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Earlier this morning, we pinged out a sponsored message promoting a capital raising workshop.
It reminded me of a ‘rant’ we published in the second or third edition of Anthill Magazine, way back in March 2004, by Michael Gordon. The piece was about the frustration many investors (and editors) feel when being pitched to.
Here’s what we published in 2004…
Why is it that so many people involved in the communications, information and biotechnology industries seem incapable of simply articulating what it is that their wonderful technologies do. What is the point of boring investors to tears when all they really care about are the market benefits?
Never has this been more important than today, when funding to develop and exploit these great technologies is required from the great unwashed. It may well be that you have developed a proprietary technology, using the most advanced systems and exploiting the most complex combobulators and thingamejiggits, but to what end?
Business exists to serve its customers. And technology must have a purpose. It exists and will be exploited to meet some unfulfilled need or because it can meet some customer objective more effectively. In other words the technology must deliver some tangible benefit to a defined customer base.
Another way of looking at it… customers buy benefits. And so do investors.
If you are going to cure cancer, thatís fantastic but very few people will be interested in how many Nobel Laureates you have on your team or what gene technology breakthrough you have achieved, unless you tell them that you intend to cure a disease that affects billions of people each year.
During due diligence an investor is likely to want to understand your process, including technologies used and resources available, but in the initial presentations investors are no different from your ultimate customer; all they want to know is what makes you and your products different.
Twenty years as a business analyst and strategist has taught me one great lesson: There is never any shortage of ideas, modest or grandiose, which have potential but in reality little chance in the proverbial of achieving success. It is rarely the technology that is responsible for the lack of success. Rather, it is typically a failure to understand the basic principals of business management.
As the dotcom boom so clearly articulated, build to satisfy a need. And when looking for capital, GET TO THE POINT!
Honestly, has much changed? Maybe. Maybe not.
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J Wood Reply:
September 25th, 2009 at 12:03 am
Trevor, that absolutely nailed it and I must say he has my vote on this one James. The utter arrogance of many of the VC and “angels” (that always cracks me up, talk about spin) is utterly beyond belief. At one stage I was one of those poor buggers being beat up for not finding the point when I could not have made the point any clearer had I nailed it to the funky little industry pins they all seem to have on their lapels! .
Later on I found out that many of these so called experts neither had the funds to invest nor had any intention to invest in the first place. In essence, I think the nature of the game is for the unimaginative and talentless to place themselves in a position to ‘borrow ideas’ from those to young and innocent to know that there is no such thing as a win-win situation with VC engagement. I liken most of these angel/VC types as catfish, they swan around in the pond sludge all day shaking their whiskers looking for the nuggets to drop , suck up spit out and begin the process again.
A few years down the track and what do you know, my poorly formed and articulated concepts will soon be on just about every PC and Mobile in the world! Not one penny of VC gambling or prostitution, instead through genuine business mentors and down to earth people I have gained insight and business partners that are worth far more that any cash investment and look ma…still have a soul!
This all begs the question however, how can this be? Surely all of these angels and investors from a few years back should be proportionally ahead of me now, No? Could it be many of them lost their shirts in businesses and investments that could be defined in an elevator ride, but had not guts of passion to it? Passion is the single most underestimated asset on the so-called company scorecard and until people wake up to that Micro business in Australia will continue to lag behind the rest of the world. I am so sick of all the wrote prescriptions being used by people who barely understand them to rate and measure, poke an prod, the buzz words drive me crazy and just serve to illustrate the many sheep in our fields.
To the uninitiated, the fist timers with a half decent idea, if someone ever tells you to define your business idea in an elevator pitch, or enter a competition to tell the world you idea with heaps of catfish whisker all a-quiver waiting in the front row …..Pause and then run like hell. Better yet ask them to define the best business idea they ever had in 60 seconds, get up in their face and demand the why and how the market is going to choose that product over others etc. I watched a VC pitch club the other day and apart from the fact that everyone still seemed to leave with their ears attached, the testosterone and ego levels were pretty much the same as title fight night!
The bottom line is that in the real world good business ideas are discussed over coffee with people that are actually keen to understand what you have to say and offer. Just because someone has more money that you, and you are seeking to access those funds does not make them better than you and the minute you get the sense that you are being talked down to or made to feel less than, you need to look them in the eye and tell them to jam it!
A smart, serious investor as I’m sure James and Trevor will both agree will take the time to find what is making you and your idea tick, not spend their time trying to impress you with their inflated sense of ego. For what it’s worth James if we keep gutting the next generation of up and comers, or exposing them to the dwellers of muddy pond waters, more people will come to the conclusion that VC’s are like lawyers…if you have to use them, you have already lost.
So there you go James, food for thought, Trevor has lit the fires of revolution, the entrepreneurs are fighting back and the muddy waters will be a stirring!
Disclaimer: The above view does not necessarily reflect the views of the author ….if you are a VC that has lots of money, will travel at least half way to meet with a potential client, has time to discuss and negotiate an equitable arrangement, will give the full 30 minutes to the initial meeting (without rushing our early because you are sooooo damn important) and who doesn’t want 60% of the company…oh wait the disclaimer has become redundant!
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