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TAG: Pitching

131
Agree
4
Disagree

Avoid the Associate!

TheFunded.com Advice

Posted by Anonymous on 2007-03-31

Tags: Pitching Associate

PUBLIC:

Do not deal with associates in the early part of your pitching process. Identify at least one key partner to be your conduit into a funding source. Associates are important to have engaged later in a deal cycle. If a partner is not present on the early calls, assume that the fund is doing competitive research in a sector. This is a waste of your time.

PRIVATE: Members Only (325 Characters)

58
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3
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Focus on the Business Model, Not the Technology

TheFunded.com Advice

Posted by Anonymous on 2007-05-09

Tags: Pitching Presentation Model

PUBLIC:

Too many entrepreneurs fall into the trap of being so enamored with their technology or widget, that they spend 55 minutes on how great their technology platform is, and only the last 5 minutes on how they are going to monetize it. Of course, there are always exceptions, but given time and resources (cash) your technology CAN be duplicated, and if it's a good idea, count on it. You stand a better chance if you split up your pitch into two sections, 1. technology and 2. business model. Take the time to be as much of an enthusiastic expert in your market segment as you are on your technology platform. Bottom line, VC's want to know how you are going to make them rich, period. Miss this vital point, and you immediately lose their interest.

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31
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Angel Networks

TheFunded.com Advice

Posted by Anonymous on 2007-07-29

Tags: Pitching Angels

PUBLIC:

If you are looking at venture funding for your first round, I would suggest that you consider an Angel round first. Why" A friend of mine just got early terms to raise $1 MM for 40% of the company in their first round of funding, and it was a preferred round with all of the standard VC protections. This seems fairly aggressive for a new company with bright prospects.

There are great angel networks throughout the world that will offer MUCH more reasonable terms, and, depending on the investors that you attract, you should be able to secure the necessary advice and counsel on business decisions. You can always save the venture round for later, if needed. Members, read on for some concrete advice...

PRIVATE: Members Only (1601 Characters)

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1
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Do Not Email Your Pitch and Other Thoughts

TheFunded.com Advice

Posted by Anonymous on 2008-03-08

Tags: Pitching Materials Email

PUBLIC:

I raised $40m from top tier VCs 6 years ago and am now raising money again for another startup. While initially rusty, I quickly remembered how much of a game this is. Recently I spoke with 3 first time CEO who are raising money for the first time. Here are my 2 cents on a few items. I'm interested in others thoughts.

1. DO NOT leave or email your presentation. you are only educating them on your category (not your job) and informing your competitors. As CEO of a VC funded firm, I always was emailed the presentation of any competitor. IF they insist on seeing presentation before mtg, then they are not interested. All the top guys know this and thus take notes during the meeting. IF they are not taking notes during your meeting and still ask for prez, then they are not interested. DO send them some material to spark interest - founding team resume, paragraph overview, perhaps article about customer pain.

2. First 10 minutes are most critical. Yes, its very hard to get meeting, but once you have meeting, you need to QUALIFY and CONNECT with the partner in the first 10 minutes. Qualify by finding out how much they know about category and space. Connect with him or her personally (without .ppt on). Resist natural inclination to firehouse .ppt since you only now have 45 minutes. The ONLY purpose of the first meeting is to establish interest to have a follow on meeting. If they don't see enough promise in your team and market opportunity, then they will not fund deal and you need to move on.

3. Beware the "Head fake" to learn. "Yes, yes, this is VERY exciting. We want to do this deal." You get excited, send them your research and customer contacts, and they now have learned everything you learned on your dime. Deal excitement then dies. Instead, given them 1-2 very specific items of homework (perhaps contacts for you on due diligence, MAYBE 1 customer contact late in the process). Be constantly giving them homework and watch their _actions_ and not words.

4. Do not serialize pitches. Schedule as much presentations during same 2-3 weeks to generate excitement and interested. The #1 thing to get these guys to move or to pass is another firm putting down term sheet down or seriously looking at deal.

5. Don't forget - 90% will never say no. Pitch, given them homework, then move on. If they are interested, they will find you. It's in their financial best interest to keep as many deals open as possible (yes, this is incredibly frustrating for CEOs but it's the way it is).

