Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Entrepreneurs, You Need to Get the Attention of Your Investors within the First Three Slides to Secure Funding

When meeting potential investors for the first time entrepreneurs need to quickly secure their attention.  Although, the standard thinking is that you have an hour, with 20 minutes to present and 40 minutes of questions, you really only have a few minutes to secure their attention and hold their interest. As such, if you do not secure your potential investors attention within the first three slides of your presentation, you will not secure funding.  Why, because like with any presentation, especially in the case of potential investors, if you do not secure their attention quickly, you risk the likely hood of turning them off completely to your investment opportunity.  So, as an entrepreneur looking to secure funding from third party investors, you only have three slides and a few minutes to secure their interest.  This includes, defining the opportunity, describing the problem and outlining your solution.  If done appropriately and succinctly, you will secure your potential investors’ attention for the next hour.  If not, your investors will turn off and move on to thinking about other potential investment opportunities.  So remember, you need to secure the full attention of your potential investors very quickly, or you risk the losing them and your ability to securing funding altogether.

Define the Opportunity

When presenting to investors, you first need to define the opportunity to be able to get your investors’ attention and their “buy-in” that your target customers will buy and use your technology, product or service offering.  This means you only have one to two minutes to sell the opportunity to your potential investors.  With the complexity of many product offerings, you need to focus on “tugging on the emotion” of your potential investors.  How would the customer use your technology, product or service offering?  This can often best be described with an example application.   This approach will get your investors attention, as they will be able to see how customers can use your technology, product or service offering.  As such, you are ultimately describing the end market application through the customers’ eyes.  This approach will allow your potential investors to empathize with the customer and better understand both the application and the opportunity that exists for your technology, product or service offering.  By creating the ability for your potential investors to understand investment opportunity through your end customers’ eyes, you quickly be able to create a lasting, positive impression in the minds of your investors, securing their interest to continue listening to your investment opportunity with intrigue and interest. 

Describe the Problem

Once you have defined the investment opportunity in the minds of your potential investors, you need to succinctly describe the problem. The “problem” is the opportunistic need you are solving with your technology, product or service offering. This problem description again needs to be clear in the minds of your potential investors. As such, they need to believe that you are serving an appropriate strategic opportunistic need in the market. So, take the time up front to properly describe the problem in terms that all potential investors can understand.  This will move these same third party investors one step closer to understanding the investment opportunity and again provide them one more time to see the investment opportunity from the “market needs” side of the equation and not from the technology, product or service “provider’s side” of the equation.  By being able to quickly and properly describe the problem from a “market needs” approach you will again be standing in the shoes of your potential investors and answering their questions – and at the same time allowing them to come to your conclusions on their own. This is the “best” way to approach investors from a “problem definition” point of view.  If they believe there exists a problem in the market, then they are more likely to believe in your solution.  Now, you are 80% there in securing their interest in you, your start-up company, and its technology, product or service offering.

Outline Your Solution

Finally, as an entrepreneur, describing your potential investment opportunity, you need to outline your solution to the problem you just portrayed.  This description needs to not only succinctly outline your solution, but it needs to outline the benefits of your solution in the market over any and all other solutions in the market.  Remember you are trying to quickly secure the interest in your technology, product or service offering from your potential investors, so they need to be able to quickly understand, in their minds, your solution and the competitive advantages it offers in the market.  So, as an entrepreneur you need to not only outline your solution, but you need to appropriately describe all of its competitive advantages and associated utility to the consumer or end user.  By doing this, you are making sure that your potential investors again come to the same conclusions that you have, and that they believe your start-up company offers a solution that provides a long term competitive advantage in the market.  So, properly outline your solution to your investors, as once you convince them that you offer “the solution” for the “problem” you are solving, all follow-on information provided during your presentation is now just back up support materials to justify the potential investment opportunity.

As an entrepreneur, typically you have an hour to present in front of sophisticated investors (e.g., venture capitalists).  This generally consists of a twenty minute entrepreneurial presentation and forty minutes of questions from these same potential investors. In reality, though, you only really have a few minutes to secure potential investors’ attention. To properly do so, you actually need to get their attention within the first three slides of your presentation by defining the opportunity, describing the problem, and outlining your solution.  If done properly and succinctly, you will secure their attention and the interest of your potential investors.  If not, your investors will “turn off” and move on to thinking about other investment opportunities.  So, as an entrepreneur, remember, you have need to secure the full attention of your investors quickly, or you risk the losing them and your ability to securing any funding from potential investors altogether.

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.

May 3, 2010 Posted by | Competition, Customers, Execution, start-up, Venture Capital, Venture Funding | , , , , , , , , , | Leave a comment

Entrepreneurs, “The Audacity of Hope” is Not a Path Forward for Securing Funding and Ultimate Success

Most entrepreneurs engage in the development of a start-up company to fulfill their hopes and dreams of being their own boss of a successful company and potentially becoming rich. This is the American dream and the primary reason America remains a powerhouse of both job and wealth creation in the world. At the same time, I often hear first time entrepreneurs say “If I only had a million dollars then I would be able to develop a successful start-up company.”  This hope is based on the false premise that money by itself will solve all of the problems of their start-up company.  Like in life, money does not solve your problems, and in business money will not necessarily make your start-up company successful.  Case in point, Teledesic was a start-up company founded in the 1990s to build a commercial broadband satellite constellation for providing Internet services. Teledesic originally planned on building a network of 840 active satellites and received multiple billions of dollars of venture funding only to officially suspended operations in October 2002.  As with Teledesic, the failure of any start-up company is inevitably not a money issue, but the combination improper planning, inept execution, and the inability to get market traction.  The misplaced “audacity of hope” that securing funding alone will solve all of your start-up company’s problems, is really based on an entrepreneur’s unrealistic expectations and unwillingness to do the hard work required to make their start-up company successful.  This article outlines the three things all start-up companies need to do on their path to securing funding and to ultimately make themselves and their start-up companies successful.

