Growthink Blog

Who Gets Funded? Great Businesses vs. Great Presentations


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From businesses come needs – like raising capital. Raising capital usually means pitching investors.

So which businesses are most likely to be among the approximately 5% who raise funds from professional investors? The chart below tells the brutal truth quickly and easily.

 

A great business which gives a great presentation is most likely getting funded.
A lousy business with a lousy presentation isn’t getting funded.

But what about a good business with a lousy presentation? Is it more or less likely to get funding compared to a good business with a great presentation? The answer probably won't surprise you.

After speaking with over 110 angel investors, VCs, entrepreneurs and educators, the consensus was solidly in favor of the good business with a great presentation. The deciding factor came down to the team, the single factor which most influences investors.

A person and a team who made a great presentation took the time to practice. Investors like to see the results of preparation and hard work. A great team willing to practice may simply need some advice and be willing to pivot, changing a good business into a great business.

A good business which gives a lousy presentation says to investors, “We didn’t care enough to put in our best effort.” The lack of preparation and the condescending attitude toward investors will derail just about any business seeking capital.

At the very least, it says the team is not ready, not mature enough, and probably not coachable.  With plenty of investing opportunities from which to choose, investors quickly move on.

Want to improve your chances when pitching to investors? Follow the eight recommendations below to maximize your chance of raising capital.

PRACTICE your pitch

If you didn’t practice 25-50 times before presenting, it will show in your lack of confidence, poor pacing, and use of filler words like “uh”, “um” and “like”. Then you’ll likely resort to the boring reading-slides-to-your-audience-with-your-back-turned method of pitching. Buy the coffin. You’re dead.

GENERATE some enthusiasm!

No one expects you to have over-the-top local sportscaster enthusiasm. But don’t pitch with a sleep-inducing monotone, either. If you don’t have passion for your business, neither will an investor.

PREPARE for contingencies

Fertilizer happens. Prepare for it.

* Know every slide in your pitch deck by heart

* Have two thumb drives with your pitch deck saved in PowerPoint / Keynote and PDF

* Bring your own laptop, projector, clicker, batteries, microphone, cables and cords

* Inspect the room beforehand, if possible. Know the lighting and sound conditions

BREVITY is king

Got 10 minutes to pitch? Finish in 9:45. Almost nobody finishes with a strong close in the allotted time. Investors love someone who can manage time effectively. It sends the message that you can manage other areas of business effectively, too. Keep your pitch deck to 10-12 slides maximum.

NAIL the opening and closing

Tell a brief story; do something unexpected; focus on emotion. Those are great concepts to open a pitch. Close powerfully with your call to action. Now think about how most people open speeches – and don’t do that.

STORIES sell

Sprinkle in stories to drive home a point, to magnify emotions, and to keep your audience engaged. Generally, a single story should take no longer than about 7% of your total pitch time. For a 10 minute pitch, a story is most effective when 45 seconds or less.

Use storyboarding, a technique invented by Walt Disney in the 1930s, to create your overall theme. Do this before designing your pitch deck.

VISUALS, not text

Your pitch deck should be primarily visual. You’re the focus, not your pitch deck. If your slides are full of text, your investor audience is reading the slides and not listening to you. Your audience can read faster than you can speak. When they finish and you’re still talking, they’ll disconnect. After that, they’re almost impossible to re-engage. Great visuals enhance your story because vision is the most dominant sense in people.

WIIFI: What’s In It For Investors?

Why you? Why now? Why should an investor care? When your pitch answers those questions in a concise yet detailed manner, your chance of funding improves.

Knowing your investor audience is essential. Pitching friends and family is somewhat causal, pitch angel investors is more serious and pitching institutional investors is sophisticated. Tailor your pitch accordingly.

Successfully raising investor funding is often a long, frustrating and complex process. Getting turned down dozens or hundreds of times will test an entrepreneur’s patience. Persistence doesn’t guarantee success but quitting guarantees failure. Investors use the process to find the most resilient entrepreneurs worthy of funding. Getting investor funding will often change your life and your world for the better. The guidelines above will make your process faster and easier.

