Internet Week - Venture Capital & Angel Bootcamp
Thursday, June 10, 2010 at 09:17AM | Michael Makarius Last night, David Rose from the New York Angels and Adam Dinow from Wilson Sonsini Goodrich & Rosati co-hosted a great presentation about funding. The event was simultaneously streamed on live stream and can be found at: http://www.livestream.com/vcbootcamp. I highly recommend anyone looking to raise capital or building a business that they expect will need outside capital at some point watch it. David does a particularly good job of dicussing how to put together your presentation for investors and of conveying what the qualities he is looking for are. Not surprisingly, most of the qualities he points to are ones that reflect the quality and integrity of the team - harkening back to the venture capital mantra of investing in people rather than ideas.
The video, unfortunately, does not have the ability to skip to the end, so I cannot tell if the Q&A session at the end is included. I want to mention three quotes from David that came out in the questions which I believe to be particularly important for entrepreneur's to understand.
1) In discussing the usefulness of an advisory board - "Are they contributing? Names on letterhead don't help." All too often I see figurehead advisory boards put together by clients. They assemble a list of names that look great, but none of those advisors make any introductions or provide any advice. The entreprenuers justify this with claims of the board being "validators" for their business. If you are going to assemble an advisory board, be certain they will actually advise you. Investors are aware of the figurehead advisory board problem and will be able to tell the difference between a board that is contributing and one that is not (often because the contributing board will have made introductions to investors or be in contact with them via email to promote the business).
2) "Most investors invest for an exit, not an ongoing revenue stream." I have seen many entrepreneurs with plans to build good businesses that generate steady amounts of cash that they intend to distribute to shareholders, and who get frustrated when angels and venture capital firms say no to their business. These types of investors are looking for a big exit (IPO, sale of the company, buyback, etc.) at a single point in time several years out. They are not looking to make money every year off the company so long as the company remains in business. At some point, I plan to write a larger post about how funds and individual investors plan to see a return on their investment as I think that will help entrepreneurs better understand why this is.
3) "Ideas are not it, it's execution." Barriers to entry in many industries have become so low (e.g. internet companies) that presenting an "idea" or a business plan without any sort of prototype is a recipe for disaster. Entrepreneurs need to understand that the expectation is on having some development done before you raise capital. Furthermore, this relates back to what David talks about in his main presentation: that investors are focused on the entrepreneur more than the idea.
On another note, Fred Wilson, has a great post today on the Panel Pile Up. His suggestion to anyone approaching him after a panel or other discussion at which he lectures: Keep it short. In his words: "Limit your pitch in this situation to sixty seconds. Communicate three things and ask for one more. The three things are your name and your company, what you are working on, and why you want to meet with me (money, advice, whatever) and then ask if I would do that." Having been both the panelist getting approached by a dozen people and the preson approaching a panelist, I think this is great advice and will improve the experience for everyone.
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I've heard of a entrepreneur from the robotics sector in WA, he's been working in tech sector and my client wants to put US$1m on the table to try him, any thing I should be aware of with him?
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