‘Insider’ tips to tighten up your VC pitch

Hey guys, Donovan here…

2009-04-30-the-venture-capital-math-problem

Over my past few years in the Shidler College of Business, I’ve listened to A LOT of guest speakers: from Richard Parsons dissecting the causes of the recession to Jay Shidler reliving his entrepreneurial career. Many of these guest speakers were entrepreneurs who told a story of  living and dying by the merciless sword of the Venture Capitalist. I recently found this article in Entrepreneur Mag in which Carol Tice interviews 3 venture capitalists (Alex Ferrara of Bessemer Venture Partners, Maneesh Sagar of CT Innovations and Jon Elton of iNovia Capital) and asks them what are some specific signs they look for in a possible investment. With VC funds running parallel to the economy, investment deals dropping from 1,200 (worth $6.8B) in 2008 to 2,000 deals ($15.2B) in 2009. Therefore, it’s even more imperative that you tighten up your VC pitch. While this article discuses some of the more fundamental rules of pitching, I found it insightful because, while basic, they are tips are often the most overlooked. Here are some of the top tips I took away from the article:

  • Experience, Experience, Experience. No one wants to look like a fool and VCs are no exception. They increase their chance of return by investing in experience. “Good judgment in business comes from experience. I want to see people who’ve already made their mistakes and struggled,” says Sager.
  • We spent how much on marketing?!#% “One of the most important figures to know: customer acquisition cost. How much does your company spend on marketing, on average, to bring in a new customer?” The reason this number is so essential is because a large percentage of the VC funds acquired by the entrepreneur is used to acquire new customers through various marketing channels.
  • Are you selling your product already? I’ve already emphasized how difficult it is to find substantial funding in the current state of the economy. If you want to be one step ahead of the VC fund-ee competition, having a legitimate customer base or list is one of the “most concrete signs of success you can offer a VC.”
  • Show me, Don’t tell me. “Jump into the demo,” says Elton, “rather than showing me a screen shot of something. I find that not very helpful.” A demo that excites the VC is better than the most compelling PowerPoint.

For the rest of the ‘insider’ tips, check out the full Entrepreneur Mag article at: http://bit.ly/1bMZp2

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Are you running in the pack or breaking away?

You win by starting fast and staying in front of the pack
Hey gang, AJ here….my daughter runs cross country and here’s what she told me before yesterday’s race, “You win by starting fast and staying in front of the pack.”  I was stunned by her simple strategy…not just because it really works for cross country running, but because of how insightful it is for business too. Why? Well I think that there are at least three important ways this strategy applies to business:

  1. “Leaders run their own race”: If you’re with the leaders you’ll be able to focus on running the way you run best.  In business this means you can focus on your best play and concentrate on your competitive strengths that are reliable and that enhance your uniqueness in the eyes of your customers! Being out front means you are running the race your way.
  2. Pack runners waste their energy dodging the competition: If you’re running in the pack you are probably wasting energy short stepping, bumping into competition, and trying not to trip/wipe out.  In business you want to spend your time and effort proactively delivering on your unique service proposition, not reacting to the competition. Are you more worried about tripping on the competition or moving your business forward your way?
  3. “The race is pretty much over after about the first 1/4 mile”: The actual first place runner may not be known until the finish line, but at the 1/4 mile mark, it is pretty clear which runners won’t  finish in the money!  In business, it is very difficult to make up ground on established market leaders so you always need to keep them within striking distance.  If you aren’t near the front defining the pace and the market standards then you will just be one of the many companies in the pack working hard just to eat dirt.  If you’re going to run hard anyway, you might as well run to win.

So here’s a few questions you might ask yourself whether you’re a runner or a business person:

  1. “Am I running with, a. the pack, or b. breaking away?”
  2. If you answered #1 with “a”, then ask: “How can I protect/increase my lead?”
  3. If you answered #1 with “b”, then ask: “Can I be a lead runner in this race?”
  4. If  you answered #3 “yes”, then ask: “What should I be doing to break free of the pack?”
  5. If  you answered #3″no”, then ask: “Am I in the right race?”

By the way, my daughter has consistently been finishing “in the money” at her races…nice, eh?

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“Obama-care”: A Bad Story Waiting to Happen

One of the reasons the term "Obama-care" has become a journalistic convention is that there is no bill. You can't talk about Obama's actual healthcare plan because there isn't one
This post is not intended to detract or support the President or the notion of health care reform, but it is here to observe that the label “Obama-care” poses a long-term story liability for the President. Why? Because Americans will ultimately blame any healthcare system for their ills, whether or not it proves successful for the masses. From a political POV, it’s a no win proposition and the President’s name is literally on it.

