What do Angel Investors Want?

What do Angel Investors Want?  

Rockies Venture Club Angel Investors Unplugged

Click Image for Angel Investors Unplugged Event Information

Every Angel Investor and every VC is different, so you need to do your homework to find out what kind of investments they like, what phase of business they invest in, how big their rounds are, etc.  Once you’ve done your homework on the specifics, here are a few general things I’ve observed that help when working with angels and VCs.

1)      Be Prepared.  The old Boy Scout Motto applies to pitching to investors more than ever.  Many companies are so eager to pitch that they fail to do the homework needed to have a really GREAT pitch.  If investors like your pitch, they’ll want to see your market research, your proforma, your due diligence package and more.  If you’ve got all your ducks in a row, you’re more likely keep the momentum going and to get invested in than if you have to go away for a month after the pitch to get your materials together for due diligence.

2)      Remember that you’re not selling your product, you’re selling an investment in your company.  That means that the product should typically be less than 50% of the pitch.

3)      Finish by talking about your exit strategy.  80% of pitches leave out the exit strategy, so the investor has no idea how you are going to be able to return their money to them. Let them know when you plan to exit, how, with whom and at what kind of multiples.

4)      Practice, practice, practice.   It’s easy to tell the entrepreneurs who have gone through their deck once or twice and those who have really practiced and honed the pitch.  Watch Steve Jobs presentations on YouTube to watch a well-rehearsed presentation.

5)      Tailor your pitch to your audience.  One of the best pitches I’ve seen was given twice in one week.  The first pitch was to a hardcore group of investors and the founder focused on the financials and the huge exit potential.  Two days later he pitched to a group of Impact Investing Angels and focused on the social impact of this investment.  He closed the deal in just a few weeks.

6)      Describe a Clear Path from Point A to Point B.  You would be surprised how a clear strategy makes all the difference in a successful pitch.  Companies that have a detailed strategic plan can describe clearly how they will get from being a startup to having a successful exit and all the steps in-between.  We all know that no strategic plan is followed to the letter, but companies with a plan are able to present a plausible case for success while those without a clear plan have nothing but hope.

7)      Finally, the most important part of your pitch has nothing to do with the pitch itself.  Remember that investors want to invest in PEOPLE, not an idea.  So take some time before you pitch to get to know the investors.  Ask questions about them and what kind of investments they prefer.

 

Characteristics

Companies selected by Rockies Venture Club share these common characteristics:

1)      Team: the team is experienced, connected and has demonstrated an ability to execute and work effectively together.  RVC focuses primarily on the team because we know that no company executes it plan as stated in the pitch and we look for the leadership, wisdom and experience to pivot and adjust to opportunities and threats that present themselves.

2)      Disruptive or Innovative Product: We are looking for companies with a product or service that is unique and presents a clear value proposition for its customers.  There should be sufficient barriers to entry either through trade secrets, patents or significant market adoption in order to gain and maintain their market.

3)      Large or growing market: RVC companies are growing typically at the rate of 100% every year.  They need to be in a sufficiently large or dynamic market that this rate of growth can continue for several years and provide promise of future growth for potential acquirers.

4)      Traction:  Since the fund does not invest in ideas alone, the company will need to be able to demonstrate traction.  They need to have overcome major obstacles that clearly demonstrates their ability to execute.  Furthermore, they should have positive momentum that we can see throughout the process of working with them.

5)      Profit Potential: Companies need to have a high profit margin and understand the costs of multi-tier distribution and all of the fully loaded costs.  After all is said and done, for a company to really grow we want to see a solid bottom line.

6)      Scalable: The products and markets need to be able to grow quickly and to have rapidly increasing margins as the company grows.  This excludes most service businesses and many businesses that address the SMB market and require a high-touch sale.

7)      Exit: The Rockies Venture Club focuses on companies that understand the importance of the exit and the role it plays in returning capital to investors.  We want to see an exit scenario with multiple bidding acquisition prospects, with high multiples of EBITDA or sales, and with a relatively short timeline, typically between three and five years.

