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.

Advertisements

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

Entrepreneurs, Take Your Time When Choosing Key Personnel for Your Executive Management Team

Choosing the right executive management team for your start-up company can make the difference between getting funded and not getting funded.  Once investors “like” the business proposition, their investment decision primarily rests on the quality, experience and depth of the start-up company’s executive management team.  Therefore, choosing the right executive management team members is a key for any start-up company.  So, as an entrepreneur, you need to take your time in choosing your executive staff, as it is better to have a hole in your executive management team than to choose the wrong person for a key position within your start-up company.  Therefore, be very careful when choosing individuals to server as your start-up company’s executive management team, as picking the right team members will help you execute your roll out plan, allow you to attract investment capital and serve your start-up company well both short and long terms.

Don’t Commit Up Font with Unknown Individuals

When choosing the initial members of their executive team, entrepreneurs generally go with “known” individuals.  This can be a mixed blessing.  More often than not, the entrepreneurs have worked with these same individuals in some capacity during their career.  This makes these same individuals a “known” entity and therefore, the entrepreneur has a good sense of their skills, work ethics, morals, and overall ability to perform on the job, both in good times and in challenging times.  On the other hand, if these same “known” individuals do not work out, it is much more difficult to let them go, as existing personal relationships are often more difficult to sever. Therefore, be careful when choosing friends and/or colleagues to be members of your executive management team.

For key executive management positions that need to be filled with “unknown” individuals, as an entrepreneur you need to learn to be a bit more skeptical.  With that being said, I find it important to meet with these same individuals and understand both their motivations and compensation requirements.  Some of these same individuals are just looking for a pay check and are not willing to put in the necessary time or work up front to show what they can do.  These types of individuals, as such, do not provide you with the opportunity to determine what overall value they can offer your start-up company. I would pass on these individuals. On the other hand, if an individual is someone you are interested in bringing on board offer them a minimum number of stock options for a short period of time, for example, three to six months. Then use a performance-based consulting contract as the engagement vehicle to define the initial relationship.  At the end of this period you will have a better understanding of this “unknown” entity and their commitment to your start-up company and the skills and value they can bring to your start-up company.  Remember, individuals that are not willing to work on some type of performance-based consulting contract upfront, are not individuals you need to bring onboard as key members of your executive management team of your start-up company.  Accordingly, this type of short term performance based assessment is the best indicator of long term performance and value an individual can bring to your start-up company.  Anything less, is just a shot in the dark, and is something your start-up company cannot afford, both in terms of lost time and opportunity.

Don’t Let Executive a Staff Member that is Not Working Out Linger too Long

Often, even “known” entities, colleagues or friends that are brought on board to be members of your start-up company’s executive management team do not work out.  This is usually obvious from the beginning and can manifest itself in many ways, including:

  • They are not willing to put in the effort or commitment to get things done. 
  • They do not add the necessary value that is expected of a senior executive staff position.
  • They are not self-starters and require too much direction and “hand-holding”. 
  • They have too many personal distractions that take away from their job performance.

Be that what it may, these same individuals are not to be considered valuable executive management team members of your start-up company and over time can often be more of a distraction and overall hindrance.  As such, these executive management team members need to be removed as soon as possible. Allowing these same individuals to continue to be a part of the executive management team will only cause resentment among the other executive staff members, as they will understand that these individuals are not pulling their weight and need to be replaced.  Therefore, as an entrepreneur you need to understand that even “known” entities do not always work out. Hence, it is your job to recognize this early and institute a discipline-based, performance improvement plan, if possible, or let them go, as doing nothing and letting it linger too long will not benefit your start-up company and its overall performance.

Executive Management Teams will Change

Sometimes valuable executive management team members, of your start-up company, will leave the company for a number of reasons. You, as an entrepreneur, need to recognize that all executive management teams change over time. This can be for performance reasons, personal reasons, etc.  The key here is to make sure that you recognize that the initial executive team you start with will necessarily not be the executive team you end up with. This is especially true if you take on third party venture monies.  Venture capitalists are notorious for removing members of the executive management teams of the start-up companies they invest in, and in many cases you will have no control of this.  So you need to recognize that through attrition, your own actions, or the actions of third party investors, your executive management team will change. This, more often than not is a good thing, as over time non-contributors leave and higher value-added individuals are brought on to replace them, and as such the executive management team will get stronger.  Therefore, as an entrepreneur, you need to recognize that a change, at the executive management team level, of a start-up company, is often a good thing and will in many cases enhance the overall performance of your company.  

