two years out into the future.  They claim that it’s impossible to know what will happen and that the third year and beyond are “just numbers.”   While I would agree that nobody expects a startup to perform according to its projections, I am heartily in disagreement with the claim that a five year proforma doesn’t tell us anything.

To read the full article, click on the title.

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Via Marty Koenig
Marc Kneepkens's insight:

Learn to think like an investor is my advice to very Startup pitching to either an Angel Investor or a VC. This is another good article explaining this. Remember that financial projections are an essential part of your business plan.

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Marty Koenig's curator insight, February 12, 2014 3:15 PM

Totally agree with Peter. the numbers going out 5 years show the savvy investor that you are:

1. considerate of what they are used to seeing

2. have thought well beyond the possible about how to get there

3. that you believe you can scale and can put that on paper



And the rest of what Peter says about valuation,investor return, and exit strategy prove that you know what you are talking about. 


So many entrepreneurs think it's all about the PRODUCT PRODUCT PRODUCT. Investors don't really care that much about the product. They care about the people they are investing in. and if the people aren't willing to the the energy and thinking into a 5-year projection are they really the type of people a VC wants to invest in? 


This, I know first hand.  

Marc Kneepkens's curator insight, February 13, 2014 12:11 PM

Another great article by an investor.

Jose Gonzalez's curator insight, February 14, 2014 3:37 AM

Ok...........Thanks

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Brand Value: a Look at Brand-Focused Startup Accelerators

Brand Value: a Look at Brand-Focused Startup Accelerators | Pitch it! | Scoop.it

If you’re a young startup with a gleam in your eye, a working prototype in your back pocket and very little else, then making the right first step will be crucial for success.

For founders with little-to-no previous startup experience,joining an accelerator makes a lot of sense. Even if you’re a seasoned pro with an exit or two under your belt,  a helping hand might still be useful.

Traditionally, accelerators provide a combination of things; primarily a small amount of funding, a space to work and access to mentors, industry bodies and individuals they would otherwise struggle to gain the attention of.

However, while many accelerators are open houses in terms of their focus, there’s been a growing trend of certain businesses to host their own in-house programs, or take part in accelerators that are designed to connect brands with tech startups.

So, how does a brand-focused accelerator – that is, one that promises startups an audience with relevant world-leading brands in their area of focus, or one focusing a specific segment of industry, differ from a more general approach? We spoke to Brandery, Collider, The Bakery London and Orange Fab to find out what they had to offer.

What do startups get out of brand accelerators?

So, what a startup gets out of a brand accelerator is pretty similar to other accelerators – although the specifics of the funding and other benefits often vary.

For example, Collider – a UK-based organization that works with more than 27 individual brands – gives startups a combination of oversight, cash and mentorship over a program lasting 13 weeks.

Each of the Collider startups this year will get up to £150,000 ($243,000) – increased from up to £70,000 – to help them bring a product to market, its co-founder Rose Lewis explained. However, it’s the focus on a specific vertical and the added exposure Collider gives the startups and brands that really makes the key difference, she argues.

 In the first four weeks of our accelerator, they meet with up to 12 brands – all giving their time to the startups, and all  [based] around the product marketing questions: are these businesses building stuff that William Hill, Unilever, Haymarket are going to buy?


Brandery‘s four-month long program is similar to Collider’s – it provides support for seed stage companies in the form of $25,000 in funding, mentoring and access to a host of discounted or free services (such as IT, HR, legal etc.). Brandery also provides one year of free office space for a year, general manager Mike Bott explained. Collider does not offer physical work space.

“Each startup is paired with a creative agency who has committed at least $25,000 in free work. Specifically, two intensive workshops are conducted during the program to get the startups off to a fast start, Brand in a Day and Growth Hack Day. During Brand in a Day, the startups and their creative agency partner develop core brand architecture: new names, logos, taglines, brand manifestos, visual identity and other core pieces of their brand.

Similarly, during Growth Hack Day, the startups, their creative agency partners, and brand managers from Procter & Gamble hammer out key parts of the startups’ marketing plans, including user acquisition strategies, go-to-market strategies, and other ‘growth hacks’ they can use to keep the startup growing and retaining users as quickly as possible.

One of the startups to come through Brandery’s program – and now a part of Disney’s accelerator is ChoreMonster. Chris Bergman, founder and CEO of the company told us that the experience was “incredible” for the company.

We were able to learn from top mentors in the branding space, specifically about what we should do to create a strong brand, how our technology could benefit their agencies, and how brands at Fortune 100 companies operate. I couldn’t imagine our company without the understanding that we gleaned from The Brandery.

Slightly differently, while Brandery and Collider tend to focus on seed stage startups looking to develop their business rapidly for the long-term, The Bakery London exists solely to accelerate ad-tech and marketing startups to a test market within eight weeks.

Its focus is increasing revenues, not scoring investment, its co-founder Alex Dunsdon explained to TNW.

We focus on markets (revenue) not investors (equity)..ie the objective is a trial market not investment in the company. We start with the problem, ie. what the market wants now. Many of the best businesses are able to carve out products that people can test now.

We find the right tech globally against problems. Think of it like flipping the way it normally works – telling the world of tech companies what the market is.

Dunsdon added that it takes very little time to accelerate a technology to trial stage, so the only real reason you’d perhaps want to look elsewhere is if you were looking for investment to get off the ground, rather than looking for a perfect market fit.

All [the companies attracted to our program] have a product and share a desire to scale. The big problem we solve is product / market fit and the ability to use a brands audience to scale.

For other startups, there are reasons to think twice about joining a specific brand’s accelerator program.


For example, if its technology isn’t particularly well aligned with the brand, or because the startup fears that association would jeapordize its independence. It might also make more sense for a startup to enter into an accelerator program based on a specific topic, rather than a specific brand, such as FinTech or health-oriented programs.

The funding aspect of brand accelerators like these are in contrast to the way in which Orange Fab operates: there’s no systematic cash support, although it does provide a convertible note option for interested startups – up to €15,000 in France and $20,000 in the US. Instead, at the end of the program, Orange’s VC division can choose whether or not to invest in the startups.

Douplitzky said that VC affiliates like Iris Capital tend to make minority investments in startups, but that the program launched too recently to provide details on the percentage that receive follow-on funding.

Ultimately, whichever accelerator a startup enters, they generally provide similar benefits on the surface, and an underlying promise of more closely connecting each startup to a brand, whether that’s a single one or mutliple. In some cases they also provide the potential to add legitimacy to startups simply through their association, which is a slightly less tangible benefit.


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