Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Entrepreneurs, Finding Strategic Partners Can Create Significant Value for Your Start-up Company

One of the key issues to be addressed by start-up companies is the ability to gain credibility in the market.  You may have the greatest technology since sliced-bread, but if no one endorses it, the road to success in the market will be a long one. On the other hand, if you are able to secure one or more strategic partners early on, your road to success will be that much easier.  As strategic partners bring instant credibility in the market place and can open product distribution channels that will allow your start-up company to gain significant, early market traction.  So, it is in the best interest of you and your start-up company to work to secure one or more strategic partnerships early so that you can expedite your success in the market. In what follows is a short discussion on how to locate these same strategic partners as an early stage start-up company.

Go to Networking Events

One of the easiest ways to get your name out there is to go to networking events in your area that focus on start-up companies. These events are attended by entrepreneurs and investors from all backgrounds, including large corporations.  This provides you with the opportunity to meet individuals from various large companies that may have a strategic interest in your start-up company and its technology, product or service offering.  This contact point may be a direct contact from a panelist at the event or indirect contact through an individual who either currently works at a large company you are interested in talking with or has worked there in the past and is willing to introduce you to a key contact point.  Any way you slice it, it is worth getting out there and go to targeted networking events that cover start-up companies and their issues or a topical matter you are interested in for you and your start-up company.  So, put yourself out there and attend networking events, you never know who you are going to run into.

Work Your Own Network

Most entrepreneurs have a long career before they strike out on their own to start their own company. Often this career was spent working for or engaging with large corporate entities. So to help yourself as an entrepreneur, work your personal contact network. Call your past friends and colleagues to tell them what you are up to.  These conversations will often lead to follow-on discussions which allow them to help you with potential key contact points within their or another organization. Nothing is better than and direct introduction through a trusted friend or colleague.  This provides you with instant credibility and will often walk you in the “front door” of an opportunity that you would never have found out about by cold calling, let alone getting directly into the person in charge of the project or opportunity.  So, take the time to connect with your person network.  This type of networking has the ability to open doors that you would not have through cold calling and more often than not, will expedite the discussion process.

 Attend Trade Shows

Finally, you need to attend targeted trade shows.  You can attend as an exhibitor or just an attendee walking the floor.  This approach to getting your name out there will allow you to meet with individuals from targeted companies that may have an interest in your product offering from either a strategic or tactical point of view.  Take the time to “work the floor” by going up to the booth of targeted strategic partners and explain to one of the booth attendees what your company does and who you are interested in talking with. More often than not, if the appropriate contact person is not at the show, the individual you are talking with will provide you with the appropriate contact point within the company. Also, be sure to get the business card of the person you are talking with, as when you contact the appropriate individual within the company, you can tell them that you were referred by this individual.  This will instantly open the door and at the same time provide you with a certain level of credibility to initiate the conversation.  So, take the time to attend targeted trade shows, it can open doors to potential strategic partners for your start-up company.                                

Gaining early credibility in the market is one of the keys to success for a start-up company. This credibility is most often accomplished through developing a partnership with a large, established corporate partner.  To facilitate the engagement with potential corporate partners you need to attend networking events, work your own network and attend trade shows. This will allow you as an entrepreneur to get your name out there and engage directly with potential strategic partners.  It will also help propel your start-up company forward and ensure both near term and long term 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.

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August 23, 2010 Posted by | Venture Capital | , , , , , , , | Leave a comment

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, Stretching the Truth May Ruin Your Chances of Securing Funding from Potential Investors

Many times when entrepreneurs meet potential investors they do so for the first time.  With a blind introduction, a cold call, or recommendation from a colleague, entrepreneurs need to quickly gain credibility with their potential investors.  This is not an easy task, and is especially true when presenting to potential professional investors (e.g., venture capitalists) that “know their space” and are looking for the next exceptional business deal, with a credible and fundable team. In this situation, the worst thing that an entrepreneur can do to ruin the potential of securing funding from these same investors is to “stretch the truth” regarding any aspect of their business, the business opportunity, or their current state of development.  This approach to trying to “impress” your potential investors will only come back to haunt you, and in a worst case scenario it will ruin your reputation as well as your chances of receiving funding from any or all investors. Remember, the financial community is small and information regarding “bad” deals or non-credible entrepreneurs will get around fast, ruining any chances or receiving funding in the future.   

