Best of Bootstrapping: Do NOT Go to VCs as Beggars – Go as Kings

Negotiation is a straightforward game. You can only negotiate if you have options.

A long time ago, when I was a young entrepreneur making my way in Silicon Valley, I found myself at the mercy of people who knew I had no option.

I did not have a Green Card.

My negotiating leverage was limited, almost non-existent.

And people took advantage of me.

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1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital (Part 4)

Sramana Mitra: So what is the best and easiest way for me to do this? I would like to acquire another product that is relatively cheap to acquire and be able to put it through my channel and just go from $1 million to 200 in million in revenue. That with the $700 million to $800 million is perfectly doable.

Jason Cahill: It’s funny because when you watch movies and they show the Wall Street banker, you’d think about the super cut-throat competition. When I think of a West Coast VC, I actually think people don’t collaborate on deals. By and large on the East Coast, especially in New York, there’s this very collegial environment where we share deal flow just because we tend to elevate things that we find interesting. The reason that I mention that is, if I’m only investing in unicorns and really chasing those, then I have to have a sharp elbow because there simply aren’t that many of them. >>>

1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital (Part 3)

Sramana Mitra: Are you chasing Unicorns?

Jason Cahill: Yes and no. I don’t get upset when my companies get marked up at billion dollars. If I invest in a company in $5 million, they get to acquire at $50 million, I can live that. That’s the tax. I have done very well at being efficient with capital. I love for all my companies to become unicorns but if they sell for $500 million, I think I’ll buy all. Everybody is happy.

Sramana Mitra: So what is the low threshold? Comment on what I said on the Bootstrapping to Exit article about the smaller opportunities. There is a class of investors emerging who are paying attention to the smaller opportunities that’s acknowledging the fact that most exits in the industry happen at the sub-$50 million price point. Are those of interest to you or are they too small? >>>

1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital (Part 2)

Sramana Mitra: What about types of companies? What in the segments do you like to invest in? B2B? B2C?

Jason Cahill: We invest in new technologies in older industries. So the flavor on that would be advanced data technologies like artificial intelligence, machine learning, and robotics. There are new type of opportunities in energy, agriculture, transportation, and supply chain. >>>

1Mby1M Virtual Accelerator Investor Forum: With Jason Cahill of McCune Capital (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Jason Cahill was recorded in January 2019.

Jason Cahill is Managing Partner at McCune Capital, a NY-based firm. He talks about the pros and cons of chasing Unicorns, as well as his firm’s investment philosophy. >>>

Best of Bootstrapping: How Can You Play this Low-Probability Game Intelligently?

Let me start with a quote from Marc Andreessen:

“At our venture capital firm we only invest in a sort of Silicon Valley–style tech. We see 3,000 inbound deals a year. And those are inbound and coming through our referral network, so those are sort of prequalified. We can do maybe 15 or 20 investments out of the 3,000 a year. So I like to say our day job is crushing entrepreneurs’ hopes and dreams. Our main skill is saying no, and getting people to not hate us.”
Source: Inside the mind of Marc Andreessen – Fortune Management

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1Mby1M Virtual Accelerator Investor Forum: With George Spencer of Seyen Capital (Part 4)

Sramana Mitra: One of the options that we have to keep in mind is that the vast majority of strategic acquisitions happen in the $50 million to $60 million price point. For everybody concerned about making money with a $50 million exit, you have to build the company in that $5 million to $10 million capitalization.

George Spencer: That’s right. The goal here is not to sell the company for $50 million to $60 million. If that’s what ends up happening, you end up making three or four times your money, so be it. Just getting yourself to the position where you’re able to do that is important. I think that you need to be very capital efficient and conscious of that. To be honest with you, I don’t think that happens all that much out in the Valley. >>>

1Mby1M Virtual Accelerator Investor Forum: With George Spencer of Seyen Capital (Part 3)

Sramana Mitra: Your point is very well-taken. In the early stage, not everything is figured out. There is a certain amount of pivoting that goes on often in the quest for that repeatable sweet spot. Capital markets change and competitive markets change. You just have to adapt.

With that understanding though, I want to ask you a slightly different question. We are in the beginning of 2019. Lots of stuff have already been built. It’s not like there are so many wide open opportunities out there to build these massive unicorns. There are some and there are categories where people are pursuing that kind of opportunities. There are also many niche opportunities. Some of these businesses need to be built for small amounts of capital – $1 million to $2 million – and then sold for $10 million to $15 million. Do you have appetite for this type of investments? >>>