As an entrepreneur, you need to take the necessary time to choose the right individuals to serve as members or your start-up company’s executive management team.  This is imperative for any successful start-up company.  To do this properly you should not commit to “unknown” individuals up front, recognize that even “known” individuals may not work out and need to be replaced, and finally recognize the fact that all executive management teams will change over time.  Understanding these principles is important. Therefore, take your time to choose the key individuals of your start-up company’s executive management team, as this will necessarily help facilitate your start-up company’s success 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.

February 8, 2010 Posted by | Venture Capital, venture finance, Venture Funding | , , | Leave a comment

Entrepreneurs, to Build a Successful Start-up Company You Must Create Value Everyday

Entrepreneurs need to necessarily focus on creating value for their start-up company.  From an initial “idea” or “concept”, entrepreneurs need to continually focus on moving their start-up company forward to the next step in its development. This is accomplished by creating value for your start-up company and focusing on those items that necessarily make a difference to both your targeted customers and to your investors.  As an entrepreneur, you are not in the business of developing technology for technology sake or the “cool” factor.  You are in business to acquire paying customers.  To do this, you must create attractive value that facilities customers’ desire to buy your technology, product or service offering.  From the initial concept, to identifying your business proposition, to developing and delivering your first prototype, to acquiring your first paying customers, entrepreneurs need to focus on value added activities that move their start-up company forward from inception, through funding, to a functional, cash flow positive functioning entity.  This article focuses on the necessity to create value everyday to facilitate both the short term and long term success of your start-up company.

Think About Your Start-up Company 24/7

As the entrepreneur of a start-up company you will have a lot of challenges along the way.  With both short term problems to address, as well as long term corporate objectives, you need to focus on your start-up company 24/7.  Why is this focus necessary?  Because as you try to successfully guide your start-up company through the maze of daily problems and opportunities, you are trying to identify the proper and best path forward that servers your near term objectives and at the same time does not necessarily cause issues that may hurt your start-up company in the long run.  Near term problems may turn out to be significant long term opportunities, and your initial long term objectives may not necessarily be right for your start-up company as it evolves and develops from instantiation to a functioning and profitable company. In addition, what was an obvious decision yesterday may be a total miss-step tomorrow.  Therefore, you need to constantly think about your start-up company from bottom to top, 24/7.  This type focus will allow you to mull over changes in the market and at the same time provide you with the necessary insight to continually create the value that moves your start-up company successfully forward not only addressing day-to-day activities, but over the long term.  So, as a budding entrepreneur, you need to think about your start-up company 24/7.  This will provide you with the necessary focus to guide your company through the trials of a successful start-up company.

Identify Your Start-up Company’s Value Proposition

One of the key items that differentiates a successful start-up company is the ability to succinctly define its underlying value proposition that targets the needs of its customer base.  By identifying a significant value added proposition for your target customer base, you are in essence solving an unmet need or problem in the market.  In addition, by identifying your value proposition early, this will allow your start-up company to create and develop a differentiated product offering in the market.  It will also allow you as an entrepreneur to succinctly define your start-up company and its technology, product or service offering to your potential investors.  This is necessary, as investors need to quickly discern how what problem or need you are solving in the market and how you are differentiated, long term from your competitors’ product offerings.  In addition, by identifying your value proposition early, you will necessarily provide a path forward for your start-up company.  This does not mean that your value proposition will not evolve or change as you engage with your customers and continue to define your technology, product or service offering.  It is okay to refine and enhance your value proposition as you engage your customers and the market. This will necessarily allow you to create additional value to your targeted customers and enhance your long-term success in the market.

Focus on Significant Value Added Activities

As an entrepreneur of a start-up company you need to focus on significant value added activities to constantly move your company forward.  This is very important, as it is often too easy to get caught up in insignificant day-to-day activities that do not add value to your start-up company.  Significant value added activities can include:

  • Calling your customers to validate the necessary features, functions and capabilities or your initial product offering and your long term product roadmap,
  • Focusing on securing the necessary strategic partners to complete your product offering,
  • Streamlining your business and financial models to ensure success in the market,
  • Minimizing time-to-money and focusing on early revenue sources, and
  • Securing initial customer commitments.

By focusing on significant value added activities, you are creating the necessary value that will get investors attention and at the same time raise your start-up company’s valuation.  It addition, you are creating a path to success in the market.  Therefore, as an entrepreneur, you need to focus on value added activities that are significant and will create long term success for your start-up company.  By doing so, you will help create a smooth path forward and at the same time enhance your probability of securing funding and success in the market. 

