Published: 1/29/2007 10:02:20 AM, comments: 0
#9 - Accept the fact that there are outside forces at play and beyond your control
While it may seem personal to you, most of the time there are outside
influences which impact the marketplace and either assist or impede
your ability to raise capital. Keep this in mind when talking to
investors and accept that this sometimes happens.
entrepreneurs have a pre-conceived notion of dealing with very early
stage venture investors or angels - they take too long, they ask a
bunch of wrong questions, there's too many people involved, I can never
figure out what is happening. At various times, those sentiments may
be true. Getting early stage money is usually hard to do for two
reasons: (1) because your company is hard to gauge the value for and
(2) because there are many reasons unrelated to your company that
investors choose not to invest. Those reasons can include: they've
soured on the space, they have other more interesting investment
opportunities, they're waiting for other investments to mature or
realize, they're busy with non-investing activities or they've made a
number of investments recently and decide to take a break.
investment can be like sales - it's a numbers game - the more people
you talk to, the less you're beholden to one investor or group and the
greater your chances of securing investment.
Published: 1/25/2007 10:17:38 AM, comments: 0
Walt Disney was never satisfied. He wasn't satisfied with the poor quality of animated motion pictures when he set out to redefine the cartoon. When television came upon the scene, his programs were among the first to popularize it with quality programming and then to bring television into the world of color instead of black and white.
Amusement parks had been around for a long time when he came up with the vision of Disneyland, forever changing the definition of the ultimate amusement park, and in the face of many who said it would fail.
By now, it's a cliche to
"never be satisfied" with your work or your company. The Japanese
called it continuous improvement. GE calls it Six Sigma. It is called
by many names and it tends to go against our natural desire to finish
something - we want to be done with it!
From a business
perspective, never being satisfied can be a matter of seeing your
company or your market(s) through the eyes of your competitors. They
want nothing more than to knock your company off. They're busy
thinking of ways to take market share from you, they're trying to
improve their services or products by comparing them to yours and
trying to improve either the products themselves, or the ways in which
they are marketed and sold. They're probably planning to leapfrog your
offerings with something that completely changes the game. They may be
looking to acquire other companies to gain advantage through scale. In
sum, there are numerous competitive threats from within or outside your
industry that are appearing or will soon appear.
So in my view
it is a necessity to never be satisfied with your company's position -
not for a moment. Ask yourself: how could my industry or business
model be disrupted, and by what type of company? Is there an adjacent
or similar industry where companies are actively changing the
landscape? How could those changes affect my industry or company? How
can I take the initiative to "change the game" in my industry in ways
that would be advantageous to me?
Published: 1/22/2007 2:31:14 PM, comments: 0
(Previous post - #7 in a series
)#8 - Be honest with investors
not accusing anyone of willfully trying to deceive investors, but you
need to be candid when talking with them about the current and future
state of the company. For example, if you're close to finalizing a
deal but are unsure of the timing, then be honest when asked. It is
better to say "I'm not sure" than having to sheepishly explain later
why there's still no signed agreement when the paperwork was supposedly
being faxed a week ago.
Remember, investors have a pretty good
memory, especially if you're telling them something important or
material about your company. If they like what they hear, smart money
investors will confirm it in due diligence. Why go through the process
only to stall out in due diligence because of some exaggeration or
representation that didn't match reality? Investors want to deal with
people they can trust, so being that kind of person will do the most to
increase your chances of getting venture capital.
Published: 1/18/2007 2:41:34 PM, comments: 0
I've been reading the colossal (860 pages) biography of Walt Disney by Neal Gabler
and aside from the fascinating details of his life, personality and
influence on American culture, I noted a number of interesting themes
throughout his life that bear directly on entrepreneurship. This starts
a series on my thoughts about how his beliefs and actions relate
to what it means to start and run a successful entrepreneurial
Walt Disney had an obsession with quality. In fact, he
believed that the quality of his animation studio's productions was the
main differentiating factor between his films and those of other
As an example of how he improved quality, in the 1920's and
1930's, when Walt Disney Productions produced such classics as Snow
White, Fantasia and the Mickey Mouse character, Disney spared no
expense in requiring his entire animation crew to attend weekly fine
art classes held at their Los Angeles studio by illustrious Chouinard School of Art
professors. He believed that continually educating his employees would
result in a sufficiently higher quality product that audiences would
have no choice but to notice and appreciate the difference.
was right. Disney's animations swept the world and created animated
icons that exist to this day. His focus on quality separated his
company from the pack of other animation studios at the time.
you want to separate your company from others in your industry, ask
yourself some questions: how can you increase the quality of your customer's experience
with your product or service? Can you measure it? How do you know
what your customers care about? When and how will you ask them? Are you
afraid to ask?
Published: 1/16/2007 11:03:08 AM, comments: 0
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Published: 1/11/2007 12:22:29 PM, comments: 0
I recently came across an interesting web site that's worth a look: TalentPoolNews
TalentPoolNews [east] is an online journal that covers Executive-level movements at venture-backed emerging technology companies on the east coast of the U.S. Published quarterly, the journal keeps track of company hiring, board appointments, VC profiles and related venture transactions.