6. Keep raising money until money is WIRED. Plenty of deals going south (yes even at top tier firms) before money is wired. Smile, but only believe money being wired.

PRIVATE: Members Only

20
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Pitching Sucks, Be Strong

TheFunded.com Advice

Posted by Mr. Smith on 2008-07-27

Tags: Pitching Effort

PUBLIC:

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

19
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Summer Doldrums

TheFunded.com Advice

Posted by Anonymous on 2007-07-03

Tags: Pitching Summer

PUBLIC:

It's very hard to close a new venture financing over the summer unless you already have a term sheet. Why" Well, most VC's need to get partner consensus on a deal terms, and your deal will likely be competing with different partner vacation schedules. There are some ways to overcome this. Members, read on.

PRIVATE: Members Only (1001 Characters)

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The VC Apocalypse: Careful with Your Time

TheFunded.com Advice

Posted by Doe on 2009-03-08

Tags: Pitching Economy Crisis

PUBLIC:

Fellow entrepreneurs, most VCs are unable to complete capital calls and, therefore, are unable to make new investments. This includes everyone from name brand funds to small funds, and it does not matter if they recently closed a new fund or not. If you are pitching a venture fund, there are two critical pieces of information that you need to know before wasting time with meetings, diligence, and faux terms:

- First, has the fund made an investment in a company that was not already in the portfolio in 2009, and, if so, which company?

- Second, has the fund completed a successful capital call in 2009?

Is the answer is 'no' to either of these questions or the fund is uncomfortable discussing these matters, then don't bother pitching them and move on. Why? Between the dismal exit history, defecting LPs, worthless secondary markets, and massive position devaluations, venture firms are facing an apocalypse right now. The whole concept of 'venture capital' as an asset class is being re-evaluated by accountants worldwide, and the outcome of that work does not look good for venture capitalists.

PRIVATE: Members Only

12
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Confidentiality and Business Plans

TheFunded.com Advice

Posted by MedTech Expert on 2008-01-01

Tags: Pitching Busines Plan Confidentiality

PUBLIC:

Do not count on an NDA to keep your business plan out of the hands of those you would least like to see it. Early in my venture career, I believed, falsely, that this would inhibit VCs from sharing the plan. I learned the truth later, when I ran a VC funded company. My investors and those who wanted to ingratiate themselves to me would send confidential material they received directly to me for review. Some times it was to help advise them on certain technologies, and at other times, it was to provide a heads-up on competitive technologies.

Just assume that whatever you write/present will end up with someone (including large corporations) that you would least like to see it. You are better off posting it on Internet!

PRIVATE: Members Only

8
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Five Tips for Pitching

TheFunded.com Advice

Posted by Mr. Smith on 2009-06-26

Tags: Pitching Strategy

PUBLIC:

Getting a meeting with an investor is hard these days, but it can be done. Once in a meeting, here are five strategies to make the meeting go well:

>> STICK TO THE FACTS
Sell your idea on factual information only. Avoid adjectives and superlatives whenever possible. You do not have the best, the most, or the greatest anything. Most investors see 2,500 deals per year. They need basic information to determine interest. Suspect information is a red flag, and it only takes one red flag for an investor to lose interest.

>> KEEP YOUR PITCH SHORT
You should be able to explain your company in 10 slides that take about 20 minutes to present. If you want to succeed, then videotape yourself giving the pitch. Watch the video and write down everything that you want to improve in a list. Repeat this process until you are happy with the results. At the end of your pitch, say: "does anyone have questions that I can help you with?" The shorter your pitch, the more questions that will you have, and more questions are good.

>> ANSWER EVERY QUESTION BRIEFLY
Answer every question with one or two sentences and with as few words as possible. Uncomfortable silence is a tool that you can use to elicit another question. If you do not have or know an answer, say: "I don't recall the answer to that off the top of my head, can I look it up in my files and get back to you through email." Questions are an excellent sign of interest and engagement. When an investor gets into 'question mode,' they usually have a series of 5 to 10 questions that they need answered quickly to evaluate the opportunity. You are doing well in a pitch when the investors are talking.