 

Register for Angel Investors Unplugged

For more information on Angel Investing (either as an Angel or an Entrepreneur) consider attending the Angel Investors Unplugged event, Tuesday January 14th 5:00-7:30PM at the CSU Denver Event Atrium 475 17th Street, Denver, CO   We will have a panel of experienced Angel Investors sharing how they think about the deals they invest in, plus we’ll have four pitches from companies looking for Angel investors through Rockies Venture Club Angel Groups.

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Venture Capital For Dummies

Peter Adams is the Executive Director of Rockies Venture Club and Co-Author of Venture Capital for Dummies, John Wiley & Sons, August 2013.  Available at Amazon.com, Barnes and Noble and your local bookstore.

Measuring Impact Investing

 

Impact Investing Metrics

Rockies Venture Club Impact Investing

Impact Investing is a term that has a wide range of interpretations. In order to have credibility, consistency and clear understanding about what constitutes success in impact investing it’s important to have a clear set of metrics to understand the social, environmental and economic impacts of impact investments.

Impact is Big Business

The impact investing industry is growing fast with over a trillion dollars of investment over the next decade according to JP Morgan research reported in Business Ethics magazine.   Funds that are investing for others find more and more reasons that they need to have clear metrics to demonstrate that they are carrying out the mission of the investors.   While each fund may develop their own metrics individually, there are huge benefits to utilizing an agreed upon set of metrics across the industry to allow for apples-to-apples comparisons among funds.

Using standardized metrics provides a framework in which larger and larger amounts of investment can be made by sophisticated funds.  The result of this is that impact investing funds can eclipse philanthropic efforts in improving health, education, environment and quality of life for underserved markets.  There will always be a place for philanthropy, but research has shown many for-profit organizations have been able to bring greater impact with greater long term sustainability than those non-profits that provide one-time support.

While individual impact investors don’t have concerns about accountability or credibility, they should also be using metrics to help them understand and evaluate the deals that they are considering and to be able to hone their investing strategies to balance financial and social/environmental outcomes.  Individuals will want to understand their investing goals, but will also want to be able to select impact investments that match and support their own values.

Global Impact Investing Ratings

In 2011 B Labs worked with over 200 impact investing funds to create GIIRS (pronounced “gears”), the Global Impact Investing Ratings System and its IRIS Registry for impact funds.  Since then, GIIRS has become the defacto standard for measuring social and environmental impact on investments that are clear and verifiable by third parties.  Impact companies that want to know how they’re doing can take a free impact assessment provided by B Labs that will let them know how they are doing and to test their future strategies against industry benchmarks.  The ability to compare each company’s results based on standardized measures opens up huge new opportunities for B Corporations and for funds alike.  Just as having standardized GAAP accounting guidelines makes investment analysis for public companies efficient, having the GIIRS standard opens the door for large scale investment in impact companies.

Rockies Venture Club Impact Investing

To learn more about B corporations and hear pitches from active impact companies, , consider attending the RVC Impact Investing event Tuesday, December 10th 5:00-7:30PM at the Colorado State University Denver Center Event Atrium 475 17th Street, Suite 200 Denver, CO. Click Here to Register

http://rockiesventureclub.wildapricot.org/Default.aspx?pageId=1349467&eventId=698729&EventViewMode=EventDetails

Impact Investing Success Stories

Impact Investing is not new and has been around since the 1960’s, if not before.  Since that time we’ve seen a lot of success stories coming from impact investments.  With these successes we’re also seeing significant amounts of dollars under management by impact investing funds with returns of 25% and up PLUS social and environmental impact.

Given the lack of early stage startup funding for impact companies, uncertainties with cleantech technologies, lack of governance in developing countries, lack of structured capital markets and exit opportunities in third world countries and the need to provide social and/or environmental impact, it’s a wonder that impact companies can return anything at all to investors.

In our research we’ve found many funds and foundations that have achieved financial success in making impact investments, but it’s sometimes difficult to find specific impact investments that have hit it big.  What is the next “Instagram” of Impact Investing?

