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:

1. Be underwhelmed by the message here
2. Scan the page for what you think is important
3. 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…

The Rosebuds 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 and emerging growth companies.

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.

While there are a few partial exceptions (two of which I will discuss in a moment), typically these networks are nothing more than online marketing mills, engineered to fleece you with the promise of “exposure” and “connections” to “The Money” – yeah right!

Posting yourself up on one of these boards is akin to entering Shrek in the Miss America pageant. They’re blind dates through one way glass (guess which side you’re on). You’re in a lineup, and on the other side of the mirror are a handful of equally unqualified service providers posing as investors.

If you don’t believe me, go forth young Skywalker and experience the Dark Side. Here are some of the scenarios you’re likely to encounter in the Red Light District of investor networks:

PAY TO PLAY
The serpent whispers tall tales of a discreet capital market that secretly awaits you, if only you had the treasure map and an experienced guide. Of course, for a small fee, this Slytherin will offer you safe passage to the Promise Land. Should you really trust a snake?

PREP & REP
“If only you were packaged properly with the right introductions.” This ancient sales pitch can be traced back to the first guy who ever printed up fake business cards posing as a talent scout for Playboy. Expect to pay up to $1,000 a page for a completely useless re-write of your already lackluster business plan. While experienced service provides can be worth their weight in gold , few Prep & Rep outfits can actually deliver what they promise- BEWARE.

JOY RIDING
“Let me introduce you to my network of Angels.” This low-riding business broker is an aluminum siding salesmen turned pimp. The peril here is overexposure to the wrong people. Joy Riders pick you up for the purpose of serving as this month’s doorstop. They turn over deals like overstocked inventory and pimp you out to their outdated list of closed doors. Meaningless “Letters of Interest” precede the usual and customary follow-up call for a “refundable” fee. Use your imagination here, it almost always ends badly.

CHERRY PICKING
“You’re the one that I want—whoo hoo hoo, honey.” Cherry Picking deals may not be the same as prostitution, but in the end you’ll get paid very little to perform sordid acts and end up walking out the same door. You’re not Julia Roberts, so don’t count on being the next “Pretty Woman.” No one in “The Biz” is looking to be your savior. If you’re the unlucky 1% that gets picked up (pre-revenue), plan on getting a big shot of penicillin afterwards.

Now don’t get me wrong here – I’m not against Investment Networks. In fact, I believe they’re the future—just not in their current format. Here’s the problem: The two models to choose from are either bulletin boards that let anyone join, and as a result, have no credibility with real investors, or; they’re structured viewing cages that require you to lift your skirt too early, exposing you prematurely to seasoned Vultures that may eat you alive. Either way, you lose the most valuable commodity I know of—time.

As for the two exceptions I alluded to earlier, I like Go-Big Network for its intuitive GUI and “in your face” style. Wil Schroter doesn’t pull any punches and tells it like it is, and his network is a reflection of that spirit. I also like the way GoBig avoids the presumption of being an Investment Oligopoly, and remains a neutral platform for the controlled chaos we call entrepreneurship.

Genesis Exchange is the right concept for a normalized, score-based preview model- a sort of Facebook page for start-ups, where building the highest score will position you preferentially before their registered investors. I like the scoring model, which allows investors to screen out flops and midnight dreamers. The Genesis interface forces the focus company to build a consistent and uniform infrastructure for investment preview, allowing screeners to quickly summarize the core concept or dig deeper if they so choose. However, if you’re going to play this game, you’d better read some Buffet, because fundamentals count when you’re willing to reveal the results of your most recent colonoscopy.

So what’s the right format? Probably a mix of the two in a transparent platform with more communal exchange between buyers and sellers—a sort of Second Life for start-ups, where you can make a deal on the street with a bunch of friends, or knock on the big doors in private neighborhoods. I have some ideas, but I think I’ll keep them to myself for now

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.

Alternatively, being labeled a “live deal” would imply that you actually stood a fighting chance of survival. Achieving this coveted status requires the following, at minimum:

• Post Revenue
• Proprietary Technology
• Disruptive or Revolutionary
• Viral Growth
• All of the Above

VC’s are in the game to accumulate equity, not help you preserve yours. The concept of win/win in Venture Capital means that the VC wins at the beginning and in the end. The beginning is where we squeeze you for value, force feed deadly conversion provisions, lay claim to your board, and handcuff you with first right of refusal options, to seal your fate. In the end, well, you’re pretty much there; you just don’t know it yet.

Flash forward, assuming you’re still employed by the company you founded, where it appears that the bludgeoning you’ve endured is about to show favor – a liquidity event is just around the corner – just not for you. By the time your dream is ready to pop (which is rarer still), you’ve most likely sacrificed more than 95% of your stake. Your upside now boils down to being offered the prospect of restricted stock held in the belly of a medium size acquirer (yuk).

