Venture Capital Investors

Entrepreneurs in search of venture capital sometimes have to work extremely hard to get that first meeting with investors. It might involve relentless networking with colleagues and business associates over a period of weeks and even months, or it might require sending executive summaries of their business plans to dozens of prospects.

When they get that first "yes", the investor who contacts them to set up a face-to-face meeting, the entrepreneur initially feels elation, but this is quickly tempered by fear of failure. They realize they only get one shot at impressing the investor. Questions like "What should I say in my presentation?" and "What kinds of questions are they likely to ask me?" and even "How can I keep from blowing this opportunity?" inevitably start popping into the entrepreneur's mind.

If you are apprehensive about making a presentation to investors, there are several strategies you can employ to become more comfortable. You might consider bringing one or more members of your management team with you, so you can break the presentation into segments, based on each person's expertise, and you are not responsible for the whole thing. Perhaps you are worried about being able to answer some of the more technical questions about your product or service. Bringing your tech expert along might help minimize the risk of an awkward moment when you have to say "I don't really know the answer, but I will get back to you on that next week."

Being adequately prepared is the best antidote to nervousness. Make sure you have practiced the presentation with members of your team as an audience. Do this as many times as necessary until it sounds smooth and polished. It's a good idea to have a role playing session where you invite in trusted associates or advisors to listen to your presentation and then ask questions you are likely to encounter in the real meeting. They will undoubtedly pose some difficult questions that you might not have thought of.

Putting the presentation in PowerPoint format can be a great help as well. For one thing, the investors will focus some of their attention on the slides, and not just stare at you with those cold, steely eyes that so many investors seem to have. PowerPoint also helps you get the presentation more sharply focused on the small number of key points you want to emphasize, the elements that really make the case for why your venture is a superior opportunity, and why your management team is absolutely capable of succeeding. Don't make your presentation a rambling recitation of your Business Plan. They can read and study your Plan on their own. Make your in-person presentation as concise as possible. Start composing it by thinking of the 4 or 5 things you want them to remember when the presentation is over and you have left.

A few other suggestions for a winning presentation:

1) Before you begin, congratulate yourself on getting this far. You have already achieved something that many entrepreneurs never get the opportunity to do. Start by thanking the investor(s) for inviting you there.
2) Keep in mind you know more about your business than the investors do. Don't get rattled by the questions they may ask. Be polite, but confident, with your responses.
3) Show them that you have a burning desire to succeed with this venture. Investors want to put their money behind highly motivated management teams with a clear vision of how they are going to build a large and profitable enterprise.

Brian Hill is the co-author of Business Plan Basics on how to write a business plan and several other nonfiction books. He is one of the few nationally recognized business plan consultants.

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The First Steps in Raising Money

Nearly every inventor has problems with money shortages. Even the best planned product introduction, using all of the low-cost methods available, can be very expensive, especially when it comes to prototypes and patents. Most inventors need to raise money sooner or later in their product introduction, but raising money can be very difficult. In this series we will teach you by laying out a good plan for raising money in advance can be the ticket to getting the big investments you may need to bring your product to market.

Getting Started Raising Money

Keep on Working

Most inventors use personal loans or credit cards to fund the first phases of their product introduction. If you are not working, you will have a hard time securing these loans. Some inventors get so excited about their idea that they quit their job to dedicate all their time to their new project. But this is usually not wise. In the early stages of your product development, you should keep on working, dedicating evenings and weekends to your project, until you are sure your product will succeed. Then once you feel it is wise to quit your job, make sure you apply for any loans or credit cards you may need before you quit. This way, you will have an easier time getting loans and credit cards and you won't be going into debt just to pay your regular bills.

Founders' Equity

When you are starting to develop your new product, it is a good idea to get a pool of money from founding investors, which includes you. This can be just family and friends, although someone within your industry is even better. Ask the group to invest a small amount, say a couple of thousand dollars, and then you match whatever the other founders invest. Then reward yourself around 500,000 shares of stock, since you came up with the idea, and give the other founders 10,000 to 25,000 shares. Then as your need for more funding grows, ask your founding investors for more money.