Dare to do Business Planning to Facilitate Funding Success

The most important thing an entrepreneur needs to do before they write their business plan and then go out to engage potential investors for the purpose of securing funding is to engage in business planning.  Yes, you need to first begin your start-up business by doing the appropriate amount of business planning.  Business planning, as investors know, is what differentiates successful start-up companies from unsuccessful start-up companies.  In addition, this is where most entrepreneurs fall short.  There are two primary reasons for this, including the following:

  • Entrepreneurs either chose to ignore, or lack the desire to put in the required effort to do business planning. They do not want to do the unavoidable hard work on their way to developing an investor quality business plan, including, the due diligence, research and overall planning that will ultimately define their start-up company.  This lack of desire to do this hard work will ultimately hurt you and your start-up company. 
  • Entrepreneurs do not have the proper backgrounds or do not have an understanding of the importance of business planning in the road to developing an investor quality business plan. In this case, again, a lack of knowledge can hurt you and your start-up company.

Whatever their underlying reason, entrepreneurs need to understand that the business planning exercise is where all of the required business plan details are formulated, developed and finalized.  Business planning is where you acquire the required knowledge regarding your proposed business proposition.  From the target markets, to competitor positioning, to the projected financial returns, this is where you become an expert in both your product offering and your business. By not engaging in the required business planning, in the near term, you will not impress your investors with the knowledge required to secure funding.  In addition, in the long-term, not knowing your competitors or the markets will not allow you, as an entrepreneur, to maximize the return on investment for your start-up company and for your investors. Therefore, dare to plan, as it will provide you with the necessary knowledge to secure funding and facilitate your start-up company’s success in the market.

Flawless Execution will Drive Success

There are many, many things that need to be accomplished for a start-up company to be successful.  In all cases, for any given start-up, there are too many things to do and not enough time to do them.  This is why the focus on flawless execution will help drive your start-up company to success.  Focusing on executing at all levels, and across all disciplines of your start-up enterprise is the lynch-pin that will drive success.  Therefore, as an entrepreneur, you need to properly map out your targeted, significant milestones and then hit these milestones with flawless execution.  Time is everything for your start-up company, and making sure that you execute in a timely manner will drive the ultimate success of your start-up company.

Potential venture investors also necessarily want to see flawless execution and that you are hitting your milestones in a timely manner.  This ultimately increases the value of your start-up company. In addition, nothing provides investors with more confidence in a start-up company’s management team than the timely execution of significant, value added milestones.  This is a big differentiator for start-up companies. As most investors know, for start-up companies, everything always takes twice as along and twice as much money.  Hence, the lack of execution, wastes both invaluable time and investors’ monies.  Therefore, clearly define achievable and significant milestones and then work diligently to execute and deliver.  This will impress investors and at the same time drive your start-up company to success in the market.

Market Traction a Final Key to Success

Achieving market traction is your start-up company’s final key to success.  Remember you are not in business to just to develop an interesting and unique technology, product or service offering.  You, as the entrepreneur of a potentially successful start-up company, are in business to acquire paying customers. Therefore, securing paying customers and achieving market traction early is a key to any successful start-up company.  To achieve this market traction means that you need to call and then engage with customers early. They need to know that your start-up company is out there in the market and that in addition you offer “value” to their end market application. 

Securing customers and acquiring early market traction, even before securing funding, is often where most start-up companies fail.  They have done their planning, have executed flawlessly, but they often fail to engage with their target customer base and secure customers.  This will not impress your potential investors.  One of the first questions these same investors always ask is whether you have any customers or interested customers. If your answer to this question is that you do not have any customers, then they will want to know who you have talked with and then determine their interest.  Remember investors are risk adverse by their nature and securing market and customer traction early goes a long way to addressing their risk tolerance and ultimately securing funding. This is especially true in today’s tough funding environment. 

Finally, as an entrepreneur,  you need to remember investors need to know that you have a product offering that provides “value” to the market and has the ability to secure customers, and quickly.  Venture investing is all about achieving the highest return on investment in the shortest period of time.  Acquiring paying customers early is the only way to achieve this objective.  Investors know this and therefore they necessarily will focus on your start-up company’s ability to acquire customers and achieve market traction in a timely manner.

“The audacity of hope” is not the path forward to securing funding, nor is it a key to success for you as an entrepreneur of your start-up company. As outlined here, doing the appropriate business planning, executing flawlessly, and then securing market traction are the best avenues forward in securing funding and achieving success for your start-up company. By addressing these three items, you are on the appropriate path to fulfill all of your hopes and dreams through the development of a successful start-up company.

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 http://www.carlsbadpublishing.com

August 3, 2009 Posted by | Business Planning, Business Plans, Customers, Execution, Market Traction, start-up, Venture Capital, venture finance, Venture Funding | 2 Comments