Here is a story of a company that hit it big.  The good news is that they are not alone and that impact companies are doing well all the time.

dlight S300-Product-Thumbnaild.light (http://www.dlightdesign.com)  has created a product line of solar powered lanterns that bring light and power to third world communities where community electricity is not available.  D.light makes high quality, affordable solar lanterns that are distributed world-wide with over half a million units delivered each month, delivering light to over 20 million individuals and families.  The users pay less for solar lighting than traditional kerosene lanterns, plus  the lighting allows for greater productivity and income generation when people can work beyond daylight hours.  Students benefit from better study environments and homes are safer and healthier without kerosene fumes.  Finally, the reduction in carbon emissions is significant.  The statistics below show the social and environmental impacts of this company that is turning a good profit at the same time.

25,315,130 lives empowered

6,328,782 school-aged children reached with solar lighting

$767,644,065 saved in energy-related expenses

7,219,013,138 productive hours created for working and studying

1,794,878 tons of CO2 offset

30,807,967 kWh generated from renewable energy source

 

d.light has won numerous certifications and awards and is backed by an impressive collection of venture funds and foundations – all expecting to turn a profit on their investments.  D.light is a “B Corporation” which means that it is a for profit corporation, but that it must meet rigorous standards of social and environmental performance, accountability and transparency.

 

At Rockies Venture Club we hope to find companies like this each December at our Impact Investing Event and support local companies that are doing good all over the world.

To learn more about impact investing and to meet the founders of four great impact companies, consider attending the RVC Impact Investing event Tuesday, December 10th 5:00-7:30PM at the Colorado State University Denver Center Event Atrium 475 17th Street, Suite 200 Denver, CO. Click Here to Register

http://rockiesventureclub.wildapricot.org/Default.aspx?pageId=1349467&eventId=698729&EventViewMode=EventDetails

 

 

Raising capital tip: Be a part of the community

Investors don’t invest in ideas, products, or markets – they invest in people.

 

Ask any investor what their criteria are for choosing which companies they invest in and the answer will be that it’s the people.  This is no secret among investors and the communities of entrepreneurs that they invest in, yet we see entrepreneurs ignore this principle every day.

 

I am continually amazed when entrepreneurs think that they can short-cut the process of forming relationships in this process.  Entrepreneurs ask why we can’t just get angels to write them a check.  These entrepreneurs will never receive funding.

 

Entrepreneurs who are successful become a part of the community.  They get to know the people and they watch how investors respond to pitches.  “What questions do they ask?”  “Which companies do they invest in?”  “How do good companies land the all- important lead investor?”

 

I don’t know many people who an attend one event and get to know all one hundred of the people who are there. It takes several events before you get to know the key players in the community.  Entrepreneurs who are serious about raising money  for their companies know that it takes time. They spend time doing the research for their company; they learn about the venture capital process; they create a great pitch and they spend three to six months or even up to a year getting to know the angels and VCs in the community.

 

Successful entrepreneurs also remain active in the community after their pitch.  They realize that the pitch is not the end of the process, but that it is just the beginning.  After the pitch, successful entrepreneurs continue attending events and work to develop a lead investor.  They are active in the process rather than waiting for investors to come to them.  Successful companies continue their involvement actively for an average of three to four months after the pitch in order to circle up their investors into a syndicate and close the deal.

 

The Rockies Venture Club offers the education and communities for those who are willing to learn and become a part of the community.  Those who get involved are a part of the club that raised over $25 million in the past twelve months.  The others are destined to keep waiting for someone to do the work for them.

 

How can you get involved?

1)     Attend RVC events and other groups in the area.

2)    Join RVC and become a member.

3)     Take classes and workshops to build your knowledge of how venture capital works.

4)    Take part in the free funding mastermind sessions offered by RVC to help you hone your strategy and learn from others.

5)    Volunteer for events to get known in the community and contribute your share to the tremendous amount of work it takes to coordinate events.

6)    Get to know the people you meet and ask them out for coffee,  beer, etc.

7)    Follow-up and stay connected even after your pitch.

 

Do these things and you will be more likely to find active investor interest in what you are pitching.

 

To get involved check out the RVC events calendar.  We offer between five and ten events every month.  Click here to learn more.  www.rockiesventureclub.org

Philanthropic investing?

