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New Rules for Software Venture Capital

Published: 4/30/2007 1:27:00 PM, comments: 0

I came across a thought-provoking article at VentureDeal partner Sandhill.com on the history and current state of software venture capital:

http://sandhill.com/opinion/editorial_print.php?id=132

It is a fascinating article by William Janeway at Warburg Pincus about the various phases that funding software companies with venture capital has gone through, since it's inception in the 1960's.  It also illuminates the role and influence of public markets on the industry and the outlook for the near future.

Any thoughts or comments on it?

Don Jones

www.VentureDeal.com

Presentation Mistakes Start Ups Make

Published: 4/23/2007 8:32:36 AM, comments: 0

As part of the "Mistakes Start Ups Make" series, I'm adding some insights about presentation mistakes.

One mistake that stood out loud and clear recently in an otherwise fine presentation was answering the simple question, "Who's your competition?"

The entrepreneur provided a vague, ambiguous non-answer.  He didn't mention any names and didn't go into any detail about the structure of the industry.  Apparently he wanted us to believe that there was no competition, no industry structure and no opportunity for adjacent companies to move into his space.

Big mistake.  By not answering the question directly, it looked like he was either unprepared, dismissive or simply not knowledgeable about a fairly large issue related to the future success of his company.

The moral of the story is to do your homework on the competition and be prepared to answer questions about specific competitors as well as the general competitive landscape.

Don Jones

www.VentureDeal.com

Marketing Mistakes Start Ups Make

Published: 4/18/2007 9:09:26 AM, comments: 0

One common mistake that start ups make is failing to create and articulate a compelling and differentiated value proposition.

The customer has a problem and they think about it in their terms.  It might be something like, "I always have to wait a long time for certain shipments to arrive."  Your job is convey how your solution solves their problem, in language they understand and relate to - that is the compelling part.  You must communicate using words and concepts that your prospective customer understands, otherwise the message won't stick.

Your other job is show how your solution is different and better than all the other options the prospect has available to them.  That doesn't mean you trash your competition.  That strategy usually backfires.  It does mean making meaningful distinctions between your company and the competition, based on how your prospect views their problem or need.

Successfully doing the above results in customers understanding that your company can help them with their problems and also learning that they should try doing business with you, because you're the best fit for them.

Don Jones

www.VentureDeal.com

Marketing Mistakes Start Ups Make

Published: 4/16/2007 9:35:21 AM, comments: 0

One marketing mistake that startups make is looking at their product or service launch as a one-time event, instead of the beginning of a series of events.

It is easy to fall into the trap of crafting a well thought-out launch press release, thinking that the release will bring legions of customers to your doors.  Instead, the first six months of roll-out should be planned for in all major respects.

Here are just a few questions for your marketing team:

  • After launch, what will be your ongoing program for gaining favorable press mention? 
  • How will you continue to encourage viral adoption of your product or service if your first attempts are not successful?  (What is Plan B, Plan C?)
  • What is your definition of initial success?
  • How will you obtain and incorporate feedback from your sales people on the reception of prospects to your offering? 
  • How often will you re-calibrate your efforts?
  • What promotions will you offer to incentivize prospects to try your offering?

Launch is a process, not a destination.  Steve Blank, a well-respected entrepreneur I know, likes to say, "No business plan survives first contact with the customer." 

What are your plans for adapting to the market's reception (or lack thereof) of your "new and improved" solution to their problem?

Don Jones

www.VentureDeal.com

Marketing Mistakes Start Ups Make

Published: 4/11/2007 9:54:24 AM, comments: 0

Among the many mistakes that are common with start ups is not understanding the customer's buying preferences.

This can take the form of a variety of concepts - what kind of pricing model the customer prefers, or what kind of channel the customer prefers to buy from.

For example, pricing models vary widely - they can be advertising, subscription, subscription plus maintenance fee, outright sale, retainer-based, hourly billing, project-based quotation, sale-leaseback, etc.  I'm sure I'm missing some other variations. 

I know of one online database that charges by the hour.  Why?  Because their customers are attorneys, who pass the charges through to their customers via their hourly billing process.  The key for you is to learn how your customers prefer to purchase and adjust your model accordingly.

Channels vary widely and the same lesson applies here as well.  Gain an in-depth understanding of how, where and when your customers want to buy and you will make it easier for them to buy from you.

Don Jones

www.VentureDeal.com

How The Angel Investment Process Works - The Band of Angels

Published: 4/9/2007 7:14:20 AM, comments: 0

As a member of the Band of Angels investment group in Silicon Valley, I get asked by entrepreneurs what the process is for obtaining funding.  In order to remove the mystery, here in chronological order is how it typically works:

1.  Entrepreneur emails a summary or powerpoint to the deal manager at the Band.

2.  Screening committee selects 6 or 8 companies each month to present for 15 minutes each in front of the committee.

3.  The committee votes on the top three companies who then present at the monthly Band dinner.  They get half an hour to present their company and answer any questions.

4.  If there is continued interest, there is an in-depth follow-up meeting, usually two hours long, where all the interested angels attend and dig further into the company's potential.

5.  If the group is further interested, due diligence is started along with negotiations on the term sheet.

6.  If all goes well, funding occurs within 2 to 4 weeks after negotiations are completed.

The total process, from start to finish, usually takes two to three months.  The process is one of the benefits of working with an organized angel group.  Of course, any delays in the negotiations or due diligence can extend the length of time it takes to close the transaction, though most transactions are completed in a three month time frame.

Don Jones

www.VentureDeal.com

Calling Angel Investors - Angel Capital Blog Network Now Open

Published: 4/5/2007 9:56:12 AM, comments: 1

I recently started up the Angel Capital network, which you may notice in the right column of this page where it says "Proud member of Angel Capital, a FeedBurner Network."  The network is administered by FeedBurner, an RSS venture-backed start up company.

I would like to call on any active angel investors to contact me if you want to join the network.  There is no cost to you and no remuneration of any kind to me.  The benefits to you are that you can be a part of a network of angels who blog on their investing experiences, generate traffic and advertising revenues to your blog and track blog statistics through FeedBurner.

If you want to learn more about the network, don't hesitate to contact me at djones@venturedeal.com.

Don Jones

www.VentureDeal.com

Marketing Mistakes Start Ups Make

Published: 4/2/2007 11:09:52 AM, comments: 0

Many start ups make the mistake of accepting early customers or partners just because they can get them, whether it's through luck or because of a prior relationship.

These customers may or may not be advantageous to the firm's goals at the early stage.  Since testimonials and references are two of the most valuable marketing tools that easy stage companies can use, having them from companies that are not strategic to the start up makes little sense.

In fact, not only is it important to have good early references, it is even more valuable to have "marquee" references.  These are industry leading companies, influential thought leaders that other companies notice.

It isn't enough to get references or pilot programs with just any companies, it is important to focus on the right companies that will smooth the way for future sales growth.

Don Jones

www.VentureDeal.com
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Don Jones
CEO, VentureDeal

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