Transcript How to Get all the Funding you require to get your product

How to Get all the Funding
you require to get your product to
market
What is a small Business
Entrepreneur?

Entrepreneur n. a business man
or woman of positive disposition who
attempts to make profit from opportunities
by risk, initiative and guidance from
2-small-business.com
Defining Your Product or Service
and Its Markets
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Focus on a problem you have personal experience
with – make sure that it is a “top three” customer
worry
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Avoid technology wanderlust – “if you build it, they
will not come”
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Look for market dislocations where new leadership
can emerge
Defining Your product or Service
and Its Markets
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Attack large and growing markets (>$1Bn)
Timing is critical – avoid:
– Markets that are hyped – usually too late
– Markets that are out of public favor (e.g. B2C)
Make sure that you have first mover advantage –
thoroughly and creatively research the competition
Focus, focus, focus …. Differentiate, differentiate,
differentiate ….
Building Your Team
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Be honest/open about team’s holes internally and with
financiers
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Hire A+ team members – wait for right people – make sure
you feel that you have the best CEO possible
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Look for a mix of skills and backgrounds:
– Combination of vision vs. operating skills – “mystic” vs.
“mundane”
– Startup vs. domain expertise
– Mix of former companies
Building Your Team (Contd).
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Focus early on engineering and sales/business
development – mid-level talent OK if senior team
profiles unclear
Everyone should know how to sell
Involve investors in key hiring decisions (e.g. V.P.s)
Spread ownership fairly
Avoid nepotism
Creating Leverage Through
Partnerships
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Business development more critical now than
ever – sales leverage, time to market, etc.
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Better to create a large footprint than extract
every last penny from a relationship
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Timing of discussion is important for
credibility and lack of competitive
repercussions
Creating Leverage Through
Partnerships (Contd.)
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Make sure partnerships are breakeven within
a year
Partnerships come in all forms (e.g.
attorneys, accountants, PR firms, search
firms, contractors, etc.) – focus on leaders
Use partnerships to create barriers to entry
Developing Your Product/Service
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Time to market is important – develop a
demo/prototype quickly
Limit yourself to 12 months to revenue
Create frequent small product improvements
– iteration better than “mega-releases”
Work with prospects/customers from the
earliest possible point
Developing Your Product/Service
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Buy rather than build at all costs
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Create a “whatever it takes” culture – deliver
on time
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Always have a contingency plan
Keeping Customers in Mind
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Create a customer-oriented culture - make sure
everyone has customer contact
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Develop a reference list as early as possible – focus
on credible industry/sector leaders
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Set customer expectations on deliverables
appropriately
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Make sure early users are ecstatic about
product/service – support them feverishly
Managing Cash
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Obsessively manage your burn rate
Use part-time CFO if needed
Understand when to adjust spending
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Advertising
Headcount
Initiate new investor discussions at least four
months before running out of cash
Developing a Good Reporting
Structure
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Publicly report status on key metrics internally (e.g.
customers, pipeline, site traffic, development
milestones, etc.)
Don’t fear investing in a good CFO – CFOs are needed
earlier now than they were in the past
Plan on monthly Board meetings for first 6-12 months
– Control the agenda
– Give management team members
exposure/participation
– Focus on one major strategic issue at the end of
each meeting
Developing a Good Reporting
Structure (Contd.)
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Communicate regularly between meetings
with the Board and investor group (e.g. bimonthly e-mails, breakfasts, etc.)
Financing Tips
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Early, raise only as much as you need to get to a major
milestone (e.g. beta product, site launch, etc.)
Later, raise as much as you can get/tolerate – helps brand
company, displace competition, etc.
Develop financing plan around sales/product/team
milestones
When choosing financing partners, marry for “love” not
money
Use financing process as a proxy for working relationship
Financing Tips (Contd.)
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Tips on getting in the door and presenting
– Research the firm/partner
– Come in via referral
– Deliver overall concept in first three minutes
– Be in sell mode and create excitement (concise, hardhitting) – avoid “fireside chats”
– Ten page summary and slides sufficient – provide
complete CVs
– Provide real-world examples – “virtual markets equals
virtual $”
– Plan on one hour
Business Angel vs. Venture Capital
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Angels
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Pros
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Usually provide up to $50K-$250Kin early financing
Are usually quick decision makers
Are less valuation sensitive
Typically allow the entrepreneur to be more independent
Cons
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Can create valuation dilemmas (e.g. down rounds later)
Can be cumbersome to manage/administer
Offer very limited operational expertise/contacts
May drop out of later rounds
Business Angel vs. Venture Capital
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Venture Capital
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Pros
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Offer great expertise/contacts
Help generate credibility/exposure for company
Leverage efforts to secure future rounds of capital
Cons
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Are tougher on valuation/terms
Scrutinize management performance more closely
Taking Advantage of Directors and
Advisors
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Treat them as extensions to management team – CEO’s
responsibility to manage them
Look for complementary skills and expertise
VCs
– Are a mile wide and an inch deep
– Help in high level strategy and positioning –
understand competitive landscape
– Have experience with common operational challenges
– Offer great contacts – business development,
management team building
– Can help guide financings
Taking Advantage of Directors and
Advisors
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Outside Directors
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Add credibility if they are industry luminaries
Help with market/operational expertise
Create a balanced BoD – avoid single
investor representative
The Five D’s
 Define the market to your advantage
 Develop a great team
 Declare yourself the victor
 Deliver the product/service on time
 Defend your customer relationships viciously
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