As an entrepreneur, to create a successful start-up company, you need to focus on creating value every day. This is necessary, as the road from inception to funding, and ultimately a successful functioning and profitable company is often difficult and treacherous.  Bad near term decisions, can often have significant consequences on the long-term success of your start-up company.  To continually add value every day, as an entrepreneur, you need to think about your start-up 24/7, identify your start-up company’s value added proposition, and continually focus on significant value added activities.   By doing so, you will enhance your ability to create and fund your start-up company and ultimately be successful 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.

January 4, 2010 Posted by | Venture Capital, venture finance, Venture Funding | , , , | Leave a comment

Entrepreneurs, Expanding Beyond Your Core Competencies will Help You Define Success in the Market

Start-up companies and large companies alike have a set of core competencies that define the company, their product and service offerings, and their position in the market.  More often than not it is this set of core competencies that provide the company with their baseline competitive advantage in the market.  Often, for start-up companies, these core competencies although unique do not necessarily provide them with a complete product offering or the ability to offer a new and different go to market strategy.  Many times these same start-up companies must look beyond their own core competencies to complete their product offering and at the same time provide a unique end-user experience.  This article focuses on looking beyond your core competencies to differentiate your start-up company and its product offering to help define your success in the market.

Beyond Core Competencies

Every start-up company must have a core competency that uniquely defines the company and at the same time provides a long-term competitive advantage in the market.   For most start-up companies this core competency is based on a patented technology, process or service offering.  Many times, this core competency, although unique, is not enough to define a “complete” product offering in the market.  So, as a start-up company, you need to define what it takes to compete in the market and at the same time differentiate your product offering beyond its baseline core competency.  This requires you, as an entrepreneur, to take a holistic approach to the market and define what other capabilities, features, functions, and services are required to compete in the market. Many of these market driven requirements are well beyond the core competencies of your start-up company and will require you to partner with other companies to provide a complete product offering and at the same time differentiate your product offering in the market.  So, as an entrepreneur, you need to realize that your start-up company’s core competencies may not be enough to effectively compete in the market.  At the same time, because of the investment requirements, and time to market issues, it is often more expedient to partner with other companies to complete your product offering and compete with a differentiated product in the market.

Strategic Partners

Strategic partners can often be the key to expanding your start-up company’s product offering beyond its core competencies.  At the same time, strategic partners can provide your start-up company with the following:

  • Access to new markets,
  • Insight to the overall product development requirements,
  • Sources of new revenue streams,
  • Help to uniquely position your company in the market, and
  • Provide a new and differentiated go to market strategy. 

Therefore, by working the appropriate strategic partners you can develop a “complete” product offering that you would not be able to develop and offer on your own.  This will help to define your product offering and in the long run will more often than not help provide your start-up company with additional success in the market.

The User Experience

One other consideration, when looking to expand your product offering beyond your company’s core competency, is to focus on the end user experience.  Is your product easy to use?  Does your product address all of the needs of the customer?  Does your product provide the customer with a satisfying experience?  Many times these things cannot be only addressed with your start-up company’s core competencies. They often require additional capabilities, features, functions, and services to address the complete end user experience.  This will again require you to look beyond your own start-up company’s capabilities to address these needs.  So when you are considering bringing your start-up company’s technology product or service offering to market, consider the end user experience and expectations. To do so, will allow you to look beyond your own core competencies and address the broader needs of the market.

Looking beyond your start-up company’s core competencies is a key to being successful in the market.  All companies, large and start-up alike need to do this to ultimately define their product offering. This often requires start-up companies to realize that they do not have a complete product offering and need to work with one or more strategic partners to define their final product offering.  In addition, taking into consideration the end user’s experience and their expectations are required to bring a successful product to market.  So, as an entrepreneur, remember, it often takes many more capabilities, features, functions, and services, than your start-up company’s core competency offers to provide a “complete” product offering to the market. So when you look to define your product offering take this into consideration as it will ultimately your start-up company with more long term success in the market.

December 14, 2009 Posted by | venture finance, Venture Funding | , , | Leave a comment

Building a First Class Executive Team Requires Objective Focus and Sometimes Tough Decisions

Beyond the investment opportunity, venture capitalists evaluate the start-up company’s executive team when making their decision to invest in an early stage company.  This is the first thing they consider, once they determine the investment opportunity has merit.  It is often said that venture capitalists invest in “the team”, as they would rather have an ‘A-team’ and a ‘B-product’ than a ‘B-team’ and an A-product’.  Therefore, when developing an executive team for your start-up company, as an entrepreneur, you need to be very careful.  This is not a “friends-based” decision. It requires objective focus, as to get to where you need to be requires an executive team that has proven experience in the business area your start-up company is focusing on, has the ability to make prudent business decisions, and can execute at a high-level in both good times and in bad.  Also, in some instances, it requires the founder to make tough decisions and release certain individuals, as some executive team members may not work out in the long run. This article outlines some of the things that need to be addressed by entrepreneurs as you are building a first class executive team for your start-up company.