>> ASK FOR FEEDBACK AND TAKE NOTES
Make sure to leave a few minutes to collect feedback. Ask the investors, 'do you have any recommendations for the business?' Have a pen and paper out, and write down everything that the investors say. It's a common courtesy to take notes, and it is expected. After an investor says something, say 'thank you.' Do not get defensive. Nothing sours a relationship faster than getting into a debate.

>> BE AN EXPERT IN YOUR INDUSTRY
You should read every recent blog post and know about every key development in the primary industry and all related industries to your idea. It is very likely that an investor will have seen and researched a very similar idea within the last 45 days. It is also very likely that this investor will ask you about mundane developments or other companies in the field as a test of your knowledge and to show off their own expertise. When confronted, you say, 'Yes, I was aware of that. Thank you.' This will lead to more questions.

As a closing point, be confident and assured. A common misperception is that a deal can be done in one meeting. It usually can't. So, the goal of any meeting should be (1) to get another meeting and (2) to specify follow-up items.

Do members have some other suggestions to add in the feedback?

PRIVATE: Members Only

8
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Reduce Time by Going Online

TheFunded.com Advice

Posted by Anonymous on 2008-01-18

Tags: Pitching Materials Tools

PUBLIC:

An online pitch and diligence room can save you a lot of headaches and time by getting ready up front... As a general rule of thumb, it is best to pitch as many venture firms in as little time as possible, and then aggressively follow-up with the best leads. Once you have interest, you need to get information out quickly. Here are some pointers for generating interest and syndicating materials by leveraging online resources:

>>>> Develop an Online Pitch Room: Polish your pitch materials and put them in a customized web site for download (the non-confidential materials, that is). The site can be very simple (one page), but it needs to have your branding. Also ensure that everything is password protected and that anyone who views the materials is tracked. Track each login and each document downloaded. If possible, add a screencast or video pitch to better sell your offering.
>>>> Invite Target VCs: Research 25 to 75 appropriate venture capitalists and invite them through a two paragraph email to speak with you, including a link to the Pitch Room in your email. Invite one partner per fund, and try to have some type of reference, such as an introduction by another CEO. Anyone that you invite should be given a custom username and password for tracking purposes.
>>>> Follow-up on the Results: Keep a careful eye on the activity over the next two to three weeks, and call the partners that have downloaded the files and logged in to the site. Wait to call until at least three days until after the files were downloaded. Write off funds that have not engaged. Take a lack of follow-up as a sign to avoid.
>>>> Develop a Diligence Room: Make sure that all of your key corporate documents, financials, budgets, resumes, contracts, etc. are all in a digital format (PDF") and online in a secure location. This could be a SharePoint server, for example. Once you have interest from a VC, they will quickly want to dive into the diligence, and you need to be ready. Like with the Pitch Room, make sure that you track all activity in the Diligence Room by individual VC.

Of course, nothing ever works out exactly as planned, but you will never lose by being prepared and one step ahead. Inevitably, you will need to face-to-face pitches and compile a ton of custom diligence. However, being ready up front will save you a ton of downstream hassles. Do other Members agree" What other experiences have Members had with online pitching and diligence solutions"

PRIVATE: Members Only

7
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0
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First Agree on a Second Date Before Trying to Meet the Parents

TheFunded.com Advice

Posted by RichieBlueEyes on 2008-10-14

Tags: Pitching Strategy Terms

PUBLIC:

This is basic advice, applicable to any sales situation and a mistake people often make. If you are meeting a potential client (or investor) first make sure they are interested in your product (your company) and agree to go out again (meet again) and provide more background on yourself (your materials) before trying to to sneak into the bedroom and score (discuss terms). Often times terms come up early, I'd recommend saying "first lets see if we click before talking specifics" and drag it out a bit... a meeting or two .... before talking numbers. This way, you know there is an actual interest, potentially leading to a term sheet before entering any type of negotiation which can cause the whole thing to go sour if there is a disagreement. However, if you already are all over each other, you're more likely to settle the disagreement then storm away unhappy. This holds true for selling anything. First gain interest, then sell. Many people just jump the gun and try to sell before knowing if they customer wants anything and while it can work, it changes the tide of leverage.

