Tag Archives: Venture Capital

Don’t forget to keep it simple – Recomended reading from Steve Blank

From Steve Blank’s BLOG post:    Turning on your Reality Distortion Field

Our product is really complicated

After hearing more details about the features of the product (I think he was heading to the level of Quantum electrodynamics) I asked if he could explain to me why I should care. His response was to describe even more features. When I called for a time-out the reaction was one I hear a lot. “Our product is really complicated I need to tell you all about it so you get it.”

I told him I disagreed and pointed out that anyone can make a complicated idea sound complicated. The art is making it sound simple, compelling and inevitable.

Turning on your Reality Distortion Field

The ability to deliver a persuasive elevator pitch and follow it up with a substantive presentation is the difference between a funded entrepreneur and those having coffee complaining that they’re out of cash. It’s a litmus test of how you will behave in front of customers, employees and investors.

30-seconds
The common wisdom is that you need to be able to describe your product/company in 30-seconds. The 30 second elevator pitch is such a common euphemism that people forget its not about the time, it’s about the impact and the objective.  The goal is not to pack in every technical detail about the product. You don’t even need to mention the product. The objective is to get the listener to stop whatever they had planned to do next and instead say, “Tell me more.”

How do you put together a 30-second pitch?

Envision how the world will be different five years after people started using your product. Tell me. Explain to me why it’s a logical conclusion. Quickly show me that it’s possible. And do this in less than 100 words.

The CEOs reaction over his half- finished muffin was, “An elevator pitch is hype. I’m not a sales guy I’m an engineer.”

The reality is that if you are going to be a founding CEO, investors want to understand that you have a vision big enough to address a major opportunity and an investment. Potential employees need to understand your vision of the future to decide whether against all other choices they will join you. Customers need to stop being satisfied with the status quo and queue up for whatever you are going to deliver. Your elevator pitch is a proxy for all of these things.

While my ex student had been describing the detailed architecture of middleware of electric vehicles I realized what I wanted to understand was how this company was going to change the world.

All he had to say was, “The electric vehicle business is like the automobile business in 1898.  We’re on the cusp of a major transformation. If you believe electric vehicles are going to have a significant share of the truck business in 10 years, we are going to be on the right side of the fault zone.  The heart of these vehicles will be a powertrain controller and propulsion system. We’ve designed, built and installed them. Every electric truck will have to have a product like ours.”

75 words.

That would have been enough to have me say, “Tell me more.”

Lessons Learned

  • Complex products need a simple summary
  • Tell me why I should quit my job to join you
  • Tell me why I should invest in you rather than the line outside my door
  • Tell me why I should buy from you rather than the existing suppliers
  • Do it in 100 words or less.

Scenarios – MBA Monday lesson from “A VC”

Scenarios

In last week’s MBA Mondays, I introduced the topic that we’ll be focused on for the next month or so; projections, budgeting, and forecasting. In that post, I described projecting as a “what if” exercise that is done at a higher level of abstraction than the budgeting and forecasting exercises. I said this about projections:

These are a set of numbers, both financial and operational, that you make about your business for various purposes, including raising capital. They are aspirational and are often done with a “what could be” perspective.

Since projections are not budgets and are much more “big picture” exercises, it is important to use a scenario driven approach to them. I generally like three scenarios; best case, base case, and worst case. But you could do as many scenarios as you like. It’s not the results that matter so much, it’s the process and the learning that comes from the projections exercise.

To read the rest CLICK HERE

reBlog from avc.com: A VC

I found this fascinating today on the blog, A VC:

My friend and fellow VC Jeff Bussgang has written an excellent book about entrepreneurs and VCs called “Mastering The VC Game.” If you are an entrepreneur who plans to work with VCs at some point in your career, you should read the book. It’s a fast read. You could easily read it in a cross country flight.avc.com, A VC, Apr 2010

“Startup List” — a new way to reach angels

From Venture Hacks 2/3/10

by Nivi

Yesterday, we launched AngelList, a curated list of angel investors, representing $80M going into early-stage startups this year.

Today, we’re launching a cool new way to get intros to these angels: StartupList. It’s a weekly email we send to AngelList, with 3 high-quality startups who want intros. Here’s how it works: you send us your pitch, we review it and, every Monday, we email the best 3 startups of the week to AngelList.

Startups: How to get on StartupList

If you’re a startup, apply for StartupList here. We look for the same things that early stage investors look for: traction, social proof, and team. You don’t need all 3 to get on StartupList but you need to kick ass in at least one of these dimensions.