Executive Team – The Beginning

Start-up companies usually begin with an executive team that is composed of individuals that in their careers have worked together at one point in time or another.  More often than not, one individual comes up with an “idea” or “concept” and passes this by one of his friends, usually a business or technical colleague.  With this “idea”, these individuals decide to move forward and develop a start-up company.  Many times, neither of these same individuals have had any experience in starting a company, or for that matter running and managing a business.  But, they give themselves lofty titles, (CEO, CTO, and Vice President of Business Development) and are off to the races.   Often this same initial executive team consists of a technical person and a business or marketing person.  These two individuals, if they have the proper backgrounds, although not a complete team can take the start-up company quite far in developing an initial “idea” into a value added business proposition.  On the other hand, if these same individuals lack the proper background, experience and focus, they often just spin their wheels trying to decide how to move the company forward. Therefore, as an entrepreneur, if you are starting a company look objectively at what you are trying to accomplish and do not build your executive team with “friends”, but with first class individuals that have the necessary and proven experience and ability to move your start-up company forward to the next level, securing funding.  If you do not, investors usually pass on your company as they will not risk their money on executive teams with no or little experience.  Remember, investors are looking to secure a substantial return on their investment and cannot afford to risk their monies on unproven and inexperienced executive teams.

Executive Team – Must Consist of Members that Contribute

Start-up companies need to accomplish many things with very little resources. Often the only real things they have are a “good” business proposition and a talented executive team.  As such, from the beginning, all executive team members must step up and contribute at a high level.  As with all teams, the complementary backgrounds and skill sets of the individual team members are necessary to put together a compelling business plan and associated value proposition that will provide a sustainable competitive advantage in the market.  Anything less will not suffice.  Therefore, each executive team member must commit themselves and their time and effort to achieving their near term goal of securing venture funding. If individual executive team members do not have the time or the necessary commitment to achieve this objective, then they need to be let go and this often requires making tough decisions by the founder and/or CEO of the company.  Remember, securing venture capital is serious business and requires both commitment and significant contribution from all the members of your start-up company’s executive team. If you do not get rid of “slackers” your investors will once they make a decision to invest.  Also, it is better to make these tough decisions early, as non-contributors more often than not have an adverse affect on the whole team, and in some instances can derail the whole start-up company.  So, recognize this and build a strong, first class team, with individuals that have the willingness and desire to contribute in the effort and objective of securing funding.

Executive Team – Filling In the Holes

A start-up company’s executive team is almost always often incomplete.  That is, your start-up company may be missing several executive team members or just a have a couple key executive positions that need to be filled.  So, while you are building your start-up company, it is smart to keep your eyes open to new and talented executives that can fill in these holes in your executive staff, and at the same time help your start-up company to achieve both its business and technical objectives.  These individuals are often hard to find, but can make an immediate and substantial impact, and at the same time be a key to achieving some important near term corporate objectives.  Hence, by doing so, these same individuals can also heuristically move your start-up company forward in the venture funding process.  Finally, it should be remembered that venture capitalists do not necessarily require a full executive team to invest in your start-up company.  Consequently, these same venture capitalists would rather have a strong, incomplete and first class team that they can help develop with their contact base, than a complete team with questionable individual, executive team members. 

Building a strong, first class executive team often makes the difference between a start-up company securing and not securing venture funding. So, as an entrepreneur, you need to be aware that initially building your executive staff with “friends” is not necessarily a smart move.  Often it is smarter to wait and build an executive staff with key individuals that can have a substantial impact and at the same time help your start-up company to meet its goals and objectives.  If you do not take an objective and focused approach to building your team, you will often have to make tough decisions later on to get rid of these same executive team members, as non-contributors or sub-par talent will not allow your start-up company to grow to its potential. Finally, remember you do not have to have a complete executive staff to secure venture funding, so focus on developing the best first in class team you can find.  This will serve your start-up company well in the long run.

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.