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7
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0
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Responding to the Quick "No"

TheFunded.com Advice

Posted by Mr. Smith on 2008-09-03

Tags: Pitching Rejection

PUBLIC:

It is one of the single greatest things in fundraising to get a quick "no" from an investor. The prolonged "maybe" is a far worse alternative. Yet, after receiving a quick "no," most CEOs tend to either (1) argue their point ad nauseam or (2) disappear without a trace. Both of these are the wrong course of action.

Before going into what to do, there is such a thing as getting a "no" too quickly. If you 10 minutes into your presentation and an investor says "no," then there is a bigger problem. The problem is probably with your pitch itself, as any investor would not even book a meeting unless there was some basic interest in the idea. In the case of a "no" that comes too quickly, it is really important to try and learn what you did wrong by asking a lot of questions, such as "could you understand me clearly," "was my presentation bad," "did you understand the market opportunity," "did you understand the offering," etc.

For the cases where the quick "no" comes after a couple email exchanges, a call, and maybe a meeting, the best outcome is to:

(1) get some advice on how to improve the presentation / business,
(2) ask for advice on other investors to speak with, and
(3) secure a time to get back in touch and report on progress.

Keep in mind that there is no such thing as a permanent "no" in venture capital, so you always want to leave the door open. Arguing your points or walking away cold will close the potential for future engagement with an investor. When you get the "no," send an email like the following:

"Thank you for taking the time to learn about XYZ Company. We would appreciate any quick thoughts on how to improve our pitch.

We are going to continue executing against our plan over the next couple of months. Let me know if you would like an update on our progress. Also, do you know of any other investors that might be interested in our space" I hope that we will have an opportunity to work together in the future."

PRIVATE: Members Only

7
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The Market Size is Too Small?

TheFunded.com Advice

Posted by Mr Smith on 2008-02-21

Tags: Pitching Rejection Excuses

PUBLIC:

Over the years, I have heard many VCs say that "the market is not large enough" in the first or second meeting. New entrepreneurs should know that this means "no."

Pocket edition of "Theoretical Future Market Values through 2020 - 3rd Edition" does not exist, nor is there a team of analysts at a VC firm inventing new markets to value. From the way that some VCs can confidently look you in the eye and say that "the market is too small" after fingering your PowerPoint, you would think that they have flipped to page 128 of the market reference guide while pecking away on the Blackberry.

The reality is (a) you have likely done a bad job explaining the market size in your pitch and (b) there is not a lot of anecdotal data for the VC to make an off-the-cuff mental estimate. When you pitch your business, you must reference concrete market data points, the best examples of which are recent liquidity events, that a VC can understand quickly. Read on...

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A Pitch is a Conversation Not a Lecture

TheFunded.com Advice

Posted by sparrow on 2008-11-20

Tags: Pitching Strategy Style

PUBLIC:

It's an easy trap to fall into. You've labored on your powerpoint presentation, you got nice graphics into it, you followed Guy's advice http://blog.guykawasaki.com/2005/12/t..., you practiced your pitch, and now you're ready to rock and roll.

You're a little nervous but feeling good. You go in and start your presentation, and you're on slide two, and the VC asks "What's the business model here""
No problem, you're ready for him. "I'll get to it on slide 7, let's go through the product first."

Stop! I know it' s hard to change the flow, but expect to do it. Go ahead and jump to slide 7 and give him 10 seconds to read the slide and then explain the model. 10 seconds should be enough since you don't have that much text on a slide, or you shouldn't and even if you did, it wouldn't matter since most VCs have ADD and won't take more than 10 seconds to read anything. The one exception is anything related to finance. But to get back to my main point (VCs are not the only ones with ADD), focus on what the other side is interested in and answer the questions in the order that they are presented.
Usually, one question will lead to the next and you'll find that you're referring to the presentation as support material rather than guiding the discussion.
So why do you need the powerpoint deck" As I just mentioned, it's support material, but it also helps you make sure you've covered everything. When things slow down in the conversation or when your time is almost up, go back through the presentation, and double check that you haven't missed any critical information.
As part of the conversation you'll hear some criticism or doubt about your product, your direction or something else in the presentation. Your gut reaction is to argue, mine is. They're not getting it. Stop yourself. Instead ask question to help you clarify why their thinking is different than yours. There are several reasons to do this.
1. They don't know your company and probably the space it's in nearly as well as you do. On the other hand, they've been exposed to a lot more companies than you have. You're getting free advice. Listen to it and try to absorb. I've talked to three VCs in the last 4 weeks, and two of them gave me good insight which helps me fine tune my model.
2. If they have this objection other VCs might have it too. Listen, learnd and maybe next time you do a pitch you'll be better prepared to answer this issue, or tackle it in your presentation.
3. Arguing has the potential of making you look defensive and uncooperative. Will they really want to invest in someone with these traits.

