As MBA students, participating in this kind of competition allowed us to get a glimpse on how startup businesses really work. How they are established, what due diligence must be done, and how to operate and sustain probable (unicorn) businesses to ensure its scalability and survival. Taking on the roll of a venture capitalist allowed us to be on the other end of the spectrum, which is quite different from what we’re used to doing in the case room setting. The one-day competition generally allowed us to mimic a day in the life of a venture capital firm.
The competition was divided into three main sessions. The first phase was the due diligence part, where we were given a session to ask questions to the startup entrepreneurs. Since this session’s time was limited, we were pressured to ask the right questions that would help us assess these startup’s current situation. In this session, the group had the opportunity to inquire about the pain points that their business was trying to address and solve. How they did their operations, what their future plans were, their means of funding, their business model, scalability and their exit strategy.
The second phase was the construction of the term sheet that would have to be presented to our chosen startup and to the judges. This phase was the culmination of all the information we had gathered in Phase 1. This was also reflective of our assessment and our belief that the startup will flourish given their business model.
The third phase was the inquiry portion of the judges. They scrutinized and assessed how we attacked the information gathering and construction of term sheet as a whole. This was where they gave their comments and recommendations for improvement.
In summary, we have learned that we have to be wary of the negotiation and take into account quick decision making. We need to deeply analyze details of the business and not be too reliant on the information given but dig deeper to have a better understanding of the industry and the business itself.
Here are some tips to help future VCIC participants:
- Speak confidently
- Prepare your questions ahead of time and practice
- Come up with a solid term sheet before competition proper – get the basics down – how do you protect the VCIC, etc.
- Get someone who is really good with numbers to do your valuation
—Sierra Madre Team
The Sierra Madre Team was composed of students from Master in Business Administration 2017 – David Chan, Shrikant Patil, Gel Enriquez, Noel Enerio, and Hana Nanji