The fact is, people get sick. They die. And crap happens in complex systems. But rather than blame failing health on old age or bad luck, they’ll blame the “Obama-care” system. When they do get sick, the anecdotes about the system will fly. They’ll hang in the air. And ultimately blemish the President’s legacy. Prediction: decades from now, President Obama will go down in history as the bozo who botched healthcare. Why? Because the White House isn’t spinning the media away from the “Obama-care” label.

Frankly, allowing the label is just poor story management. LA Times opinion writer Johan Goldberg observed on August 18, 2009, “One of the reasons the term “Obama-care” has become a journalistic convention is that there is no bill. You can’t talk about Obama’s actual healthcare plan because there isn’t one.” So the media, particularly conservatives, latch onto the term, “Obama-care.” It’s not a right-wing conspiracy, it’s just a convenient and catchy label. But now it’s developing into an open wound that conservatives are discovering convenient to rub salt into.

The cure is really simple: renamed it. Pronto. Let it go too long, and it’ll be like the “Swine Flu” battle… seriously, who the heck really calls it the “H1N1 Virus”? Right. Even now, changing the “Obama-care” label will be an uphill battle at best. So for the President’s sake, the sooner “Obama-care,” can be converted to “H.R. 000XX,” the better.

LEARNINGS:

Be wary of potentially negative associations. Manage away from them. And when discovered, take decisive steps to get your story back on track.

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Will Your “Weakest Link” Break Your Profit Chain?

the best leaders will work to clarify and communicate company strategy and market positioning to ensure the entire team works to keep us on the right track
My old skool newspaper is wet…does anyone care? Well I certainly do, and so do the other subscribers on my street.  Should you care too?

You should, because you are only as good as your weakest link. You may have the best reporters, the best editors, the best marketing, and the best printing, but if the guy you choose to deliver my newspaper can’t keep the paper dry, then the effort of the rest of the team may not matter.  You don’t lose customers because of what you do well, you lose customers because of your weak links.

For businesses of any size the “weakest link” phenomenon can mean the difference between profits or losses. Earning new customers is tough enough, but as staff grows and company success becomes increasingly dependent on people whose experience and commitment may be less than yours, your company’s ability to execute successfully may be greatly impaired.

Having weak links may be unavoidable with growth, but you can reduce the risks. As you grow, you will probably need more people on your team; you may not be able to be the salesman, run the operations and personally deliver every paper to every subscriber.    But you can work to minimize the weak link risks by clarifying and communicating the strategies, goals, and values of your company to the entire team.  Keep everyone on the right track and help every team member make good decisions.  If you do this well, the guy who you have delivering my paper will realize that delivering the paper dry is a vital part of what your company does, and I might not be an unhappy customer forced to surf the web for my news when it’s raining outside.

Business has always been vulnerable to weak links, but technology is raising the stakes.  The digital age is creating many new products and services that give your customers alternative choices that will compete with you;  My old skool example also highlights how you may be only a nudge away from losing customers to the new technology on the block.   I still have my newspaper subscription for now, but as I surfed the web for news last week, I realized that my internet news is always dry, on time, and free.  So now do you care whether my newspaper is dry or not?

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Why Customers Demand Authenticity

Authenticity sells and your "story" needs to be truly authentic. Be true to your heritage. Be what you say you are. Don't be a phony. Be for real
Joseph Pine, author of The Experience Economy, makes the case that success will increasingly be based upon whether or not a company is perceived as authentic. In a nutshell, he theorizes that our economy has evolved from agrarian-age commodities, to industrial-age goods, to information-age services and now to preference for authentic experiences.

Says Pine, “Everyone now has the desire for the authentic. And authenticity is therefore becoming the new consumer sensitivity. The buying criteria by which consumers are choosing who they are going to buy from and what they are going to buy…” For more, checkout his full TED presentation below:

From a business POV, it’s just smart to start from what’s authentic. Your past, especially the seemingly un-matched chapters in your life, or those skeletons in your closet, are often great fodder for a Unique Selling Proposition. For example, Frank Lloyd Wright, one of the most influential architects of all time, started as a civil engineer and combined strong interests in sociology to remake architecture. In retrospect, this unique combination makes total sense, but it didn’t at the time and despite Wright’s success, isn’t taught as the obvious path to architectural greatness today.

As for that closet of bones, your angst just might provide the motivation to cure your’s and others’ ills. Just ask Oprah Winfrey who set out to explore her own early torments and now cures millions around the world. Necessity is indeed the mother of invention and it often results in meaningful business.

Also consider that in this age of Internet stalking, there’s a much higher chance that your bone stack will be revealed. So it only makes sense to turn a negative into a positive by integrating weaknesses into your story to create an asset. Besides, acknowledging weakness shows you’re human, and we all respond to that.

