Comments on: Venture Capital – The First Meeting http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/ Senior Adviser, Board Member, Executive Coach, Author Sat, 17 Sep 2011 14:00:20 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12480 Dr. Earl R. Smith II Mon, 22 Feb 2010 01:38:44 +0000 http://www.dr-smith.info/?p=103#comment-12480 Agastus Naik wrote: Thank you very much Dr. Earl, Your article is outstanding among those that I read in the recent time. It's addressing the challenges faced by entrepreneurs to present their value proposition to VC's. I've a small group "The President/CEO Elite" exclusively for Entrepreneurs, I'm sure they'd really appreciate your artcle posted in the discussion board. I'd like to invite you to join our Elite group and have this discussion featured. Agastus Naik wrote:

Thank you very much Dr. Earl, Your article is outstanding among those that I read in the recent time. It’s addressing the challenges faced by entrepreneurs to present their value proposition to VC’s.

I’ve a small group “The President/CEO Elite” exclusively for Entrepreneurs, I’m sure they’d really appreciate your artcle posted in the discussion board. I’d like to invite you to join our Elite group and have this discussion featured.

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12217 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:50:37 +0000 http://www.dr-smith.info/?p=103#comment-12217 J, thanks for the rant - but you left out one thing in your list - results to date. A presentation that is built of the premise that 'we will start the business the day after you fund us' is dead on arrival with most investors. Investors want to see results - clients - revenue - business relationships that involve payment to the presenter. What they generally can't stand is a laundry list of excuses why not. Entrepreneurship is first and foremost about an action oriented focus - getting things done. Writing a business plan and putting together a power point presentation do not qualify. In my experience, investors sort out teh two groups fairly quickly and show the non-entrepreneurs the door. Dr. Smith J, thanks for the rant – but you left out one thing in your list – results to date. A presentation that is built of the premise that ‘we will start the business the day after you fund us’ is dead on arrival with most investors. Investors want to see results – clients – revenue – business relationships that involve payment to the presenter. What they generally can’t stand is a laundry list of excuses why not. Entrepreneurship is first and foremost about an action oriented focus – getting things done. Writing a business plan and putting together a power point presentation do not qualify. In my experience, investors sort out teh two groups fairly quickly and show the non-entrepreneurs the door. Dr. Smith

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12215 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:49:32 +0000 http://www.dr-smith.info/?p=103#comment-12215 Erick Chung wrote: Wow, I like it. Great Stuff ... I will actually use this method and let you know how this goes. Erick Chung wrote:

Wow, I like it.

Great Stuff … I will actually use this method and let you know how this goes.

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12213 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:47:37 +0000 http://www.dr-smith.info/?p=103#comment-12213 Song Clash wrote: Great article and post from everyone. I would like to point out that Angels do have an Angle but I think he meant to type Angel. Best to everyone, Juan Carlos Song Clash wrote:

Great article and post from everyone.

I would like to point out that Angels do have an Angle but I think he meant to type Angel.

Best to everyone,
Juan Carlos

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12211 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:46:37 +0000 http://www.dr-smith.info/?p=103#comment-12211 Song Clash wrote: Great article and post from everyone. I would like to point out that Angels do have an Angle but I think he meant to type Angel. Best to everyone, Juan Carlos Song Clash wrote:

Great article and post from everyone.

I would like to point out that Angels do have an Angle but I think he meant to type Angel.

