Comments on: Diary of an entrepreneur raising capital: I think, therefore IM http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/ Business help for entrepreneurs, startups and small business owners in Australia | Business > Innovation > Technology > Entrepreneurship - Anthill Magazine: It's Where Ideas and Business Meet. Fri, 10 Feb 2012 14:06:00 +0000 hourly 1 http://wordpress.org/?v=3.1.1 By: David Calabrese http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-19170 David Calabrese Thu, 05 Nov 2009 21:20:18 +0000 http://anthillonline.com/?p=20188#comment-19170 Well my friend the worst part of it is that valuation and the reasons for investment don’t necessarily match what you are putting together. While ideally investments are always made based upon barriers to entry, strength of team, potential/projected ROI and valuation the decisions are often made for reasons such as the “me too” investment strategy or “I wanna be cool” process or the always interesting “they have someone I’d like to target for my next fund”. While I have had the pleasure of working with a fund that does it right, many do not. They make decisions for the wrong reasons and valuation is a joke. The magic formula is “this is what we like to invest and where we need to be in the cap table for that investment”. So the numbers may move a bit, but not far. I wish you luck and if there is anything I can do to help please let me know. As a serial entrepreneur who has had the opportunity to sit on both sides I find it quite rewarding to ease the pain of the next guy/gal. Good luck! David Well my friend the worst part of it is that valuation and the reasons for investment don’t necessarily match what you are putting together.

While ideally investments are always made based upon barriers to entry, strength of team, potential/projected ROI and valuation the decisions are often made for reasons such as the “me too” investment strategy or “I wanna be cool” process or the always interesting “they have someone I’d like to target for my next fund”.

While I have had the pleasure of working with a fund that does it right, many do not. They make decisions for the wrong reasons and valuation is a joke.
The magic formula is “this is what we like to invest and where we need to be in the cap table for that investment”. So the numbers may move a bit, but not far.

I wish you luck and if there is anything I can do to help please let me know. As a serial entrepreneur who has had the opportunity to sit on both sides I find it quite rewarding to ease the pain of the next guy/gal.

Good luck!
David

]]> By: Helen http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-19121 Helen Thu, 05 Nov 2009 11:07:20 +0000 http://anthillonline.com/?p=20188#comment-19121 When I submitted an IM to a VC they contacted me to set up a meeting. They asked me if my accountant would be coming. I replied that I would ask him what his schedule was like and whether he could get to the meeting. The VC replied, 'Well there's not much point having the meeting without him there as he's written the IM.' When I told him that I'd written it, there was silence on the other end of the phone followed by disbelief! There seemed to be an automatic assumption that the business owner wouldn't have written it him/herself. I wrote it myself so that I knew it inside and out, and I wasn't going to be asked a question I couldn't answer. Good luck. When I submitted an IM to a VC they contacted me to set up a meeting. They asked me if my accountant would be coming. I replied that I would ask him what his schedule was like and whether he could get to the meeting. The VC replied, ‘Well there’s not much point having the meeting without him there as he’s written the IM.’ When I told him that I’d written it, there was silence on the other end of the phone followed by disbelief! There seemed to be an automatic assumption that the business owner wouldn’t have written it him/herself.
I wrote it myself so that I knew it inside and out, and I wasn’t going to be asked a question I couldn’t answer.
Good luck.

]]> By: Simon Franklin http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-19099 Simon Franklin Thu, 05 Nov 2009 07:49:14 +0000 http://anthillonline.com/?p=20188#comment-19099 Hi Steve, What a great idea to share these trials and tribulations. It will serve to make you more "real" to any potential investors and give them a connection to you. Too much emphasis is put on the legal and technical details along with the financials and not enough on marketing and sales. I think the IM should be stacked with real market research and a clear plan on how you intend to grab that market and hang on to it. Good luck and I look forward to seeing things unfold. Simon Hi Steve,

What a great idea to share these trials and tribulations. It will serve to make you more “real” to any potential investors and give them a connection to you. Too much emphasis is put on the legal and technical details along with the financials and not enough on marketing and sales. I think the IM should be stacked with real market research and a clear plan on how you intend to grab that market and hang on to it.

Good luck and I look forward to seeing things unfold.

Simon

]]> By: Steve Sherlock http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-19092 Steve Sherlock Thu, 05 Nov 2009 05:55:19 +0000 http://anthillonline.com/?p=20188#comment-19092 @John - thanks for encouragement. one company had proposed $30k to write IM etc, then charge a 5% fee if they raised the money raised. the 5% is fair enough because it means they achieved the goal. but $30k expense with no guarantee was out of the question. i can be a bit of a woody at times, but not this time. am spending about $5k on this IM. was told yesterday that many investors won’t really do a deal based on the IM, but they do want to see that you’ve had the discipline to do one. @Noel - I’m glad you see it similar to me. in contrast I’ve had advice not to have an open diary, citing that investors have their own investors and sometimes they need a little room to spin the investment, and its history. but if it’s all open i.e. to the start date of the raising etc, they can't dress it up much. also that the entrepreneur can't spin it much. for example if after six months if i have not got investment, i can’t really go to a new investor and say we've just started the process. not that I’m a goody two-shoes, but I’d like to see if i can succeed by being honest and transparent. @Jerry - yeah good point, i agree optimising for the audience is important. already i have two version of the marketing plan. one for VC's and one for strategic aligned travel companies. because the later is likely to include access to their distribution network which alters the acquisition strategy and cpa, for example. @John – thanks for encouragement. one company had proposed $30k to write IM etc, then charge a 5% fee if they raised the money raised. the 5% is fair enough because it means they achieved the goal. but $30k expense with no guarantee was out of the question. i can be a bit of a woody at times, but not this time. am spending about $5k on this IM.

was told yesterday that many investors won’t really do a deal based on the IM, but they do want to see that you’ve had the discipline to do one.