LEARNINGS: Authenticity sells and your “story” needs to be truly authentic. Be true to your heritage. Be what you say you are. Don’t be a phony. Be for real.

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3 Steps to Entrepreneurial “Passion”

Sure we want it. But the issue is, how do you get it? It just doesn't magically appear even if you decide you want it
The term “Passion” is often perceived as a trite and over-used cliché. Sure we want it. But the issue is, how do you get it? It just doesn’t magically appear even if you decide you want it.

Epiphany: Passion is an end-state. It’s not a process and it doesn’t tell you how to get to your goal. Telling a person to get passionate is about as helpful as telling her to strive to be happy… it’s a, “like, duh” statement without a solution. What’s really needed is a process to achieve passion… here’s some thoughts:

THE ROAD TO PASSION

1. Pinpoint Your Legacy. Define what you want to be known and remembered for. Identify what you have to give. It should be uniquely you and something that people really want or need. Try this exercise: Visualize what will be your brick in the pyramid of human ascension. Be as specific as possible. Identify that brick and you’ll have the cornerstones to passion, success, happiness and ultimately your legacy.

2. Map Toward Your Goal. If you know your destination, it’s easy to plan your journey. Of course, along the way, don’t be afraid to change your route as you learn about yourself and arrive at new crossroads. Also keep in mind that making wrong turns are part of the learning process, so don’t fret about whether you’re backing up or not–regard every move as a step toward your goal–you wouldn’t have known it wasn’t it until you were there so go with the flow and explore a little.

3. Get on the Road. Having a roadmap in hand breeds interest, commitment, dedication and a sense of purpose… All you have to do is put one foot in front of the other and start moving–before you know it, you’ll be running with your hair on fire and realize one day that OMG… “I’m passionate!”… and successful… and fulfilled… and happy…

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Are You Chasing the Right Customers?

figure out who your best customers are...pursue them...win them over...nurture and protect them
It’s a maxim of life that “We may not like everyone we meet, and not everyone may like us either,“ it may be wise for companies to consider this wisdom in their pursuit of customers;   While much of our personal lives are focused on impressing and hanging out with people who make us most happy and successful, businesses often seem to think that their goal is to garner the affection of every customer no matter the cost.

It’s vital that companies Invest your time and resources to take care of your best customers first and with preferential treatment.  Concentrate on and satisfy those customers who are loyal and whose needs you can meet in ways that allow the business to succeed at the same time.  I’m not suggesting that you send dear john letters to your less desirable customers, but you should do the stuff that takes care of your best, most loyal customers first, even if it means potentially losing a few less desirable customers along the way.  By doing this you will keep your best customers, the ones who love you more and will help you be more successful and profitable.

No single business can expect to profitably meet the needs of every customer.It’s a fact that customers come in all shapes, sizes, and backgrounds, and their needs and expectations vary widely.  So what cosmic force drives you to work tirelessly to try and win over customers who you just can’t seem to please or who just don’t fit your business model?  You probably owe thanks on this point to Marshall Fields whose promotions helped engrain that “the customer is always right” into the American psyche.  Who were they kidding?

There’s really only 3 key things to know about your company:

  1. Who are we? What’s your secret sauce really is..”What are you the best in the world at”
  2. Who are our customers? Who loves your secret sauce…”Who needs/wants what we’ve got?”
  3. How can you profitably win their love? “Make’m happy and Makum money!”

Always remember to spend your time attracting and hanging out with the people who will make you most happy and successful.

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What You Need & Don’t Need to Succeed

Whatever you can do, or dream, begin it. Boldness has genius, magic, and power in it. Begin it now
OK, so we’ve beat this Big Moo thing to death, but with 33 insightful authors, it’s worth savoring. Here’s yet another smart snippet to whet your entrepreneurial appetite:

“Are you ready to do an original, life-affirming, remarkable thing? The German philosopher-poet Goethe gave us the only bit of wisdom you need: ‘Whatever you can do, or dream, begin it. Boldness has genius, magic, and power in it. Begin it now.’

FOR ENTREPRENEURIAL SUCCESS

1. You Don’t Need…

  • A life of quiet desperation. Not now, not ever.
  • Permission—it’s highly overrated. Imagine Steve Jobs seeking permission.
  • A lot of fancy moves—Duke Ellington only had four.
  • More experience. Beginning it is the experience.
  • To forgive yourself for the things you’ve screwed up. It’s history.
  • To be computer literate. The best decisions and the best ideas come from people, not machines.
  • A degree. M.B.A.s and other three-letter words are also overrated. Ask Tom Peters, who has three, and still got fired by McKinsey only to go on to become the big “!”
  • Praise for your idea. Constructive criticism is a much more helpful filter.
  • An invitation. Waiting to be asked to the table, the dance, the game, the party, the big meeting is a waste of important energy that keeps you from beginning.
  • A baseline or benchmark. By the time you’ve baselined and benchmarked, it’s already too late.
  • Consensus—even if you buy the notion that consensus means 50 percent approval.
  • Money. Bootstrapping is simply a design constraint.
  • Gratitude. As I learned from both my father (who said this often when people whined in his business), and from my dear dog Topper, “If you want gratitude, get a dog.”

