How Hot is Your Deal?
August 5th, 2008 categories: Business Plans, Entrepreneurship, Venture Capital
Whether you need $50,000 in seed capital or $5,000,000 in bridge financing, raising the temperature of your deal is mission critical. Every entrepreneur is looking for the source, or the sorcerer that can truly connect them to the right accredited private investors-each of which is looking to put money into deals with the right ingredients.
What’s it take to get on the menu?
Keep reading to find out…
REALITY BITES
Why deals get chewed up & spit out
YOU’VE BEEN LIED TO-by your banker, your broker, your bean-counter-a long line of stuffed shirts who like to hear themselves croak about “getting outside of the box,” only to cram you back into one when it’s time to start raising money for your business.
Don’t get me wrong. These aren’t bad people and they may even be wildly successful, they just don’t get where they are by packaging and positioning early-stage opportunity. Unfortunately for you, all that well-meaning advice can cost you time and money-lots of it.
Alright, so you’re here because you want to raise money. If it’s the truth you seek, you’ve come to the right place. The bad news is, if you’re like most people, you will:
- Be underwhelmed by the message here
- Scan the page for what you think is important
- Miss the real point and move on
If you’re still reading, good for you, because what you just read isn’t merely a profile of how most people surf the Net, IT’S HOW INVESTORS LIKE US SURF OPPORTUNITY.
If you’re in the market for private debt or equity capital and that doesn’t scare you, look down-that line you just crossed may well cost you your business. Sure, you may think you’ve got your act together, that you’re ready to talk to serious money players, but you’re not. I see it day in and day out, and it’s because most entrepreneurs don’t understand one thing: THE VALUE OF TIME.
One of the many benefits a surplus of capital affords investors is the freedom to cherry-pick opportunity and draw a distinction between entrepreneurs and misguided dreamers. This is why we prefer deals we can understand quickly, caluculate the upside and effectively assess the risk.
HALF-BAKED
What are you trying to sell us?
All but the most savvy of entrepreneurs fail to recognize the heart of their own deals and kill their fundraising efforts before they even begin. In order to raise the right kind of money, you need to think like an investor. Remember, you’re competing for mindshare here. It doesn’t matter if you’re a concept stage start-up or a growth company looking to take things to the next level, every successful financing effort begins as a bid for an investor’s time, not his money.
Do your materials clearly, concisely and compellingly articulate the market opportunity and the mechanics of your deal? Probably not. Odds are, it’s a room-clearing testament to the reasons most early-stage deals die slow, painful deaths: Emotional founders, plodding, techno-saturated narratives, muddy corporate structures, baseless valuations, bad investment vehicles…the list goes on and on.
Unfortunately, most of the misguided efforts to slim them down yield nothing more than quarter-scale versions of the original 50-page abominations. BEWARE: Just because it’s short, doesn’t mean it’s sweet. The short-form pitch isn’t a short-cut-it’s an art form.
FEAST OR FAMINE
It’s not just what you serve, it’s how you serve it
If you really want to get an investor’s attention, less can be more-provided you’ve got the right ingredients and know how to mix them up. Find a quick way to whet our appetites with something that’s got the right flavor-not too spicy, not too sweet-and you’ll find us more than willing to sit down at the table with you. Who knows? If you’re the real thing, we may even pick up the check…
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Protected: Kluster F@#k
July 16th, 2008 categories: Entrepreneurship
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Angel Notworks
July 12th, 2008 categories: Investment Networks, Venture Capital
A successful bachelor really never throws away his “little black book,” and neither does an Xvulture. From time to time we “water the plants,” to ensure a blooming rose is always in season.
The Rose buds in our world consist of “Venture Capable” friends and trusted institutional investors - relationships cemented over the years by successfully pulling the wings off start-up flies.
Our network of private and corporate cohorts are often mistaken by would-be entrepreneurs for “Angels,” “VCs,” and “Investment Bankers.” To us they are just that, but to the uniformed start-up, they might as well be an electric fence—which brings me to the point of this post:
INVESTMENT NETWORKS ARE BOGUS.
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Looters, Moochers and Titans
May 29th, 2008 categories: Just Because
Ayn Rand’s, Atlas Shrugged, paints an eerily familiar state of affairs, related to man, society, and the sad, but true nature of the “collective whole.” Although written more than fifty years ago, her philosophy related to capitalism and the perils of compromising the “free-market” and “free-thinking,” clearly ring true today.
Particularly interesting (to me at least) is her labeling of two distinct parasites of society, Looters and Moochers. As defined in Wikipedia:
“The looters are those who confiscate others’ earnings “at the point of a gun” (figuratively speaking) —often because they are government officials, and thus their demands are backed by the threat of force. Some looters are following the policies of the government, such as the officials who confiscate one state’s seed grain to feed the starving citizens of another state; others are exploiting those policies, such as the railroad regulator who illegally sells the railroad’s supplies on the side. The common factor is that both use force to take property from the people who produced or earned it, and both are ultimately destructive.”
