Oodles.com founder Steve Sherlock has set himself the goal of raising a multimillion dollar Series A funding round by the end of January 2010. He is documenting his trials and tribulations and seeking feedback from readers on AnthillOnline.com. This is the fifth post in his series.
Week 4: Enter the Dragon
If you’ve ever watched the television show Dragon’s Den then you’ll understand exactly how the GetFundedShow in London works.
Basically, in front of an audience, 20 young aspiring travel businesses stand up and pitch to four business experts (the ‘dragons’). Five pitches per session with the dragons changing each session.
The entrepreneurs have strictly five minutes to present their business and then about another five minutes of questions from the dragons. It’s a pretty tough format that quickly exposes those who are underprepared or presenting a model that doesn’t stand up to scrutiny.
At the end of the first day of this year’s show, four companies made it through to the next round of pitches, held the following day. All were high-quality pitches, with the winner being www.housetrip.com.
Sitting in the audience it was obvious that every company taking part would have benefited enormously from the process, given that they had to get their business to a point of being investor-ready with business plans, Information Memorandums, presentations and lots of practicing.
I had contemplated pitching for Oodles, but given the stage we’re at, and having already raising two rounds and now seeking a larger round, I didn’t think it was a good fit.
Instead, I took the opportunity to network with all the investors and successful travel companies in the room. I ended up giving about 40 two-minute pitches, quickly describing the pain relief we provide to our target market. In terms of refining and sharpening a pitch, the process was invaluable.
GetFundedShow also included presentations by a number of successful entrepreneurs and investors. Here is some of the advice they, and the dragons, passed on:
Glen Fogel, who effectively does all of Priceline‘s acquisitions:
- Make projections conservative so that you hit them.
- Projections must be supported down to minute details (source of traffic, conversion rates, repeat user rates from this source, etc.).
- Ensure you have dynamic numbers so that when an investor or acquirer wants to know certain info, it can be produced instantly.
- When counting revenue, enter it when it’s paid rather than when you get the order (like PPC, expense now and revenue in following months).
- Higher valuation if you have brand momentum can increase your price by 60 percent
- If you build your business with SEO grey hat or brand squatting then your business is being built on a foundation of quicksand.
- There is no replacement for making profits if you want to be acquired.
- Don’t use investment bankers, get lawyers very early on and bring auditors in early.
- Don’t ask investors to sign a non-disclosure agreement (NDA).
- If you are being acquired, talk to other businesses that have been acquired by this company.
Bill Morrow, who heads up www.Angelsden.co.uk, which represents thousands of angel investors around the world:
- Angels want to see where their money is going, rather than lose money in faceless broker transactions.
- They invest on the other side of world, if need be.
- Investors want to know if you’ve had the discipline to do an IM.
- Angels spend an average of two minutes and 12 seconds looking at your business plan.
- They need to know the idea, the pain, how the pain is solved, how it’s differentiated and the people involved.
- Never write in a business plan, “We have no competition.”
Alex Hoy from SeedCamp said an Angel should have the ability and networks to help get money into the company down the road. He put forward four ‘No’s that can lead to a ‘Yes’:
- ‘No’ means feedback.
- Know why you will win.
- Know your investors
- ‘No’ substitute for traction.
And finally, from me, if looking for an Angel, find out about what losses they’ve had and address those criteria early on to re-assure them that your scenario is different.