Having said that, if they challenge one of the basic assumptions of your plan and you've considered and rejected their arguments, it's perfectly OK to present this. "Yes, we've heard from other people that they thought that the markets can't be any bigger than 250,00 users, but actually a Gartner report in Feb of 2008 shows that there are at least 5,000,000. The reason the market is understimated is that most of these people are in Asia and the web analytics don't count them."
Here you scored a point. You thought of the problem researched it, and can provide supporting data.

In summary, try to reach a good balance of give and take. Talk about your product, show that you're excited about it, but listen. I certainly try to.

PRIVATE: Members Only (99 Characters)

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VC Wants Presentation Before Meeting...Yes or No?

TheFunded.com Discussion

Posted by Anonymous on 2008-10-30

Tags: Pitching Presentation

6
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0
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Avoid Information Overload Early On

TheFunded.com Advice

Posted by J on 2008-09-13

Tags: Pitching Strategy

PUBLIC:

Many entrepreneurs send a long introductory email and attach a ton of information when contacting an investor for the first time. There is the infamous multi-paragraph email and the 30+ slide PowerPoint that includes information on the vision, strategy, technology, and financials. Sometimes there is also the executive summary and even a full business plan.

The reality is "less is more." If you can say three words and get to the next meeting, then you have succeeded. Send just enough information on the business in the body of an email to get to the next encounter. Here are some reasons why:

Relationship: Investors want to get to know the people involved as much as they want to know the business details, so most investors want to have a few interactions before making any decision. It's very rare to close a financing in one meeting and even less likely after one email. Your goal should always be to get to the next encounter.

Mistakes: Providing too much information gives ample opportunity for a professional investor to find mistakes in your work. An active investor will see dozens, if not hundreds, of deals in one month, so it's likely that you have less perfect information than they do. Don't be judged too early on by perfectly reasonable mistakes caused by your lack of information.

Trash: Given the large volume of dealflow that professional investors are seeing, professional investors are likely to look at simple deals first, coming back to deals with a lot of clutter and materials later on. If you overload your initial email, it may be either (1) thrown immediately in the trash or (2) dumped on a junior associate "to process."

Confidentiality: Your initial materials, even your initial email itself, will likely end up with a competitor and certainly with another investor. Investor confidentiality is correlated (1) the length and (2) the strength of your relationship with that investor. Even in cases of an excellent relationship that has survived over time, confidential information still manages to leak.

PRIVATE: Members Only

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"Why you"?

TheFunded.com Advice

Posted by Entrepreneer on 2008-04-14

Tags: Pitching Meetings Strategy

PUBLIC:

I had the opportunity to sit in on someone else's pitch to a VC recently, and for the first time got a chance to see a pitch meeting from the investor's point of view. It was illuminating. I turned back to the various pitches I had made in the past, and saw them in a new light. When you're embedded in, and heavily personally devoted to an idea for a long time, it's hard to have any perspective. When you're hearing an idea for the first time, you'll probably see some gaping holes immediately. The entrepreneurs who are trying at the idea are willfully blind to these holes, having spent months (or years) justifying their hopes. There is one hole that I perceive is routinely there, and you'd better be ready to answer this question: "Why you""

As an engineer, I have been routinely approached by people with business ideas, who need an engineering lead to get the idea off the ground. They usually also need a designer (product and visual), and maybe a sales person. Which causes me to ask them, "I have my own ideas, and I can go build them. What the hell do I need you for"" In the end, if you cannot write code, write a detailed product spec, draw graphics, draw up contracts, or raise money, what good are you" We could come up with 5 decent ideas a day, so even at a good consulting rate, that's what, $240 per idea" For something to be investable, you need both the idea and the capacity to execute. If you're a dreamer with an idea and nothing built, please don't talk to VCs. You're wasting everyone's time. Go find an angel investor who will help you put together a demonstration of the idea.

