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A Summary of

When the VCs say "no"

by
Marc Andreessen
Marc Andreessen
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When VC rejects your business plan, you could:

  1. Lay the groundwork to go back in later. Take the rejection gracefully and ask for feedback
  2. Consider the macro business environment's implication. VC's decision process are different in normal vs euphoric vs funereal times
  3. Retool your plan: understand the risks VC sees in your business, keep peeling the risks off until VC say yes

Common risks and mitigates for a high-tech startup

  1. Founder risk: does the startup have the right founding team?
    1. Mitigate through swap or add key personnel
  2. Market risk: is there a market for this product?
    1. Mitigate: need to get customers to validate your market hypothesis
  3. Competition risk: is this startup differentiated?
    1. Never say you have no competitors
    2. Never say you will be successful if you get only 2% of market
  4. Timing risk: is it too early, too late?
    1. Mitigate: make more progress, get customers in bag
  5. Financing risk: how much additional rounds of financing will need for this company to become profitable?
    1. Mitigate: think how much money needed to raise after this round
  6. Marketing risk: can this startup acquire profitable customer 
    1. Make sure differentiation is sharp
    2. Model out customer acquisition economics in detail, show how to get more revenue from a customer than cost of acquisition
  7. Distribution risk: need certain distribution partner to succeed?
  8. Technology/Product risk: can product be built by this team?
    1. Mitigate: build the product, at least to beta
  9. Hiring risk: can they hire the right talent?
    1. Mitigate: add key personnel to founding team
  10. Location risk: can this startup succeed in this location?
    1. Mitigate: move
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