Impact-Investing1December is the month in which 25% of American philanthropic dollars are donated.

December is also a month in which investors are making investments, balancing

portfolios and taking profits and losses for tax purposes.

This is a time for investors to be asking themselves whether they can accomplish their

philanthropic and investing goals at the same time.

 

Impact investing has become increasingly popular not only for foundations and family

offices, but also now for individuals.

 

What is “Impact Investing?”

 

The term Impact Investing has been coined to describe investments that have social or

environmental impacts in addition to the economic impacts for the investor’s portfolio.

There has been much debate about what constitutes an Impact Investment though,

since even the most profit minded investment may help communities with job growth

and possible environmental benefits. Sophisticated impact investors typically use

metrics to evaluate the potential social or environmental impacts, and individuals have

access to these as well, though individuals more often rely on a gut feeling to tell them

which investments they prefer.

 

Another debate in Impact Investing circles is how much, if any, reduced profit

expectations should the investor have when making impact investments. Corporate

investors and CSR (Corporate Social Responsibility) programs have developed

sophisticated guidelines for balancing the costs of social and environmental impact with

expected financial costs or returns. They use a “Triple Bottom Line” system to measure

social, environmental and economic impacts of their decisions. Individuals may use

their own guidelines that may apply to all impact investments they make or which may

be applied on a case by case basis. I have seen everything from “I’m just hoping to get

my money back some day” to those who show preference for impact investments, but

who also expect the same types of returns relative to risk that they would see on the

rest of their investment portfolio.

 

At Rockies Venture Club, we hold an impact investing event on the second Tuesday

of every December. We recruit expert speakers on the topic as well as four impact

companies seeking early stage investment. The criteria we use are very close to those

that we use every month when evaluating venture companies for investment. The

companies should have experienced and capable teams, a disruptive technology,

product or service, and a substantial market demand. The outcomes we’re looking for

include an “exit” for investors within about five years with a potential return of up to ten

times the original investment.

 

Rockies Venture Club also supports EFCO (the Entrepreneurs Foundation of Colorado)

Which helps start ups to donate one percent of their founders stock to community

organizations. In this way every company that achieves a successful exit can be an

impact company.

 

To learn more about impact investing and to meet the founders of four great impact

companies, consider attending the RVC Impact Investing event Tuesday, December 10th 5:00-7:30PM at the Colorado State University Denver Center Event Atrium 475 17th Street, Suite 200 Denver, CO. Click Here to Register

http://rockiesventureclub.wildapricot.org/Default.aspx?pageId=1349467&eventId=698729&EventViewMode=EventDetails

Should Investors Expect Lower Returns for "Impact Investments"?

 

imact investing returnsOne of the main questions we get regarding impact investing is whether impact investing should be considered to be philanthropy with little or no returns or whether impact investing can be expected to have the same kind of returns that other investment opportunities on the market can offer. We like to think that with a good amount of deal-flow, we can provide a number of impact companies that are also great investments. Research from the Global Impact Investing Netowrk and J.P. Morgan corroborate this, with fully 65% of investors expecting market rate returns.
It’s interesting to note that 36% of those who indicated that their impact investments should return market rates also said that they would consider impact investments at below market rates. I think this is the general opinion of most Rockies Venture Club investors. They’re looking for market rate returns, but for impact companies with a great mission and an ability to demonstrate significant social or environmental impact, they are willing to consider a slightly lower return.
This attitude reflects the “triple bottom line” analysis that corporate CSR departments have implemented in which economic returns may be balanced with social environmental returns when proper metrics are in place to ensure a balanced return to the organization.
An interesting aside to this flexibility in returns for impact companies is an article in the November 25th Wall Street Journal citing a higher degree of happiness among those who regularly donated to philanthropic organizations. We hope that RVC investors who invest in impact companies have a quadruple bottom line return with economic, social, environmental and happiness impacts!