November 30, 2009 Posted by | Venture Capital, venture finance, Venture Funding | , , , , | 1 Comment

Entrepreneurs, Do Not be in a Hurry to Get Venture Funding, You will not like the Results

All entrepreneurs I have met are in a hurry to secure venture funding for their start-up companies.  Even if they only have a vague idea of what they will be developing, do not really know how much funding they require, or have not really thought through their product offering and if it offers a long-term competitive advantage in the market and hence the potential for substantial returns for their investors. Never the less, they believe that they are fundable and want the opportunity to present their “half-baked” idea to these same venture capital investors.  This approach to engaging with venture capital investors will only result in a funding experience that will not be pleasant for these same entrepreneurs. With this approach, entrepreneurs will often run into the venture capital “buzz saw” and have a needless to say unsatisfying experience. In the end, they will not receive the funding they desire and walk away disenchanted with the venture funding process. This article outlines what can happen when you are in a hurry to talk with venture capital investors – the end results will be something you will not like.

Do Not Go In Unprepared

Going into venture capital investors unprepared will not bode well for your objective of securing funding from these same investors. Being unprepared means that as an entrepreneur, you do not have a well thought through investor presentation deck that addresses all of the issues investors expect to see.  In addition, you do not have your story down pat.  That is, your investment story is not clear and concise, nor does it get your point across such that the investors understand the “value proposition” of your product offering to the market and why you can achieve a sustainable, long-term competitive advantage in the market.  Remember venture capital investors are looking to achieve substantial returns on their investments that are commensurate with the risk they are taking.  Anything less will not get their attention.  So, as an entrepreneur, you need to understand what the venture capitalists are looking for, and if your investment offering meets their needs as well as their investment criteria.  Going into venture capitalists unprepared with an investment opportunity that is anything less will not result in a pleasant experience.  And, consequently you will not obtain your desired result, securing funding from these same investors.

Do Not Learn on Your Feet

Venture capitalists often ask tough questions to see if you have done your homework on your start-up company, its product offering, and the overall investment opportunity. Some of these questions are designed to get a reaction; others are designed to see if you really understand your markets and the competitors within these same markets.  The one thing you do not want to do when you are presenting to investors is to make up answers or in essence “learn on your feet”. You need to be able to answer all questions directly or indirectly, based on your market expertise and drawing logical conclusions that will satisfy the investors.  Not knowing the answer or learning about various aspects of your market, be it your financial model, competitors, or new product offerings, etc., is not something that will impress your investors. To gain confidence in your start-up company and its executive team, investors need to believe that you know everything about the markets you will be addressing.  You are the “expert” in the room.  Learning on your feet, in front of the same individuals you are expecting to invest in your company, is a big mistake.  Finally, if you really do not know the answer to the venture capitalists’ questions, you need to tell these same investors that you do not know the answer and will get back to them.  Trying to make up an answer will not endear you to these same investors, as they probably already know the answer to their question and will be able to see through any made up answers. So, being in a hurry to get in front of venture investors often results in one learning on their feet and as a result, again will not allow you to secure funding from these same investors.

Do Not Make a Bad First Impression

The venture capital community is a small community, and as such you will not get a second chance to make a first impression. If your first set of meetings with a number of venture investors does not go well, more often than not you will not get a second chance to present your investment opportunity to these same investors or any venture capitalists for that matter. Why, because venture capitalists frequently talk amongst each other about their investments and the investment opportunities they encounter.  If there is a good deal out there, they all want to be the one who found it.  On the other hand, if there is a bad investment deal out there, they do not want to waste their time on it.  Remember, venture capitalists are very busy and are not just waiting around to hear about your investment deal.  They want to only have the best deals presented to them and as such this is generally a one shot opportunity.  Making a bad impression the first time out and you will not get a second chance. So a missed first opportunity may result in not being able to secure funding for your start-up company. 

Entrepreneurs are often in a hurry to get in front of venture capital investors.  They have an inherent desire to get going, even when they are not ready to talk to these same investors.  Being unprepared, learning on your feet, and making a bad first impression are all symptoms of not doing your homework before you get in front of investors. This will not only result in an unpleasant experience, it will result in your start-up company not being able to achieve its objective – securing venture funding.  So as an entrepreneur, take your time and prepare yourself and your start-up company before you get in front of investors.  If you are in a hurry and do not do this, you will not like the results.

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.

November 23, 2009 Posted by | Funding Requirements, Venture Capital, venture finance, Venture Funding | , | Leave a comment

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.