Before you apply to StartupList, build a minimum viable product and learn something about your customers by putting the product in front of them. If you can’t get this far on your own, go find some idea investors instead. (The exception is if you’re an entrepreneur who has made money for investors in the past — your team alone is probably good enough.) Then, write an amazing 150-word elevator pitch and apply to StartupList.

If you’re not one of the 3 startups we highlight on StartupList each week, we may include you in the runners-up of the week. Investors have asked for intros to the runners-up, so it’s also a good place to be.

Apply for StartupList and please help us spread the word! I’m looking forward to discussing your feedback in the comments.

“Angel List” – How to reach angel investors

Launch: AngelList, a curated list of angel investors

by Nivi on February 2nd, 2010

Posted on Venture Hacks

I’m psyched to announce AngelList, a curated list of super high-quality angel investors. And how to reach them.

Investors like Jeff Clavier, Dave McClure, Rob Hayes, Aaron Patzer, Brad Feld, and 50 other investors have already joined. I want to thank all of the angels for taking the time to fill out these extensive profiles.

And it’s not fair for me to list just a few of the investors here — they’re all awesome. You should click and browse the entire AngelList. Together, they represent $80M that will be invested in early-stage startups this year.

Startups: How to contact the angels

Read an angel’s profile before you try to get in touch with him. All the angels have listed how many investments they expect to make this year, their typical investment amount, the markets they invest in, how to get intros, and lots more information you can’t find anywhere else.

Some of the investors let you contact them directly. But, before you do, build a minimum viable product and learn something about your customers by putting it in front of them. If you can’t get that far on your own, go find some idea investors instead. Then send the angels an amazing 150-word elevator pitch.

Don’t send them nonsense. Angels talk to each other and they talk to me. Your reputation is all you’ve got — so please follow our suggestions in the previous paragraph.

And — stay tuned — we’re announcing a sweet new way to reach AngelList soon.

Get AngelList updates

Get notified about new angels on AngelList via RSS.

VC self image

“The New Super Hero of the Modern World”

This is my first post regarding venture capital (AKA ‘Vulture Capital’). I’ll be reading and reviewing VC blogs from time to time and share my thoughts under the category Venture Capital.

The first VC blog I’ll be reading is:

Venture Hacks

http://www.venturehacks.com

Stay tuned for a review in a week or so.

Estimating entrepreneurial risks

Don’t Quit Your Job Until You’ve Talked to a Small Business Failure

Over the last week I’ve done several posts on different surveys showing how small business owners view risk. A quick summary is most small business owners think working for someone else is more risky than owning a small business and they are very good at minimizing business risk.

Several people have asked me does this data mean that small business ownership is less risky than traditional employment? The quick answer is yes, but only if your small businesses is successful.

The reason is the referenced surveys onlysurveyed existing small business owners. This is almost always the case with small business surveys because most research is focused on what is going on at existing small businesses.

But if your goal is to find out how all small businesses owners think about risk, this approach is flawed. This is because former small business owners – the folks that went bankrupt, lost their companies or were removed from their jobs – are no longer small business owners so theyaren’t included in these surveys. Because business failures are excluded, the survey resultsare biased towards successful small businesses.

It’s possible (probably likely)that failed small business owners consider small business ownership riskier than those still in business.Andincluding them might change the survey results.

This is called survivor bias and it is a common research problem.

My favorite example of survivor bias is surveyingexisting customers to develop satisfaction ratings. I was once asked to figure out why a company was losing so many customers despite having stellar customer satisfaction ratings.

It turned out they didn’t include customers that left prior to the annual customer satisfaction survey. After all, they explained, they weren’t customers anymore.

Not surprisingly, when surveyed this group rated the company very low in several important areas. But because of stellar ratings fromthe shrinking number of customers that stayed with them, the company was unaware of these problems.

So if you are considering small business ownership, entrepreneurship or self-employment keep survivor bias in mind as you read surveys and talk to people. Also, make sure to talk to folks that have failed. They will give you important and likely different perspectives than people thathave succeeded.

Understanding VC Networks

Research & Ideas
Understanding VC Networks

Published: December 4, 2006
Author: Julia Hanna

Most of us have experienced the power of networks. There’s the job found through a friend’s sister’s boyfriend, or the lifelong partner met through a neighbor’s cousin.

But how do networks play into business—particularly the relationship-rich industry of venture capital?

New this year to the HBS faculty, Toby Stuart studies networks and how they enable or impede certain organizational and entrepreneurial behaviors. In a working paper, “The Evolution of Venture Capital Investment Networks,” he and coauthor Olav Sorenson of University of Toronto’s Rotman School of Management examine the effects of geographic distance and a “hot” IPO market on the formation of networks in the venture capital industry.