How to Get all the Fundingyou require to get your product to

market

What is a small Business Entrepreneur?

Entrepreneur n. a business man

or woman of positive disposition who

attempts to make profit from opportunities

by risk, initiative and guidance from

2-small-business.com

Defining Your Product or Service and Its Markets

Focus on a problem you have personal experience with – make sure that it is a “top three” customer worry

Avoid technology wanderlust – “if you build it, they will not come”

Look for market dislocations where new leadership can emerge

Defining Your product or Service and Its Markets

Attack large and growing markets (>$1Bn) Timing is critical – avoid:

– Markets that are hyped – usually too late– Markets that are out of public favor (e.g. B2C)

Make sure that you have first mover advantage – thoroughly and creatively research the competition

Focus, focus, focus …. Differentiate, differentiate, differentiate ….

Building Your Team

Be honest/open about team’s holes internally and with financiers

Hire A+ team members – wait for right people – make sure you feel that you have the best CEO possible

Look for a mix of skills and backgrounds:– Combination of vision vs. operating skills – “mystic” vs.

“mundane”– Startup vs. domain expertise– Mix of former companies

Building Your Team (Contd).

Focus early on engineering and sales/business development – mid-level talent OK if senior team profiles unclear

Everyone should know how to sell Involve investors in key hiring decisions (e.g. V.P.s) Spread ownership fairly Avoid nepotism

Creating Leverage Through Partnerships

Business development more critical now than ever – sales leverage, time to market, etc.

Better to create a large footprint than extract every last penny from a relationship

Timing of discussion is important for credibility and lack of competitive repercussions

Creating Leverage Through Partnerships (Contd.)

Make sure partnerships are breakeven within a year

Partnerships come in all forms (e.g. attorneys, accountants, PR firms, search firms, contractors, etc.) – focus on leaders

Use partnerships to create barriers to entry

Developing Your Product/Service

Time to market is important – develop a demo/prototype quickly

Limit yourself to 12 months to revenue Create frequent small product improvements

– iteration better than “mega-releases” Work with prospects/customers from the

earliest possible point

Developing Your Product/Service

Buy rather than build at all costs

Create a “whatever it takes” culture – deliver on time

Always have a contingency plan

Keeping Customers in Mind

Create a customer-oriented culture - make sure everyone has customer contact

Develop a reference list as early as possible – focus on credible industry/sector leaders

Set customer expectations on deliverables appropriately

Make sure early users are ecstatic about product/service – support them feverishly

Managing Cash

Obsessively manage your burn rate Use part-time CFO if needed Understand when to adjust spending

– Advertising– Headcount

Initiate new investor discussions at least four months before running out of cash

Developing a Good Reporting Structure

Publicly report status on key metrics internally (e.g. customers, pipeline, site traffic, development milestones, etc.)

Don’t fear investing in a good CFO – CFOs are needed earlier now than they were in the past

Plan on monthly Board meetings for first 6-12 months– Control the agenda– Give management team members

exposure/participation– Focus on one major strategic issue at the end of

each meeting

Developing a Good Reporting Structure (Contd.)

• Communicate regularly between meetings with the Board and investor group (e.g. bi-monthly e-mails, breakfasts, etc.)

Financing Tips

Early, raise only as much as you need to get to a major milestone (e.g. beta product, site launch, etc.)

Later, raise as much as you can get/tolerate – helps brand company, displace competition, etc.

Develop financing plan around sales/product/team milestones

When choosing financing partners, marry for “love” not money

Use financing process as a proxy for working relationship

Financing Tips (Contd.)

Tips on getting in the door and presenting– Research the firm/partner– Come in via referral– Deliver overall concept in first three minutes– Be in sell mode and create excitement (concise, hard-

hitting) – avoid “fireside chats”– Ten page summary and slides sufficient – provide

complete CVs– Provide real-world examples – “virtual markets equals

virtual $”– Plan on one hour

Business Angel vs. Venture Capital

Angels– Pros

Usually provide up to $50K-$250Kin early financing Are usually quick decision makers Are less valuation sensitive Typically allow the entrepreneur to be more independent

– Cons Can create valuation dilemmas (e.g. down rounds later) Can be cumbersome to manage/administer Offer very limited operational expertise/contacts May drop out of later rounds

Business Angel vs. Venture Capital

Venture Capital– Pros

Offer great expertise/contacts Help generate credibility/exposure for company Leverage efforts to secure future rounds of capital

– Cons Are tougher on valuation/terms Scrutinize management performance more closely

Taking Advantage of Directors and Advisors

Treat them as extensions to management team – CEO’s responsibility to manage them

Look for complementary skills and expertise VCs

– Are a mile wide and an inch deep– Help in high level strategy and positioning –

understand competitive landscape– Have experience with common operational challenges– Offer great contacts – business development,

management team building– Can help guide financings

Taking Advantage of Directors and Advisors

Outside Directors– Add credibility if they are industry luminaries– Help with market/operational expertise

Create a balanced BoD – avoid single investor representative

The Five D’s

Define the market to your advantage

Develop a great team

Declare yourself the victor

Deliver the product/service on time

Defend your customer relationships viciously

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