November 16, 2009 Posted by | Business Plans, Venture Capital, Venture Funding | , , | 2 Comments

Military Contractors Looking to Move Their Products or Technologies into the Commercial Markets have a Lot to Learn

I have worked with many traditional military contractors that see the commercial markets as a panacea for their military-based products or technologies.  While there often exists an opportunity to take a military product or technology, commercialize it, and then address a broad range of commercial market applications, generally it is not a straight forward transfer of these same military products or technologies to the commercial markets.  This is something that traditional military contractor companies and their entrepreneurs have a hard time understanding.  Having only worked with customers that define their product needs through a “request for proposal” process, they need to step back and understand that the commercial market is much different.  As such, products or technologies that were necessarily developed for a given military application through the request for proposal process do not necessarily translate into products that are sellable in the commercial markets. This article outlines several items traditional military contractors need to consider before they jump into the commercial markets.

Military Products or Technologies do not Necessarily make Commercial Products

Military contractors traditionally developed products or technologies that address a focused military-based application. That is, the U.S. military is looking for a product or technology to solve an identified problem.  As such, they send out a request for proposal to a set of military contractors, which respond with an engineering services proposal to develop the products or technologies to solve the identified problem. Once completed, the military contractor usually ends up with a technology or a set of products and technologies that are to be used in a very specific military application. 

Some military products or technologies may have commercial value, but as defined by the U.S. military, more often than not, these products or technologies are not sellable as products in their current form in the commercial markets. This often means that the military product or technology as defined, is a not a complete product offering. That is, this product or technology will often require other technologies, products or services to make it a “product” for the commercial markets. So, as a military contractor, one should not expect that their military-focused product or technology is sellable in the commercial market in its current instantiation.  Yes, an existing military product or technology may have some commercial value, but often it will need to be substantially modified to be competitive in the commercial market space.

Military Price Points Do Not Cut it in the Commercial Markets

The price points defined for military products and technologies do not cut it in the commercial markets.  So often, an existing military-based product or technology will need to be cost reduced to make it viable in the commercial markets. This is something that needs to be realized by military contractors and addressed right away.  Trying to force fit a military-based product or technology into the commercial market, with a military price tag, is a losing proposition.  But, this is often the mentality of traditional military contractors and their entrepreneurs.  They often wrongly believe they have a “product” that is viable in the commercial markets and want to sell it “as is”.  What they really have is a product or technology with a price point that will not stand up to the competition of the commercial market place.  So, as a military contractor, realize the price points you are currently selling your products or technologies at, are not the price points that the commercial markets will support.

Military Products or Technologies Often Require Additional Investment

Military contractors typically want to sell their products or technologies “as is” in the commercial market.  They do not want to invest any additional monies to make their products or technologies commercially viable. This lack of desire to spend any of their own money comes from their military background where the government pays for all of their R&D, plus overhead, to secure a desired product or technology for a particular application. This is a “no risk” venture for the military contractor.  This is not the case in the commercial market.  The commercial market is a “risk” and “return” based opportunity.  So, as a military contractor and entrepreneur, you more often than not will have to invest some of your own money to develop a product that is targeted for the commercial markets. It may be a little bit of money, or in some cases, it may be a lot of money, but the capitalist-based commercial market requires one to take a “risk” by investing their own monies to properly commercialize a military-based product or technology offering.  If as a military contractor, you are not comfortable with this, then the commercial market is not for you and your products or technologies.  Remember, the commercial markets often require additional investment monies to make military products or technologies commercially viable.

Military contractors often want a piece of the commercial markets.  With the limited upside to their military contracts, they often have a desire to take their military-based products or technologies into the commercial markets and harvest the large financial rewards the commercial space has to offer.  What these same military contractors often do not understand is that their military products or technologies do not necessary translate into products that are sellable in the commercial markets.  In addition, these same military-based technologies or products usually have price points that are too high and at the same time usually require additional investment monies to make these same products or technologies a commercially competitive product offering. Therefore, traditional military contractors often have a lot to learn when moving their military products or technologies into the commercial markets.

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.

November 9, 2009 Posted by | Competition, Customers, Venture Capital, venture finance, Venture Funding | , , , | 1 Comment

Entrepreneurs, Putting a Stake in the Ground Early will Help Move your Start-up Company Forward

If certain items are not defined early in the development of your start-up company, things will tend to meander and not move forward in a coherent manner.  You will continue to have early meetings with customers, and potential strategic partners, etc., but your start-up company and its product offering will continue to be fluid and not coalesce into a defined market position and complete product offering with an associated roll-out schedule.  As these discussions continue, things will become more fluid and less defined as each potential customer or strategic partner you meet with will have their own product requirements, opinions and overall list of concerns regarding your start-up company and its potential product offering.  So unless you put a stake in the ground early, you will continue to move down an undefined path and the world will look murkier by the day or by the meeting.  Therefore, to help drive your company forward, as an entrepreneur, you need to address three things that will define your start-up company to your customer base and potential strategic partners. This article defines these three items which will help move your start-up company forward.

