These are NOT meant to be all inclusive of what questions to focus on ..... but will arm you with a solid framework to work from.
1) What resources do they bring to the table from a high-level perspective - all VC's claim they add value, but in what ways?
2) How often would board meetings be held, how often and in what manner do we maintain communication? Weekly calls, email reports, KPI's, or do they want access to internal systems, bank access. What's the threshold before a purchase, hire, expense/expenditure should be shared with them? (Is it $500, $5000, or $50,000?)
3) If they claim they know everyone under the sun, what is the "process" to make those introductions. Do you share a spreadsheet of contacts you want to meet, do they "go to bat for you" and "tee up" the introduction, do you have to go to their events/meetings, or are you suppose to drop their name and expect a callback?
4) What boards of other companies is the "VC on your board" sitting in on? How much time does he have for you - what is the caliber of those companies versus yours? If Mark Zuckerberg calls an emergency board meeting, and he has to go - he will go, let's face it, you're not quite FaceBook yet.
5) Which law firms do they work with, have worked with, and feel comfortable with. How much do they charge, what are the estimates for closing funding (negotiate for a cap!)
6) I assume you are talking to early-round VC's, how many companies have the VC participated in their portfolio companies' later round? Do they pump and dump or do they stick it all the way through?
7) Look at their portfolio companies and find out whether they were the lead investors or just follow-ons. Do they usually lead or follow?
8) What's a typical due-diligence process like? (Yes, you own your code, right? You have all the work-for-hire agreements and intellectual property transfer agreement... if not, you better get them quick).
9) Most VC's will show you a their tombstones (trophy) of startups that went public, or sold for many millions of dollars. Ask for the real tombstones, which companies have they funded are in the deadpool or delisted from their glossy website. What happened? (Don't dwell too much on this, makes everyone uncomfortable, but it’s good to know how they treat the founders of companies that didn't make it versus claiming how they are BFF with Sergei and Larry)
10) When did they close their most recent fund. How big is it? Are they towards the end of the fund (it’s about to dry up, son) or at the beginning (happy days are here again).
11) What is their investment thesis. (What's yours?) What is their exit expectations (ask for a ballpark range - the real answer will be revealed in the term sheet hidden somewhere in the text between their liquidation preferences and protective provisions <--- Google it)
12) Can I have some references of other founders and companies you have funded? (No, their internal EIR does not count, he already made money and will have nothing but happy roses to talk about how they came in at the last moment and saved their asses and now its kumbaya and happily ever after)
If you ask at least the above questions … you’ll be much better off than 95% of other start-up business who don’t ask these questions. Be prepared.
Thursday, January 28, 2010
Tuesday, January 26, 2010
Starting A Small Business …. You Need A Business Plan
A business plan is the vehicle by which you conduct the research for your market, decide which individuals to involve in the sales of your product and validate your revenue and expense financial forecasts. It is the means by which you will convince first yourself and then others who can help you that your company has a road map to success.
New entrepreneurs should go to the SBA web site at Writing A Business Plan that guides them through the business planning process. They should follow the site presentation and note the factors to consider in starting a business.
You can find examples of business plans here:
Sample Business Plans
Entrepreneurs can also choose a counselor at the third link below who is experienced in their industry and that they feel can help them. They should their plan out on the counselor. The counselor will put on a banker's or investor's hat and give them a reaction, then make suggestions to improve the plan and how to communicate it to a financial institution.
Above all - PLAN --- to Succeed!
If you can't plan it how are you going to do it --- or convince a financial source you can?
Finally take advantage of the assistance available through your nearest SCORE office. You can learn more about SCORE here: SCORE
Most SCORE volunteers have been in business and know the practical ways to assist, but a structure is needed for that communication as well.
A business plan fills the bill.
Here’s some additional tips to help you through those first days of your small business …..
1. Do not promise what you cannot deliver
2. Do not overextend your resources and get a poor reputation for poor performance.
3. Do not tell the customer what he or she wants to hear. Tell them what they need to know. They will respect you for it.
4. Network constantly on professional sites such as Linked In. Hit the "Answers" feature and accumulate an "Expert" rating from your peers in your field.
5. Blog like there is no tomorrow. A blog is quite different than a web site. Provide good, solid information free of charge and use blog searches for synergistic businesses to team with. Teaming is an absolute necessity these days.
6. Be prepared to provide information, samples and valuable service gratis as a marketing tool. Introduce yourself and then immediately engage the client with your presentation tools available to bring your expertise to whatever topic they are interested in. Let them take you where they want to go with their concerns and their needs. Apply your presentation tools and expertise dynamically on the fly in a sincere manner to those concerns and needs and you will be in demand for follow up business.
7. Quote and bill what the client can afford and grow with him (in content and resources).
8. Be dedicated to working yourself out of a job with a specific customer and having your client take over by training him. He will remember you and recommend you to 10 others.
9. Remember growth is a function of persistence and foresight. Know where your market is headed and get their first - then write and speak about your success indirectly by helping others. Demonstrate humility and a satisfaction in helping others succeed. They will find ways to give you credit. There are ways of tooting your horn without making peoples' lights go out.
