Embed Size (px)
Citation preview
1 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Feedback on Competition Section
2 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
The Best Competition Sections… Acknowledged that there was competition Segmented & sized the market Named specific competitors Drilled down into competitor details
Revenues, market share, growth rate, how funded, distribution channel, pricing, product features, …
Used hard numbers Had a feature matrix to compare themselves
to their competitors … and had text to go with it… and showed why they’re better
3 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Common Problems
“We have no competitors…” “We have no direct competitors…” Generic market information but no mention of
specific competitors List of big companies who are or might be
competitors, but no details Lack of market size info Lack of hard numbers We know this info can be hard to get … we
expect you to have to dig deep to get it.
4 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Light at the End of the Tunnel
Today: Sales and marketing due Wed 4/9: Technology & product due Wed 4/16: Manufacturing, logistics,
service due Mon, 4/28: Take an entrepreneur to
dinner write-up due Wed, 5/5: Financials due Wed, 5/14: Complete bplan due
5 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Raising Money: From Angels, Devils, In Laws
6 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
How we’ll cover raising money
Today I’ll talk about the getting the attention of an investor; Angels vs VCs.
On Mon (Apr 7) Ken will go through the ins and outs of term sheets and VC negotiations.
On Wed (Apr 9) We’ll talk about determining how much money you’ll need and what you’re company is worth.
On Mon (Apr 14) Todd Dagres from Battery Ventures will be here.
7 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
We have spent half of the damn semester….
Talking about how to separate people from their money….
We have written business plans, done 5 year projections, talked about the idea, the technology, forms of the deal, the term sheet
We have mouthed every truism alive (“money’s not the problem”) - until we almost believe it….
8 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Raising Mondy: Its hard; its demoralizing; its insulting; it has
to be done
It’s the rawest form of selling; its selling true intangibles - ownership in a company that doesn’t really exist, for a product that hasn’t been built to a market that may not be there to a skeptical audience who has heard it all before. Most people hate it; more actively dislike the activity; only a few like it.
9 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Success or Failure
Is a matter of inches…how do you get people to sign on the dotted line…or will they back off…how many people do you approach….what do you say to them...
What are the reasons they won’t buy… what are their questions… are you approaching the right sorts of capital….is your proposition right…does it really matter.
10 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
In an ideal world...
You would make one pitch… ...and the money would come rolling in….like
an ATM machine spewing money…. In an ideal world, you would raise money from
prestigious sources… ...who would be your partners for life….Invite
you into their homes…. Offer up their daughter or son in marriage…. Name you in their will….
11 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
But lets talk reality...
Investors are looking for an excellent investment, not a friend….You want their money more than their body….
You would like to have advantageous investors… but you will take anybody as long as their money is green and they are not the Mafia…. Er, check that.
12 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
What do investors want to see..
• Your commitment. Why should they be committed if you are not.
• What resources have you put up yourself? • Are you doing this full time?• Have you borrowed on your house?
Invested your savings? • How about others on your team? • This also shows them how much you can
do on little resources. It shows them you will be equally careful with their money.
13 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Investors like to see confidence..
Good deals “ooze” confidence. The principals are confident. The plan is confident; the company is on the move… with or without them….
14 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Investors can smell fear….
… like a banker asking for a crop loan…Investors want to feel that you will succeed, with or without their money… If they are the crucial element…. They want no part of the deal.
15 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Investors like to be on “winning” teams…...
They can brag at the golf club They can feel that they are Masters of
the Universe They are smart, savvy business people They are smarter than the doofus that
their old girl/boyfriend married
16 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Investors hate losing...
Because they will hear about it from their friends at the golf club.
Because their wives/husbands will question their competence.
Because they can’t stop thinking their old girl/boyfriends left them because they actually WERE losers-and this investment proves it.
17 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
What investors want… is a REASON to say yes...
So order your WINS so they are cascading..
Example: “Joe, I told you we had a proposal to make to ___; they came back last night and said that they were in…”
18 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
How I Raise Money…..
1. I first line up a few investors who I know will invest… or highly likely…I want them as prestigious as possible, even if the amount is small….I NEED THEM to show off to later potential investors….Example: T A Associates/ Tucker Anthony
19 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
2. Define a list of 100 potential Investors….
30 Angel Investors 20 Friends and Family 50 V.C’s….
Doesn’t matter if you know them or not…You just want a list of PEOPLE who might invest if they were impressed with you, your plan, your team….
20 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
3. Use Connections to Get the Investor’s Attention
Very few investors will take “cold calls” or unsolicited plans.
Work on every possible angle of how you might know somebody who knows somebody:alumnifriends of familyformer work colleagues
21 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
4. Then, write them a letter… asking for a meeting...
The letter doesn’t ask for money; it oozes the enthusiasm… and shows a market opportunity….and some momentum.