Position Your Company and its Product Offering

Defining the market position of your start-up company and its product offering early will help define you in the eyes of your customers and strategic partners. Having meetings with potential customers and strategic partners without a clearly defined market position for your start-up company is a big mistake.  If you continue down this undefined path, each meeting will end up with individual customers or strategic partners walking away with their own conclusions as to where your start-up company and its product offering fits in the competitive and market landscape. This is not good for your customers and definitely not good for your start-up company.  So, define your start-up company and its product offering early. Position yourself against your competitors. Leave your customers and potential partners with a clear idea of why your start-up company and its product offering is different and provides a value proposition that is important to them as either a customer or potential strategic partner.  Anything less will create confusion and leave these same individuals to define your start-up company on their own, with each customer and potential partner coming to a different conclusion.  Therefore, positioning your start-up company and its product offering early is definitely something you want to do as the entrepreneur.  It will help you create a smoother path forward.

  

 Define Your Product and its Key Features and Functions

Often entrepreneurs have a clear view of their product offering in their minds. They believe that they can do anything their customers want, and with each meeting, the list of required product features and functions only gets longer and longer.  Some of these features and functions are important, while many others are only a “wish” list of features and functions from these same potential customers.  So, it is the responsibility of the entrepreneur, early in their start-up company’s existence, to define the key features, functions and capabilities that will not only make their product offering competitive, but make it unique when compared to other product offerings in the market.  Once defined, it is an important to discuss your product’s key features and functions with your customers, as they may want you to prioritize certain features and functions over others. So once you have a clear product description, including features and functions, make sure you talk to your customers. This will validate the product definition you have defined and provide you with a clear path forward for developing your product offering.

 

Develop a Go To Market Strategy, Rollout Schedule, and Product Road Map

Your customers will also be interested in knowing what your go to market strategy is and how it will benefit them. If you have developed a unique go to market strategy that allows your customers to secure a competitive advantage in the market, this is surely something they will be interested in knowing about early.  So, define your go to market strategy early and share it with your customers.  If it is something that truly differentiates your start-up company from its competitors, this will definitely be something that will pique their interest and possibly allow you to secure a level of early commitments from your customer base.

 

It is also important to define a realistic rollout schedule early so that your customers will know when your product will be available in the market. This rollout schedule should necessarily include your start-up company’s initial product offering along with a product road map, which defines future product generations and their associated feature and functions.   Remember, customers need to know when your product will be available and what they can look forward to with future product offerings. One product, single generation product start-up companies do not cut it in the market. This is true for customers and for investors.

 

Entrepreneurs, you need to put a stake in the ground early to move your start-up company forward.  Doing anything less will cause your start-up company to meander and become ill defined for both your customers and investors.  So, define your start-up company’s market position and product offering early. Include in this process, the key features and functions of your product offering.  Finally, develop a realistic go to market strategy, rollout schedule and associated product road map.  Accomplishing these tasks early will help define your start-up company in your customers’ eyes and with potential strategic partners and help move you forward to achieve success 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.

November 2, 2009 Posted by | Business Planning, Customers, Venture Capital, venture finance, Venture Funding | , , , , , , | Leave a comment

Entrepreneurs, Make the Tough Decisions Necessary to Move your Start-up Company Forward

Start-up companies by their nature are very volatile. As such, things change rapidly and need to in order to stay ahead of the game.  Unlike large companies, many daily decisions can have an inordinate affect on both the short term and the long term success of a given start-up company.  Accordingly, entrepreneurs often need to make tough decisions that will have a material impact on their start-up companies.  These decisions should not be taken lightly. On the other hand, due the fast paced nature of start-up companies, and the need to focus on creating significant value in an accelerated time frame, many of these same decisions do need to be made and quickly.  Often delays in decision making can create missed opportunities, and at the same time wreak havoc on a start-up company’s potential for success in the market. This article outlines several examples of tough decisions that need to ultimately be made by entrepreneurs that can significantly affect the long-term success of their start-up companies.  Here, quick decisions are welcomed, as prolonging the decision making process can often lead to a failed venture.