2. You Do Need…

  • Passion, to get you over the hurdles.
  • Trust. Tiny threads of passion always lead to bigger threads.
  • Attention. Watch out for the threads and they become tapestries.
  • Guts to ask the question, “What’s missing?”
  • An attitude that suggests, “I’m prototyping, playing, and palling around.”
  • To arm yourself against perfectionists when you choose to use this attitude. They don’t like it.
  • The realization that learning is a paradox. It is life affirming and often painful, because you care, and without it you’re literally dead.”

The Big Moo: Stop Trying to Be Perfect and Start Being Remarkable is a book by Seth Godin and The Group of 33. It’s seriously right on. Check it out.

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How to Make Your Biz Better by Cost-Cutting

The key is to capitalize on what your audience really wants and deliver just that
Lowering prices (and costs) usually means products that are more average, less engaging, and involve big trade-offs for purchasers. Selling less for less is rarely a strategy for growth. But here’s a paraphrased lesson on positioning from the The Big Moo:

“Steve Jobs had a problem. His iPod was dominating the market, but was threatened by cheaper music players—players with far fewer features but much lower prices… A Flash MP3 player uses a computer memory chip instead of a hard drive—so it’s cheaper to make, but holds less music. Every day, more consumers were making a compromise and opting for the cheaper alternative. Apple could have launched its own Flash player in response, but everything about it would have been a compromise in order to offer a lower price. A smaller, cheaper screen. A flimsier, cheaper body. A smaller, cheaper capacity.

So Apple did something different. They figured out how giving people less than what a Flash player offered could actually create a better product. Apple removed the screen altogether. They made the player less than a third the size of the iPod and smaller than all of its competitors (the Shuffle weighs as much as a few sticks of gum)… Getting rid of the screen cut a huge piece out of Apple’s costs, but it also allowed them to make a product that was not a compromise. If you’re an athlete or a commuter, this smaller, lighter, non-repetitive, no-skip player is actually better than the more expensive iPod…

ING Direct uses the same strategy as Apple but in a very different business: banking. In three years, they’ve signed up more than a million new customers for their bank, largely based on what they don’t do. They don’t offer checking, they don’t have ATMs, and they don’t handle cash. They have no minimums and no fees. They don’t have branches or tellers, either… Instead, ING Direct puts the money they save into two things: 1. actual human beings who will talk to you instead of requiring you to go through a computer 2. higher interest rates ING doesn’t compromise in order to pay higher rates. They don’t choose to give slightly less service, or to have people wait a little longer on hold… Instead, they invented a bank where giving people less is actually better.”

LEARNINGS

Less Can Be More. The key is to capitalize on what your audience really wants and deliver just that.

The Big Moo: Stop Trying to Be Perfect and Start Being Remarkable is a book by Seth Godin and The Group of 33. It’s truly a great read. Check it out.

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The ingredients of RVCA’s “Secret Sauce”

It is about inspiring our generation, providing something of substance and culture and above all doing it with integrity and as a united family

We’re all becoming experts at stalking on the Internet. We do it on facebook. We do it on twitter. We do it by googling anything and everything. So if your “brand” isn’t authentic, we’re gonna find out and we’re gonna slam you. We’re not gonna buy your stuff and we’re gonna tell our friends. Don’t try to fake us out cause it won’t work.

The day of the “trumped-up” brand is dead. In other words, authenticity is the only way now. How simple is that? Take apparel company RVCA for example. Pronounced rvca_logo“Roo – kah”, RVCA is more than a clothing company, it’s a movement, it’s a culture, it’s a lifestyle. Founder PM Tenore’s vision was to create a subculture of like-minded individuals by showcasing the talents of inspiring artists.”

And RVCA’s culture is really for real. They actively engage and build upon art, music, fashion, action sports, mixed martial arts (MMA), etc. RVCA’s website states, “it is about today, tomorrow and life as the big picture. It is about inspiring our generation, providing something of substance and culture and above all doing it with integrity and as a united family.”

The result is a RVCA philosophy that’s now a $50 million a year reality. Tenore has created a lifestyle that people want to be a part of, myself included. But more importantly, by staying true to his roots, Tenore has created his own story and laid a blueprint for others to follow: Be real. Be authentic. It’s the only road to success.

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