Insights and Opinions

 

Wednesday, July 15, 2009

Top 10 Attributes of Successful Southern California VC Investments

from Jeff Cohn





For today's Insights & Opinions section, we're sharing a brief piece that Jeff Cohn, a well known consultant to angel and venture investors in town, and is a venture consultant to MHS Capital--and who was previously Investment Screening Director for the Tech Coast Angels--wrote about his view of Southern California's current VC investment market in his blog, which he's let us repost here.

Contrary to the common belief that Southern California "should be an easy place to raise money" with all of its' entertainment and real estate wealth, it is a very difficult place to raise Venture Capital for technology start-ups. The bulk of all professional Venture Capital is managed out of offices based in Silicon Valley and most of these fund managers like to invest close to home. To make matters even more difficult almost 90% of VCs based in SoCal in 1999 are now gone while our beachhead entertainment companies have a terrible track record at making early stage investments and now typically wait to invest in later rounds.

So how does an entrepreneur based in SoCal get the attention of VC funds today? Over the last ten years I have seen hundreds of entrepreneurs raise VC funding and I have compiled a top ten list of attributes for companies raising Venture Capital in Southern California.

1) The team is articulate, polished and focused in their delivery of their value proposition
2) Frugality reigns supreme and founders have bootstrapped the product development
3) Founders are thought leaders with relevant engineering and marketing domain expertise
4) Founders have chemistry and have established culture with their investors and employees
5) Company has paying customer references with high gross margins
6) Word of mouth marketing and industry references are working
7) The market is still somewhat undefined and growing rapidly
8) Pain relief creates incremental revenue or cost saving opportunities for customers
9) Founding team is raising money through their own personal networks or referrals
10) Company has a clean capital structure and the founders have personally invested

Jeff Cohn is a Venture Consultant to angel and venture investors who have an interest in building technology companies in Southern California. Jeff sources investment opportunities, plays an active business development role and builds teams for VC portfolio companies. Jeff was the Investment Screening Director for the Tech Coast Angels from 1999 - 2008 and has built a deep network of Southern California technology entrepreneurs and seasoned investors.


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