Month: May 2009
Today’s great VC post is by Greg Gottesman (a managing director at Madrona Venture Group) and is titled Thirteen key characteristics of a great startup culture. It shows up in John Cook’s column in TechFlash – the article is solid and the comments (all 66 of them at this point) are priceless. I’m baffled by the super-negative anonymous commenters as they add absolutely nothing to the conversation. If you are going to be critical (which is fine – and often helpful in sharpening up the ideas), be bold and comment with your real identity!
Q: At a pub in Los Gatos, CA a casual conversation with some young, first time entrepreneurs lead to an interesting comment:
"…the business plan outlines our estimated (operational) expenses but how do I know an investor is not going to look at these numbers and say…’are you f’ing kidding me’ and right then and there we can loose this guy (his interest)…"How can an entrepreneur build these projections most accurately and in a way that will maintain credibility with potential investors? What could be defined as the "best practice" for entrepreneurs dealing with this subject?
A: (Brad) As I’ve said in the past, I’ve never met a financial plan for an early stage company where the revenue side was correct. However, I’ve met plenty where the cost side was correct (or – at least – appropriate). The key here is simple – you want to have a cost structure that makes sense, covers all the bases, but doesn’t assume a big revenue ramp to be supportable.
If you are in the very early stages (e.g. a few people and an idea), recognize that your investor is likely going to be funding you for about 12 months to see how things play out. The biggest mistake first time entrepreneurs make is that they fall prey to the idea that they need to put together a five year P&L forecast and cash flow projection. I can guarantee – with 100% certainty – that this model will be wrong. As an investor, I don’t really care about this; rather I want to see how you are thinking about getting to “the next stage” of your business. You get to define the next stage, what it’ll cost you to get there, and what things will look like when you get there.
If you are a first time entrepreneur, go find an experienced entrepreneur to act as a mentor. She can be a first line of feedback your cost model and likely will know a few “financial people” that can help you put together a simple, yet credible model. In addition, when you spend time with potential investors, don’t try to bluff. Tell them it’s your first time building a model like this and that – while you had help – you know you lack experience and are looking for feedback. Try to engage the investor in the process. Listen the potential investors feedback and iterate on your model.
Simple message – don’t be afraid to ask for help.
Today’s post is from Matt Eventoff – a communications consultant who has good tips for entrepreneurs who are pitching VCs.
I reinforce that having a clear message is really important. If you get off on the wrong foot in a presentation and can’t clearly definite your value proposition, you risk losing the interest of the VC and never getting it back.
The 2009 New York Venture Summit is happening on June 17th at Digital Sandbox in New York City. The summit will feature 50 early stage and emerging growth companies as presenters, interactive panel discussions and lots of networking. The agenda looks strong as does the speaker list. The cost for investors or entrepreneurs is only $395 if you register online now.