Beyond that, even if you bring a team that's capable of executing, you still face a real problem. You aren't the only person working on this idea. Trust me, if you are the only one working on it, the idea is too early. So if there are other people working on it, why are you likely to be one of the winners" Do you have plenty of contacts in the industry" Do you have a deep personal understanding of the problem space" If you're a male 20-something building a Mom's portal, you gotta ask yourself what the hell you're doing. Remember, for every idea a VC invests in, they probably turned down 99 others. What will make you stand out" How will you answer when they ask, "why you""

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The Junior Partner Can't Get a Deal Done Jive

TheFunded.com Advice

Posted by Anonymous on 2008-01-17

Tags: Pitching Partners Excuses

PUBLIC:

They say that VCs are "pattern matchers". Now after a couple of identical (bad) experiences during our current fund raising round, I think I see a pattern worth sharing.

Here's the story line:

-- Junior partner at mid-tier firm hears about deal, gets really excited, makes boastish claims about the speed at which they can get a deal done and makes strong enough claims about valuation that it's hard to say no to spending time

-- Junior partner researches the hell out of the deal, sucks down a lot of company time with questions, models, reference calls, etc.

-- Full partner meeting. Junior partner hasn't done his homework with the partnership to sell the deal. Senior partners start raising a series of questions and objections.

-- Junior partner, back on his heels, scrambles around to respond to all of the new objections, while assuring that the deal will still get done and a term sheet is just days away. Sucks down a bunch more company time. Objections are mostly silly and easy to overcome, and should have been handled before the full partner meeting.

-- As each objection is overcome, a new one appears from the big bag of silly objections. Objection overcome yet again.

-- Once this game has run its course, one final objection appears, this time, the objection that can not be overcome: "We just don't feel good about on the management team. No specific issue, just can't get comfortable." This the first time that this objection was raised. And there's no way to overcome this objection. No term sheet after all. (Interestingly, in our case, NOT the same member of the team each time.)

As I reflect on these these two experiences, it is pretty clear what happened. The deal was dead by the time we walked out of the full partnership meeting. The junior partner had not properly sold the deal, and they didn't have the juice with their senior colleagues to get to the finish line.

But of course, the junior partner can't admit to any of this. It has to be the company's *fault* that the deal came off the tracks. So instead of a simple, "No, we're not going to be able to go forward," they reach into that good ol' big bag of silly objections. The management team is on their game, and so the objections are easily overcome.

After a few cycles of this, the junior partner realizes that he can't save face on the back of a factual objection, so he ultimately retreats into the vague ad hominem objection that can not be overcome.

So beware. Junior partner" Questioning his juice" All powerful senior partner stomping on the deal" Think twice before you spend any more time on a process to get to that elusive term sheet that is still coming. If they won't give you a simple "no", give THEM a simple "no".

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A Few Words about Placement Agents

TheFunded.com Advice

Posted by Anonymous on 2007-05-14

Tags: Pitching Intermediaries

PUBLIC:

If you use an agent, you will be paying a fee for service. Do your upfront work to avoid being disappointed later on...

PRIVATE: Members Only (1314 Characters)

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4 Tips From the Inside

TheFunded.com Advice

Posted by The Founding Member on 2007-05-03

Tags: Pitching Presentation

PUBLIC:

Our favorite VC blogger, David Stern of Clearstone Venture Partners, contributed four hardball questions to ask funds that you are pitching on his blog. Since VC's are strictly not allowed to post at TheFunded, we have re-purposed the advice, which is very insightful stuff. Don't forget to ask these questions in your next meeting. Enjoy!

