Notes from the Rick Segal roadshow

The Canadian VC, Rick Segal, hosted a great round table session for startups last Thursday all about raising money. The 2 hour chat covered subject like term sheets, how to structure angel rounds, and how to avoid the common mistakes (land mines!). Suzanne Dingwall Williams (legal counsel to many Toronto startups) was at the event and contributed a ton of good perspective/advice. Scott Pelton from Growthworks was the third expert in the room and also added a lot to the conversation.

In the spirit of sharing, here are some of the notes I took.

Important!: These are notes, not quotes (unless “” are used). I’m paraphrasing conversations and adding some of my own interpretation.

• Raising VC in Canada takes 6 months and is “brutal”
• Lots of lawyers involved (and lots of lawyers fees)
• 6 months to raise the money and then you have 18 months to prove your business – then it’s time to raise again
• Founders should never take the CEO title – CEOs get fired :)
• $2-5m pre-money valuations seem to be the norm right now
• Funding metrics are very consistent in Canada at the moment – the deals all look the same
• VC will often (always) ask for preferred shares. The VC’s main stipulation is for liquidation preference. This means they get their money first in a disaster situation. Most of the time the VC is looking for protection, not voting preferences etc.
• Matters requiring special approval: Sorting this out with a VC can be the thing that takes the most time and legal fees. Matters requiring special approval are the things a founder or CEO can’t do without getting the specific approval of the VC. These often include: hiring and firing senior people, selling (obviously), changes to the shareholders agreement. The list can be long if the founder/CEO is inexperienced and very short if the founder has done it (built and sold companies) a few times before.
• How does Rick decide whether to invest? “Science experiment”, if it’s to do with social networking I “send it to my daughter”, rock paper scissors
• What questions should you ask VC’s when evaluating them? [response by Suzy] What stage is your fund at? How may deals left? Let me talk to some of the founders you have funded
• When a CEO is managing a board (especially if the board includes a VC) the first thing to do is to agree the metrics you are all going to measure success against. This makes updating and managing a board much easier.
• Rick told the room to call Butch from PlanetEye if we want to know what Rick and Scott are like to deal with once they have invested

If you have any questions about the session please ask ‘em in the comments. Hope this was helpful!

Photo: View from the JLA boardroom

2 Comments

• StartupNorth » Blog Archive » Weekend Reading - April 26, 2008 April 26, 2008 at 1:30 pm

  [...] Gigpark Founder Pema Hegan’s notes from the Rick Segal Roadshow. [...]
• a canadian startup » Blog Archive » More Notes from the Rick Segal Roadshow April 29, 2008 at 12:21 am

  [...] Pema also has a summary of what he gained from the talk Rick did in Toronto. [...]