If this doesn’t sound like your particular brand of vodka, I don’t blame you. Raising money is tough sport, and the odds of keeping it (and your equity) is even tougher. Now don’t get me wrong, I’m not encouraging you surrender to a life of aimless mediocrity or forfeit the challenge, quite the contrary; if you believe this is your chosen path, then take the path of least resistance.

Avoid becoming the walking dead by recognizing your place in the finance life cycle, and what options are “truly”available to you, at each stage. The real lesson here, is that dead deals don’t walk – because they don’t have legs. Unless you’re really one of the rare, “live deal” candidates, get used to hearing “Thanks for your submission, but unfortunately your opportunity does not meet our investment criteria,” or “We very much appreciate your submission, however at this time, our fund is focused on other initiatives.”

Parents are supposed to guide their children through the fundamental stages of development, and as my father once told me: “there are seasons of a man’s life, don’t skip em.” The finance life cycle of your business is no different. So in the unlikely event that you’re greeted by a Vulture and invited to the Bird’s Nest, be sure to keep your ears tuned for the whispers of dead deals past.

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.

Now, let’s for a moment presume that you’re not the typical midnight dreamer (as described above), high as a kite on your own blend of ether and idiocy, where the order of the day is to not walk you back to your cubicle, in favor of shock treatment for your “entrepreneurial seizure” – what now…?

Truth:

The quest for entrepreneurial freedom is now more en vogue than ever before, beginning with deconstructing college students – to get off the pipe of corporate hype, and ending with late bloomers (baby boomers) and old timers – three distinct groups who are now aware that they are either unemployable or obsolete. Either way, regardless of how you arrived at your destination, the ice water is pretty frigid.

Someone once told me:

“You’ve got a better chance of getting hit by lightning in a swimming pool, than you’ll ever have getting a venture capitalist to return your phone call.”

- But gaining access to venture capital isn’t the meat of my message, quite the contrary – so don’t focus purely on the term “Venture Capital,” but rather on the intrinsic meaning of the words “Venture” and “Capital” independently.

Joining these terms suggest that someone, or a group of someone’s, somewhere, are intent on, or at least interested in, venturing a commodity called Capital, into something you believe in. It also implies that a venture gained is not capital lost, so you’d better believe “they” want a return. That’s right, a return, and a big one at that.

My point here is that everyone is a venture capitalist—it’s just a question of scale and whether or not you espouse to be a professional. If you make a bad deal with a friend or family member, realizing later that you gave away too much of your company, you essentially beat yourself at a pro’s game, which makes you an amateur.

The only difference being, you probably sealed your fate and don’t yet know it. Join the club, you’re not alone. You’re now a proud card carrying member of the “would be” society – wearing the scarlet number 98, representing the percentage of businesses that will never gain official access to the capital markets – and not just because you botched the value of your company by bringing in Uncle Herman for 30%, but for a multitude of factors, which include, among many others, pure lack of experience mixed with intentional misdirection.

Yes, you heard it right…Intentional Misdirection.

We the people…wait, wrong charter. We the Vultures (Venture Capitalists, Angel Investors and Commercial Banks), of the United Financial Oligopoly (“UFO”), do solemnly swear to hide the truth, the whole truth, and nothing but the truth, so help us God.

How do I know this? – because I’m one of them, and have been now for the last fifteen years!

Behind the cloak of the XVulture, I’ve amassed considerable wealth, trading on the scalps of inexperienced and unsuspecting dreamers like you. My cohorts and I happily cherry picked the best of breed from almost every industry, luring bushy tailed entrepreneurs into our clutches, on the promise of capitalizing their life’s ambition.

What we didn’t disclose, however, was the reality of our chosen path for them – a road paved with landlines, not gold. Each and every one of them (even the ones that did deliver), would soon learn the art of Intentional Misdirection—a calculated setup born from our (self proclaimed) elitist greed, and a viewpoint that entrepreneurs are nothing more than accidents waiting for capital. Regardless of how the deals started, they always ended the same way—our way. We owned, controlled, and fired at will – leaving the founders for dead, only to pass on our secret recipe for Vulture Stew (1/5/0):

One year, less than a five percent stake, and zero involvement.

So who am I and why am I telling you this? The second part is easier to answer—because life has a way of teaching us things in reverse. Sometimes we have to fast forward to the end in order to to make sense of our beginnings. So if you happen to be one of the rare few that ever get glimpse of who you might have been, change.

As to the first part of the question, I’m the XVulture for now. And because I haven’t yet evolved to the point of giving all my blood money to charity, I have partners, investors, and numerous companies that would not appreciate my new found conscience or desire to help the underdog.

Maybe someday.