  • 1. Do you sit on boards" This is a crucial piece of information most entrepreneurs never ask. Honestly. Maybe 1 in 20 have asked me that. Why is that important" It is important because unless you are meeting with someone who does, you aren't meeting the right people in the firm. And while that is fine for an initial meeting or two, entrepreneurs need to know that moving a deal forward in any firm means moving to meetings with people who sit on boards. That isn't to say that those who don't aren't important. But as a general rule, until you get to someone in a partnership that does or can, you haven't made enough progress. Caveat: Some of those in firms that don't sit on boards, also have an enormous amount of clout within a firm.
  • 2. Can you introduce me to 2 or 3 entrepreneurs you have worked with" Can you introduce me to entrepreneurs you have backed that have failed" Ok, this is a two part question, but both are important. The first question should be essential due diligence for every entrepreneur. Why don't entrepreneurs, especially in a market where good people and good deals are in short supply relative to the number of firms with a ridiculous amount of capital to deploy, ask these questions" Knowing how the partner you are meeting with interacts with other CEO's is essential. And even more essential, in my opinion, is finding out from failed venture backed CEO's, how the firm handled itself in those cases (and the partner in charge, if he's on your company). Knowing how people react in times of failure I believe is more dispositive of true character of a firm and a person than knowing how someone reacted when the company they backed was acquired by Google. And oh, by the way, the entrepreneur that has the guts to ask this question, gets extra points with me...it shows confidence. And that sells!
  • 3. Where is the firm in its fundraising cycle/capital deployment" Again, another question I've been asked only once. Is this important" You bet your payroll this is important, because you just might be. Even before I'm contacting firms, if I'm an entrepreneur, I'm looking to see what firms from the outside, look to have dry powder in their fund. Why" Well, let's just say that from a investment professional's perspective, HEARING a great pitch without a lot of dry powder is like going to In-N-Out Burger on a no fat diet--there is no payoff! But make sure if you ask this question, that you not make the wrong conclusions. Every firm handles fundraising/low powder in different ways. Some look to invest in later stages the later on in their funds that they are, some continue to invest early, some sit quiet while awaiting first closes of their next funds. And for many funds, it isn't an issue at all. But, the point is, make sure you ask the question and consider the context around the answer. History is useful here to establish context to inform your thinking about whether there is a fit or not.
  • 4. What does the funding process look like for companies that have been successfully funded at your firm and what does it look like for companies that haven't" This is pretty obvious, right" Ok, maybe it is, but again, how come I'm never asked this" And it's verifiable. Shouldn't you ask to speak to company CEO's that have gone through the process with the firm, so that if there is a variance, you know that a funding event is unlikely or more likely to happen" Look. Every firm, and every investment professional at firms, acts differently. Their processes are different. But you should know that upfront.
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    The Definition of Traction

    TheFunded.com Advice

    Posted by Mr. Smith on 2008-11-03

    Tags: Pitching Traction

    PUBLIC:

    Traction is the buzzword of fundraising these days. It is required by many, and understood by few. Here is an attempt at defining traction for all parties in the fundraising cycle.

    1. The Idea: How strong is the fundamental idea and underlying revenue model" Does it make complete sense, and is it backed up by published industry data"

    2. The Team: Have you assembled a group of domain experts that can execute the idea and the model" How seasoned are the experts that you have assembled"

    3. The Prototype: Do you have a prototype of your offering that is compelling to the target audience" How polished is the prototype"

    4. The Launch: What is the reaction among trade journals and other media outlets regarding your product launch" Is it well covered and well regarded"

    5. The Adoption: How many target customers have adopted your offering and is the growth rate substantial" Are you experiencing a high level of customer satisfaction or a concerning level of churn"

    6: The Revenue: Have you started to derive revenue from your offering and is that revenue either ahead or behind or model assumptions" What variables have changed from your assumptions"

    7. The Profitability: How profitable or near profitable is your model once in operation, and are there untapped revenue opportunities for future revenue growth"

    8. The IPO: How long until you can take your company public, assuming two years of fast growth, audited financials, and profitability or near profitability"

    Most venture capitalists, for better or for worse, tend to invest in phases 4 and 5. VCs like the potential upside without the too much details from phase 6, though many investments occur at the start of phase 6, before any details can be conclusively determined. Any other thoughts"

