William Sahlman, professor at Harvard Business School, suggests that when raising money, entrepreneurs should carefully select venture investors based on the quality and value of the partnership not funding terms alone. Specifically, Sahlman argues that although all VCs claim to be value-added investors, the entrepreneurs job is to find the investors who add rather than subtract value.

Transcript



It is clearly the case that from whom you raise money can be as important as the terms. And certainly, I ascribe to the view that in some cases you should take money at a lower valuation from one group than from another group. But I remind us all that all venture capitalists have a common phrase, which is: we are value added investors. So go search the websites. Every single one says, "We have proprietary deal flow, and we are value added investors." And it is absolutely the case, that they're value added investors. But in my experience, only about 10 % get the sign right. And your goal is to find those who can add value, not subtract.

1. The Best Money Comes from Customers
2. Choose Venture Investors Carefully
3. Opportunity Recognition and Leveraging One's Experience
4. Four Key Elements of an Entrepreneurial Venture
5. Changing the Game
6. Three Factors to Improve Entrepreneurial Success
7. Characteristics of Entrepreneurs
8. Opportunity Driven Entrepreneurship
9. New Ventures Must Adapt
10. Managing the Risk / Reward Tradeoff
11. Four Qualities to Look for When Hiring
12. Challenges of Hiring Good People
13. Three Most Critical Elements of Venture Success: People, Customers and Sales
14. Teams Are More Important than Individuals

William A. Sahlman lectures on Entrepreneurship for Stanford University students, May 1, 2007. William A. Sahlman is the Dimitri V. d'Arbeloff - Class of 1955 Professor of Business Administration at Harvard Business School. His research focuses on the investment and financing decisions made in entrepreneurial ventures at all stages in their development. In this Stanford lecture, he talks about how the best money comes from customers, four key elements of an entrepreneurial venture and how teams are more important than individuals.



Course Details:

- Endeavor's Entrepreneurs' Summit

- Stanford University's Entrepreneurship Corner (ecorner)



Original Course Name: Endeavor's Entrepreneurs' Summit.