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Wednesday, December 10, 2008

A cheat sheet to help you with your friendly Dragon (Investor)

What you need to know before you go on the funding trail(or entering the dragons den):

Well you have your business plan written, you have a one pager prepared, the elevator pitch is polished and sharp, your friends think it is great great and your competitors are nervous, it is time to go and dual with the Dragons. There are two keys to a Dragons check book, fear and greed, you need to raise there appetite to open the door to there treasure trove, once you have entered there den, you need to be:



and be prepared to walk away

You need to have a good team, not high flyer's, but definitely street cred ability, a few scars.

You need to have prospective customers.

You need to have a solid financial plan for 3 years.

You need believe in what you are doing, and know that you can do this for the rest of your life.

You need to be committed and demonstrate it.

These are some other thoughts I picked up from Guy Kawasaki (http://blog.guykawasaki.com/)

These are the characteristics of an attractive and fundable date for a venture capitalist or angel investor.

Realness. This seems like a duh-ism, but few entrepreneurs do it. Most entrepreneurs focus on quick flips to an IPO or acquisition. don’t get me wrong: Venture capitalists and other investors aren’t necessarily good guys who want to make meaning and change the world. A simpler explanation is that entrepreneurs who make meaning and change the world usually also make money. Nothing is more seductive to venture capitalists than a company that may have a big impact on the world.

Traction. The easiest way to prove that you have a real business is to already generate revenue. It’s one thing to believe your bull-shiitake pitch; it’s another to have customers and cash flow. You show traction, and investors will suspend disbelief. Fundamentally, you’re asking them to take a leap of faith, and it’s easier to get people to jump off a diving board than the Golden Gate Bridge. If you can’t show traction, then at least line up customer references who will really say, “If they build this, we’ll buy it.”

Cleanliness. Investors are busy, so you need to present a clean deal to them. Clean means that there isn’t a lawsuit by your former employer contesting the ownership of the intellectual property, or a disgruntled founder who owns 25 percent of the company but doesn’t do anything but sit around and complain. The more crap that an investor has to clean up, the less likely he’ll be interested in your deal.

Forthrightness. If you have crap that you simply cannot clean up, then disclose it right away—not necessarily in the first meeting, but soon thereafter. Also, have a plan ready to fix the problems. The worst thing you can do to an investor is surprise her with bad news, like a messy deal with lawsuits and conflicts, beneath the surface of the company.

Enemies. Woe unto you who claims that there is no competition. It means youre clueless or pursuing a market that doesnt exist. Investors like to see some competition because it validates that a market exists. Th en its your problem to explain why you have an unfair advantage. If you truly have no competition (and I doubt it), then either say that Microsoft or Google might go after you because these companies want it all or provide potential competitive threats.

Generally, in everything that you say, ensure that your results exceed expectations. Deliver a prototype early. Deliver your list of references early. Sign up your first customers early. Close a partnership deal early. Launch early. The only thing you shouldn’t do early is run out of money while trying to raise money. Investors seldom fund ships that are already sinking.

Well if you are going for funding, starting your own adventure, be prepared to be changed, and remember to enjoy, when you have lost the enjoyment, you will loose the motivation to succeed, remember money does not bring happiness, it helps, but it will leave you hollow.



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