After living hand-to-mouth for several months, the Entrepreneur envisioned a day where his financial woes would be over.  Food would be plentiful.  Shelter would be secure.  All the resources necessary to grow his company would be at hand.  He felt that it was time to go before the Elders and ask for an unlimited, guaranteed supply of cash to spend in any way he chose.

In my line of business, I have entrepreneurs who come to me and ask for advice about raising Venture Capital.  The problem is that they can’t answer the most basic question standing in their way: “What to you want to do with your company five years from now”.  If you’re not willing to sell the company, cede control, and otherwise “cash out” of your enteprise, then venture capital is not an option.  If your goal is to grow a nice “lifestyle” company, then grow it on cash flows.  If your desire is to create a company that you can pass on to your oldest child, then invest your life savings and take out loans to cover your (financial) shortfalls.  Never, ever, approach a venture capitalist for money under these conditions.

If you want to take your company to the level where it dominates a sector, is attractive to acquisition by a larger player in the market, or is set to IPO (an unlikely result and a topic for another posting)… then, by all means, get your company ready for venture capital.

Your source of funding will dictate a few things…

• Taking money from a Venture Capitalist is like getting married.  There will be a “pre-nuptual” agreement (aka term sheet).  There’s a nice honeymoon period after funding where all the promises you made to each other drive a “wonderful life.”  Everything is rosy.  Yet, now you’ve got a spouse to help you make decisions.  If things get ugly, divorce is possible.  But, their lawyers are better than yours and the “pre-nup” protects them.  This is why it’s important to hire your own big-time lawyer to work out the details in the term sheet.
• Getting money from an Angel investor is like having a live-in lover.  There’s still a term sheet.  But, they’re probably not as interested in spending every waking moment with you. Some, however, might want too much of your time… so pick one carefully.
• Going to “friends and family” for funding is quick and easy.  But, remember that blood is thicker than water.  Rather than having a legalistic relationship, you’ll be taking money from your parents or your best friends.  You’ve got to answer for failures and difficulties over Thanksgiving dinner or at the 19th hole after a round of golf.  They won’t likely every show up at a board meeting or understand anything about your business proposition.  They’re writing a check because it’s you.
• Borrowing money from the bank is good because you buy yourself out of the relationship over time.  Of course, they want something in exchange for the capital… so you’ve got to have collateral.
• The best way, IMHO, is to self-fund the company.  You’ll remain in control and you get to keep all of the “up side” from the deal.  The problem is, however, that most people don’t have such funds.

Regardless of the source of funds, it’s important to understand the difference between “smart money” and “dumb money.”  Neither is better than the other.  Smart money is generally better, but sometimes it is important to take money for the sake of money.  That’s “dumb money.”  The “smart money” comes with extra benefits.  It could be relationships or it could be advise.  Then, there’s the celebrity factor.  If you can get someone who has name-recognition, is an industry expert in your field, has a roladex deep enough to help find you new customers/partners, AND can write a check… you’ve hit the grand slam. 

… more coming soon …

And so it came it to pass that Elders came forward and asked the Entrepreneur to share the good news about the Company in their presence.  The Elders set the time and place.  The Entrepreneur did not panic, but began diligently preparing his thoughts.

It’s pretty exciting to have a potential investor express interest in your company.  It’s both intoxicating and scary at the same time. But, once that moment comes it is time to get busy.  The problem usually is that you shouldn’t stop pursuing new customers, nor put anything else on hold.  Your family still needs attention.  Your employees, if any, need attention too.  You *might* consider canceling some social engagements. But, most likely you’ll go without sleep.

The important thing to understand is the structure of your pitch and matching it to your audience.  Clearly, a presentation prepared to sell the company’s product is different than a presentation to pursue an equity investment.

more coming soon…

Rather than first creating a narrative, the PowerPoint Wizard was summoned.  This Wizard recommended following a Template, replete with its bullets and title slides.  30 minutes later, the Entrepreneur had fashioned a Pitch in the image envisioned by a few dozen Microsoft programmers.Or, the Entrepreneur dusted off an old presentation and shuttled a few things around to make it up quickly.

I sat with an entrepreneur yesterday afternoon who was quite proud of his PowerPoint presentation.  He had asked me for 15 minutes of my time to help him with a financial projections slide/graph.  Not one to keep my mouth shut, I asked him to go through the whole presentation first.

Dutifully, he started with the infamous “Title Slide”.  It had the obligatory name of his company, his name and title.  He even used animation to reveal his elevator pitch, written in large fonts for the audience to read.  The problem is that if he’s going to SAY the words, why show them on the screen?  I proposed a different approach. 

The name of his company isn’t as important on the title slide, IMHO, as the image of his core product.  I recommended filling most of the screen with a photograph of his product and using the ‘white space’ for the company name and his details.  Then, to reinforce the 3 verticals his company will focus on with the same core device, he caused his name to transition to the categories list.  This will allow him to engage the audience with his elevator pitch *while* this slide is static behind him on the screen… there’s less distraction from the VERBAL message.

A side note is in order.  Your PowerPoint should *support* the presentation, not drive it.  Presentation is equally about what comes out of your mouth and how you appear when giving the presentation.  Even the best PPT files won’t help a speaker overcome poor body language or lack of confidence in one’s tone.

Some advisors recommend starting with a short bio before jumping into the presentation.  IOW, “Hi, I’m [Joe] and I have [20 years] of experience in [fill in the blank] building the greatest [widgets] ever.”  I think that some of that prep work needs to be done in advance.  This could be immediately before the presentation as a 3rd-party introduces you (since you got the opportunity to present because of a referral – more on that later) or earlier because the audience read your website’s About Me page or your LinkedIn profile when they heard you were coming.  BTW, just like you take great care in how your About Me page reads, you should also coach the 3rd-party on how you’d like to be introduced… help him/her concentrate on points of your experience/capability that supports your Pitch message, not distracts from it.  IOW, if working for the Olympics is important to your pitch then get that reinforced early so that you don’t have to say it.  Spending any time talking about your hobbies or political affiliations could simply distract for your eventual presentation.  Lastly, if possible, ask that your introduction be personal and conversational… not be read from a biographical sketch.

What happens if you don’t get the introduction and can’t be sure everyone has read the web page first?  Then, start with the elevator pitch and follow it with a short biographical statement as a segue to next segment of the presentation.

Since this company had a shipping physical product, I felt it was important to remind the audience of that fact.  Since the audience will make up their mind within the first few minutes (some have argued it’s the first few seconds), it’s important to SHOW that you have a product.  In his case, I recommended a photograph of the finished product (professionally lit, if possible).  For a software product, use a screen shot at minimum.  A professional photograph of someone USING your software is better.

In the beginning, there was an Idea.  A simple, basic Idea.  And it was good.

And so the saga begins.  This is my story about an individual who wants to make a company out of an idea and where he might end up.  For the sake of this blog, I’m going to be bouncing around as the topics present themselves in the course of my consulting business and working with various entrepreneurs here in my backyard.