From the monthly archives:

June 2009

Venture Capital Gets a Boost ~ Crack in The Log Jam?

in VC Garage

A recent survey of Venture Capitalist by Polachi came out with some interesting findings - one piece of data suggested that over 90% of VCs were either ‘worried’ or ‘very worried’ about exits for their investments but only 40% were worried or very worried about deal flow – i.e. the quality of investment opportunities they are seeing.

So why does the fact that the ability for a VC to exit the investments they’ve made in prior companies matter to Startups and entrepreneurs today? Especially when VCs are still seeing good investment opportunities…

Because those companies that do not IPO or get sold or somehow get taken out of a VCs portfolio start to create a log jam.

Log jam? Of what?

Well – pretty much everything – for example -

The VCs will often have a partner on the boards of those companies within their portfolio – if they don’t ‘exit’ these companies then these partners will often continue on these boards — a person can only be on so many boards and working with so many portfolio companies before they are too stretched. VCs spend time with their portfolio companies – they may help with recruitment, talking to potential customers and so on.

So, no exits – less time available for new investments.

Also consider cash – if there is no IPO or sale then the portfolio companies may need additional rounds of funding – perhaps above and beyond what was originally anticipated – this means additional funds are committed to the existing portfolio and cannot be made available for new investments.

It shifts the role of VC towards a higher percentage of ‘gathering’ rather than ‘hunting’ for new, fresh opportunities.

One rule of thumb I’ve heard is a VC needs approximately $50M available for investment per partner – no exits, less cash coming in, more cash dedicated to existing portfolio, valuations probably set at pre-economic downturn high levels and before you know it –  it all starts to look a little like the mortgage crisis where folks can’t sell their overvalued assets…

But – this quarter – there was a ray of sunshine perhaps (perhaps...) breaking through the clouds…

…in Q2 09 there were five VC backed companies who IPO’d .

So what…

So what?

This is versus ZERO in Q2 08.

Now five IPO’s is not a rush to exit – but perhaps…just perhaps, its a crack in the log jam…

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Andrew

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Podcast: Raising Millions – Venture Capitalist Interview – Eric Hjerpe, Kepha Partners

in How To,Podcast,Raising Money

Eric_Hjerpe_Interview1 (Part 1)

TheFundingGuru_EJ Interview (Part 1)

Podcast Continued below…

Are you looking for Venture Capital Investment? Would $5 million dollars help you take your business to the next level? Well, despite the challenging economy there are still people out there looking to put money, experience and contacts to work helping entrepreneurs make the next generation of great companies – and lets face it – the economy could use the boost!

As ever – it will be the entrepreneurs, business builders and their financial supporters who will lift their communities and their countries by building great companies which tap into the innovation of their founders and employees to deliver products and services which meet our needs.

Today I was lucky enough to interview a partner of a young and fast moving Venture Capital firm called Kepha Partners – as promised, I focused on very specific questions that you’ll need the answers too if you are looking for to secure a $2 or $3 or $5 million dollar investment in your company.

This was a fantastic interview and I really appreciate Eric’s candor and the simple way he outlined what it really takes to go out there and secure significant amounts of money from Venture Capitalists. He not only covered what he finds important when considering investing in a young company but takes us through the benefit of his experience to take us through many of the critical elements all entrepreneurs should consider when talking to ANY Venture Capital firm.

Again – A fantastic Interview! Worth listening too over and over again…

These were some of the questions I asked Eric –

  1. Tell us about you and your venture capital firm
  2. What areas do you invest in and what is the typical range of investment?
  3. From what you are seeing – What impact is the challenging economy having on the Venture Capital industry and the investments you and they are making?
  4. Where do you find companies to invest in? Are they cold calls or referrals or some other route?
  5. What are you looking for?
  6. What is your selection criteria and how do you weight it?
  7. What process do you go through when deciding if you’ll invest?
  8. What tips the balance towards a “Yes!” investment
  9. What should you NOT do when looking for Venture Capital investment?
  10. Can a company approach you directly via your website? What is your website address?

And here are some sound bites and areas covered during today’s podcast:

“The Business Idea is low on the list – No.1 for me is the Team…”

“I get asked – ‘Do I need a Business Plan?’…I personally prefer a great presentation with rigorous spreadsheets beneath…”

“I like to invest alongside other partners in other firms who I’ve worked with before on boards…”

“Don’t name drop other venture capital firms – often I can pick up the phone and just ask them…”

“We look at making a series A investment in the $5 million dollar range…”

Again – I highly recommend you listen to this podcast – especially if you either are currently looking for funding from the Venture Capital community or even if you think you might do at some point in your career.

