A couple startup pointers online

Genuine VC: Seven Common Tactical Mistakes Entrepreneurs Make in their Initial VC Pitch which are Simple to Fix

Genuine VC: Seven Founding Sins: “”

Allen’s Blog: Ten Commandments for Entrepreneurs
1) Meet with the right partner at the VC firm. Try to get your idea and meeting with the person that has the most appropriate background for your idea.

2) Be on time! Duh! Actually be early so you can set up your laptop, hook up to the projector, get access to the wireless hub, have a glass of water, and breath

3) Tease. Don’t cram several meetings into one. The objective of the first meeting is to get a second. Tell them you have a great technology idea, being implemented by a great team, and attacking a huge market in the midst of a transition. Crisply and clearly reduce a complex business message into a short set of slides that intrigues the audience and makes them want to find out more. The same tactic with the Exec Summary.

4) Know your audience. Either read up before the meeting or ask questions about domain experience, companies in their portfolio, etc. Don’t get surprised by who knows what and bore them with redundant background info.

5) Get to the point. Tell the audience what you are doing right away. “What problem is my startup solving?”

6) Describe your idea by analogy. Compare it to what else has been in the market. Google adwords for widgets.

7) 13 slides. Check out Guy’s 10/20/30 rule for presentations

8) Know, but admit when you don’t. 1) know a lot, (2) know what you don’t know and (3) admit it when asked — will get you a lot farther down the road.

9) Know your competitors and list them. Be intimate with strengths and weaknesses.

10) Listen well to questions and answer quickly. Don’t play the ego game and followup on points in dispute after the meeting.

Focus Focus Focus

EarlyStageVC

How to Double Your Valuation

That got your attention, didn’t it? Maybe I learned something from all those enlargement offers in my email after all.

Now, let’s get down to business. I re-learned something last week. Focus sells. Duh. I’ll be specific. Last week I saw two remarkably different pitches, both from companies with great technology. One sold the generality of what they could do, telling a Big Story. The other told a Focused Story about an existing customer base they were going to serve better. .They explicitly avoided in the pitch any mention of where else their technology might apply. That was the voice over in the conversation around the pitch. All other things were equal — limited management team, pre-launch, working alpha.

I struggled with the Big Story Company, befuddled about who would really use this. I jumped out of my chair (metaphorically) to chase the Focused Story, because I could envision so many more uses beyond the first beachhead market. VCs are great at imagining a big Future, but most of us want an anchored Present. The Big Story Company was hoping for a valuation $10M pre-money. The Focused Story already had a term sheet at $20M when we met.

There is an enormous temptation in startups to think and talk expansively about a long-term vision centered on the technology of the Company. That vision often includes the word enable as in we will enable … That’s your first clue. Enable is one of those value-halving words. So are Discover, Context, Create, and Build. All those words really say, The proof of value is left to someone else. That applies equally to the valuation. The proof of value is left to someone else because we can’t articulate it.

Companies started by technologists routinely fall into this trap. (I mean both business and engineering technofiles, BTW) They don’t start with the intent of solving a specific problem. They start with the intention of “leveraging” a specific technology. The fact that the technology is a piece of many potential futures seduces the team to think they have a big opportunity. It is uncomfortable for the team to commit to a market because they don’t know the end user. There are two solutions to this. Turn inward and build technology, or turn outward and recruit people who do understand the solution. It is dilutive, but if it doubles your value, you can’t afford not to do it.

Years ago I was on the board of a company that had phenomenal technology for building predictive models from text or data. The team had identified potential applications in CRM, online advertising, search, database marketing, customer support, and others. The CTO referred to the product as a bolt-on brain, because it made many existing applications much smarter. The problem was that the technology was 10% of any given solution, even though it was the piece that differentiated the rest of the system. Capturing the other 90% required domain expertise not present in the team. The Company never went deep, straddling several potential markets. They were eventually acquired for the team and tech, not for the book of business it created. It was an unsatisfying outcome for nearly everyone. It was positive, but vastly under the potential.

So how do you double your valuation? Pick one application; serve one type of customer and be in that business. Show how you can conquer a specific set of competitors by virtue of the technology, but don’t be in the technology business. If you can persuade your investors that the first beachhead is attainable and interesting, you will get credit for subsequent applications and the big, horizontal play. Tell a story that shows you understand who your customer is, how to get to them, and why they will buy or use your product/service. Show how powerful the technology and team are, but stay on message about the focus. Let us imagine the Future.

* Don’t enable – solve
* Don’t provide context – provide conclusions
* Don’t ask customers to build – ask them to use

Technology is raw material. Create finished goods.

Enhance your value with this Vi@gr@ for startup companies. Your partners will love you for it.