Article from the VC company Cannan Partners

Raise your venture capital


By
Maha Ibrahim
General Partner, Canaan Partners

The venture capital industry is strong again today. That means there is no lack of money for highly promising entrepreneurs with good, well-formulated ideas, whether they're creating a startup from scratch or seeking later-stage financing for a growing venture with promise. Just look at the numbers. In Q2 of 2006, VCs invested $6.3 billion in 856 deals—the highest dollar amount and the most deals in more than four years, according to PricewaterhouseCoopers.
And the well is hardly dry. U.S. VC firms raised $4.3 billion in Q1 of 2006, the latest figure available—a 69 percent increase over the same figure a year earlier, according to Dow Jones VentureOne.
VCs are deploying these dollars somewhat differently than they have in the past. Consumer-oriented investments, especially in wireless communications and Web 2.0 startups, are dwarfing traditional networking and enterprise-oriented deals. VCs are also placing most of their bets on new startups or late-stage deals. Their hope is that they can make as much as five times their money within three years or so. And they are investing much more internationally in rapidly developing nations such as India and China.
Prospective entrepreneurs should bear these trends in mind. Here are tips to help you raise VC—ways that can enhance your odds and avoid undermining your chances.
Do
Use your network to approach VCs. Cold-calling VCs—who receive hundreds of business plans weekly—doesn't work. If you already know some VCs, approach them initially. If you don't, see whether an adviser, lawyer or a board member has entree to VCs.

Prepare a realistic, believable business plan—one that targets a healthy market in which customers are relatively easy to find and support. Make sure there is a clear and compelling case for your product. It would be a mistake to develop and sell a generic hardware platform to a dozen customers, each of whom uses the platform to support a different application. This model is too obtuse to attract a lot of new customers.

Develop a good "narrative." Be willing and able to tell a strong story about the potential of your startup. Don't assume the startup will sell itself. Build the theme that there is a significant hole in the market, and that your startup will address it squarely and grow rapidly.

Show that you have good insight into competitive threats. One good way to do this is to develop a matrix itemizing points such as product features, price points and technical differentiation. Then outline the relative strengths of your startup on each point and the relative weaknesses of the competition. VCs want to see graphically who is chasing the same dollars and why your competitive edge is superior.

Build a business that has barriers to competition. There are lots of startups in the Web 2.0 space, for example. But those with a good shot at success have a significant marketing, ease-of-use and technology edge over the competition, whether it's a better way to navigate the site or a novel way to attract many users.

Don't
Claim you have no competition. Almost everybody does, and you have to respect it. VCs have to feel comfortable that you have a good sense of what is happening in your target market.
Build a product without talking to prospective customers. VCs expect startups to go to market with products that are painstakingly analyzed, and that means the developers have incorporated a lot of feedback from those who will buy and rely on the product. Good customer communication is also imperative for growth.

Present your ideas informally or sloppily. A lot of entrepreneurs think they can initially communicate with VCs in an informal discussion. As busy people with time constraints, VCs want to see good ideas clearly and succinctly presented. They also want to know that prospective entrepreneurs are sufficiently organized to capture the essence of their business plan in a 20-page PowerPoint presentation.

Create the suspicion that your startup suffers from a lack of focus. For example, don't say that you will develop six products in six months. Startups focused on one product, let alone six, rarely make their initial timetable, partly because products rely on input from beta customers who chronically insist on changes.

Foster the impression that you don't have a solid plan for taking your product to market. Startup founders often get wrapped up in technology at the expense of strong marketing and sales plans. Entrepreneurs often don't realize that it's equally important to show how they intend to get their product into the hands of customers cheaply and quickly. Don't fail to address whether you're going to rely on a corporate partner or third-party resellers to sell your product, and why or whether you need to develop an internal sales team from the start.

From the EE Times

One evening when I was out for a walk I noticed something or Making decisions

One evening when I was out for a walk I noticed something


Since we moved to the village we have taken to going for a walk , early evening after dinner, we go through the main part of the village, this is a habit we picked up when we were living states side, last night Margaret said something that caught my attention, she said "she had not noticed that seed planter before in one of our neighbours garden" . I off course started to think, well why had she not and came to the conclusion it was darker than usual and a lot of the houses had there lighting fired up out front, so you could see cleared.

I was then distracted as a thought flashed through my mind about our perception of issues and challenges in business and the circumstances around us that influence our decision making process in them. I thought of an experiment to run where I tested my theory but quickly decided not to bother as I remembered early lessons on observation of work / life situations, and how the observation effects how the individuals perform, so you do not get the normal routine operations, they are change ever so slightly because of the knowledge that they are being observed, this is true for researchers in the wild as well.

So I did come away with a lesson that is very poignant to the work situation for me, we are going through a restructuring of the business, the whole process is very painful , but will be a subject of discussion in a few weeks once I can get my head around it in a stable and less emotional way. In this process you have to make a lot of choices which will have long term effects on families and friends, it is hard to take the personal part out of making the choices but you have to, so you make the correct ones, you could be telling your friend he has lost his job and you have to be unbiased in how you treat them differently from the others effected the same, and you need to make the correct choices for the people that will be left to give them the best chance of success.

In these complex and emotional situations as a leader you need to be able to detach from the people and make the hard choices, use the team around you to get to the correct decisions, because your ability to make them will be influenced by what is going on around you. The situation does not need to be a restructuring it can be a project or product you have emotional ties with, but as leader you need to back off and make the correct choice and use your management team around you to make that decision. These are complex and diverse times we are working and living in and it will take extraordinary leaders in industry to see success, and stability in the economic progress of our country or any ones country. We need to switch the lights on and see clearly, act on what you see, understand the emotional consequences and empathise, try to understand the influences around you, there effect on you but also the others involved in the process, those who will be effected by the change and those who will make the change. The leader then needs to make the best decision for the good of the company and the stake / shareholders.


So the take away from this , be aware of the influences around you and how they are coloring your judgement and deal with it, if you don't you will be at best a mediocre leader at worst you will ruin your company and effect negatively the lives of those who follow you.



Slainte


Keltie