From the monthly archives:

July 2009

Andreas_DFJ_pt1

Andreas_DFJ_pt1 (Parts 2 & 3 below)

I was fortunate enough to spend some time chatting with Andreas Stavropoulos, a Managing Director at Draper Fisher Jurvetson (DFJ). DFJ is an innovative, forward thinking Venture Capital firm that has a passion for creating a networked Venture Capital firm that can identify investment opportunities and deploy capital throughout the world.

In this podcast, Andreas takes us through a number of important points – such as the selection criteria he and DFJ go through when considering making an investment in a company.  While chatting, I made a few notes which I wanted to make sure I called out -

DFJ tend to invest particularly early in a company’s life cycle – I asked if an entrepreneur needed a full team, customers and other key milestones before they would be taken seriously – Andreas took us through a number of critical considerations but to quote his immediate response…

“We’ll take two people and a dog seriously – Its never too early to connect with us.”

It’s interesting that identifying investment opportunities very early is part of the DFJ culture – I gathered it was a key focus and a strategy for identify the best opportunities for a significant return.  Andreas repeatedly made the point that if a particular segment (Cleantech) or Geography (China) is ‘hot’ then the returns are likely to be impacted through competition. The ideal is to identify these segment and geographic opportunities before the herd catches up. So – DFJ works to identify opportunities which might be too early for some other VC firms. In fact, DFJ can point to investments they’ve made in industry changing companies such as Hotmail, Meetup and others which seem like obvious investments now, but DFJ invested so early in these companies lives that, in some cases, they were little more than a handful of passionate business builders and a big idea!

On this podcast interview, we also explored what DFJ and Andreas are looking for when they receive a submission for funding – for these points you would be smart to listen to the podcast, but briefly – be self filtering, take a look through the background and portfolio of each of the Principals in DFJ and make sure you know who to reach out to and why your proposition is relevant to them. Just starting the email with a reasonable rationale for wanting to connect, and not using some form “Dear Sir/Madam” template will already put you ahead of the crowd who are also trying to raise millions of dollars just like you.

…and here is a critical point. DFJ and Andreas read ALL submissions…in other words, you don’t have to be referred by a pal, a classmate or priest…you can just email, cold, with a smart, reasonably comprehensive 4-5 page summary of the investment opportunity and providing its interesting to DFJ – they’ll meet with you and then you can begin the dating process that may turn into a real relationship.

Again, listen to the podcast – and you are welcome to add you questions or comments – I’ll happily ask Andreas to respond, focusing on those which will benefit the largest number of readers.

So – thanks for reading, let me know if you have any questions or comments and I’d like to hear if you have heard of any other Venture Capital firms who are just as open at DFJ to cold calls from entrepreneurs? Is this abnormal or normal as far as you know? If you have heard of very open VC’s please post them in the comments – this could be helpful to others.

DFJ’s  stated mission is “…to identify, serve, and provide capital for extraordinary entrepreneurs anywhere who are determined to change the world”. Its no surprise that DFJ value the passion of the founding team  members almost above the size of the opportunity – partially, I would suggest, because all of the DFJ team have that same degree of passion for the business they are building and their own goal to positively change the world.

Thanks again Andreas – you and DFJ are a star act!

Andrew

PS – for a short time I have an audio course which could seriously help your fund raising. I’ll soon bundle it with a broader course so it could be pulled from availability at any time.

PPS – More info on Andreas and DFJ: http://www.dfj.com/about/

Andreas_DFJ_pt2 Andreas_DFJ_pt2

Andreas_DFJ_pt3 Andreas_DFJ_pt3

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survey

Just under a month ago I put some simple questions together focused on fund raising and asked you, the people who read this blog, to respond.  Thanks to all the people that took the “45 Seconds Survey”.

I thought it would be useful to go through some of the data and comments and if you have not yet taken the survey – I’ll put a link at the end of this posting.

1. Do you think you will be raising funds for a business in the next 6 months?

50% Yes
16.7% Maybe
33.3% No

2. If you will be raising funds for a business – where do you think you will focus?

80% Angel Investors
20% VCs or loans

3: How hard do you think it will be to raise funds for a business? Why?

