How to Get all the Funding you require to get your product to market

1. How to Get all the Fundingyou require to get your product to market

2. 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

3. 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

4. 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 ….

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. Developing a Good Reporting Structure (Contd.) • Communicate regularly between meetings with the Board and investor group (e.g. bi-monthly e-mails, breakfasts, etc.)

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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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