10. Word of mouth advertising from pleased clients is a sure ticket to success.
Take to heart the above insights and your experience starting a new small business will be easier … and more successful …. Than those who don’t.
New entrepreneurs should go to the SBA web site at Writing A Business Plan that guides them through the business planning process. They should follow the site presentation and note the factors to consider in starting a business.
You can find examples of business plans here:
Sample Business Plans
Entrepreneurs can also choose a counselor at the third link below who is experienced in their industry and that they feel can help them. They should their plan out on the counselor. The counselor will put on a banker's or investor's hat and give them a reaction, then make suggestions to improve the plan and how to communicate it to a financial institution.
Above all - PLAN --- to Succeed!
If you can't plan it how are you going to do it --- or convince a financial source you can?
Finally take advantage of the assistance available through your nearest SCORE office. You can learn more about SCORE here: SCORE
Most SCORE volunteers have been in business and know the practical ways to assist, but a structure is needed for that communication as well.
A business plan fills the bill.
Here’s some additional tips to help you through those first days of your small business …..
1. Do not promise what you cannot deliver
2. Do not overextend your resources and get a poor reputation for poor performance.
3. Do not tell the customer what he or she wants to hear. Tell them what they need to know. They will respect you for it.
4. Network constantly on professional sites such as Linked In. Hit the "Answers" feature and accumulate an "Expert" rating from your peers in your field.
5. Blog like there is no tomorrow. A blog is quite different than a web site. Provide good, solid information free of charge and use blog searches for synergistic businesses to team with. Teaming is an absolute necessity these days.
6. Be prepared to provide information, samples and valuable service gratis as a marketing tool. Introduce yourself and then immediately engage the client with your presentation tools available to bring your expertise to whatever topic they are interested in. Let them take you where they want to go with their concerns and their needs. Apply your presentation tools and expertise dynamically on the fly in a sincere manner to those concerns and needs and you will be in demand for follow up business.
7. Quote and bill what the client can afford and grow with him (in content and resources).
8. Be dedicated to working yourself out of a job with a specific customer and having your client take over by training him. He will remember you and recommend you to 10 others.
9. Remember growth is a function of persistence and foresight. Know where your market is headed and get their first - then write and speak about your success indirectly by helping others. Demonstrate humility and a satisfaction in helping others succeed. They will find ways to give you credit. There are ways of tooting your horn without making peoples' lights go out.
10. Word of mouth advertising from pleased clients is a sure ticket to success.
Take to heart the above insights and your experience starting a new small business will be easier … and more successful …. Than those who don’t.
Thursday, January 21, 2010
Pearls Of Wisdom For Fledgling Entrepreneurs
The first thing that you must do is get a mentor. This is the person that you go to with all of your questions, concerns and anxieties.
Find several business owners who are doing what you want to do and interview them. Ask them how they got started, and do they have any suggestions or warnings for you.Tell them to give it to you straight. Find out from these business owners if this idea will sustain you financially.
Assemble your team: accountant, lawyer, web designer, marketing, sales coach and support group(s), etc. You will need support groups to bounce ideas off of, and hear ideas that are working in other areas of business that might work in your area of business.
Attend conferences and trade shows in your area of interest. Attend meetings and conferences at your local Chamber, BNI, etc. Do not join any groups or organizations until you have visited them at least twice to get a feel for the type of people that are in the group.
Be ready for looooong hours of research and product/service preparation. It won't happen overnight....be patient.
Does your product/service sell itself? Can you sell? If you can't you will need a sales coach.
You must have a business plan, and someone to show you how to market your product/service.
Here are a few more items you might like to ponder:
1) There are some dreams you need to follow, and others you need to wake up from.
2) You only lose when you quit.
3) And the old Kenny Rogers advice:
Know when to hold 'em
Know when to fold 'em
Know when to walk away
And KNOW WHEN TO RUN!
Find several business owners who are doing what you want to do and interview them. Ask them how they got started, and do they have any suggestions or warnings for you.Tell them to give it to you straight. Find out from these business owners if this idea will sustain you financially.
Assemble your team: accountant, lawyer, web designer, marketing, sales coach and support group(s), etc. You will need support groups to bounce ideas off of, and hear ideas that are working in other areas of business that might work in your area of business.
Attend conferences and trade shows in your area of interest. Attend meetings and conferences at your local Chamber, BNI, etc. Do not join any groups or organizations until you have visited them at least twice to get a feel for the type of people that are in the group.
Be ready for looooong hours of research and product/service preparation. It won't happen overnight....be patient.
Does your product/service sell itself? Can you sell? If you can't you will need a sales coach.
You must have a business plan, and someone to show you how to market your product/service.
Here are a few more items you might like to ponder:
1) There are some dreams you need to follow, and others you need to wake up from.
2) You only lose when you quit.
3) And the old Kenny Rogers advice:
Know when to hold 'em
Know when to fold 'em
Know when to walk away
And KNOW WHEN TO RUN!
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