80% Super Hard because…(A few representative comments)

“Economy is tight. “

“Never done it; not part of my network”

“Few contacts, poor economic climate”

4. What help or information would be critical in the next six months – either for funding or your Startup / business? (A few representative comments)

“What do I need to present to potential Angel funders? How do I find potential funders?”

“Connecting with interested investors…”

5. If you could have a magic button that would do ANYTHING for your Startup or growth business – What would that button do? (A few representative comments)

“Marketing. We don’t have the funds to spread the word.”

“Deliver my marketing message to a million people in a credible, trusted manner.”

 ++

There are a few elements that particularly stood out – I was surprised at the number of people who would actually be going out to investors in the next six months – more than 50%. Now that could be a factor of the people who read this blog (if so – you’ve come to the right place and thanks for reading…) – however, 50% + still seems high to me – what do you guys think?

Second, the overwhelming majority of people believe that Angels are the route to go to get the necessary capital to take their business to the next level – I found that extremely surprising – especially as Angels tend to get used earlier in the funding life cycle of a company. I would be shocked if 80% of the people who read this blog are just at those earliest stages. Assuming for a moment that there are readers with more mature growth companies – why is Venture Capital not more represented as a likely route for those to raise capital?

A few ideas –

1)     Is there a belief the VC industry has slowed down or is no longer lending?

2)     Are VCs tougher investors?

3)     Is it tougher to get through the door of a VC than an angel?

If you have a view – please add your comments.

And lastly – despite their being multiple websites and blogs out there – there still seems to be a lack of clarity around what VCs and Angels need to see as part of the investment evaluation process.  Well, interestingly enough – I’ve been working on some tools that could help with that process and as soon as they’re ready for prime time, I’ll let all those on the mailing list know more.

If you would like to add your views to the survey – I’ll keep it open for a short while longer.

Click Here to take survey

Any comments or thoughts – please attach them and I’ll do my best to respond.

Andrew

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I asked the guys at Hepnova (a cool group of folks) to put together a video on how marketing factors into connecting and making a great first impression with Investors.

You HAVE to watch this video!

Tell us what you think.

Thanks Hepnova Guys!

….Who says working with Investors or raising money has to be boring…

Comments below

Andrew

PS: for a short time I have an audio course which could seriously help your fund raising. I’ll soon bundle it with a broader course so it could be pulled from availability at any time.

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Last night, while mowing the lawn, I was thinking about some of the ways I was able to break through the barriers and raise both Venture Capital and Angel funding – and while walking backwards and forwards, one of the main ways just sprang into my head. 

I thought I would share this Fund Raising Mega Tip as it really works…

With the first business I started, I almost stumbled across investors and with each business, the same has been pretty much true – and even, when I think about how it all unraveled…even when I was consciously out to raise $5-6 million bucks from the Venture Capital community.

Now, if you are actively out there or even if you will be soon you’re probably either scratching your head in wonderment and disbelief or about ready to throw that coffee cup through the computer screen in disgust…

He almost tripped over his investors?

Crap – I don’t believe it, I’ve been banging my head against a brick wall for months or expect to be soon, and still no investors or a term sheet in sight…

So – let me tell you that mega tip I promised…and it really DOES work

…no kidding….

If you go out looking for cash, you will end up getting lots of free (and probably worth what you paid for it… ;-) ) advice from angels and investors about what you need to do to make your business investment ready…

…and, unless you’ve hit some really exciting milestones in your business, that’s probably all you’ve got so far or probably all you’ll get.

Depressing huh?

But there is another (easier…) way…

So – again, if you went out and asked for cash, you probably got ‘advice’…

So what do you do?

Here’s the beginning of the mega tip #2…

You flip that around…

You DON’T go out and ask for cash….

You go out and ask for ADVICE…and it will lead to cash if you are asking the right people…

Still scratching your head?

Let me explain…

Go out there and find some people who have been there and done it already – (I highly recommend a mentor or three whatever happens) – but…

We’re talking about raising cash here – so – go out and find those people that have been around the track before and, making sure they understand how you appreciate their experience, ask to spend some time with them to benefit from this experience.  They probably will – ego is involved, and they will doubtless appreciate the recognition of their accomplishments from someone who can sit at their feet and learn from one of the masters… (…tongue in cheek of course but you’re getting the pitch right?)

