If there’s one story that I don’t like to tell, it’s this one…
But, there’s a great lesson in it, so I’ll tell it anyway.
Years ago, prior to Growthink, I created a frozen smoothie product. Let me explain exactly what it was…
If you ever buy a smoothie from a juice shop, half of the product is essentially juice concentrate and frozen fruits, and the other half is simply water.
So, I created smoothie cubes using the non-water ingredients, that, when mixed in a blender with water, tasted exactly the same as smoothies you buy from a juice shop.
Armed with my product and business plan, I entered a business plan competition.
The plan was a hit amongst the judges, and landed me in the finals of the competition. In the finals, we had to present our business plans to a panel of investors.
I created a solid presentation of just ten slides, explaining the key points about the venture: why there was a need for the product, the growing market size, my unique qualifications, the financial implications, etc.
And, for good measure, I threw in something that my competitors couldn’t. I went on stage with a blender, my smoothie cubes, and water, and made smoothies for the judges and allowed them to drink them during the presentation.
Once the presentation ended, the critiques began.
First up was Bud Knapp, the entrepreneur who purchased and grew Architectural Digest into a massive enterprise and then sold it.
Bud loved it.
The second critique was from Zobmondo Entertainment President Randall Horn (go to any toy store and you’ll see his Zobmondo products).
Randall loved it too.
The third critique came courtesy of Frank Kline, founder of Kline Hawkes & Co., a venture capital firm with hundreds of millions of dollars under management and a dozen portfolio companies who have gone public.
Frank’s critique consisted of just four words: “I Don’t Do Juice.”
To make matters worse, there was a crowd of 200 people in the audience, and this comment received a hearty chuckle from the crowd.
I held in my frustration and moved to the next judge. I actually don’t remember who the next judge was (probably since, while remaining calm, I was quite a bit perturbed).
OK, so what’s the lesson here?
The lesson is that Frank was NOT an appropriate investor to be hearing my story. Frank is a venture capitalist. Most venture capitalists focus solely on high-growth technology companies.
If you go to Frank’s website, it clearly states that his firm focuses on middle market and expansion-stage companies engaged in IT Infrastructure, Enterprise Software, Business Services, Aerospace and Defense, and Industrial Manufacturing.
So, the problem wasn’t Frank. It was me!
Now clearly, in a business plan competition, I can’t choose the judges, so the problem really wasn’t me. But, had it not been a competition, and I was proactively seeking investors, Frank Kline would have been an inappropriate choice.
Which is the key lesson here: Do NOT go after the wrong investors.
Most companies who seek venture capital do not fit the criteria for venture capital. Instead, most of the time they should be going after angel investment, or bank financing, or vendor financing, etc.
I firmly believe that there is an investor for every solid business plan that is developed.
Unfortunately many of these business plans fail to raise capital because the management team wastes time targeting the wrong investors.
Figure out who the right investors are for your venture, and then, and only then, methodically and aggressively contact them and get them to hear your pitch and invest in your company.
And in case you’re curious what happened to my smoothie business…
My juice days ended when my wife came home from the doctor, said she was pregnant, and I realized I needed a steady income. But I still make smoothies for my wife and kids each week :).