Tag Archives: venture capital

VCs are from Mars, Entrepreneurs are from Venus

John Gray’s book Men are from Mars has the subtitle ”The Classic Guide to Understanding the Opposite Sex”.  To some entrepreneurs, Venture Capitalists might as well be the opposite sex. Many entrepreneurs don’t really understand them very well. In a good blog post by ex-VC and VentureBeat writer Tom Tzach, he offers 4 good tips to entrepreneurs. Here are my comments to his tips:

1. It’s a numbers game. Expect casualties.
Tzach reminds us that VCs get a huge number of requests for their time and money. If you are an entrepreneur seeking capital (especially if this is your first time), then you will have to play the numbers. You might need to pitch to 50 in order to find 3 who are truly interested. You might need 9 who are truly interested before you find one who will give you the funds.  Just like sales, it is a pure numbers game and the odds are not great, especially in today’s market where many investors are (un-admitably) scared.

I was at a venture meeting in Lisbon a few weeks ago and talked to one of the really classy European VCs (Diana Saraceni from 360 Capital Partners in Milan). She said that even though they have only 4 partners at her firm, they received 1202 business plans last year. They held 354 meetings with entrepreneurs and closed 6 new deals. If you are one of the 1202 then be prepared for a rejection. It is not personal. It only means that there are other (better?) deals out there ahead of you in the queue.

Tzach writes that in the US less than 2% of entrepreneurs pitching get funding, and that the average time for the process takes from 9 to 12 months. Don’t be discouraged, just plan to work hard.

2. Develop a VC pitching strategy
You will certainly need a strategy or else you will just end up shooting at any animal in the jungle that moves. Tzach recommends that you develop key parameters (like history, relevance of their portfolio, location, etc.) and then divide the prospective VCs into ranked groups. Start with those that are least likely to invest so that you get some practice before you tackle the big boys. Plus, if you screw it up in the first meetings, it won’t kill you. I think you will experience that pitching is a huge (and fun) learning experience.

3. You need to play your cards right
I have always been a lousy card player because I tend to play out my cards without a longer-term game plan (OK, I have other redeeming skills). Tzach reminds entrepreneurs that the VC community is small and that VCs like to talk together a lot. Expect this, but be selective in how you handle and manage your communication. Negotiating with 2 different VCs at the same time is not an ideal situation. Try to work out your deal with one and then shop the same deal to others if you need to fill the offering. Remember that while term sheets are confidential, they will be around long after you are gone. Treat them with extreme professionalism and care. I have a consultant (who I pay with options or shares) who always helps me with term sheets. He has saved me huge amounts of money and some rather embarrassing mistakes.

4. Don’t seek funding under pressure
The best time to visit a banker is when you are not in need of a loan. The best time to start your fundraising work is long before you actually need the capital. Fundraising will take a long time. It is like selecting a wife – you should use a lot of time to get to know each other before you tie the knot. VCs are smart and they will sense it if you are under pressure, plus when you show them your cash-flow budgets and financial statements, they will quickly figure out your predicament. Plan ahead.

Just as 50% of all marriages end on the rocks, only about 10% of all VC investments actually pay respectable returns. Realize that this is the reality and plan your strategy accordingly. Good VCs can be fantastic partners who can help you (not only with capital, but also with lots of assistance) to grow your business much faster than on your own… But you have to play by their rules in order to get them on your team.

Want to turn-around your business and achieve results in record time?
Contact me to discuss Executive Coaching, Group Facilitation and Management for Hire services for technology companies. You can learn more at www.ricksalmon.comwww.xelerator.com and at www.e-unlimited.com. Rick Salmon is an energetic entrepreneur who lives in Norway and believes that European startup companies can succeed and grow quickly if only they get the proper help and assistance. Please join the discussion and leave your comments. Subscribe to this newsletter/blog to receive frequent updates and tips.

 

USA passes Educating Entrepreneurs bill

“Every $1 dollar invested in this program will put $2.87 into the national treasury” – N.Velazquez (US State Representative)

“The entrepreneurial spirit is alive and well in our region. What is lacking is the opportunity and ability to tap into ‘the experts’.” Donna Kilhoffer (Community Education Council)

On July 28, 2009 the US House of Representatives passed a bi-partisan bill called the Educating Entrepreneurs Through Today’s Technology Act. The bill was introduced by New York Democrat Nydia Velazquez, who is the Chairperson of the House Small Business Committee.  It provides funds for creating a USA national training program for entrepreneurs, startups and small businesses. It will finance satellite and advanced network infrastructure as well as leading-edge content and participation by some of the most successful and experienced entrepreneurs on the planet. The delivery will be live, online, interactive and available to small business owners and entrepreneurs nationwide. Whether they live in the backwoods of West Virginia or in the heart of Silicon Valley, they will now have access to instant, interactive and specialized expertise. Now that is the type of government stimulus program I like.