@Noel – I’m glad you see it similar to me. in contrast I’ve had advice not to have an open diary, citing that investors have their own investors and sometimes they need a little room to spin the investment, and its history. but if it’s all open i.e. to the start date of the raising etc, they can’t dress it up much.

also that the entrepreneur can’t spin it much. for example if after six months if i have not got investment, i can’t really go to a new investor and say we’ve just started the process.

not that I’m a goody two-shoes, but I’d like to see if i can succeed by being honest and transparent.

@Jerry – yeah good point, i agree optimising for the audience is important. already i have two version of the marketing plan. one for VC’s and one for strategic aligned travel companies. because the later is likely to include access to their distribution network which alters the acquisition strategy and cpa, for example.

]]> By: John Power http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-19089 John Power Thu, 05 Nov 2009 04:59:59 +0000 http://anthillonline.com/?p=20188#comment-19089 Sad but true, I agree, this has been exactly our experience. Some want lot's more on product/technology, some are focused on the go to market plan. Some want to know the "ask" on the first slide, others don't want to know until they understand the opportunity...so yes, it pays to be flexible! Sad but true, I agree, this has been exactly our experience. Some want lot’s more on product/technology, some are focused on the go to market plan. Some want to know the “ask” on the first slide, others don’t want to know until they understand the opportunity…so yes, it pays to be flexible!

]]> By: Jerry Bloom http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-19079 Jerry Bloom Thu, 05 Nov 2009 02:45:57 +0000 http://anthillonline.com/?p=20188#comment-19079 Steve, be prepared to have multiple versions of your IM/BP. We have found that no matter how its written or who writes it each potential investor will have a different idea of what is important to them. For example, we have a 3 different 'Executive Summary' docs (2 pagers), 3 different IMs, 3 different BPs and for the U.S. investors a so-called 'Slide Deck'. The BP is more of an operational plan whereas the IM is a 'blue sky' document with the ROI, IRR and NPV as the critical elements. Each of these has a different emphasis. One has a financial projection focus, another has a technology focus and the third has a people focus. The 'Slide Deck' is to fit the U.S. 'short attention span' where they want no more than 20 slides to cover everything they want to know in a 15 - 20 minute 'pitch'. Nobody else will understand how to write this better than you, however its most often the order of presentation that determines the outcome. For some this means that 'people' come first, that is who are the personnel, have they got the history and stamina to pull this off. Others want to know all about the technology first and of course with others its the financials. Same documents, different order and emphasis! Steve, be prepared to have multiple versions of your IM/BP. We have found that no matter how its written or who writes it each potential investor will have a different idea of what is important to them. For example, we have a 3 different ‘Executive Summary’ docs (2 pagers), 3 different IMs, 3 different BPs and for the U.S. investors a so-called ‘Slide Deck’. The BP is more of an operational plan whereas the IM is a ‘blue sky’ document with the ROI, IRR and NPV as the critical elements.
Each of these has a different emphasis. One has a financial projection focus, another has a technology focus and the third has a people focus. The ‘Slide Deck’ is to fit the U.S. ‘short attention span’ where they want no more than 20 slides to cover everything they want to know in a 15 – 20 minute ‘pitch’. Nobody else will understand how to write this better than you, however its most often the order of presentation that determines the outcome. For some this means that ‘people’ come first, that is who are the personnel, have they got the history and stamina to pull this off. Others want to know all about the technology first and of course with others its the financials. Same documents, different order and emphasis!

]]> By: Noel Wiggins http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-19019 Noel Wiggins Wed, 04 Nov 2009 14:11:55 +0000 http://anthillonline.com/?p=20188#comment-19019 What a great find!, I can't wait to follow along as you go through this journey. I think the fact that you are taking the plunge of doing what people are suggesting then, seeking honest opinions from outside help and then backing that up by investing in that help. shows that you have a great desire to make this thing work. I love that you are documenting as you go through not only will you help a ton of people following but I will make it obvious which route worked and which didn't. Allowing you to replicate again and again. -- Thanks and Regards Noel for Nopun.com <a href="http://www.nopun.com/" rel="nofollow">a graphic design studio</a> What a great find!, I can’t wait to follow along as you go through this journey.

I think the fact that you are taking the plunge of doing what people are suggesting then, seeking honest opinions from outside help and then backing that up by investing in that help. shows that you have a great desire to make this thing work.

I love that you are documenting as you go through not only will you help a ton of people following but I will make it obvious which route worked and which didn’t. Allowing you to replicate again and again.

–

Thanks and Regards

Noel for Nopun.com
a graphic design studio

]]> By: John Power http://anthillonline.com/diary-of-an-entrepreneur-raising-capital-i-think-therefore-im/#comment-18942 John Power Wed, 04 Nov 2009 02:12:59 +0000 http://anthillonline.com/?p=20188#comment-18942 Steve, you are spot on about it being imperative that you write the BP. The IM is largely legal requirements wrapped around your BP along with key, specific elements of interest to Investors (like exit strategy / returns etc). I know people who outsourced the whole thing, spent $60K on "consulting" and it never went anywhere because they didn't really author the content and have "ownership". Investors won't care what some 3rd party paid consultant has to say, they're interested in your plans to provide them with a significant ROI. Good Luck. Steve, you are spot on about it being imperative that you write the BP. The IM is largely legal requirements wrapped around your BP along with key, specific elements of interest to Investors (like exit strategy / returns etc). I know people who outsourced the whole thing, spent $60K on “consulting” and it never went anywhere because they didn’t really author the content and have “ownership”. Investors won’t care what some 3rd party paid consultant has to say, they’re interested in your plans to provide them with a significant ROI.

Good Luck.

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