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    The Infamous VC Intro Email

    TheFunded.com Advice

    Posted by Mr. Smith on 2008-03-06

    Tags: Pitching Materials Email

    PUBLIC:

    You have been slaving away at a fundraise, and now you have an introduction to a top fund. Pow! You pop open Outlook and copy and paste your three page introduction email meets business plan synopsis. Guess what" Bad idea. Almost every entrepreneur, including myself, has overdone the initial introduction email. Your mission is to sell them on the opportunity, not to close a deal with the Death Star of pitch emails. Let's walk through the anatomy of a good introductory email.

    Starting at the top, the email title should be clear, including key data points on stage, industry, and need. For example: "Early Stage Biotech Opportunity" or "Follow-on Investor Needed for Cleantech Expansion Round." If you have a well-known company, then say "TechCrunch Looking for small Series A."

    Blanket spam-pitches are insulting, so the email itself should open with some personal context based on doing your homework. For example: "I see you are on the Board of VentureBeat, and I would like you to look at my TechCrunch opportunity" or "Roger has said that you are the right person for us to speak with about cleantech."

    Next is where every entrepreneur makes a series of classic mistakes. A compilation of overwhelming market data, jargon, and bullet points normally follows the impersonal introduction, accompanied by a slew of useless attachments, login information, etc. Do you think that VCs actually read all of this stuff" Your goal here is to say as little as possible and get this person on the phone.

    Your best case scenario is to boil down personal background, market need, market size, and funding requirements into an easy to read paragraph (even a sentence, if possible). For example, "After selling my last company Google, I patented a process to generate electricity from highways. An initial field study demonstrated that the 405 through LA can supply electricity to 400,000 homes, generating $40 MM in revenues. We are looking to raise a $5 MM Series A to deploy a larger technology trial to supply electricity for 10,000 homes before we enter full-scale production across the United States."

    Close your email with a couple of opportunities to speak, and be specific. For example, "We are planning to start meeting with investors next week, and I have availabilities on Tuesday and Thursday afternoon. I will also be down by your offices on Friday. You can reach me on my cell to set something up." Never delegate scheduling to your assistant, especially when fundraising.

    Do any other Members have some good tips for an introductory email to post below"

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    Wrong Reasons VC's Take Meetings

    TheFunded.com Discussion

    Posted by Anonymous on 2010-09-09

    Tags: Pitching Meetings VC

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    Get Screened in Not Out

    TheFunded.com Advice

    Posted by MedTech Expert on 2008-02-27

    Tags: Pitching Busines Plan Materials

    PUBLIC:

    Part of the science of getting in the door of a VC is to stand out from the crowd. Unfortunately, inertia is often a big factor in business plan screening. Contrary to popular opinion, every word of every plan is not read. First the plan gets a glance. Then it gets a skim. Then it gets a more detailed read. But every step is contingent upon the reader finding a reason to go the next one.

    Here's the truth: most investors screen out rather than screen in. Especially if they're overwhelmed and very time constrained as most are.

    This means:
    • if your business overview looks like it needs to be deciphered - you're out
    • if they don't see what they are looking for in a glance - you're out
    • if they don't have all the information they need to know -you're iffy

    Eliminate objections and pessimism before it arises by explaining in a very well thought-out cover letter what makes your business different - and position it as one that's advantageous to the firm's objectives, if you can.

    Your business overview is a screening tool. It's the point person on your investor search. It needs to screen you in, and it needs to do that by being read, not ignored. If you want to get in the door, this is one of the keys that can open it.

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    When You Don't Get a Response...

    TheFunded.com Advice

    Posted by zip on 2008-02-01

    Tags: Pitching Responses

    PUBLIC:

    The thing I read over and over on this site is, "He never wrote me back!" or "He didn't call me back!" Let's face it, if you're going to to deal with VCs, you have to play by their rules. Many VCs are not great about getting back to folks when the decision is "pass" or "maybe." So, when some VC doesn't get back to you right away, chalk it up as a "pass" or a "maybe" and move on. If they get back to you belatedly with a "yes," be surprised and enjoy the moment.

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