P.S. The author Luke Brown is an Engagement Partner with Growthink.  If you would like to discuss how Growthink could help in creating your presentation for you, do reach out to Luke directly at luke.brown@growthink.com, and / or at 310-846-5047


"Venture Capital Bootcamp" Opens Thursday


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UPDATE: Venture Capital Bootcamp is now live.

Click here to register for Venture Capital Bootcamp



This Thursday, June 3rd at 12pm EST, we will be opening the doors to Venture Capital Bootcamp, our 4-week online venture capital coaching program. You’ll receive step-by-step training walking you through the entire venture capital process from start to finish. 

Here's an overview of what we'll be covering each week...

Week 1: Preparing to Raise Venture Capital 

During Week 1, you’ll learn:
* The pros and cons of debt vs. equity capital (and unique advantages of VC)
* Key venture capital terminology you must know to get funded
* How angel investors can help you raise venture capital
* What venture capitalists will want to see BEFORE writing you a check
* And more...

Week 2: Finding and Contacting Venture Capitalists 

During Week 2, you’ll learn:
* How to create a targeted list of VCs who will actually want to hear your pitch
* Top mistakes to avoid when contacting venture capitalists
* 6 ways to get tons of VC meetings (even if you don’t have ANY “connections”)
* How to tell if a VC is serious about funding you (or just wasting your time)
* And more...

Week 3: How to Pitch Venture Capitalists 

During Week 3, you'll learn:
* How to protect your business ideas when meeting with VCs
* The 10 things you must cover in your VC pitch
* Top venture capital presentation mistakes to avoid 
* Effective follow-up strategies for after your VC meeting
* And more...

Week 4: How to Negotiate with Venture Capitalists 
* When to hire a lawyer 
* How to maximize your valuation (so you keep control of your company)
* What terms to watch out for in your venture capital “term sheet”
* How to prepare for venture capital due diligence, so it goes smoothly
* And more...


Also: Weekly Q&A Call-In Sessions

The weekly training modules will answer most of your commonly-asked questions about how to raise venture capital. However, as you really get into the venture capital process... and you start contacting and meeting with investors, you’ll likely have questions about what to do next. 

That’s why I’ll be holding Four 90-Minute Q&A Sessions during VC Bootcamp, at the end of each week. Each session will last approximately 90 minutes.

Here’s the Weekly Q&A schedule:

Week 1 Q&A call: Friday, June 11 at 12pm EST.
Week 2 Q&A call: Friday, June 18 at 12pm EST.
Week 3 Q&A call: Friday, June 25th at 12pm EST.
Week 4 Q&A call: Thursday, July 1st at 12pm EST. * 

* (I’ve scheduled the last call for Thursday, rather than Friday, so we won’t conflict with the Fourth of July holiday weekend.)

You’ll receive the dial-in instructions after you register for VC Bootcamp. And each Q&A session will be 90 minutes long, so you’ll have the opportunity to ask me any and all questions you have about how to raise venture capital.  

And, if for any reason, you’re unable to attend one of the sessions, we’ll post recordings of the Q&A calls in the members’ area for you.

My Q&A calls are a tremendous opportunity for you to get all of your questions asked, so you can approach investors with greater confidence.  

Plus: 1-on-1 Venture Capital Coaching

When you attend VC Bootcamp, you’ll also be paired up with your own personal Venture Capital Coach, for three 1-on-1 coaching sessions. 

During these coaching sessions, your Coach will give you personal feedback on the three most critical elements of your VC campaign:

1. Business Plan Review

Your coach will review your business plan with you and give you feedback on how to make sure your business plan will impress investors. 

2. Venture Capital List Creation

Your coach will help you create the perfect list of VC firms for you to contact, and will also help you craft the message you’ll use to line up face-to-face meetings with venture capitalists. 

3. Venture Capital Pitch Feedback

Your coach will review your VC pitch with you, and will prepare you to answer all the tough questions that VCs are likely to ask you. 

Limited to 150 Attendees

We are strictly limiting enrollment in VC Bootcamp to 150 attendees.  

And that’s for a couple of reasons… 

The main reason is because we have a small coaching staff. We only have the staff to coach 150 entrepreneurs at once.  Our 10 coaches will be coaching a maximum of 15 students, each.  I’m limiting each coach’s workload to make sure you get the personal attention you need.

The other reason is that I want to make sure that the Q&A sessions are manageable, so you’re able to get ALL of your questions answered. 