“The moochers are those who demand others’ earnings because they claim to be needy and unable to earn themselves. Even as they beg for their help, however, they curse the people who make that help possible, because they hate the talented for having the talent they don’t possess. Although the moochers seem benign at first glance, they are portrayed as more destructive than the looters-they destroy the productive through guilt and often motivate the “lawful” looting performed by governments.”
Looters, as much I detest the breed, are par for the course - assuming you’re talking about some corrupt government official (which they all are), that at 9am, signs a bill to fleece the high achievers or “Titans,” and at 9pm, signs a check to his prostitute (which will bounce, and be paid for by those he just fleeced). Moochers however, are the Antichrist of free thinkers and Titans, where the very nature of their existence seems evil. Rand holds that “evil is a parasite on the good and can only exist if the good tolerates it.
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Leave Home While You Know Everything
May 23rd, 2008 categories: Entrepreneurship
Mark Twain left home at eighteen years of age, having heard enough of his father’s wisdom. After returning a few years later, he couldn’t believe how much his old man had learned.
I just love bushy-tailed know-it-all’s—young entreprenerps who’ve obviously never read Michael Gerber’s “E-Myth.” Go forth young technician and conquer the world. Surely your exceptional skills as a salesman/broker/engineer/coder/designer/whatever, will propel you to great heights, once you catapult over your air-conditioned cubicle.
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Dead Deal Walking
May 6th, 2008 categories: Venture Capital
It pains me to mention how many times I’ve heard this phrase: “If I can only get through the door, I’ll sell this deal.” Sure you will – if the door’s made of Balsa Wood and you’re strapped with explosives. Short of that, you don’t “get through the door,” you’re invited in – and once you’re there (wherever there is), don’t be too discouraged if you hear chanting from the bowels of back office… “Dead Deal Walking!”
I know, you’re probably scratching your head right about now, wondering how this catchphrase relates to your big shot. In Vulture cackle, Deal Deal Walking is a fraternal battle-cry - a cheer of enthusiasm that assumes another “stew worthy” entreprenerp is about to be skinned, and there’ll be meat for everyone.
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Keep Your Napkin In Your Lap
May 1st, 2008 categories: Deal Making
If I had a sliver of ever deal that ended up in the toilet as a result of partner infighting, I’d own Berkshire. If napkins were intended to be legal instruments, people wouldn’t use them to wipe their chins, blow their nose in, or clean up spills. Napkins are fine for sketching ideas at the coffee shop, but you’d better memorialize your shared inspirations with a definitive agreement, if you want to avoid future headaches. Good faith, goodwill, and good intentions are mere spittle, irresponsibly mouthed from the lips of naive deal-makers, giving little consideration to what matters most - implementation. This “googley talk” always precedes the perfunctory palm pressings that underscore every narrowly defined deal.
For all the use of the word “good” in the early stage deal-making, there’s still one missing… good luck - because if you intend to make a deal with that napkin in your lap, you’re going to need it.
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Intentional Misdirecton
April 24th, 2008 categories: Venture Capital
Let me guess…you can’t sleep at night.
You’ve been up for days thinking about your new idea, or perhaps the latest rendition of it. You have it all thought out: staffing, management, equipment, space requirements, growth rate, sales and marketing, etc.
You’re certain to recruit great talent, and why not? —with an endless supply of superior malcontents within your sector - you might as well be plucking day laborers from the back of an INS truck. They’ll gladly serve as Generals in your army. You’ll be a fearless leader and command battalions of troops (lured by options of course), to join your disruptive Jihad against oppressive corporate America. You’ll free yourself from the shackles of mediocrity and the bondage imposed upon you by the “9-5 Axis of Evil.” All you need now is a little financial support - a brigade of friends, family and fools, peppered with a few Angel Investors, here and there. One hard pull on the bootstraps and it’s off to the Series A Round—here comes the private placement for widows, dentist’s wives and idiot’s sons.
Following that successful round up, who’d ever question your plans for an institutional play? Maybe 20% for $1M and some convertible debt. Venture Capital is abundant and there’s billions of it out there. Just Google the word “Ventures” and take your pick. Better yet, why not join a few preferred investor networks - bringing the red light district right into the privacy of your own home.
Flash forward, you’re nearing the three year mark (in your head). Why not position yourself for a successful merger, acquisition or IPO? (they’re quite abundant these days). Why not go OTC? Your buddy knows a guy who knows a guy, that does these “reverse mergers” into public shells. It’s not that expensive, and a great way to churn your own volume - Next stop: Nasdaq.
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Trading Places
April 24th, 2008 categories: Entrepreneurship
Deals are a dime a dozen, maybe a penny these days. Like a good dog, everyone thinks they have one – sure, while it’s cute and cuddly, until it grows up to bite you in the ass. Animal’s behaviors mimic their human counterparts (Dog Whisperer 101). If you’re neurotic, so are they. If you’re stressed and erratic, so are they. If you’re abusive, they’ll turn.
Deals, similar to dogs, often have fleas, and sometimes blood sucking ticks - differentiated generally by those who care for them. To care for a deal, you must have discipline, patience, time, understanding, and the ability to constantly adapt to external stimuli. A great leader not only balances these factors, but does so while others remain awestruck at the magnificent effortlessness of it all.
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