This is the first in a series of posts I want to write on lessons learned from working at, and now with, Start-up companies. In particular, I’d like to discuss several aspects of the fund raising process, which in many ways is downright brutal and cut-throat. I am hoping that the many gifted and talented entrepreneurs find this helps them in the process. Despite the press going on and on about how there is too much venture capital in the market, paving the way for stagnated returns, the environment for early stage funding remains extremely challenging and competitive. The best plans and ideas usually find a way to attract interest, yet you would be surprised at how many common, completely avoidable mistakes are still made in the process. Having now spent years pouring over hundreds if not thousands of prospective business plans and listening to entrepreneurs pitch their companies, I thought it was about time I start cataloging what I believe separates the truly interesting and attractive from the more mundane and ordinary. Remember, this is just one person’s opinion, but I would bet it represents a good cross section of the early stage VC experience. The companies that typically get through our screening process share many of the common elements that I will write about over this series. This doesn’t guarantee our interest, but it certainly should help you get a handle on what VC’s tend to look for. Hope it helps
Part I: The executive summary
It amazes me to this day how many different definitions there must be about the Executive Summary; the first thing that usually crosses our desk. Does it convey the key value proposition right up front? Do you explain the problem that needs to be solved? Do you have a keen understanding of the market you intend to compete in? Who is the competition, both obvious and not so obvious? Who are the people running the show? How do you intend to distribute? Is the business model clear and compelling? Does it explain a detailed use of capital? What is the length of the document? Lets take them one at a time. Future posts will detail the remainder of the issues.
1. Does it convey the key value proposition right up front? Many plans we see tend to focus on a quick summary of the solution, whether that be technical or business model based, but forget the obvious elephant in the room; can you explain your solution and why it’s superior in a few sentences or less. What is the takeaway? Remember, we see literally dozen of plans all competing for attention. Give me the obvious takeaway. Make me want to read more. I am not suggesting that we aren’t sophisticated enough to find the gem, believe me if we are interested, we will dig until we find it. But, you would be amazed at how simple is truly better. We have to socialize the deal among friends, partners and associates and build a case for spending time on your plan. By having that transportable value prop, you make that easier for all. Some of the examples we have seen that illustrate this point; the “Lending Tree” for student loans, mobile content concierge, salesforce for the events business. They are all easy to explain (or sell to our constituents) and compel us to want to dig in. Keep it simple stupid has real meaning here.
Next Post: 2. Do you explain the problem that needs to be solved?