Posted by Anonymous on 2008-08-02
Tags: Preparation Strategy Effort
As a CEO I make sure I periodically look back at my 'fuck ups' and learn from them. Theres been a few along the way, some small, a couple a little bigger, so I wanted to share one here.
Raising money took way longer than I expected. The search didn't take too long.. the deal completion tooks months and put enormous strain on our resources. Both financially as we bridged our way to funds and on our time and focus. Raising money is a major distraction from running your day to day business. I estimated 2 months to complete the deal. Its taken almost 5 and stretched us thin as well as pulled my attention away from what I am here for - building the business. I'm lucky, we raised money.. but now I get 80+ hour weeks making up lost ground in business development as well as the backlash of robbing Peter to pay Paul the past couple months.
Lesson: Assume 6 - 9 months to search, obtain and close funding and make sure you have both the financial and human resources to run and grow your business during the deal cycle.PRIVATE: Members Only
Posted by Mr. Smith on 2008-07-27
A lot of new entrepreneurs start pitching venture capitalists or angel groups and rejected over and over again, myself included. Entrepreneurs hear the same criticisms across dozens of meetings, which is discouraging. In some cases, you may even have second thoughts about your business, but, before you reconsider your model, consider what is going on.
First, investors use the same critical reasoning for different businesses in related industries as a way of saying "no" politely. For example, with online advertising businesses, your site is not sticky enough. With subscription business, conversion will be too low.
Second, investors are not operational or modeling experts, so their opinion on your business is worth as much as you pay for it: $0. They are experts at convincing entrepreneurs to give them a large portion of a company and the control for the least amount of money.
Third, investors say "no" many times per day, so they are very good at doing it without revealing the real reasoning. Reasoning rarely has anything to do with a model, but it usually has to do with (a) partner personality matches, (b) firm investment focus, (c) other investments by the firm, (d) sector heat, and (e) control.
In general, a new entrepreneur pitching a business should expect to hear "no" between 30 and 60 times before receiving investment. Each "no" meeting can be an opportunity to get closer to a "yes" by learning which aspects of your pitch generate the confusion, resistance, and questions. With each additional meeting, your pitch should get shorter and better. Don't give up. Be Strong in the face of "Trained Skeptics."PRIVATE: Members Only