The site was launched in April, 2006 by publishing veteran Janet Stites. Janet was the co-founder of Alley Cat News
, a technology & finance magazine focused on New York emerging companies. She also has written for Fortune Small Business
, OMNI Magazine
and has been profiled in Folio
If you're a start-up founder or executive based on the east coast, check it out at http://talentpoolnews.com/frontpage.asp
Published: 1/10/2007 11:43:58 AM, comments: 0
A Due Diligence Case StudyFind the skeleton in the closet
recently evaluated a start-up that makes sensor systems for law
enforcement and military applications. Due to my strong interest once
the company was presented to the angel group I belong to (the Band of
Angels), I ran point on performing as much due diligence as possible.
for me, the company was quite organized in its documentation, to the
point of having many of the supporting documents in PDF form available
online for viewing. I concluded that good organization and
transparency were both good signs. So I spent the hours piecing
together the company's history, which had involved a previous merger
and significant intellectual property (IP) that was important to the
company's valuation and potential future defensibility.
focused more intently on the IP, I had to work hard to follow and
confirm the chain of title, since there had originally been three
co-inventors on the core patent and title had changed hands among them
and between them and other parties on several occasions. This involved
spending a lot of time on the USPTO.gov site, the government patent and
trademark office site for searching patent and trademark claims,
matching company-supplied documentation with government confirmation
After probably 10-15 hours of work, and despite a
written opinion from a well-respected law firm that had given the IP a
clear chain of title, I concluded that the company really had rights to
only 2/3rds of the patent and that one of the original inventors had not
sold or granted his interest to the company. Presenting this
conclusion to the CEO, he admitted that it was indeed the case, and
that the other patents the company had filed or received were
essentially designed to "box in" this hold-out inventor, so that if he
sold his interest to a competitor, the competitor would not be able to
use the interest to harm the company. Furthermore, the CEO intended to
negotiate with the hold-out from a position of strength after the
financing round closed, in order to obtain the final 33% right to the
I accepted his explanation, as did my colleagues who also subsequently invested.
moral of this story is that there are almost always skeletons in the
closet of start-up companies. It's your job as an angel investor to
find them so that you know exactly what you're buying.
Published: 1/8/2007 11:58:57 AM, comments: 135
#7 - Become an expert at follow-through
follow-through with potential investors is indicative of what your
habits will probably be like with employees, customers, partners and
A deal can "stale out" in an investor's thinking
if they haven't heard anything about it in a while. Investors are
busy, usually reviewing multiple deals at one time. If they haven't
chosen to invest yet, your steady and consistent follow-through will
help keep them on track, keep them involved in the process and give
them a sense that the deal has momentum.
With investors, until
you receive their investment check in hand, don't assume that you can
stop following up with them. Anything can happen in their mind that
can change a previously-communicated decision to invest.
For many investors, the final "Go" decision is sending out the check or wiring the funds.
Published: 1/5/2007 12:02:40 PM, comments: 0
(Previous post - #5 in a series
#6 - Less is often more
Practice quickly answering the following three questions:
1. Who is the team?
2. How big is the market?
3. What is the business?
If you can accurately convey the opportunity in less than two or three minutes, then you will be able to grab your audience’s attention for the details that follow.
There’s a school of thought about company presentations - start with the punchline. Why? Venture investors are busy and extremely knowledgeable about business in general. They understand that most good businesses are fundamentally easy to understand, so they distrust a long and complicated explanation of the opportunity.
To use an analogy, think of your company presentation as an “introduction.” When you’re introducing yourself to someone new on a personal level, you don’t start the introduction with a long-winded description of your background. You start off with a short greeting and then ease into the conversation. Asking questions, providing bite-sized information about yourself and learning about the other person. It’s the same concept with presenting your company.
Less is more. If investors are interested in your “introduction,” they’ll pursue the opportunity to get into the details later.
Published: 1/2/2007 3:02:36 PM, comments: 14
(Previous Post - #4 in a series)
#5 - Mitigate Investor Risk
Early stage investors are not risk averse, but they are cautious when
evaluating totally unproven technology.
Ways to reduce investor hesitancy include obtaining referenceable customers
and having demonstrable technology. If you have a weak management team, try to
engage industry leaders as company advisors, so investors feel that there is
“adult supervision” in place.
I would go even further to say that it is preferable to get a marquee
customer/pilot-ready account. Early stage investors see companies who have
pilots ready to start all the time. What will make your company stand out from
all the rest is having a well-known company ready to test-drive your product or
As far as demonstrable technology goes, the level of development will also
determine the valuation of your company in the eyes of investors. The further
along you are, the greater the valuation. The more you can develop your product
with your own funds, family and friends, etc., the more you’ll reduce
technology risk to the investor.
Once you’ve attained the level of development you can before starting your
funding search, be honest with investors about your description of the stage
your product or service is in. I can’t tell you how many times a company says
they have a “beta” version of their product, when they really don’t even have
an alpha version - it’s just barely a prototype. That results in a big letdown
by the investor and is the wrong way to start. Investors will find out the
stage of your widget anyway during due diligence anyway - just be candid up
How do you get industry leaders as advisors? If your solution really is a
big advancement, they should be able to see it. Add some stock options and
limit their time and effort required and with a little luck you’ll be able to
put their name on your PowerPoint deck.