To learn more about Impact Investing and to hear speakers and pitches from Colorado Impact Companies, consider attending the RVC Impact Investing event Tuesday, December 10th 5:00-7:30PM at the Colorado State University Denver Center Event Atrium 475 17th Street, Suite 200 Denver, CO. Click Here to Register

http://rockiesventureclub.wildapricot.org/Default.aspx?pageId=1349467&eventId=698729&EventViewMode=EventDetails

Impact Investing – Social Impact or Environmental Impact?

impact investing
When we talk about Impact Investing, we’re talking about investments that make an impact on our communities. There are many ways that this can happen, but the two most common categories are social and environmental impact. My intuitive guess was that environmental impact investing would comprise the greatest portion of investment, but what The Global Impact Investing Network (GIIN) and, J.P. Morgan found in their study “Perspectives on Progress: Impact Investor Survey” January, 2013, was that environmental and social impact investing were almost equal, with slightly more investing going to social impacts.
It’s interesting to note that these two areas have typically NOT been addressed by business interests and therefore must be dealt with by governmental or philanthropic organizations. (In fact Rockies Venture Club gets a lot of applications for “Impact Companies” who “create jobs” or further economic development through their capitalistic activities. While it’s great that these companies do impact their communities, we’re looking for the companies that do something materially different than the normal day-to-day companies out there.
Environmental impact companies are often “clean tech” or “green tech” in their approach. They’re addressing environmental needs in many ways such as wind and solar, energy storage and delivery systems, biofuels, alternative energy sources such as generating energy from waste dumps. These companies are now becoming successful at both returning a profit to investors as well as reducing our carbon footprint, reducing energy costs, and furthering energy independence. That’s a big impact that our big oil and gas companies have not been able to effectively deliver in the past – primarily because there was so much money to be made in traditional energy delivery. Environmental impact companies are making a difference by making alternative energy sources economical, often without government subsidies.
Social impact investments are often more difficult to quantify the returns, yet they account for fully 50% of impact investments according to GIIN, J.P. Morgan. Social impact investments that can provide a return often take the form of jobs programs, education with immediate returns in productivity, water and sanitation systems that create jobs and health benefits for communities, healthcare delivery in remote areas and more. Rockies Venture Club has seen tremendous creativity and energy spent in addressing global community needs by companies that are innovating and finding lower costs of delivery and sustainable income that returns profits to investors while benefitting communities.
To learn more about Impact Investing and to hear speakers and pitches from Colorado Impact Companies, consider attending the RVC Impact Investing event Tuesday, December 10th 5:00-7:30PM at the Colorado State University Denver Center Event Atrium 475 17th Street, Suite 200 Denver, CO. Click Here to Register

http://rockiesventureclub.wildapricot.org/Default.aspx?pageId=1349467&eventId=698729&EventViewMode=EventDetails

Why does RVC pitch so many companies?

Why do we pitch so many companies?baseball-vc-pitch

I like to tell the story of the first time I filled out a questionnaire about Rockies Venture Club’s activities for the Angel Capital Association.  When I got the the question about how many companies we present each year, the choices were something like 1-3, 4-7, 8-10, 11-15, 16-20, 21-25, 25+ pitches per year.   With over 100 companies pitched in 2012 and 80 in 2013, we are off the charts!

I have a huge respect for the people I’ve met at the ACA, so I began to wonder whether we were doing something wrong.  I started looking at how the different angel groups functioned and why we were different.  Here is a summary of what I found:

1)      RVC is unique in that it serves the whole community and not just investors.   We have pitch events with 100+ people watching four pitches every month and conferences with hundreds of people watching 12 or 24 pitches.  We reach out to the community through partner groups.  If you just have a few dozen angels to depend on for your deal flow, then you won’t see a lot, but if you involve the whole community, then the deal-flow suddenly becomes significant.

2)      RVC is also unique in its focus on education.  By educating both the angel investors and the entrepreneurs, we make a smarter environment full of smart investors and savvy entrepreneurs.  This means that there are more high quality deals available than if no quality educational resources were available.  Without Pitch Academy we’ve noticed that most  (but not all) of the pitches we see are pretty flat.  They’re not only poor pitches, but the thinking behind them is often thin and poorly researched.  RVC workshops help entrepreneurs to build a solid logic to their plans, backed up by good research and hard work.  This alone is not enough to succeed, but it definitely raises the bar and puts higher quality deals in front of investors who now have the tools to really evaluate the deals that they’re looking at.

