The wild IPOs of LinkedIn and then Yandex are signs of the Mania phase in action. You should already know the numbers and valuations, so let's move on to the point of this blog.
What can entrepreneurs do to take advantage of such as wave? Here are some tips from serial entrepreneurs:
- The now-rich VCs are racing to get fresh money (before the bubble pops) to invest. Look for recent funds raised and go after the green cash, it's eagerly looking for the next great thing.
- The IPOs have spawned rich individuals with lots of cash in their hands. Some have worked more than a decade to get rich and will now "stop working" and do something else. They often become the new wave of angel investors. Read the IPO documents to find the names of the large individual shareholders. Knock on their doors (yes, at their homes) and pitch your deal to them. Great start-ups have gotten going that way.
- High IPO valuations favor start-ups. $8 billion Yandex and $4 billion LinkedIn are the balloons lifting the numbers higher and higher. Investors are looking for "really big deals". Your forecasted numbers must support their dreams. Your sales and valuation in five years has to be very large. Spend time, do your homework, generate large numbers. Change your business model if you have to.
- Be bold. This is not a time to be "conservative" or cautious. Use the same confident language the VCs and super angels are using.
- Be confident. This is time to choose which great investor you want for your next round. All of them are eagerly looking for a great start-up. They are intensely competitive with each other. Get them competing for your deal. Such competition is the entrepreneur's best friend.
- Be smart. Plan your campaign to raise your funding. Choose your investors carefully. Select only the best. Prepare for intense, fast negotiations.
All of this requires a lot of work by you. The numbers have to be generated. Yes, they are dream numbers, but hey, so were the numbers shouted out by founders of Facebook, Google, and Yandex when they got their first money. So come to presentations with investors prepared to talk about "How large could this business get?" The larger the better. It's your business, you know better than investors how large it could become.
BOTTOM LINE: Take advantage of the current IPO boom. Use its energy and underlying wealth creation economics to get the deal you want for your next round of financing. Do your homework. Generate your numbers for sales, customers, etc. Prepare your discussion about how large the business could become. Then get investors competing for your deal. When you can do that, you'll be well on your way to building an unfair competitive advantage.
I wish you The Best on your Adventure!