Kevin Colleran at the Summer Venture Showcase
During the Summer Venture Showcase, in which a number of Babson startups pitched their businesses to a live audience of ~400 investors, entrepreneurs, and professionals from around the world, Debi Kleiman interviewed venture capitalist Kevin Colleran on the topic of investing in startups.
The talk started with Colleran joking about how getting funding is a pretty straightforward process in which you just write a VC an email and they send you a check! The talk then went into changes in the industry. In the past, seed investing was the first round, but now there is pre-seed round. For that reason, VCs typically invest in companies that already have a few hundred thousand in funding. This pre-seed money usually lasts 6-12 months.
Colleran discussed the typical deal he’s involved in, with the average round is between five and seven million dollars (eight to ten million post money) with a $2.5M average investment. Two VC firms are usually writing $1M of that, with angels investing the rest. The reason for this typical process is that Venture Capitalists want to see evidence of success. The 18 months that go between rounds are a way to prove which businesses will succeed and which won’t.
VCs are an integral part of the investing process. Colleran explained that everyone is trying to offer a service. Some firms will help you find engineering talent, some offer bootcamps (YC), and some will do in-house marketing to position your brand. Kevin makes the introduction to the firm that will lead the investing round. As a VC, Colleran’s overarching goal is to stop the companies from focusing on funding related networking and helping them focus on building the product.
The discussion moved to advice from Colleran to people going into bootcamps like Y Combinator and Techstars. “A lot of people don’t think about the cost…You’re going to hire most of your management team for less than 7% equity”, Colleran stated, pointing out that the bootcamps are up front about there fees, but that the equity can come to be extremely valuable down the road. At this point, Kleiman pointed out that the Summer Venture Program doesn’t take any equity, but that there is an options Founder’s Fund in which a company donates a portion of equity to Babson.
Finally, Colleran went into how a company should optimally reach out to a VC firm, keeping in mind that every year his company picks four out of thousands. Colleran stated that the best piece of advice is to get in through the personal network, specifically through meeting funded founders at events and getting an introduction.
Companies Kevin has invested in: AngelList, Casper, Birchbox, Gusto, Slack, Pillpack, Handy, Nest, Pinterest