Click here to register for Venture Capital Bootcamp

 


An Overlooked Secret to Raising Capital


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After the dot com bust, I served on a panel with Tom Clancy, a former partner at Enterprise Partners Venture Capital, a billion dollar venture fund in San Diego.

Having been burned by poor investments like most other venture funds, Clancy said that, going forward, Enterprise Partners would wait at least six months before funding any new company they met.

Their rationale was that during the six month period, they would see what the entrepreneur was able to accomplish. If the entrepreneur accomplished the
milestones set forth in their business plan, than they were deemed worthy and would receive funding. If not, they would not.

The rationale behind the strategy makes sense. Venture funds primarily invest in people, and those people with a proven track record are typically the best bets.

So what is the entrepreneur to do during the six months in order to get the investor to write them a check?

Obviously they need to achieve milestones... But what else?

Before I give you an answer, I want you to know how crucially important this is, not only in raising capital, but in securing key partnership and gaining key customers.

Let me give you an example of an entrepreneur who successfully used this technique in order to get a key partner. This entrepreneur is now a famous author and marketer. His name is Chet Holmes. And one of the key reasons that Mr. Holmes achieved success was through his partnership with marketing guru Jay Abraham.

How did Holmes get the partnership with Abraham? Like many people, he tried to reach him by phone, fax and mail. But Holmes did it every other week...

...FOR TWO YEARS!!!

Then, he finally got a call from Abraham's business manager for a lunch appointment, flew to Los Angeles for lunch, and established a very profitable partnership.

So, what's the answer to the question of how to woo investors, customers, partners, advisors, key hires, and more over six months?

Effective and persistent communications. In other words...

FOLLOW UP.
 
You must consistently, over a period of time, hammer home your message to investors, key customers and others.

What exactly does this mean? For investors, once you meet them, you should follow-up with them at least twice per month to update them on your progress. For prospective customers, you should contact them on an ongoing basis to continually give them value and convince them of the benefits
of working with you. And of course, don't forget to follow-up with your existing customers.

And a key here is that this follow-up should NEVER END unless or until the costs of the follow-up clearly outweigh the benefits.

Remember that people invest in, buy from, and partner with other people. So, who would you rather work with? Someone who has been contacting you for two years with quality messages regarding why you should partner with them, buy their product or invest in them? Or someone who you just met yesterday and tells you how great they are?

The answer is clear.

Don't stop at the first contact. Choose the appropriate frequency (i.e., you don't want to be perceived as too obnoxious or pushy to potential investors), craft quality messages, achieve your milestones, and convince investors and others to work with you over time.


You're Invited to Attend... "Venture Capital Bootcamp"


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UPDATE: Venture Capital Bootcamp registration is now open.

Click here to register for Venture Capital Bootcamp



Next week, I'll be opening up registration for my new online training program, Venture Capital Bootcamp.

But before I do that, I wanted to give you an overview of what we'll be covering together.
 
Here's What's Included...

Venture Capital Bootcamp is a four-week interactive e-class where I'll guide you step-by-step through the process of raising venture capital, from start to finish.

The reason VC Bootcamp is a 4-week program is because there are 4 critical steps to the venture capital fundraising process.

If you're serious about raising venture capital, you need to go through each of these four steps. And if you ignore any of these steps, you will sabotage your chances of getting funded.

There's a lot to learn, but I'll be there with you every step of the way, giving you all of my best practices and proven techniques.

Here's an overview of what we'll be covering each week...

Week 1: Preparing to Raise Venture Capital

First, we'll cover Venture Capital 101 including:
* Key venture capital terminology you must know to get funded
* What you must accomplish BEFORE you can raise venture capital
* How angel investors can help you attract venture funding
* Why you should stop obsessing about giving up equity ownership
* And more...

Next, I'll explain What Venture Capitalists Really Want, including:
* The exact criteria VCs will use to judge your company
* How you must position your company in order to attract venture capital
* The 2:6:2 rule of venture capital (and how to use it to your advantage)
* And more...

Next, I'll give you my best practices for creating all of your Venture Capital
Marketing & Presentation Materials... including:
* 3 simple keys to a powerful elevator pitch
* How to construct a business plan that will impress venture capitalists
* The 3 things you must accomplish in your Executive Summary
* And more...