Outside investors always like to know how much money you have put into the project and are putting into each additional stage. By having a founders' group, you can say how much the founders are investing and it will help you not run out of money and be unable to invest in the next stage. If you approach an investor to finance, for instance, your patent and you say you aren't putting up any money for the patent since you have none, you probably just lost your investor. In that case, you will look like a poor planner. Having founding investors helps you always have at least a small supply of funds.
Business Experience

If you don't have business experience, you will have a very hard time finding serious investors. Find a mentor, hire a consultant, or take on a business partner to let the investors know the project is in reliable hands.

How can you find people with business experience?

First, check with your family and friends. Often, they will know someone in the industry you are targeting and even if that person does not have the experience you need, he or she might know who does. Also keep your eyes and ears open and ask people what they do for a living. You can meet the contacts you need almost anywhere: at religious gatherings, at your children's sporting events, at community gatherings, etc.

Another good way to meet mentors is through business courses offered through the SBDC (Small Business Development Center), SCORE, and local universities. Both those teaching and those attending might be good contacts for you. The same goes for events at your local chamber of commerce and your local inventors club.

Join trade associations in your industry. Seminars and meetings of the trade association will introduce you to many important people in your industry.

Read articles about your product category. Write or call the authors and ask for input. If they aren't open to helping you, or don't have the experience you need, ask them if they know someone else who might be interested in being a part of your project.

Eric Debelak is part of the team at the One Stop Invention Shop, http://onestopinventionshop.net. The One Stop Invention Shop provides great services and lots of free information to help inventors succeed.

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Venture Financing Games

There are so many entrepreneurs who want to start businesses, but they won't get off their lazy butts to start the business until someone gives him 2 or $3 million for the venture capital. As a retired entrepreneur, who has started several businesses from scratch, literally from a "bucket of water and a sponge" into a national franchise chain cleaning cars, airplanes, and fleets of vehicles, I am often blown away by the audacity of some of these younger so-called entrepreneurs.

It's amazing, how they wish to thrust themselves into the world of high-finance. You'd think they were investment bankers by the way they talk, act, and scheme. I can recall similar conversations with folks from Lehman Brothers back in the day, attempting to get me to merge my company with some silly nonsense and unprofitable brand.

Not long ago, someone approached me to discuss a new business venture that they were considering, and they pretended to be my friend, and discuss the actual concept, but what they were really trying to do is feel me out as an Angel Investor, and they were looking for 1,000,000+ and they indicated that they were willing to put in a couple hundred thousand dollars of their own money into the venture, but not unless they had the big money funding they felt they wanted to start.

This new innovation and invention was only an idea on a piece of paper, with rough rudimentary sketches. The reality is a prototype could probably build a built in someone's garage or about $20-$30,000. Therefore, if they use their $200,000 to do this, they would have $170,000 left over once they produce the prototype. But alas, they were too lazy to start the process until they received a huge chunk of money so they could live on easy street while doing it, literally paying everyone else to complete their idea and concept, while they drove around in a new bright red sports car.

You see, if someone spent $30,000 building the prototype and had $170,000 left over, they could spend $40,000 to a Patents and still have $130,000 to actually start their business, and then go get venture capital. And it would be a lot easier to get venture capital once she had a working prototype and patents and, she'd be able to keep a larger percentage or chunk of the company as she started.

The reality is either I am getting too old, or this next generation is getting far too lazy. Indeed, it was interesting because the individual that contacted me was actually a couple years older than I was, but she acted like a twenty-something who wanted a free ride. The moral of the story is if you are an Angel Investor, and you are approached by someone like this tell them to "take a hike," you don't need them, they need you so they can go buy new sports cars and live high on the hog until the money runs out with your dime. Forget that noise. Trust no one.

Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank. Lance Winslow believes integrity and hard work, not hype and nonsense.

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Venture Capital in Recession

As you might imagine, the recession and implosion of the credit markets has had just a tad of an effect on the venture capital and angel investor markets this year. For those considering start-up businesses or expansion, the forecast is decidedly mixed.

I don't have to tell you that the implosion of 2008 and 2009 resulted in the near strangulation of many niches of the financial markets. Oddly, venture capital investing was not one of those markets that was rocked to its core. Don't get me wrong. Things were bad, but the downturn in venture capital investing was in the teens as a percentage instead of a much larger number as with most markets. Angel investing, sadly, was crushed for the most part with rates dropping by 30 percent or more.