Why is this important for European entrepreneurs and politicians?

  • USA entrepreneurs are challenged because there are so many remote geographies and rural areas. Europeans are challenged because there are so many different and also remote nationalities. Europe needs this kind of program.
  • USA entrepreneurs are blessed with a single, large and homogeneous market. Europeans need to lower the national barriers so that European Entrepreneurs can service EU markets unencumbered.
  • USA venture capital markets are uniform and relatively equivalent across the country (the VC terms in Boston are not that much different from those in Silicon Valley or the Technology Triangle in N.Carolina). Europe needs to flatten the geography.
  • USA entrepreneurs struggle with internationalization and cross-border ventures. Europeans understand this innately and should be encouraged to use this to their competitive advantage.

Europe needs to find a way to turn this from a disadvantage into a competitive advantage.

Your comments on this article are encouraged.

Here is more information:


Thompson Bill Passes House “The Educating Entrepreneurs through Today’s Technology Act”

July 28, 2009 6:12 PM. Washington, D.C.—Today the House of Representatives passed by voice vote, House Resolution 1807, the Educating Entrepreneurs through Today’s Technology Act, introduced by U.S. Representative Glenn `GT’ Thompson, R-Howard.

“Small businesses are the backbone of our economy, employing roughly half of U.S. workers, and while our communities are experiencing high unemployment rates, the entrepreneurial spirit remains alive and well,” Thompson told the Members.  “For many underserved and rural areas, it is critical to have the opportunity and ability to tap into resources that will foster further economic development and provide prospective entrepreneurs with the same access afforded to their suburban and urban counterparts.”

The measure will provide high-quality tele-distance training through a competitive grants process administered by the Small Business Administration. The program will promote peer-to-peer networking for small business development, by using technology to deliver information and share data on-line and through videos and satellite communication.

Satellite seminars and online information services will allow prospective and established business men and women to interact with each other to trouble shoot problems and share best practices for interacting with the Small business Administration.  This is a good example of the proliferation of online networking sites, where people can exchange their knowledge and  information.  This one will offer facts and figures on securing financing, navigating government regulations and learning to get a small business off the ground.

For many entrepreneurs, accessing this kind of information requires driving long distances to a Small Business Development Center.  This legislation will bring the information to home computers.

In April, when this bill had a hearing before the Small Business Committee, Donna Kilhoffer, the program manager for the Community Education Council of Elk and Cameron Counties testified, “The entrepreneurial spirit is alive and well in our region. What is lacking is the opportunity and ability to tap into ‘the experts’.”

This measure will allow people throughout the Nation to tap into the experts.

Thompson’s bill passed in May as well when it was included as a part of a larger House-passed bill, (H.R. 2352), the Job Creation through Entrepreneurship Act of 2009.  Both measures await action in the U.S. Senate before either can become law.

Want to turn-around your business and achieve results in record time? Contact me to discuss Executive Coaching, Group Facilitation and Management for Hire services for technology companies. You can learn more at www.ricksalmon.com and at www.xelerator.com.

Rick Salmon is an energetic entrepreneur who believes that this beautiful world that we have created needs our help. Subscribe to this newsletter/blog to receive frequent updates and tips.

Worshiping Genius

RS_Photo94“Italy worships Genius, but has not yet figured out how to create a culture of entrepreneurship”. This was an interesting statement made by the Executive Director of the Italian Angels for Growth, Lorenzo Fanchini at last week’s semi-final of the European Venture Contest (EEVC) held in Turin. Italy is a country filled with brilliant scientists and engineers. There is a huge supply of new technology, brilliant engineering and mechanical precision but unfortunately a shortage of businessmen – those boring guys in business suits that focus on cash flow instead of electron flow. Don’t get me wrong. There are good businessmen in Italy, but as an outsider, I am struck by the inequality in the number of engineers.

Continue reading Worshiping Genius

The Circle of Life

allman_brothersI admit it. I spend too much time on the web. Mostly I am searching to see what other people are doing to solve problems for entrepreneurs and early-stage startup companies. There are some really interesting things happening out there, but in today’s world of info overload you really have to do some serious searching. And then there is all the other stuff that you stumble over on your way down that rocky road…

Continue reading The Circle of Life