welcome to ass Jay I'm Jay Adelson happy
to be here I am here to answer all the
questions that no one answered for me
when I was starting my business and I
hopefully can help you not experience
the pain I went through so let's get
started I'm Jay Adelson and I'm the
founder and chairman of revision3 I've
built a number of companies I've been
hired as a CEO and I've even been fired
as one for example a clinics is a
company I took public in 2000 and now
has a market cap of over four billion
dollars in 2008 I was incredibly honored
to have been selected as one of Time
Magazine's most influential people in
the world my goal is to pass on some of
this nose to you the budding
entrepreneurs can hopefully leave you
with some words of wisdom this episode
of ask Jay is brought to you by Netflix
today's question comes from Sandeep from
Fremont California who asks how much
should I give away to a VC hmm well
that's a good question as little as
possible I don't know it's it's it is
hard particularly at the beginning
whether it's an angel or VC to figure
out what is an appropriate number but
let me tell you just some general
guidelines to use when starting a
company at the beginning I have found
that for angel investments in angel
investments again are anywhere from you
know $10,000 to a quarter million
dollars that angels aren't expecting a
lot they're expecting between five and
fifteen percent depending on the
investment and also depending on how far
along you are with your idea obviously
if you've got a prototype out the door
already you know asking for 15% for a
tiny amount of money is it's kind of
dumb so you got a got to work that out
make a choice figure out whether or not
your company's at that point and and
give away as little as possible now a
venture capitalist like in a series a
you know when you're taking millions of
dollars you're typically going to try
and target around 30% of your company
that's the magic number
I've seen in competitive situations
where there's a lot of heat around your
idea and competition between investors
where where maybe you can get that as
low as 20% but giving it away you really
need to think about never going over
that 30% mark now here's the exception
to that rule and I'll tell you a
personal experience I had when I was
raising money for Equinix I know that in
a six month period I was able to reduce
the amount the venture capitalist would
take from like 70% of the company
because it was just a business plan to
more like 40% of the company by hiring a
team getting a team on board maybe even
raising some angel money which I did at
the time you know ten twenty thousand
dollars getting some names behind the
business and customer letters of intent
and then I went back to the same VC and
he's like well you know I can't I can no
longer claim that this is not a viable
business or there's more risk you D risk
the business so at this point it's worth
a lot more it actually brought it way
way way down that was helpful
another tip and trick I'll give you in a
second but first I want to thank our
sponsor Netflix streams TV shows and
movies directly to your home saving you
time money and hassle as the Netflix
unlimited member you can instantly watch
TV episodes of movies streaming directly
to your PC Mac or right to your TV with
your Xbox 360 ps3 or Nintendo Wii watch
as many movies as you want
anytime you want cancel anytime get your
free trial membership go to WWF flexkom
/ HJ and sign up now be sure to use this
URL so they know we sent you today's
homework assignment in order to make
sure that you give away as little of
your company as possible is talk to
other entrepreneurs to raise money at
the same stage you have and figure out
how much they've given want one really
easy way to do this is actually talk to
the investor and say hey you know I'm
I'm interested in taking your money here
but I need some reference
you noted because after all this is like
a marriage we're going to be working
together for a long time can you give me
the names of some other entrepreneurs
you've invested in so the investor
typically gives you these names and one
of the first questions I ever ask these
guys is okay when you raise this round
with them how much did you give away
it's a great way to make sure you don't
accidentally screw yourself in this
process the other thing that I recommend
that you do and write this down on a
piece of paper because going through
that process is very helpful define the
things that bring your company value at
your current stage of the business if
you're before a prototype the business
plan itself doesn't have a lot of value
but who are the team members that
de-risk your business have you hired
them already
do you have letters of intent of people
who will join your company once you
raise the money for example on a piece
of paper what are the assets you bring
us or code that has already been written
is there a domain name domain names have
value you know the do you already have
that figure out list them down so that
when you're sitting across the table
from a venture capitalist who's trying
to take more of your company for the
same amount of money you say hey here
are the things that I already bring to
the table so this is the value already
have and so therefore you know I should
be able to get the same amount of money
for for less giving away all right we're
all done please keep your questions
coming to ash J at revision3.com I love
these questions I love the weird
attachments just again please nothing
that's going to scare my mother and
we'll just keep it at that
remember find that screw that's loose
and loosen a little bit more and I'll
see you later