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When I first raised venture capital in 1990, the world was a different place but one very similar to today. Our company was a software business, we were growing, losing money, and achieving trailing twelve month revenue of $1.5M. Our burn rate, as I recall it, varied between $25k and $75k monthly. We ended up receiving $1M of vc money at 1x trailing twelve month revenue valuation and we were pleased to get the money we needed to grow the business. So, we sold 40% of the company and with a 1x liquidation preference (meaning the VC's would get their money out first) -- we gave up a lot. And our VC's were well positioned to make money on almost any positive outcome. Which they did.
This thought is prompted by an excellent article by Matt Asay on cnet.com. Matt's article talks about the big changes needed in the VC industry -- back to smaller funds making smaller investments in earlier stage companies. Matt's Article
At Grotech Ventures, we couldn't agree more with this line of thinking. For me personally, this shift to a smaller fund doing earlier investments prompted a move to Grotech two years ago this month. Grotech Ventures made this shift in recognition of opportunity , which was for Grotech, a shift back to its future.