Please sign up to my mailing list and we’ll let you know when we have other interviews like this and more.

…and don’t keep us a secret, tell others and we would appreciate your comments to today’s podcast below.

Was this helpful? Post a comment and let me know…

Andrew D. Ive

http://www.TheFundingGuru.com

Eric_Hjerpe_Interview2 (Part 2)

 Eric_Hjerpe_Interview2

Eric_Hjerpe_Interview3  (Part 3)

TheFundingGuru_com_EJ Interview (Part 3)

Eric_Hjerpe_Interview4 (Part 4)

TheFundingGuru_com_EJ Interview (Part 4) 

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Video: Investors – The Basics

in Raising Money,Video

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Raise Millions: First Stage of Captivation – The Hook

in Podcast,Raising Money

First Stage of Captivation: The Hook

What are you trying to achieve when you meet with VCs?

You may think it’s to close in on a, let’s say, a $3million dollar investment for example and you should always keep the goal in mind but there are stages when building the relationship. You need to recognized them and make sure you are delivering at each step of what I call “The Stages of Captivation”.

Why do I call it that? Because that is exactly what you are trying to do – you are trying to captivate a VC at each stage of your interaction – from the first communication all the way through to term sheets and a deal. Why?

Because you are trying to establish and build a relationship with a VC – you are trying to attract them and encourage them to want to build something great with you – it is not about the cash, it is not short term and is not a loan – it’s a relationship so you can create something worthy of both their and your efforts.

So what is the First Stage of Captivation – The Hook

Before you even get through the door…you need to hook them.

How do you do that?

By making yourself look attractive.

Most often that first touch with a VC will be from your initial introductory email or executive summary.

Now be careful – with these two tools you are NOT trying to get your entire life story into as small a space as possible – you are trying to do just what I said before “You want to Hook them”. In other words, you are trying to entice them – to wet their appetites just enough that they want to meet you.

So, focus on the business opportunity and in particular, the size of the opportunity i.e. the upside if you manage to create a company which delivers on your expectations but a note of caution – try not to use to much hyperbole – keep the fact that you are about to change the world to yourself for the moment, instead cover the industry you are focused on, the business you want to build, why you are the right team to build it – If you cover those elements I would consider stopping there – with one added element –

If you are reaching out to a few VCs (and you should) – you should consider mentioning this point within your initial pitch – Why?

Because it’s human nature –

If you are attractive and popular with others then you’ll be more attractive and popular with these VCs.

And aside from the psychology of it – VCs want to find out about attractive opportunities before their VC competition – so consider briefly mentioning “We are meeting with a select group of VCs in Sand Hill Road” for example, suggests there may be interest from other VCs too – You have begun to create an ‘Impetus for Investment Action’.

…and because of it they will be more compelled to consider your opportunity and act themselves.

So – and let me make this point very clearly – one element of the hook is to suggest interest from their competition – Why? So you can create momentum.

What do I mean?

You want them to want you. And what will create that impulse?

A great initial hook, competition and a closing window of opportunity.

Throughout the process – at the start and all the way through – subtly mention that others are also interested in your opportunity. Capitalize on human nature – being confident and showing a certain demand is critical. A note of caution – there are not many bullets in this gun – do not try to suggest competition over and over again – use those few bullets selectively and wisely.

So – that covers the First Stage of Captivation – The Hook.

I’ll cover the second stage on the next podcast.

Until then – remember establishing a relationship with a VC is a two way relationship – Always keep in the back of your mind “what can they bring to the party aside from cash? Do you like these guys? Do you trust these Guys?”

So – Thank you for listening.

Please go along to AndrewIve.com to sign up for my mailing list and get update when other Podcasts and postings are available.

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Andrew

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Podcast: Raise Millions – What Are VCs? (Prelude)

in Raising Money,VC Garage

What are VCs

When its time for you to go out there and raise thousands or millions for your business – you’ll probably want to talk with VCs (or Venture Capitalists). If you’ve never done it before then it can be intimidating – even if you have the beginnings of the best business on the planet. 