Best to everyone,
Juan Carlos

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12209 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:45:50 +0000 http://www.dr-smith.info/?p=103#comment-12209 J Roberge wrote: Okay... here is my rant... further to my first point. Further to Guy's 10/20/30 rule... make your presentation short and to the point. The ten slides should be as follow: 1. Problem 2. Your solution 3. Business model 4. Underlying magic/technology 5. Marketing and sales 6. Competition 7. Team 8. Projections and milestones 9. Status and timeline 10. Summary and call to action Once you get into more detail, and assuming you have hooked some interest, there is another road block that entrepreneurs seem to miss. Founders and their shares. Try to keep this to two founders, perhaps three and that is it. Approximately 75% of the founders shares will be vested over 2-3 years. IOW, 75% of your equity will be earned out over this time while you build the business. If one of the founders quits on day two s/he forfeit 75% of their shares. The share capital of the Company (pre-money) should set aside ~10-15% as an option pool. Make sure what ever valuation you are aiming for it takes into consideration this option pool as it is dilutive to the founders obviously. Valuation. Be realistic. You will find more and more VCs are investing less at lower and lower values. In tech, what use to take a team of ten can be done with a team of two; barriers to entry are coming down and in general so have first round valuations. Its more about the terms then the money. Familiarize yourself on all the typical terms and conditions of a typical VC term sheet. Understand them clearly and what they mean to your company now and moving forward. It is better to accept a lower valuation, less money on preferred terms. (Two debated ones these days - and they go hand in hand - are participation and liquidation preference). Last comment. Remember. You need to impress upon the VC or investor how THEY are going to make money. Your real objective once you take someone else's cash is to make them money FIRST and foremost. Get yourself thinking like them and aligning your objectives. Oh one more comment. Dont fall in love with your business. What I mean here is if you are a young entrepreneur dont get hung up thinking your company is the next Facebook or Twitter and you are going to become a multi-billionaire. Chances are its not. And chances are you have a number of start-up ventures in front of you. GET A DEAL DONE! Dont let your personal greed skuttle a financing and dont hold on too long thinking there is a better deal around the corner. Advance your project, get financed and build a successful business. Make some money and start another company. That's how to do it. It builds your track record, credibility etc. And its good for the economy! ;) Sorry for the long rant... I could go on but we'll leave it at that. J Roberge wrote:

Okay… here is my rant… further to my first point. Further to Guy’s 10/20/30 rule… make your presentation short and to the point. The ten slides should be as follow:

1. Problem
2. Your solution
3. Business model
4. Underlying magic/technology
5. Marketing and sales
6. Competition
7. Team
8. Projections and milestones
9. Status and timeline
10. Summary and call to action

Once you get into more detail, and assuming you have hooked some interest, there is another road block that entrepreneurs seem to miss. Founders and their shares. Try to keep this to two founders, perhaps three and that is it. Approximately 75% of the founders shares will be vested over 2-3 years. IOW, 75% of your equity will be earned out over this time while you build the business. If one of the founders quits on day two s/he forfeit 75% of their shares. The share capital of the Company (pre-money) should set aside ~10-15% as an option pool. Make sure what ever valuation you are aiming for it takes into consideration this option pool as it is dilutive to the founders obviously.

Valuation. Be realistic. You will find more and more VCs are investing less at lower and lower values. In tech, what use to take a team of ten can be done with a team of two; barriers to entry are coming down and in general so have first round valuations.

Its more about the terms then the money. Familiarize yourself on all the typical terms and conditions of a typical VC term sheet. Understand them clearly and what they mean to your company now and moving forward. It is better to accept a lower valuation, less money on preferred terms. (Two debated ones these days – and they go hand in hand – are participation and liquidation preference).

Last comment. Remember. You need to impress upon the VC or investor how THEY are going to make money. Your real objective once you take someone else’s cash is to make them money FIRST and foremost. Get yourself thinking like them and aligning your objectives.

Oh one more comment. Dont fall in love with your business. What I mean here is if you are a young entrepreneur dont get hung up thinking your company is the next Facebook or Twitter and you are going to become a multi-billionaire. Chances are its not. And chances are you have a number of start-up ventures in front of you. GET A DEAL DONE! Dont let your personal greed skuttle a financing and dont hold on too long thinking there is a better deal around the corner. Advance your project, get financed and build a successful business. Make some money and start another company. That’s how to do it. It builds your track record, credibility etc. And its good for the economy! ;)

Sorry for the long rant… I could go on but we’ll leave it at that.