NOTE: Don't worry if you haven't created all of your VC materials yet.
During VC Bootcamp, I'll show you how to create them quickly and easily.

Then it's on to Week 2...

Week 2: Finding and Contacting Venture Capitalists

First, I'll show you How to Identify the Right Venture Capital Firms, including:
* Why all VCs are not created equal
* 3 techniques you must use when creating your VC list
* How to target the right individual to contact at each VC firm
* How to tell if a VC is serious about funding you (or just wasting your time)
* And more...

And then, I'll show you How to Contact Venture Capitalists, including:
* "Rookie" mistakes you must avoid when contacting venture capitalists
* The 3 surefire ways to "cut through the clutter," so you get more VC meetings
* How to use blogs and social networking websites to find and contact VCs
* What it means to "over-shop" your deal and how to avoid this like the plague
* And more...

Then it's on to Week 3...

Week 3: How to Pitch Venture Capitalists

This is the most important part of the process because no matter how many VC meetings you set up, you won't get a dime of funding unless you have a great VC pitch.

That's why we'll be focusing an entire week on your venture capital pitch.

You'll learn:
* How to make sure you're totally prepared for your VC meeting
* The 10 things you must cover in your VC pitch
* How to protect your business ideas when meeting with VCs
* What NOT to say during a VC meeting
* The best way to follow-up with VCs AFTER you meet with them
* And more...


Week 4: How to Negotiate with Venture Capitalists

By this point, you've impressed VCs, and they're interested in writing you a check. But you haven't sealed the deal yet. And if you fail to negotiate the right terms, it can mean disaster for both your company's future and your ability to "cash out"...

The deal terms are often the difference between you eventually receiving a personal check for millions (when you later sell your company or go public) or losing control of your company.

The stakes are very high - so you can't afford to screw this up!

In this final week, you'll learn:
* How to maximize your valuation (so you retain equity & control)
* What to watch out for in your venture capital "term sheet"
* How to prepare for venture capital due diligence, so it goes smoothly
* When to hire a lawyer
* How to position your company for follow-on rounds of funding
* And more...

As you can see, I've structured Venture Capital Bootcamp so that, by the end of Week 4, you will have everything you need to successfully raise venture capital.

I hope that gives you a better idea of what you'll learn during VC Bootcamp.  I'll be in touch with more details as we get ready to open the doors (next week). 

Dave

P.S. VC Bootcamp attendance will be strictly limited, because of the amount of personal attention we'll give each participant.

If you'd like to be the first to know when we open up registration, then join the Priority Notification List.


How to Pitch Venture Capitalists


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Meeting with the venture capitalist and giving them the right presentation is the MOST important part of the venture capital raising process.   

This video shows you exactly what topics you should cover during a venture capital presentation. And it also highlights mistakes to avoid when pitching VCs. 

Click here to watch the video.

And after you watch the video, be sure to download the free VC presentation template located below the video.

 

Click here to register for Venture Capital Bootcamp


How to Find and Contact Venture Capitalists


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I recently surveyed THOUSANDS of entrepreneurs about raising venture capital. And then I spent hours reviewing your responses. 

I went ahead and created a report that answers most of the common questions - specifically, about how to find and contact venture capitalists, and set up VC meetings.

Click here to download your free report.

This report shows you:

* How to target the right VC firms (so you won't waste time
"barking up the wrong trees")

* What you must do before approaching any VC firm, or else
you won't get funded (no matter how great your pitch is)

* How to pinpoint the perfect person to contact at a VC firm
(who will actually WANT to hear your pitch)

* A proven method you can "copy and paste" and start using
immediately to set up VC meetings

* The 1 thing you should never send to a VC firm (unless they
specifically ask for it)

Click here to download your free report.

You may be surprised by one of my recommendations (what you should NEVER send to VCs, unless they ask for it).

But as I've said before... it's often a good idea to take a totally opposite approach from most entrepreneurs, since MOST entrepreneurs fail to raise venture capital.


Click here to register for Venture Capital Bootcamp


This "Late Mover" Just Raised $1.5 Million


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Last week, Denver-based Internet Pawn (InternetPawn.com) raised $1.5 million in funding from Daylight Partners and Access Ventures.