3)      You could challenge our plan to pitch roughly one in ten applicants.   “Why not just pick a few really good companies and go with them?”   There are a few problems with this challenge.  The first is that in many cases you don’t know which companies are good until you pitch them and get into due diligence.  If you just goody-pick the companies with great executive summaries all you get is companies that are good at executive summary writing.

4)      What about the 75% of RVC pitch companies who don’t get funded?  I’m often surprised about what does and what doesn’t get funded.  What I have seen is that something like two thirds of the companies that don’t get funded didn’t make it because they weren’t ready to pitch yet.  They still had homework to do in order to back up their plan and to refine their message and build a sharp strategy.  Some times these companies give up and other times they go back to the drawing board and come back six or twelve months later with a new CEO on board and the funding falls immediately into place.  Giving these companies the opportunity to pitch provides them with the perspective that they need to grow and get funded – or better yet, it teaches them how to bootstrap so that they never have to be beholden to angel or VC investors!

5)      Seeing lots of companies is the best way to build your 10,000 Malcolm Gladwell hours as an investor.  Some angel groups pitch only one company per month.  It would take one of those angels ten years to see as many deals as an RVC investor sees in a year.  Which investor do you think is going to have the ability to spot the winners from the losers?  Pattern recognition plays a big part in investing and the only way to build that is to see lots of deals.

6)      Enterpreneurs benefit by seeing lots of pitches too.  If entrepreneurs can see lots of great pitches, they get an idea for how high the bar has been set in our community.  They see what investors like and don’t like and they get to see which companies get funded and go on to do great things.  In many angel groups, the first pitch the entrepreneur sees is their own.  This is a bad way to learn how not just to pitch your company, but to build a winning strategy and team.

After thinking about it, my conclusion is that, like so many things, the best solution is to reach a balance.   It’s great to pitch a lot of companies for perspective, exposure and deal flow, but you also have to be prepared to limit the companies pitching to the ability of your entrepreneurial community to produce quality deal flow.    Right now we’re seeing 80 quality deals a year, but if things slow down, 60 might be the  right number, or if they heat up, then maybe 120!

To see a dozen great pitches – and I mean it – twelve highly investable companies – attend the 25th Rockies Venture Club Colorado Capital Conference.  #2013CCC   This even will have twelve great companies PLUS presentations from four Colorado companies that have gone big-time and had huge exits this year.  Hear from their founders and CEOs to learn how they did it and what to watch out for as either an investor or entrepreneur.

November 6-7 in Denver and Golden.  The 25th Colorado Capital Conference

Register for Investing In Tech Companies event

 

The Debate: When Should a Company Start Planning its Exit

success-next-exitI’ve been talking to a lot of people about exit strategies this year, including VCs, Investment Bankers, two and three time exit participants, entrepreneurs and investors.  I’ve heard a lot of great exit stories and yet there doesn’t seem to be a consensus about when a company should begin planning for its exit.

One school of thought is that you should just start a company and grow it as fast as possible and you’ll know when it’s time to exit.  This has been described kind of like lightning striking and then it’s time.

The problem with this school of thought it that it is all wrong.

Companies should be thinking about their exit plan before they even form the company.

Why?

Here are a few reasons:

1)      It’s an agreed upon principle that a company should really know its customer.  If you’re selling widgets  through your company, you need to know the widget buyers, but if you’re eventually going to be selling the company, pursuing an IPO or other exit, you need to know your customer – and it’s not the guy who buys your widgets – it’s the company that acquires you.   You need to know why your company would be a strategic advantage for them – would you provide a geographic benefit?  A new set of clients? Intellectual Property? Or would they buy you just to get rid of a meddlesome competitor?  You need to know who will acquire you and why they want to acquire you.  Once you know that, then you build the company to provide the most value to the people who will buy it.