Changes in the Executive Team

The executive team is the key component that drives the success of any start-up company.  Therefore, this is the first thing, beyond the business opportunity, that venture capitalists look at when deciding to invest in a start-up company.  As such, if there is a member of your start-up company’s executive management team that is not working out or not adding significant value to the start-up company and its ultimate goals and objectives, the best thing to do is to remove this person from the team.  Why, because for start-up companies, there is no room for “non-contributing” executive team members. This situation only puts more burdens on the rest of the executive management team. Also, with each executive team member having more than enough to do, everyone needs to be pulling their own weight.  Anything less is a drain on the start-up company and its overall performance.  So, as an entrepreneur, if you recognize that your team has an executive member that is not working out, a quick decision needs to be made to cut your losses.  Here, removing the executive team member and having an empty position is much better than having a non-contributing team member.  Non-performance, by a single team member will lead to resentment from the other executive team members and pull the performance of the overall company down.  So, as an entrepreneur, once you recognize that one member of your executive team is not performing, it is important to remove this person, and quickly.  If you do not do this, your investors will.

 Changes in Strategic Direction

From their inception, start-up companies often go through multiple changes in strategic direction. More often than not, there are good reasons for this and it is necessarily part of the process to support the long-term success of the start-up company.  What is important here is that as an entrepreneur, you need to recognize that sometimes a significant change in strategic direction is necessary to enhancing the overall value of your start-up company. In addition, once the decision has been made to make a significant change in the strategic direction of a start-up company, the executive team needs to fully embrace this decision and commit the company to this new direction. Anything less will cause the start-up company to fail.  A one foot in, one foot out commitment to changes in the strategic direction of a start-up company will not work.  Finally, it is important that any significant changes in the strategic direction of your start-up company are not taken lightly, and do not happen too often, as too many changes in the strategic direction of your start-up company will kill the overall momentum of your start-up and as such will result in disaster. Therefore, once a decision has been made to change the strategic direction of your start-up company, get buy-in from all of the executive team members and move quickly to make it happen.  This approach only will benefit your start-up company.

Deciding on Strategic Alliances

Strategic alliances can help create phenomenal success for start-up companies and at the same time significantly enhance their overall value with investors and in the market.  By providing access to markets, sales channel support, complementary technologies and services, all value added propositions, strategic alliances can be used to create significant value for your start-up company.  That being said, a bad strategic partnership can have the opposite impact on your start-up company.  Therefore, when determining the value of a strategic partnership, look at the market credibility of the strategic partner.  Are they a significant player in the market? Does their name add credibility to your start-up company? Will they be able to deliver on the promises of the strategic partnership?  Often it is often better to step back and make an overall assessment of the potential long-term benefits of the partnership before committing your start-up company’s future on a particular strategic partner.  This will provide you with perspective and allow you as an entrepreneur to make a better decision.

Sometimes it is the case that as an early stage start-up company, you will not be ready for a strategic alliance relationship.  Here, be honest with yourself.  Does a strategic alliance partnership make sense at this point in time?  If it does not, then it pays to walk away, as it may only serve as a distraction to the important immediate goals and objectives of your start-up company.  Therefore, take the necessary time to properly evaluate any potential strategic alliances.  Move quickly, but remember to make an informed decision as the wrong strategic alliance can be detrimental to the overall performance of your start-up company.

Determining a Funding Strategy

Determining a funding strategy is often a difficult task for entrepreneurs. Do I go after all of the required funding now and give away more of my start-up company to investors, or do I look to secure funding in multiple tranches?  This is a very difficult question to answer and how it answered is specific to the each start-up company, their overall funding requirements and their ultimate value at a given point in time.  The key thing here is to outline your start-up company’s significant deliverables for the various funding scenarios and then make a decision as to whether at the end of each funding scenario, if significant market value has been created to secure addition funding from either existing investors or new investors. Remember, investors want to see significant value at the end of each funding round.  So, take the time and map out your start-up company’s significant milestones their associated time frame and then overlay the funding requirements.  This will allow you to determine that natural break points in securing funding and provide your investors with the insight necessary to determine if your start-up company’s funding strategy makes sense.  Remember, determining a funding strategy is often one of the most difficult decisions an entrepreneur can make.  So take the time to make an informed decision, but do not dwell on, as investors will often dictate the overall all funding terms and tranches of your start-up company.  The key point here is to make a decision and then move to secure funding to push your start-up company forward to the next level.

Entrepreneurs need to make tough decisions every day. These decisions often have a significant impact on the start-up company and its long term success in the market. For each decision presented here, whether it changing the make-up of the executive team, moving the start-up company in a new strategic direction, deciding on alliances, or determining a funding strategy,  it is important to make an informed decision.  Also, the quicker the decision is made that more likely you will get your start-up moving forward, and creating momentum for your start-up company. Therefore, as an entrepreneur, make the tough decisions it will only benefit your 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 www.carlsbadpublishing.com.

October 26, 2009 Posted by | venture finance, Venture Funding | , , , , , | 1 Comment