To help you, I recorded a brief overview of what VCs are, some of their key motivations and some invaluable tips that could move you closer to raising millions for your business.

Take a listen and if you have any questions or would like me to go deeper into a particular element of this overview – post in my comments section and I’ll be happy to reply.

If you’d like more tips and thoughts that could help you and your business – consider joining my mailing list and get my free “Start-Ups Launch Blueprint” today.

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Andrew

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Video: How to Register A Company For Less – The Blueprint Examined

in How To,Startups,Video

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Cash – The Oxygen of the Start-Up (…or the Advisor Garage Re-Launch)

in Angel Garage,Startups,VC Garage

About four years ago, I worked with a smart group of people to design and build Advisor Garage.  At the time, dating websites were growing exponentially – it seemed even my postman was about to set up his own version of match.com.  But Advisor Garage was not a dating site to help people met the partner of their dreams…

Advisor Garage was set up to help entrepreneurs ‘connect and date’ advisors and mentors.

This is how we (as tried and tested Entrepreneurs) thought about it…

No Entrepreneur is an Island…Like a great beer – Start-Ups often require a multitude of ingredients…:

A GREAT idea… A plan of execution… Motivated People… Money… A place to do business… Legal support… Marketing… Technology… Money… A Channel to market… Prospective customers with a need… Sales expertise… A Product or Service… Did I mention Money?

…and the list goes on and on.

What about bootstrapping you might ask? Sure – bootstrap – but you still need the above list…and more, you just somehow manage to get them for less. Bootstrapping doesn’t mean no resources – it means cheaper or, if you’re lucky free resources (but remember that saying – you usually ‘get’ what you pay for…).

Pulling all those (and more) elements together can take months – especially for the newbie Entrepreneur – so Advisor Garage was created. The Goal…help ‘connect’ entrepreneurs with advisors with a wide variety of expertise and contacts so they could save themselves weeks and months they would usually spend to find and pull these pieces of the Start-Up jigsaw puzzle together. 

Let me say that in a slightly different way – Advisor Garage’s goal:  Help entrepreneurs shave off months from Start to Market to CASH!

Cash is the oxygen of a new business – Again – Cash is the OXYGEN of the business. ALL Businesses. No exceptions. Private or public sector – for profit or not-for-profit.

Cash keeps the lights on – the people coming through the front door – the computers humming and the telephones ringing. Everything is about CASH. Without it, you can’t service the customer, be a Green company, employ people or yourself or whatever your own, specific, world changing goals for your Start-Up might be.

CASH IS THE START AND END OF A BUSINESS. If you don’t believe me – Go ask General Motors! 

During the three years Advisor Garage was live – over 1000 advisors joined! That’s a THOUSAND Advisors with enormous diversity of contacts, experience and access to resources to help entrepreneurs cut weeks and months off of the cost and time it takes them to start and build their businesses. 

By plugging into great advisors could mean shaving months off the time it takes to bring a business to market. So what?

Those saved months could be critical in terms of securing your first customers…getting ahead of your competition…building your brand and market – but bottom line – it gets you faster to the cash!

During those three years building Advisor Garage I was lucky enough to meet and connect with some great Advisors and entrepreneurs and about six months ago I woke up one morning and had a ‘Eureka moment’…

Advisor Garage had been growing day by day but my Eureka moment told me there was a better way to help entrepreneurs…I felt a broad smile spread across my face as it all fell into place inside my head. 

That day I took down Advisor Garage and began to focus on the Advisor Garage re-launch – a re-launch which would completely change the product /service Advisor Garage delivered but which would offer SIGNIFICANTLY MORE VALUE to entrepreneurs and multiply their chances of successfully launching and growing their young business!

So – We haven’t set a re-launch date yet as we’re still working on it and want to make sure it’s ‘just right’ but if you are interested in finding out how Advisor Garage can SIGNIFICANTLY enhance your chance of Start-Up success and shave months off your time to market and to cash then head over to Advisor Garage and sign up to our mailing list.  We’ll tell you all about our re-launch just before the BIG day!

Next post I’ll tell you a little bit about Advisor Garage’s sister sites that we are also busy developing – Angel Garage and VC Garage…by all means ‘comment’ if you have any ideas about what they may do or even better – what they could do for you and your start up.

Here’s to YOUR Start-Up Success!

Andrew

 

 

 

 

 

 

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