1
Tips on Negotiating a Termsheet
2
Why I Joined Origin Ventures
3
How To Bend the Arc of Your Career to VC
4
The Forces Behind a Hungry M&A Market
5
Sabotaging Code: 1996 NCAA March Madness Pool
6
Consolation Prize When You Can’t Raise Venture Capital? Financial Independence
7
Great Movies you Never Knew Were About Entrepreneurs

Tips on Negotiating a Termsheet

Last year, OpenTable founder and all-around great guy, Chuck Templeton, asked me to put together a talk on negotiating termsheets for participants in his Impact Engine program. Although Chuck thought he was asking a favor of me, I found the process of organizing my thoughts on negotiating termsheets (and in general) a personally useful exercise. Below is a digest of the talk including some of my tips.

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Why I Joined Origin Ventures

In June, I made the difficult decision to leave one of the Midwest’s finest venture capital firms, OCA Ventures. I began my career in venture capital at OCA in 2001, when I started as an intern. I will be forever grateful to the mentors, partners, support staff, founders, management teams and friends that made working at OCA and working with its portfolio companies such a rewarding and formative experience over the last 13 years. I will continue to serve on the board of Base CRM and have responsibilities for OCA’s investment in Alert Logic. I will still be rooting hard for OCA and its portfolio companies as an investor in the funds.

 

I am excited to announce that I joined Origin Ventures at the beginning of September. Origin is a venture capital firm in Chicago that invests primarily in series A rounds of technology companies and highly-salable services businesses. Our specialties include e-commerce, SaaS, digital media and advertising technology. Origin is perhaps best known for being the first investor in Grubhub, IfByPhone, Whittl and many other great businesses. I’ve had the opportunity to work with Origin and its partners over the last 10 years in various capacities- as a co-investor, board member and in the thicket negotiating deals. We’ve had the chance to see one another react to significant challenges, navigate through negotiations, perform cap table calisthenics, seize opportunities and work alongside entrepreneurs. Working in a small partnership is different than other jobs I’ve had. You are electing to intertwine your financial, professional, personal and every other aspect of your life together. Consequently, there is a lot of comfort working with people who you know and when you’ve already been tested together.

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How To Bend the Arc of Your Career to VC

I am still learning the formula of what makes a great venture capitalist. In an examination of other successful investors and my own numerous deficiencies, I’ve composed a theory that the best venture capitalists are a Jack/Jill of all trades and a master at a couple. Here’s how to bend the arc of your career toward venture capital.

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The Forces Behind a Hungry M&A Market

The M&A and IPO markets for VC-backed companies is hot right now, and there is much attention on the huge wins like Whatsapp, King, Grubhub, and many others.

But there is also a lot of activity at the lower end of the market (exits in $12M – $30M range), and I think there are several prime forces behind these exits that we’ve experienced with some of our seed-stage deals that were sold quickly:

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Sabotaging Code: 1996 NCAA March Madness Pool

I started at the University of Michigan in 1992, right during the Fab Five era. The Fab Five were five freshman basketball players who in 1991, with a totally new coach, went all the way to the NCAA championship. This was unheard of, and the team had a deserved swagger and aggressive style that was addicting. Even if you’d never seen a basketball in your life, if you were on that campus at the time you were crazy about basketball. It was a golden era. It turns out years later they were breaking rules but that’s a topic for a different blog. 
 
As you can imagine, everyone participated in a NCAA pool. My friend across the hall, Andrew Borteck, was an out-of-his-mind Michigan fan and was clearly the guy on the hall who was going to organize the pool for us. Borteck somehow enlisted me to help [it turns out Borteck now works for NBC Sports as an attorney, a fate that could have been predicted in college]. 

Consolation Prize When You Can’t Raise Venture Capital? Financial Independence

One of the hardest things in the venture business is to turn an entrepreneur down for funding, especially one that has invested time in building a relationship.It’s not fun to be on the receiving end of a “no” either, something we are reminded of when we raise capital for our funds.
Not every company should raise venture capital. Venture capital is expensive money. It comes with high expectations that can only be met with very absurdly rapid growth. And not every company can achieve hyper growth. Another way to look at it is that venture capital funds like betting on companies attacking very large and growing markets. This allows for a very high margin of error but also means that if the company is successful, that the value of the company is unbounded. Given the risk of these companies, a big payoff is the only way to get good expected values (and positive-NPV investment outcomes) from the portfolio.

Great Movies you Never Knew Were About Entrepreneurs

Over the years I have stumbled on some documentary movies that were not overtly about entrepreneurs, but turn out to be. They are various portraits of people who have managed to channel their obsession to accomplish great things. 

  • Man on Wire. this movie is about a French tightrope walker who decided at a young age that he was going to walk on a tightrope between the twin towers in NYC knowing that he would never be given permission. The movie chronicles the multi-year preparation of the mission, including recruiting a team to implement his crazy idea. Want to know the qualities of a good entrepreneur? Watch this movie.
  • Joan Rivers: A Piece of Work. This movie made me realize that Joan Rivers is a true entrepreneur. She has worked harder in her 80s than most people work over their whole career. You also get the sense of her complete devotion to her craft. 
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Copyright © 2014 Jason Heltzer