Now, assuming you strike up a rapport – you will probably find that they’ll want to help – and then they’ll do that magical thing…they’ll refer you to people that can help…

No lets stop here – if they want to give you names, numbers and emails – you should suggest that an email out of the blue from you will likely end up in the email junk folder. Tell them you’ll only get the time of day if that person know’s you’ve come them – so, ask them to send each of these contacts an email and either cc you or bcc you.

When that happens – reply all and away you go.

A suggestion – check back with the mentor reasonably regularly, tell them how you’re getting on, especially with their contacts, keep them engaged – you never know, you might need them when it comes time to negotiate or at any other time…

This has happened to me often…but, and this is critical…actually go and spend time with the absolute focus on learning as much from that person as you can…do NOT go there, nod a few times and wait for them to crack open their network – they’ll know in an instant and after your coffee, you’ll find yourself on the sidewalk, wondering what went wrong.

So – mega tip #2 – go out looking for advice and it will likely lead to referrals and ultimately cash…having someone who has already won their spurs, tell potential investors to take a look at you is magic!

Mega tip #3 coming soon.

Does all this stuff make sense? Any questions or suggestions?

If you liked this posting – tell a friend, hell…tell California…tell the world…. ;-)

Join my mailing list and you’ll be one of the first to hear about Mega Tip #3.

And by the way – I offered help on my post below – I meant it – if you have ANY questions, I’ll either do my best to answer them in a follow on posting, or find someone that can. Thanks to those that have already sent me an email…so email or comment please…

Andrew

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What do you need to know about Start-ups or funding in the next three months?

If I can’t answer your question – I’ll find someone that can…

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Last night I played a new album – the first track started and I listened – it was a great track.  The next started and almost instantly, I knew I didn’t want to listen to that track, so jumped to the next.

That got me thinking…how can you know, in just a few seconds, you’re not going to like something?

Somehow – you just do, right?

And do you know what’s stranger than that?

More often than not, your first impression was correct!

If you go back and listen to that skipped track – you’ll probably find it really wasn’t worth your time.

That reminded me of one of the first things I was taught when I started within the brand management (marketing) group at Procter & Gamble – it was a simple lesson that just about everyone (especially within the internet marketing space) either consciously or unconsciously appreciates.

The lesson?

“You have four seconds to make a Great Impression”…

Now to Procter & Gamble that meant the product packaging needed to convince the consumer that they needed and wanted that product within four seconds…

If the product couldn’t do that then it would fail. Clear and simple.

They came up with data driven ways to determine if the product met that four second rule.

Now consider a web page – the ads ( and the whole site itself) are designed to hit the target audience and convince them within just a few precious seconds.

The human mind moves on after those precious four seconds IF its not convinced.

Consider dating – don’t you just know, as soon as you meet someone, if there is going to be some chemistry between you?

Another example – My Father used to tell me that a person’s shoes were critical for making a good first impression – if they looked a mess they said something about the person who wore them – and they were almost the first things you saw. (there’s that four seconds again…)

So what does any of this have to do with raising money or getting an investor for your business or Startup?

Well – it’s critical to consider because…

By all means spend hours on the business plan, the executive summary, the powerpoint slides and the financials and all the other things you are building for yourself, your business and your target investors…they will probably be invaluable as you build your business…

But know this…

The first four seconds when meeting an investor could (and probably do) significantly impact your ability to close that investor.

Ughh – does that mean its all…chance?

No – absolutely not!

Just like anything else – you can put your best foot (or shoe :-) ) forward and optimize the likelihood of success.

Want more information?

Please post your comments.

Andrew

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A year or two ago I sat on the Board of the Small Business Council – this was a group of entrepreneurs, handpicked by the UK government to advise them and the Department of Trade & Industry on all things related to Startups, Entrepreneurs and Small Business.

We would meet regularly as a board, look at programs to stimulate small business, proposed laws and regulations, meeting with tens of venture capitalists, angel investors and private equity folks at a time, as well as other small business owners around the UK and Europe. My area of interest and where I spent most of my time and energy was being a part of the Small Business Investment Taskforce looking at funding for small business and the Angel/VC and Private Equity Communities. This whole experience was challenging, stimulating and the learning curve was hyper incredible – it was seriously a once in a life time opportunity and worth going back to the UK for (after it finished, I went back to the US…)

So what has this to do with you having problems raising money?

