Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Start-up Companies Often Require an Experienced Leader to Move Forward in Securing Funding

I have met a million start-up companies that say they need venture capital to get going.  Many of these same start-up companies have accomplished a lot in a short period of time, and with little money.  But, at the same time, these start-up companies are not ready or prepared for venture capital funding. Why, because they do not have a cogent business plan that will stand up to the rigors of the venture capitalists.  What often they have is a concept or even once in a while, a working prototype, but they often do not have a plan that outlines how they are going to spend the required monies and what financial returns the venture capitalists can expect to get for their investment. At this point, many of these same entrepreneurs are stuck. They have a compelling concept or even a prototype, but they do not have a way forward to secure funding.  What they often need is someone, who has experience in fund raising to come in as the CEO of the company and provide the leadership required to move the company forward in secure funding.  This article outlines several of the near term leadership-related issues this new CEO needs to address to get the start-up company moving forward to securing funding.

Set the Expectations for the Team

The first thing the new CEO needs to do is to set the expectations for the team.  This includes outlining what investors are looking for from the executive team and their start-up company. Too often, start-up companies and their executive teams have an unrealistic expectation of what it takes to secure venture funding or even what is expected from venture capital investors. This needs to be cleared up at the start.  Venture capitalists are a tough group from which to secure funding, and statistically these same investors only typically invest in 3 out 100 start-up companies they review.  Therefore, the conclusion one should come to here is that venture capitalists are looking for something that is really unique with the ability to create a substantial impact in the market.  Anything less will not get their attention.  Even with these characteristics, there are many start-up companies that do not get funded, due to many other reasons, including a bad executive team, no real go to market strategy, etc.

In addition, many entrepreneurs do not really know or understand the amount of work and effort that is required to get from where they are to securing venture capital funding.  So, it is also important to set the work-related expectations for the executive team up front.  They need to understand the raising money is hard work and it requires a substantial amount of effort over a prolonged period of time from all of the team members, not just one or two, members of this same executive team.  So remember, setting the venture funding expectations up front will help lead the team through the funding process.

Define the Near Term Funding Goals

The most important near term goal the new CEO can set is to develop a business plan that is sellable to venture community.  Having a great business concept of even a prototype will not necessarily provide the path forward to securing funding from venture capitalists. So, here as the leader of the start-up company, you need to set the near term goals for the company.  This necessarily includes developing an investor focused business plan, but in addition it can include:

  • Creating an appropriate strategy and focus for the start-up company,
  • Defining the appropriate product offering as required by the market,
  • Determining the start-up company’s financial model,
  • Securing the appropriate partners to provide a complete product offering,
  • Calling customers and getting real feedback on your product offering,

In addition to the above, many other things need to be addressed.  The point here is that while you are developing an investor focused business plan, as the leader of the company, you need to address all of the necessary things that will make your start-up company successful. Having done your homework and accomplished these near term goals will provide you with a much more complete business plan and provide your investors with the necessary confidence in your start-up company and your team.

Assign and Execute the Associated Tasks

Nothing ever gets accomplished unless the team is pulling together in the same direction. Here, as the leader of the start-up company and its executive management team you need to assign tasks, with associated delivery dates, to these same team members. More often than not, each team member will have an appropriate skill set that can be used to not only help develop your investor focused business plan, but to open the necessary doors to secure the right resources, get into the right customers, and target the necessary potential strategic partners, etc.  All of these things need to be accomplished in parallel and it is often a daunting task. But, with a committed team and the appropriate leadership, the assignment and the execution of these same tasks possible in a defined time frame.  By going through this, the team will also necessarily become closer, as they are working toward to same goal of securing funding for their start-up company. So, as the leader of the team you not only have the responsibility of assigning the tasks, you necessarily have the same responsibility to see that these tasks get executed on time. This will allow you to not only deliver an investor focused business plan, but provide a complete picture of how and why your start-up company and its team will be successful in the market.

Too often start-up companies claim they need funding to be successful, but have no idea how to secure this funding.  With a great concept or even a working prototype, these same start-up companies often lack direction or the ability to secure the necessary funding to move forward.  To move to the next step, these same start-up companies often need to hire a CEO, with funding experience, to provide the leadership to guide their start-up company through the funding process. Here, the near term leadership responsibilities, as defined here, include setting the appropriate funding-related expectations for the executive team, defining the near term funding goals, and assigning and executing the appropriate tasks.  With this new leadership, the start-up company and its executive team have a much higher potential for success in securing funding and ultimately being a force in the market.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.  For more information on the book go to www.carlsbadpublishing.com.

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November 16, 2009 - Posted by | Business Plans, Venture Capital, Venture Funding | , ,

2 Comments »

  1. I only want to tell you thanks for all the great info found on your blog, even helped me with my work recently 🙂 keep it up!

    Comment by Spyware Removal | November 17, 2009 | Reply

  2. I wish that start ups would actually read this…

    Comment by The Lone Ranger | March 4, 2010 | Reply


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