Well, enough about the past. What about the future? After all, we've all read and heard we are now in a recovery from the Great Recession. To say it is a tepid recovery might be a mild understatement. The simple fact is the financial world is still at a stand still. For example, more banks have failed in 2009 than all of 2007 and 2008 combined. That doesn't make for a solid platform from which to launch 2010. So, what can we expect?

2010 is going to be a brutal year for start-ups. Venture capitalists are risk adverse at the moment, which means few will be interested in taking on the risk of a brand new business. Unless you have a proven record turning start-ups into big winners, don't hold your breath on VC funding. The same goes for angel investing. The year is going to be about family and friend investing or simply waiting until things turn in the venture capital markets.

What about existing businesses looking to take that next step? VC companies and angels are going to be much more receptive towards inquiries from companies that have a history. That doesn't mean they will be handing over money right and left, but it means you have a chance. As usual, it comes down to whether your idea seems plausible to them at a time when things are very tough.

The venture capital markets are not dead. Not even close. That being said, there are a lot of fish competing for the food in that market. Things will eventually loosen up, but it may be some time before that happens.

Thomas Ajava writes about venture capital funding for VentureCapitalInvestmentFirms.com where you can find venture capital investment firms for your start-up or existing business.

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Raise Capital For Your Company

Whether you're trying to raise debt or equity capital there are still certain unwritten rules that apply that cater to the mentality of today's investor and funding community. Certainly there are scores of private placement memorandum and business plan chop shops that wouldn't know how to properly consult with your company or write a fund-able document even if they wanted to but they will gladly take your money to throw together a template and try to pass it off as custom work.

The issue is this, it's not necessarily the consultant, though these fly-by-nights shoulder a large portion of the blame, but the client usually doesn't even have the proper structure in place to attract a funding source even if they had the most incredible PPM and business ever to hit the venture capital marketplace. Here is a simple (very basic) way to evaluate your company to find out if you are properly structured to attract capital. Have a corporate meeting and ask yourselves the following questions: What type of corporate structure do you have and why did you choose that particular structure? Break down your executive infrastructure, where do your individual executives stand in your industry, do the unthinkable, Google everyone's names; are the people running your company real industry players? Are all the basic positions accounted for (president, CFO, controller etc)? Next, look at your advisory board and board of directors. If by some miraculous act of God you actually have these two groups represented in your company, how did you qualify them? Sorry but if you have an attorney on your board because he's, um...well, an attorney, that's not good enough.

You need an industry specific legal guru who not only spells out the intricacies of your business genre's regulation but they must also be actively qualifying potential strategic partnerships as alliances for your company. He should be reaching into his client base and actively picking companies that could enhance your company in distribution or in any other way that will have a profitable outcome for all involved. Each of the members must be serving a similar purpose.

Next, on what criteria are you basing your share price or loan amount? If you don't have a clear cut 'use of proceeds' model, you need one. This and many, many other questions need to be asked before you are actually ready to raise capital and in all reality, until your corporate structure is in place you shouldn't even attempt to write a business plan or a private placement memorandum. If you are serious about setting up your company to attract investors you need a turnaround consultant, you can't do this on your own. There is an entire industry that centers around structuring companies for their first and ongoing capital raise.

Before you blackball your company by prematurely attempting to raise capital, the critical concepts you need to keep in mind are (precisely in this order): corporate structure, infrastructure, advisory board, board of directors, use of proceeds, business plan, private placement memorandum, investor finder, funding. Look at each aspect listed here as its own item, break it down and analyze every minute aspect of each element and look at everything objectively and eventually your company will evolve into a structure that is fund-able and stabilized for years to come.

Do you need an experienced Turnaround Consultant? Do you need an Investor Finder? Do you want a legitimate, quick and easy way of taking your start-up or small business public? Do you want to talk to a consultant that will help you decide which path is best for your company? Call Princeton Corporate Solutions today at 267-233-0183 or visit our website at http://www.princetoncorporatesolutions.com there are many ways to take your company public in an affordable manner that will achieve your goals and begin raising capital quickly.

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