Well, one of the insights this extended group came up with and reinforced by a monumental survey they undertook for a few years (called The Big Survey) – was that there was “no shortage of cash for small business” and just so you know, part of this study and the research after included looking at the startup environment in other countries – Europe, Australia and the United States. Supposedly, this was true not just in the UK but in those countries too…

I’ll pause there because, if you have tried or are trying right now to raise money for your business, you may have just fallen off your chair. Get up and I’ll type it in again so it doesn’t get missed.

One conclusion they came to was … “There is no shortage of cash for small business (…and startups)”

Now, when they tried to tell me that as an entrepreneur that has gone through the hot and sweaty crucible of raising millions of dollars by giving pints of my blood, crying into my startup pillow late into the night, and gnashing my teeth in absolute frustration - I found myself sitting on the edge of my chair and arguing – “Are you kidding? When you’re starting a business – finding cash is next to impossible…” I yelled across the boardroom, purple faced, heart racing.

With urgings to sit back down and wondering if they should call Security, they calmed me down and spent the next two hours is whispering my disagreement…

Do you know what they showed me – and what I’ve since had reinforced by multiple conversations with CEOs and Startup junkies?

And this is worth slowing down for too….

There is not a shortage of cash for startups and small businesses – even in this economically challenged times….do you know where there’s a shortage?

…there’s s shortage of companies that are READY to receive an investment from an angel or venture capital investor.

What?

Yep – You may think your business is ready to get cash from an angel or a VC – but maybe, just maybe, it isn’t.

It may not be that Investors have all gone on vacation just when you are raising money – it may be that either you are not yet investment ready or, and these two points could be true too… either…

  1. There is a mismatch between where your business is versus what investors want to see or
  2. You aren’t communicating where you business is at in the right way for investors to digest and get comfortable with.

Now this is big stuff – because if these points are right – perhaps it isn’t that there are no investors around, or that cash has all dried up – maybe, just maybe, you need to think different (read: rethinking…) about how you pitch your business or (and this might be tougher to accept…) perhaps you need to make a little more progress in your business before you are ‘investment ready’. But having raised $5M+ with a business plan, a couple of people and a concept after the dot com bubble had already burst – in my view – it’s probably the former – you may need to re-examine and rethink HOW you are pitching your business to investors.

Are you ‘investment ready’?

And how should I do that Andrew?

That – dear Reader – will be an extended topic for yet another blog post…

Until next time – please consider joining my mailing list and I’ll send you blog posts as and when we have updates.

How did this post hit you? Any comments? Or Questions?

If you found this useful or interesting please consider forwarding, tweeting or other some such way of spreading it to the masses. (I also do Kids parties and Bar mitzvahs:-) )

Thanks!

Andrew

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One of the most common questions I get asked is…”How can I connect and engage a VC if I don’t know any?”

And please forgive the tangent – but I will answer this (I promise) but a little know fact (until now…) is that I write stories and novels to relax…somehow being in the heads of multiple characters is more relaxing than 24 or CNN - go figure!  Now, after nearly five years I’ve probably written about five, maybe six novels in the 70 – 110K range. Now despite that – I’ve never tried to have them published – but about six months ago, I had one near final draft I was really enthusiastic, nay…passionate, about, so much so that I thought it deserved to see the light of day on the shelf of my local Barnes and Borders. So now what?

Well – people in the know suggested I needed to find a literary agent - a person that would vet, bless and promote the manuscript to the market.

Now finding a literary agent is not easy – (oh is THAT an understatement…) and as I started to go through that process, I started to see some strong parallels with Venture Capitalists and their relationship with entrepreneurs…huge Déjà vu!

 How so Andrew?

So imagine this – Literary agents get manuscripts…piles and piles of manuscripts…on a daily basis.

The get them from all kinds of sources…they get manuscripts through the post, they get faxes, people accost them at dinner parties, in the street, in bagel stores, on elevators, in public toilets (ughh!) - well, you get the picture right? They get LOTS of manuscripts – to the point where, if you walked into their office, you would probably wonder where to sit down for the mini-towers of 12 pt courier and times roman fonted documents held together by thick elastic bands (not – God help us – clips or staples…an absolute no no!). They call this collection of massacred trees – The ‘Slush Pile’.