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12208 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:44:10 +0000 http://www.dr-smith.info/?p=103#comment-12208 J, thanks for the comment - and right on point. I have also had the 'massive slide stack' experience. One reason I think that entrepreneurs do that is a misunderstanding of the process. They don't understand that each meeting has a set of objectives and that those objectives are cumulative. Instead of focusing on the objectives of a particular meeting, they present as if all the meetings are taking place at once and the entire decision process for the investors is compacted into one one hour session. Dr. Smith J, thanks for the comment – and right on point. I have also had the ‘massive slide stack’ experience. One reason I think that entrepreneurs do that is a misunderstanding of the process. They don’t understand that each meeting has a set of objectives and that those objectives are cumulative. Instead of focusing on the objectives of a particular meeting, they present as if all the meetings are taking place at once and the entire decision process for the investors is compacted into one one hour session. Dr. Smith

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12207 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:42:00 +0000 http://www.dr-smith.info/?p=103#comment-12207 Frank Bu wrote: Maybe we can do some work together for your clients in great Nanjing region, Yangtze River Delta, China mainland. Regards, Frank Frank Bu wrote:

Maybe we can do some work together for your clients in great Nanjing region, Yangtze River Delta, China mainland.

Regards, Frank

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12205 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:40:59 +0000 http://www.dr-smith.info/?p=103#comment-12205 J Roberge wrote: One of the more common problems I see, is that many companies have a product plan and not a business plan. And often the reason for this is because that is what they have. A great product, but not a business. In terms of the actually presentation, I recommend Guy Kawasakis' 10-20-30 rule for a presentation. 10 slides > 20 minutes . 30 font point. This forces you to get to the core of your value proposition. An entrepreneur recently sent me a powerpoint presentation in a very interesting business... it was 59 slides. Our interest died right then and there. For Guy's 10 20 30 Rule of PowerPoint go here: http://tr.im/ERxC To see Buy present this on You Tube go here: http://tr.im/wQGB J Roberge wrote:

One of the more common problems I see, is that many companies have a product plan and not a business plan. And often the reason for this is because that is what they have. A great product, but not a business.

In terms of the actually presentation, I recommend Guy Kawasakis’ 10-20-30 rule for a presentation. 10 slides > 20 minutes . 30 font point. This forces you to get to the core of your value proposition. An entrepreneur recently sent me a powerpoint presentation in a very interesting business… it was 59 slides. Our interest died right then and there.

For Guy’s 10 20 30 Rule of PowerPoint go here:
http://tr.im/ERxC

To see Buy present this on You Tube go here:
http://tr.im/wQGB

]]> By: Dr. Earl R. Smith II http://www.dr-smith.info/venture-capital-%e2%80%93-the-first-meeting/comment-page-2/#comment-12203 Dr. Earl R. Smith II Wed, 17 Feb 2010 16:40:17 +0000 http://www.dr-smith.info/?p=103#comment-12203 Eric, Thanks for the comment - right on point. An additional comment on Google - almost every VC I know Googles a space well before each presentation - to see what companies are in it and how they might represent competition. They take key words from the value proposition descriptions in the submitted presentation. If during that face-to-face session, it becomes clear that the VC has done more diligence than the management team, the meeting can come to an end very quickly. I was in one session where the CEO stated that his start-up had 'no direct competition'. The VC responded with a list of a dozen companies that seemed to him to be potential competitors. The CEO was familiar with none of them. You can guess the outcome of the request for funding. It's OK to be wrong - we all are more than we would like to admit - but it is unforgivable to be ignorant on purpose. Dr. Smith Eric, Thanks for the comment – right on point. An additional comment on Google – almost every VC I know Googles a space well before each presentation – to see what companies are in it and how they might represent competition. They take key words from the value proposition descriptions in the submitted presentation. If during that face-to-face session, it becomes clear that the VC has done more diligence than the management team, the meeting can come to an end very quickly. I was in one session where the CEO stated that his start-up had ‘no direct competition’. The VC responded with a list of a dozen companies that seemed to him to be potential competitors. The CEO was familiar with none of them. You can guess the outcome of the request for funding. It’s OK to be wrong – we all are more than we would like to admit – but it is unforgivable to be ignorant on purpose. Dr. Smith

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