7/10/2006

Know the Rules and Plan Accordingly

"There are some fundamental rules successful investors, be they angels or VC’s, have in their bible...

Rule No 1 - The idea is worth only 20% of the value of the venture...

Rule No 2 - People – not ideas technology or money - build companies, thus they are worth 50% of the value of the venture...

Rule No 3 - Structure is worth 30% of the value of the venture. Investing millions in a brilliant idea executed by a skilled, passionate and connected entrepreneur without a structured and validated market, sales, operation, product development, financial plan and team to execute it will burn through any investment in a very short period without creating revenue.

Rule No 4 - Only products and services that can relieve a significant identified group of customer’s pains can generate revenue...

Rule No 5 - Investors expect to exit with significant returns within six years...

Read more in this essay by Gerry Lemberg that he uses as a supplement to a seminar called “Planning, Funding, Executing, and Exiting a New Venture” which he gives regularly.

Technorati Tags: , , , ,