Now from what I hear from Venture Capitalists – they too have their own slush pile of PowerPoint slides, business plans, emails and more that piles up in their offices too on a daily basis.

So – if you are an entrepreneur or author – how do you cut through the slush pile, how do you get to that treasured term sheet or book contract?

And here – the parallels just continue…and here too is a secret for optimizing your chances of engaging a Venture Capitalist – and it’s not really that much of a secret (but admit it…you continued reading right?)…

Most VCs I talk with tell me that somewhere around 80% of the businesses they are seriously looking at, come from….

Post? Nope

Fax? Nope

….Referrals….

And according to pretty much every literary agent you talk with will tell you the same thing – sure – they go through their slush pile but just because occasionally, they’ll find a diamond amongst the rough – and let’s face it, that’s quite exciting right? A bit like treasure hunting without a map…

But most VCs and most literary agents tend to really look into those candidates that are recommended by people they know and trust.

Damn! You may be thinking…I don’t hang out with VCs or literary agents – so how do I get referred?

Well, that’s actually quite easy – you need to plug into their network and there are a few tried and tested ways of doing that…

1)  The Entrepreneurial Law Firm or Lawyer:

In most entrepreneurial hubs (Silicon Valley, New York, Austin, Boston and the like) there are certain law firms which like to work with entrepreneurs and young, growing companies. Example – In Silicon Valley, they would be firms like ‘Fenwick and West’, ‘Wilson Sonsini’ and ‘Cooley Godward Kronish’.  If you become a client of a firm like this – they will occasionally have mixers for clients and also your assigned lawyer may help connect you with VCs they know. It happened to me when I was a client of a company called The Venture Law Group.

So – one way of getting that referral is to become a client of one of those startup-centric law firms and have them join the dots for you with some of the VCs within their network.

2) Other Entrepreneurs (or Authors):

Now if you like in one of those entrepreneurial hubs I mentioned above, you’ll probably trip over other entrepreneurs of varying degrees of experience and success when you go out for milk in your sweats and sandals. Finding a successful or aspiring Startup CEO in San Francisco is about as tough as catching a cold in the subway…but if you don’t happen to live in SF, or NY or Boston – how do you connect with other entrepreneurs who can refer you to a VC?

Go where the entrepreneurs and VCs are – for example, find the annual conference or tradeshow for your space – just like authors go to Thrillerfest or Comic-con and hook up with other authors and literary agents.  Go online – find the best tradeshow for your space, buy a ticket then go schmooze – making sure you rehearse your elevator (60 second) pitch so if you are lucky enough to connect with the VC or entrepreneur of your dreams - then you can engage and start a dialogue. Most VCs and entrepreneurs will recognize an aspiring entrepreneur and will cut you a break and listen…unless you’re harassing them at 3am in their hotel room, anyway.

3) The Open House:

Some of the more innovative VCs are hosting open houses, just like they were trying to sell a property in a buyer’s market.  An open house is when they throw open the doors and let hopeful entrepreneurs come pitch. The challenge is that sometimes these spots are rationed according to…yup, you guessed it…referrals. But sometimes not.

4) Twitter and other Social Media channels like Linked In: (My Twitter Handle is /TheFundingGuru)

Believe it or not – many of these target VCs /Literary agents are on twitter – so why not follow them, find out what they are into, and find out which conferences etc they’ll be attending – they often tweet with this kind of info and hey, if you engage them in a conversation then maybe you can bridge the gap yourself. Warning Will Robinson – engaged them…don’t stalk them! Being creepy will not get you that VC term sheet or book contract. The other advantage of this form of forum is it will help you determine if they are right and interested in what you have to offer. One thing I hear quite a bit from VCs and Literary Agents, is that they get pitched by people who have no real clue what they tend to invest in – it’s just a complete mismatch that wastes everyone’s time and could have been avoided with a little more background work.

There are a multitude of other ideas that would help you connect and engage but I’m starting to bore myself – so I’ll cover those later. Until then, if you try the ideas I’ve laid out – I think your chances of connecting and engaging with a VC are much higher – and if they still don’t work….

