29 June 2009

The Case for Taking a VC's Money (even if you don't need it)

In contrast to our recent posts which tout the advantages of bootstrapping, here is an interesting blog from the founder of SEOmoz and his (generally positive) reasons for taking outside capital from a venture investor:

http://www.seomoz.org/blog/my-startup-experience-vc-entrepreneurship-selfanalysis-the-road-ahead

He points to the ways that taking venture capital has helped him, such as the accountability, networking, metrics and experience that come along with the dollars. He also rightly points out that raising funding takes a tremendous amount of time, and that in addition to money, founders also gain a "boss" that can fire them-- something that many entrepreneurs fail to realize.

But what I particularly like about this post is his discussion on the importance of timing; namely, he was able to bootstrap his firm to a point where he didn't really need the money. This had the added-- and very significant-- advantage of giving him leverage in his discussions and negotiations. It also made SEOmoz all that much more attractive to investors in the first place, and helped close the deal quickly.

This is a common mantra I try to hammer home with startups that I work with, who frequently want to raise money too early. In short, there is nothing more frustrating than spending three or six months fruitlessly knocking on doors; you've got to be ready to raise money, and generated enough momentum on your own such that you are an appealing investment opportunity.

The rather off-the-wall metaphor we often use is that of a train...the burden is on the entrepreneur to get the engines fired up and the train rolling out of the station, at which point investors will jump aboard for fear of missing it. The investors bring the fuel-- I suppose coal, in this scenario-- but they have no incentive to join if the train is stationary. (And in fact, it is in their best interest to watch and wait as long as possible-- an issue we talked about previously in our post titled "Closing Term Sheets Quickly." Is your train moving?

19 June 2009

Basic (But Solid) VC Pitching Tips

I stumbled across this blog this morning called Startable, co-written by an entrepreneur and a former VC with Atlas Ventures.

They have compiled some pretty useful content and pitching tips. The tips are basic, but all-too-often neglected or forgotten-- things like focusing on the team and demo, or making sure your WebEx account is working and your financial model is formatted correctly.

I have been in a few VC pitch meetings where the first 15 minutes-- i.e., 1/4 of the total time allotted-- were spent troubleshooting the demo, trying to hook up the projector, or fruitlessly hunting for a WiFi signal.

While the VCs were relatively patient and sympathetic, those meetings never progressed any further. Somtimes it's the little things...

http://www.startable.com/category/vc-tips/

16 June 2009

Things A Founder Will Never Say

As a follow-up to last week's slide show of Things A VC Will Never Say, here is the other side of the coin:

Things A Founder Will Never Say

The picture on the front of a very young Bill Gates and his team in some very fashionable "1970's Geek" attire is pretty good, as are these lines:

Consistency: "We're all about real-time, just like we were all about the iPhone last quarter, and Facebook apps before that."

and,

Preparedness: "Our marketing plan is to pray for TechCrunch coverage."

Spot on!

09 June 2009

Things A VC Will Never Say

Let's start off the day with a little VC humor...this slide deck, modeled off the "Successories" line of motivational posters (favored by Michael Scott in the Office), accurately sums up a few of the more common VC sentiments.

Things a VC Will Never Say

My favorites:

Humility: "Quite frankly, I'm not the smartest person in the room."

and,

Confidence: "I will not let my absence of direct experience reduce the intensity of my opinion."

and,

Attentiveness: "It was rude of me to check my Blackberry during the meeting."

Good stuff!

08 June 2009

Apple's Business Plan and Offering Memorandum

Apple is one of the most fascinating companies, ever.

As a kid I was a huge fan-- my first computer was an Apple IIe, and I discovered at an early age both the joys of programming (I could code a program to make a Pac Man open and close his mouth) and the thrills of software piracy (it was quite easy to put a piece of tape over the write-protect chit on the big 5 1/4 inch floppy discs and duplicate a friend's entire Castle Wolfenstein collection over the course of a weekend).

Then, like almost everyone else-- save for a few artist and graphic-design types-- I switched to a PC with the release of Windows 3.0, and never looked back. With a very mild tinge of sadness, I watched as Apple's market share slowly but continuously eroded, and as the company struggled with notable flopss like the Newton PDA and as Steve Jobs struggled to get NeXT off the ground. Apple appeared on its way toward being a footnote in business history.

Apple's turnaround is, of course, one of the greatest comeback stories ever written. Instead of battling it out with Dell, HP and Compaq as PCs became low-margin commodities, Apple returned to it's strengths in creative design, user experience and overall "look & feel" and went on to produce some of the most amazing products ever created.

So, with the company now at the peak of its game, it is amusing to take a look back and see how it all started. These documents are courtesy of the excellent Computer History Museum.

Here is Apple's Investor Offering Memorandum from 1978

and the original Business Plan for the Mac from 1981.

It's amazing to read how far Apple (and the computing industry) has come...enjoy!

01 June 2009

VC Blog Lists and Rankings

About a year ago, we compiled a list of VC bloggers on the VentureArchetypes website:

http://www.venturearchetypes.com/Blogs_written_by_VCs.html

It was a fairly laborious process, involving combing numerous other lists, so I can only imagine how long it took Larry Cheng of Fidelity Ventures to put together this list of the top 100 VC bloggers, as ranked by number of Google subscribers:

http://larrycheng.com/2009/05/26/global-vc-blog-directory-ranked-by-of-google-reader-subscribers-may-2009/#comment-246

While some critics grouse that "real VCs don't blog" (meaning they're too busy doing deals and don't need to market themselves), I actually think the proliferation of the VC blogosphere is a godsend for entrepreneurs. Plus, there are some great names on these lists.

The reason it's so advantageous is simple: in any deal, your odds of succeeding are greatly heightend if you can understand the other party, and tailor your message around their needs and wants...e.g., a "value proposition that meets their values." This is true whether the deal is a venture pitch, a strategic partnership, a marketing alliance/JV, or even an acquisition.

But of all those examples, it's only the venture pitch where there's a ready-made 'window' into the other party-- their blog. This lets the entrepreneur get inside the head of the person he's pitching, and get a feel for his/her personality and ways of thinking. It also serves to de-mystify the VC a bit, which is always a useful thing.

Who is your favorite VC blogger? Who is missing from these lists?
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