The Funding Guru » VC Garage

Have Two Brains When Talking to Venture Capitalists

Andrew — Thu, 13 Aug 2009 05:25:03 +0000

Homer

Have two brains when talking to Venture Capitalists

You are standing at the end of a board room, licking your lips, a warm moist sweaty hand leaving a print on the table, that if laden with turkey, sweet potato, gravy and stuffing – would be a Thanks Giving dinner for three families – but putting hot platters of food on top of the highly buffed cherry wood surrounded by misted brown glass floor to ceiling windows, would be close to sacrilegious to all the furniture lovers out there.

You have done it – your carefully crafted email passed to a friend who reassures you they have a relationship with a ‘known’ VC – actually arrived in the hands of the VC and something in your hopefully constructed paragraphs encouraged them to schedule a meeting with you – and here you are – your laptop whirring and the small machine rendering your first power point slide onto the pale cream wall.

A younger than you would expect, happy, hip guy strolls in – a perfect all American boy with near teenage good looks and a smile which makes you wonder if you’re about to be asked if you want cream with your coffee – is this an assisant to the VC?

…then the penny drops…no, this is not some intern or recently minted college grad…this is the Venture Capital – damn, they make them young don’t they?…

Doing your best to swallow as all the fluid in your mouth decides to disappear into your twisting gut; you press the down arrow on your presentation and begin to take the VC through it…

…who you are…

…who the team is…

…why this is the biggest market opportunity since the Ford Motor car…

…why you are the right team, nay, the only team to bring this soon to be huge business to the world…

…the barriers that will stop anyone following your world changing idea with a copy of their own…

… And before you know it – you’re done.

Presentation over.

The last slide.

And, with one of your trusty team members flicking the light switch up – you blink into the smooth face of the VC and not for the first time, wonder if he’s shaving yet.

So should you ask him a question or wait for him to ask you?

Whew – question answered – his pen taps on the table as he ‘hums’ – thoughtful…breaking the ice and asking the first question…

And during the next 33 minutes, you have a discussion, listen and retorting as wonder boy pulls and picks your baby apart…

Perhaps it’s the size of the opportunity – perhaps it’s a half complete team – perhaps it’s too close to a company in their portfolio – perhaps you need a few customers…or maybe, just maybe…he loves it and want to introduce you to his partners at their regular X-Day meeting – and you are on your way…

Now you can change the table, you can change the brown mist on the glass but much of the rest will likely be close to what you experience when you meet your first few Venture Capitalists – Oh, OK, they might be older than Wonder boy mentioned above…maybe…

But one thing that is an absolute certainty – you need to be in two brains when talking to VCs – the one that is making your mouth move and helping you put complete sentences together (if you’re lucky) and the other needs to be recording and analyzing because it may take 1 or 5 or ten VC meetings before you start to get real traction – hey, you may also be lucky and get that traction immediately – but either way – have more than one VC meeting and in each of them – learn what elements concern them, learn what parts of the business model they consider a weakness and consider if they’re right. If they are, work on fixing it and during the next presentation, home in again on those areas that are of concern.

Why?

A few reasons – you will only get VC funding when you are ready to get VC funding…

By listening and understanding your business weaknesses, you can address them and ensure when you next present, they’re not weaknesses but perhaps strengths.

Last – VCs see a lot of businesses and business plans – they tend to get pretty switched on about the areas of concern and weakness – if they point them out to you – take it as extremely valuable advice that you got for free. Hey – maybe they’re right and by listening and find a solution now, you might save yourself a lot of time, money and pain later. And worse case – by listening and addressing, it makes your next VC presentation that much stronger and your chances of securing the large check your business needs much higher. Do this enough and you WILL raise the money you need for your business – unless it’s a completely crazy idea of course…

So present, kick ass, sell your business but listen to the challenges and the suggested weaknesses – don’t take them as personal slights – they’re not, they are learning opportunities that will get you closer to raising a significant amount of money for your business and may help you identify and resolve business challenges very early in the life of your new business.

Remember – it’s not personal – its business!

Podcast: Raising Millions – Interview with Andreas Stavropoulos, MD @ Draper Fisher Jurvetson

Andrew — Thu, 30 Jul 2009 21:51:20 +0000

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

Jurvetson’s Lecture at Stanford (pehub.com)
HCT Establishes a Benchmark for Social Finance (clearlyso.com)
DFJ Frontier And City Of Ventura Launch Incubator For SoCal Startups (techcrunch.com)

Podcast: Raising Millions – An Interview with Erik Benson, MD @ Voyager Capital

Andrew — Wed, 01 Jul 2009 18:24:04 +0000

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 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

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

Andrew — Tue, 30 Jun 2009 20:05:23 +0000

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…

Join my mailing list and I’ll keep you updated with new posts.

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

Andrew

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

Andrew — Thu, 18 Jun 2009 13:53:00 +0000

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.

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

Andrew

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

Andrew — Thu, 04 Jun 2009 13:26:01 +0000

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

The Funding Guru » VC Garage

Have Two Brains When Talking to Venture Capitalists

Podcast: Raising Millions – Interview with Andreas Stavropoulos, MD @ Draper Fisher Jurvetson

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Podcast: Raising Millions – An Interview with Erik Benson, MD @ Voyager Capital

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

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

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