…just post your Executive Summary with a cover – because – after all, there’s always the slush pile and hey…they may get to those – eventually…

I have a couple of questions for you guys:

1) Which are the main entrepreneurial law firms in your town, city, area? That would help other readers…post in comments please.

2) What other ways have you tried to connect with VCs (or literary agents) and what has worked or not worked?…again, help others with you comments (thx)

Consider joining my mailing list and I’ll send you updates as an when they are written. And I never share my list with anyone – ever! Period. Fullstop!

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

Thanks!

Andrew

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TheFundingGuru_Erik_pt1 (Erik Benson Interview with the Funding Guru Part 1)

TheFundingGuru_Erik_pt1

Today’s podcast is an interview with Erik Benson, an MD at Voyager Capital in the Pacific Northwest.

Erik_ Benson

Erik takes us through a number of areas including:

  • What makes Voyager Capital different than it’s peers in terms of the value it brings to it’s entrepreneurs.  Come listen to find out about three key areas of value that Voyager delivers – keep an ear out for ‘GTM’, ‘HPT’ and “PEP’. (A blog first exclusive for The Funding Guru!)
  • The kinds of companies Erik invests in and the types of companies he’s looking for…
  • Erik also gives us some tips on how to get noticed by Venture Capitalists if you are NOT plugged into their advisory network or alumni group. Take a listen to get a tip that could help you with Voyager and most other VCs.
  • One key sound bite is Erik believes its never too soon to met an entrepreneur – he lets you know how you can reach out to him in the podcast.

Could Voyager Capital be right for you?

Voyager  tends to invest between $500K – $3m (first round)

  • Commits in the range of $7m per investment
  • And they are actively looking to find another 7-8 new companies to invest in with the current fund

Please consider joining the mailing list and we’ll keep you updated with when other great interviews like this come along. There are more lined up that you will NOT want to miss.

Thanks for your time Erik and thanks for your time listener!

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

Andrew

TheFundingGuru_Erik_pt2 

(Erik Benson Interview with the Funding Guru Part 2)

TheFundingGuru_Erik_pt3 

(Erik Benson Interview with the Funding Guru Part 3)

NOTE: Podcast music is called Rocket by Kevin Macleod

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grouse-shooting

You’re treading through the entrepreneurial forest surrounded by uncertainty and mist – taking one careful step at a time, frightened to pick and commit to one path, you wonder if there is still time to turn around and head back into safer country – they’ve kept your old job available (..surely…) but, only pausing for a moment, you know, deep down, that you are already committed. Gulp!

…the hunt it on.

Your gun is lowered but your sweaty hands clasp and unclasp around stock and barrel.

You feel the weapon, knowing it has some weight – knowing too that it’s not as big or as powerful as those guns possessed by others but nevertheless, you’re still proud – it makes you smile because you created it with your own two hands.

You press on, only briefly glancing back over your shoulder, the path you’ve trod already dark and uninviting.

Your gun gleams in a flash of sunlight and inspiration…is it time to ready it? Should you relax for a bit longer? Will it be good enough to bring down your first investor?

Barely daring to breath – you swallow with a drying mouth – knowing your ability to eat rests on the next few moments, scanning for investor movement, then…

– SNAP –

…your last step breaks a twig underfoot…and the angels burst from the brush…

Your heart responds by jumping into your throat – damn! So Soon….too soon?

They scatter in multiple directions – none towards you but sighting one that looks fat and promising – before you’re even properly lined up – you pull the trigger, desperate to bag your first.

With half shut eyes you watch perhaps you last chance fly on brisk wings, already knowing the result in the hollow of your stomach.

You Missed! 

…and the sound of fluttering fades with your hopes, disappearing into the gray sky.

But out the corner of one eye, you see movement. Could it be?

Twisting your head, you see it…Yes!

A breath, held as you squint to make sure…  

Lined up and holding tight, you pull the trigger, wincing as the gun recoils.

Bang!

A Hit!

Whew – you bagged your first angel.

Now what?

Do you really have to gut it yourself?

Consider signing up to my mailing list and I’ll send you updates to help.

Andrew

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