“At Sloan, I first figured that there was a need for a Trusted Third Party in the Internet….18 Million American households today are confused……”
22 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
That letter, oozing charisma… showing progress, asks for a
meeting….
“so, taking the money I got from selling my bicycle and renting a garage in East Cambridge, I contacted General Electric… who…..
23 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
The goal of the letter is to set up the first meeting….
“so, with $4000 in invested capital, we were able to demonstrate a working prototype…..”
We are now ready to move to Stage Two… and I have brought on board, Jacqueline Welsh….
Show momentum…
Our plan is to…..
24 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Don’t show your business plan quite yet…..
The goal of the letter is to prepare for the First Phone Call….
Where you present EVEN MORE good news….
“ Since I wrote you, John The Baptist...has signed on to our Advisory Board…. As you know, John won the Nobel Prize….
It really doesn’t matter what you say; show momentum.
25 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
This pitch is aimed at angels as much as v.c.’s
You are in the business of networking… be a good networker.
Personalize that letter. Write a handwritten note at the bottom that shows you know something or someone or something… anything to get by the secretary….
Make the letter sound informal; write like you talk….show insight….
26 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Your letter is you in print. You have one shot… to get them to
see you….
“I’d thought I would come by and tell you where we are going and how we are attacking the market…”
“I wanted to come by… and tell you why I mortgaged my house to get this started…”
27 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Don’t use Guilt, Pity, or Conscience…. Use...
Opportunity! Your letter shows insight; your follow up
phone call shows more insight… and a chance to meet you (and your team).
Things you can also do:get on the program at a trade show (“we
have been asked to present at…”)get some PR (“Computerworld is
running…”)
28 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
What else….
Form an “advisory” board; costs you nothing but some warrants; adds credibility.
Pick people who are known in the industry and who have a reputation for performance.
Ex: retired CIO of Gillette; this doesn’t have to be a Board of Directors yet; would help if they had a Rolodex you could borrow
29 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Do you want their brains or their money?
ALWAYS their money; sometimes their brains. And then, SOME of their brains.
Networking to find Angels. Formal Angel Organizations. Informal network: lawyers, accountants, other entrepreneurs (!).
Angel money is usually cheaper than VC; it carries less restrictions. The amount of due diligence is substantially less.
30 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Business Plan
Will need for any that you raise money for. If the angel investors are ex- high tech
guys, they will expect a business plan. Angels know V.C’s Idea: your money first Angel Money Second VC money Third Public Money Fourth.
31 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Are your Angels High Net Worth Individuals?
Sophisticated Investors?
If not, you are going to have problems. Give them a form to sign saying that they are both. (Net worth exceeding $1Million +). If things go wrong, you may be sued.
There is a limit to the number of people you can offer this to: Assume 99. And then check with your lawyer. ASK if they would like to have a PPM.
32 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
If they DO Invest, give them documentation with
disclaimers.
Don’t get sued. Keep them informed at least quarterly and in writing.
If this is ALL the money you are going to need, great. But if and when you run in to trouble, tough to get the next round.
Always raise MONEY BEFORE YOU NEED IT!
33 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Confidentiality
You can ask an angel to sign NDA; maybe he/she will; a VC will never sign, at least in the beginning.
But assume that they can’t HELP but divulge details to their friends… so you are going to lose confidentiality, somewhat.
Have a legal confidentiality form ready.
34 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
VC’s
Charge more. Demand more. Take control. Want board control. But with them, you are now taken seriously.
VC’s like to see angels in.... some validation of your proposition.
35 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
I’ve been an angel before
I’m interested when... I think the VC’s will come in on the next round. When the product has only a short time - 1
year - to development. When there is a team. When I see OTHER angels who I respect. When the business plan is rational and well
thought out. Where the company really doesn’t need my
help - or needs it very little. Where I see confidence.
36 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
… and I never NEVER invest AFTER the VC
There is something fundamentally wrong.
The VC has given up. It’s the Sucker Round and I’m it. I never want to invest if my money is to
pay their old debts….I want my money for new efforts.
37 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
DEBT Capital
Silicon Valley Bank. Imperial Bank. Often will lend when there is a serious VC involved. Not
so, angels. Debt has to be repaid. Short Term: only 60 days (equipment bridge). Line of credit. You pay for the standby line. Long Term: forget it; you aren’t really going to get this…
unless you put up collateral.
38 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
Asset Based
A/R: Banks will do this. 80 -90%. They check which they will accept. You eat losses. Factoring.
Inventory: 50% of finished goods only. Equipment: 50% of price. Condisco and
others will do this and take warrants. Personally secured loans.
39 2000-2003 Copyright – MIT
15.3
90 N
ew E
nte
rpri
ses,
An
der
son
/Zo
lot
The end.