2)      Exits aren’t executed in a day.  By the time that you realize it’s time to exit, it’s probably too late to put a plan together and get it done.  Smart companies plan for their exits and understand acquisitions in their field and structure their company so that multiple companies will be likely to be bidding for it when the time comes.  If you spend your time building a company that has only one potential acquirer do you think you’ll get top dollar?  A great exit is built on relationships.  These can take months and years to cultivate, especially among multiple acquirers.  Why not begin those relationships at the start and shorten the time to exit?

3)      Understanding exits is the key to understanding company value.  Many valuation methodologies for early stage companies are based on the exit value.  The Venture Capital Method begins with potential exit scenarios and then discounts the value of those exits to present value.  If the company can’t develop a strong case for a big exit, they will either fail to raise venture capital, or they may raise capital at valuations far lower than their potential.  Early stage companies should research who is acquiring whom in their market and for how much.  This research will make them much more attractive to investors who know that without an exit, they will never get their money back.

4)      I recently worked with a company that set up several subsidiary companies with different ownership structures and potential conflicts of interest among them.  This could make sense in terms of building an international distribution business, but it makes no sense to potential acquirers.  Ultimately this strategy would lead to much lower acquisition price in the end.  If you think about the exit when you’re setting up your company, your decisions will be easier since you can just ask yourself “what will add the most value to an acquirer?”

5)      Finally, there’s Steven Covey’s second Habit of Highly Successful People “Begin with the end in mind.”   Do you think he meant this for everything except something as important as the destiny for your company?   No, you need to found your company with the idea that there will be an exit and a clear idea of who will acquire it.  Without this clarity, the company will be spinning its wheels on initiatives that may not ultimately be adding value to the acquirer.  Some people say that you can’t know for sure who will acquire you when you’re just starting out.  Sure – that’s true.  But the fact is that you can’t know ANYTHING for sure, so if you can only plan for things you know for sure, the only sure thing is that you shouldn’t be planning on being an entrepreneur.   I’ve heard the same arguments from people that entrepreneurs shouldn’t even bother with a business plan – just do it, they say.  This is a pendulum-swing response to those who are stuck with analysis-paralysis which is also a company killer.  Neither extreme is good.  These people are sometimes lucky, but more often not, they’re forming part of the 90% of businesses that fail.  All investors and entrepreneurs should know that their plans are not likely to be executed as stated, but this doesn’t mean that there shouldn’t be a plan.  Without a plan, there is no alignment among team members, no goal, no smart thinking about options and alternatives, and all you’ve got going for you is luck.  Good luck with that.

 

To learn more about exits and learn from some of the biggest exits in Colorado, attend the Colorado Capital Conference November 6-7 and hear about seven big exits and how they happened.  You’ll also get to see twelve great startup pitches, all of which have a clear exit strategy articulated!  Join us and follow the debate!

Register now at www.coloradocapitalconference.org

Register for Investing In Tech Companies event

Four Tips to Know if You Have Practiced Your Pitch Enough

Practicing your pitch is one of the most important parts of presenting to a group of investors.  While some people can do a pitch with relatively little practice, no one can just wing it.  So how do you know when you’re ready to pitch and you’ve practiced enough?   Here are a few quick tips:

1)       Practice at least ten times before you pitch in front of someone else.  You should get to the point where you’re not having to think about what you’re saying – you have key phrases that you use every time.

2)      Time your pitches.  If you have more than ten seconds of variation between the pitches,  that means you’re making up new stuff each time.  Practice enough times that you can hit the same amount of time within ten seconds each time you present.

3)      Memorize your slide order.  If you have fifteen slides, you should be able to recite the titles of each of the slides in order.  This way when you’re on your “problem” slide, you’ll know that the next slide is your “solution” slide and you can transition smoothly and powerfully from one thought to the next.  Have someone quiz you for the complete order and starting at random slides so that you always know what is coming next.

4)      Be smooth even if you have distractions.  Use the TechStars method and have people throw wadded up balls of paper at you while you’re pitching.  Have someone unplug the projector and then practice dealing with that smoothly and without dropping a beat in your presentation.  Things often go wrong in a pitch, so be ready to roll with the punches.

If you do these things, your pitches will be more professional and confident and you will be better prepared to communicate your ideas most effectively to investors.