Presentations from the Investor’s Perspective

 Venture Capital  85 Responses »
Dec 112009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

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All investors are bombarded with requests for meetings. Entrepreneurs put a lot of effort into networking and building relationships that will allow them to make a presentation to a possible source of funding. They have honed their elevator speech and given it many times. Mostly the results of these contacts are non-committal or an outright expression of no interest. All investors say no or maybe much more frequently than they say yes. But, there are the times when you say yes and a meeting is scheduled. Here are a few thoughts on how to handle that meeting. Continue reading “Presentations from the Investor’s Perspective” »

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Protecting Investor Interests: Quick Assessment, the Short List

 Turnaround Management, Venture Capital  Comments Off
Dec 052009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

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I am sometimes asked by investors to ‘parachute’ into a company and give them a quick assessment of conditions and possibilities. Most of the time, the company has been under-performing. Frequently the money that the investors provided has been spent and they are facing the need for follow-on funding. The investors want to know if additional investment is prudent. Generally I am asked to opine on four options: 1) shut it down, 2) sell or merge the company, 3) overhaul the team and value proposition and re-launch, or 4) make an additional investment and stay the course. My first steps are to prioritize those options and present a quick summary of the strengths and weaknesses of each. I also focus on the threats and opportunities that will most likely present themselves. Continue reading “Protecting Investor Interests: Quick Assessment, the Short List” »

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Mergers & Acquisitions: Thinking About Selling – Part II: Working Through the Emotions

 Advisory, Executive Coaching, Venture Capital  Comments Off
Nov 232009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

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Most founders think that the process of selling their company is the most difficult – but that is not the principal reason that companies do not transact. Unfortunately, many founders discover much too late that they are the reason.

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The closing table is no place to finally come to terms with the fact that you are about to sell your interest in a business that you may have spend years building up. It is no place to come to terms with the fact that tomorrow morning you will wake up and either have no place you have to be or nowhere near the authority over the people you built into a team. Coming to terms with the facts of life may mean that: Continue reading “Mergers & Acquisitions: Thinking About Selling – Part II: Working Through the Emotions” »

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Helping Companies Adapt to Changing Times – Part One

 Advisory, Venture Capital  33 Responses »
Nov 172009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

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Change is a fundamental and unavoidable part of life. Sometimes there is more change and sometimes that change presents much more difficult challenges. During those times, companies need to adapt more quickly and more surely to new realities.

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In the aftermath of two important developments – the election of a new and transformative administration in Washington and the financial and economic downturn, I have found myself working with companies that are in need to refocus and, in some cases, reinvention. For the most part, these companies are well established, mid-market businesses with proven management teams, established customer bases and value propositions that historically served them well. Many of them are government contractors with long-standing relationships with clients and programs – established contracting vehicles – and a business model that drove them through years of growth. Lately something is not working nearly as well as previously? Revenues may have flattened – customers may have started to seek other alliances – the business development team has begun to lose traction – business is not going as well as it had. That is generally when I am contacted by either the CEO, Chairman of the Board or the lead investors. Continue reading “Helping Companies Adapt to Changing Times – Part One” »

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Mergers & Acquisitions: Thinking About Selling – Part I: Confronting the Reasons

 Advisory, Turnaround Management, Venture Capital  Comments Off
Nov 092009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

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Most M&A transactions fail to close for reasons that do not relate to the structure, timing or fairness of the deal. In fact, the emotional state of the principal seller is a far more potent factor than any thing that the lawyers or accountant might focus on. Increasing the chances of an actual closing involves helping the seller come to terms with the implications of the decision to sell.

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One of the most difficult decisions that a founder faces is when and to whom to sell his interest in a business – a business that he might have spent a considerable part of his adult life building. It is a decision that is often made and unmade many times along the way. Frequently and after much work and discussion, a founder will end up deciding not to sell. The result is lost time, resources and reputation. Continue reading “Mergers & Acquisitions: Thinking About Selling – Part I: Confronting the Reasons” »

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The Cost of No Cost

 Venture Capital  Comments Off
Sep 062009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

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Have you ever done a favor for someone only to find out that you did them no favor? What to they say about the road to hell? Oh yes – that it is paved with good intentions.

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About a quarter of my work is with companies that have been funded by angel investors. During the first couple of months of any engagement, I work to identify the underlying causes of the condition that the company is in. It is rare that I am called to help with a company that is hitting its projections and generating a return for the investors. Most often, the return is slim or non-existent and the investors are beginning to run out of both patience and any interest in sending good money after bad. Continue reading “The Cost of No Cost” »

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Lack of Accountability – The Core of Failure

 Advisory, Venture Capital  249 Responses »
Aug 242009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

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There are lots of reason why a business fails – but one is particularly insidious. Failure that results from not being held accountable for your actions and their results is an unnecessary call to a futile end.

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Recently, I was recently invited by three different investors to ‘take a look’ at companies that they had invested in. The pattern that I found was so strikingly similar that I set to thinking about what I was finding. I began to think about the roots of the pattern. The more I thought about it, the more I found myself staring at one of the principal reasons that only one in ten start-up companies make it to their fifth anniversary. Continue reading “Lack of Accountability – The Core of Failure” »

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Death of the Hockey Stick

 Venture Capital  Comments Off
Jul 142009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

Here is a simple prescription for killing the tendency of founders to produce hockey-stick financial projections. Base the valuation of their company on the money being invested and let them ‘earn in’ to the extent they actually meet those projections. Continue reading “Death of the Hockey Stick” »

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Angel Investing – The ‘Elevator Speech’ Antidote

 Venture Capital  4 Responses »
Mar 052009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

One of the most insidious contributions to the process of investing is the ‘elevator speech’. Nothing had done more damage than the idea that you can boil down a value proposition, management team, business plan and resourcing requirements to a forty second pitch. Complex discussions are not improved by simplifying them – and people who think so simplistically are to be avoided.

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Listening to the delivery of an elevator speech is the single most distracting event in an investor’s journey. It is to that point in time – the equivalent of ‘love at first sight’ – that most of the subsequent failures can be traced. An elevator speech is an advertising undertaking. It is an attempt to draw in a potential investor and get them interested in providing funding for a venture. It the starkest terms, it is a money trap. Continue reading “Angel Investing – The ‘Elevator Speech’ Antidote” »

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Angel Investing – Hard Choices or Hard Times

 Venture Capital  3 Responses »
Mar 022009
 

Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com

Avoiding hard decisions – not insisting on tough performance metrics – choosing the hard for the easy – these are all recipes for hard times.

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The reaction to my two prior articles in this series has reinforced my view that angel investors often, by their own tendencies, can make it less likely that their investments will prove profitable. In Angel’s Sins, I outlined some of the mistakes that early stage investors make. In Angel Investing – Governance I described how many investors overlook the contributions that a professional, independent board of directors can make. I have received quite a few responses from investors – some that contain tales of woe and loss while others invite me to ‘get involved’ in an effort to salvage what can be of a lost situation. I don’t much like these latter invitations – too hard on the digestion with little to show. Treating sick puppies may be necessary but this series is about preventive approaches. Continue reading “Angel Investing – Hard Choices or Hard Times” »

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