Increase Your Credibility by “Knowing” Your Business

The best way to prepare for investor meetings is to know your business.  As such, you need to do months of business planning and preparation just to get to the point where you are truly prepared for meeting potential investors for the first time.  Winging it will not go too far, as you will lose any potential interest from your investors if they know that you are not fully prepared, and trying to skate through the funding process. Remember, professional investors usually specialize in a given “space” (e.g., biotechnology, IT, wireless), and as such they are very well read in this area of focus and know all of the players and the current and future trends in the industry.  You need to be just as “knowledgeable” as they are, as you are trying to convince these same potential investors that you and your start-up company offer a unique technology, product or service offering that can create a long term sustainable competitive advantage in the market. This is no small task, but by “knowing” your business you will have required knowledge to create a credible story line for your technology, product or service offering.  Therefore, before you call one investor to set up a meeting, make sure you have taken the time to “know” your business, as this will substantially increase your credibility with your potential investors.

Don’t Stretch the Truth, Just Say “I Don’t Know”

When presenting in front of potential investors for the first time, many entrepreneurs want to always appear knowledgeable on all subject matter and all questions that are posed to them.  If you are well prepared, you will most likely be able answer 99% of the questions or subject matter posed to you during your first meeting with potential investors. That being said, there will always be one or more questions that you either don’t know the answer to, or did not prepare for.  This can be compared to preparing for a test, as you know you are ready, but it is that one thing you did not spend much time on that will catch up with you at test time.  To get through this many entrepreneurs try to “stretch the truth” or their “knowledge base” in a real time fashion in front of their investors. This can be a real untenable situation. In the worst case scenario, your investors know you are “stretching the truth” and you will instantly lose all credibility.  Alternatively, this approach will lead to more follow-on questions regarding the same subject matter and again you will be out on limb, just hoping to be able to get through the line of questioning without getting caught.  These scenarios can be easily avoided by just telling the potential investors, “I don’t know and I will get back to you.”  This is the best approach, as in this scenario you do not put your credibility in jeopardy and you still have to ability to impress your investors with your follow-up answer.  Remember, sometimes investors are just asking you questions to see how you will react.  So again, do not put yourself and your reputation out on a limb by “stretching the truth” in an effort to appear knowledgeable, as this approach will not work with potential investors.

Investor Due Diligence will Validate Both You and Your Start-up Company

Finally, as an entrepreneur, your “credibility” needs to stand up through the investor due diligence process. Therefore, any half-truths, or “stretching of the truth” during your investor meetings will be invalidated during the due diligence process. For professional investors, this due diligence process can take three to six months.  Therefore, during this process, you need to be careful to represent you and your start-up company in a truthful manner at all times. Accordingly, this due diligence process will require you to address all aspects of your start-up company, including:

  • The development status of your technology, product or service offering,
  • The members of your executive staff and their participation in your company,
  • Any and all invested capital, and company debt,
  • Strategic customer relationships,
  • Market size and growth potential,
  • Customer development status,
  • Corporate capitalization, and
  • Other

By truthfully and fairly representing your start-up company’s investment opportunity you will be fully validated through the potential investors’ due diligence process. This will also provide them with the assurance that they are dealing with a first class, reputable team, making your start-up company a much more favored investment opportunity for potential investors.                                                                                                            

Most entrepreneurs and potential investors do not know each other when the meet for the first time.  As such, the onus is on the entrepreneur to quickly gain credibility with these same potential investors. This is accomplished by knowing your business, never “stretching the truth” and presenting an investment opportunity that will stand up to thorough due diligence by your potential investors.  By doing so, you will increase your immediate credibility with you investors and the potential of receiving funding from these same investors.  So, take the high road and present you and your start-up company in a straight-forward, honest manner, it will serve you well with your potential investors.

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.

April 26, 2010 Posted by | Venture Capital | , , , , , , | 1 Comment