What I found most interesting about this deal was that nearly ten years ago Growthink wrote a business plan for an online pawn shop.

Conventional thinking would say that Internet Pawn was too late to the game and thus had no chance of success.

But many times it's better not to be the first mover. As the 2nd, 3rd or later mover, you learn a lot from the earlier risk takers. And you can avoid many of the costly mistakes.

Oftentimes, the later movers are headed by people who worked at the first movers and learned the mistakes first-hand. That's invaluable experience.

One key lesson is that if you are still contemplating starting your company, try to work at an entrepreneurial company where you can learn first-hand what works and what doesn't.

Another key lesson is that there is always room for a better mousetrap. So don't be too concerned if you're not the first mover...nor should you let your guard down if you are the first mover -- since someone else will always be trying to beat you.

If you would like help developing a professional business plan for your company, Growthink has developed business plans for more than 2,000 clients (who have raised $1 billion since 1999).

To learn more about Growthink's business plan services, call 800-506-5728. 

And if you'd rather develop your business plan yourself, click here to download Growthink's business plan template.


Who Else Wants to Raise Venture Capital?


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I've been working with entrepreneurs for more than 10 years, and by far the biggest question I get asked is...

"How can I raise venture capital?"

Like it or not, much of our success as entrepreneurs depends on our ability to secure enough funding.  

And when it comes to venture capital in particular, the vast, VAST majority of entrepreneurs go about it the wrong way...

For every 10,000 entrepreneurs who try, only a handful succeed.  The harsh reality is that the other 99.9% fail.

And if you go about raising venture capital like MOST entrepreneurs do, then you'll probably get the same results that most entrepreneurs do.

Most entrepreneurs "blast" their business plans to hundreds or thousands of VC firms... but they get no meetings, no term sheets... and no funding.  

Yet, every week - if not every day - you see news reports of companies who've raised millions of dollars in venture capital (even during this "slow down" in the economy).

In fact, just a few weeks ago, on April 22, 2010, one of our clients, Click Forensics, Inc. raised another $6 million in venture financing, for a total funding of $15 million.

So why am I telling you this?

You can greatly increase your chances of raising venture capital if you take the RIGHT approach.  And I want to give you access to my proven methodology.

For the past 10 years, I've been developing my system for raising venture capital. It's the same system we use for Growthink clients (who have raised $1 billion since 1999).  

About a year ago, I revealed my entire venture capital system to a small group of entrepreneurs, and since then many more have been on the waiting list.

Well, the wait is almost over... I'm planning to share all of my venture capital strategies and tactics again next month, so YOU can dramatically increase your chances of getting funded.

But before I unleash this thing, I want to do one final check to make sure that my system really has everything you need.

So I have this one question for you...  

"If you could have a private conversation with me, what 2 questions would you like to ask me about venture capital?"

Click here to tell me your questions

When you click that link, you'll be taken to an online survey form, where you can type your response.

I really want to make sure that I answer ALL of your questions about raising venture capital.  

What are your 2 biggest questions about raising venture capital?

Tell me here:
http://www.surveymonkey.com/s/NQC8JHP

 


Good News For Those Seeking Venture Capital


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Money LadderVC-backed exits had a great quarter in Q1 of 2010. (For those who don't understand "VC-backed exits" it means companies funded by venture capital firms which cashed out, which typically happens through being acquired or by going public.)

According to The National Venture Capital Association and Thomson Reuters, VC-backed M&A exits were the highest ever in a single quarter. 111 venture backed companies were sold for $5.86 billion in disclosed value. And nine venture backed companies went public, raising more than $930 million.

Another note to folks seeking VC; in the first quarter M&A (exit by acquisition) was 12.3 times more likely than going public. This ratio is fairly typical.

Another piece of good news is that 79 private equity firms, including VC firms, raised $50.4 billion in Q1 to invest in companies.

So, VCs are generally in a good mood since they've just made big money on their exits, and they now have more money to invest. So start sending out your teaser emails and raising venture capital!

(If you don't know what a "teaser email" is, or you haven't raised venture capital before, it is a very tricky path with lots of landmines. So download our Step-By-Step Guide to Raising Venture Capital so you can successfully raise venture capital.)


Venture Capital Directory


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