I am excited to announce a twist to this month’s Meet the VC event. We are bringing in three active angel investors to talk to you about investing in the Georgia area. Sig Mosley from Imlay Investments, Mitch Free, founder of MFG.com, and Gordon Rodgers, angel investor, will sit on our panel for February’s Meet the Angel event. The session will take place on Wednesday, February 11th from 7:30 to 9:30 am.
The basic format of these gatherings is a question and answer session delving into the fundraising process, venture capitalists’ investment criteria, and specific venture capital firm profiles (or angel investors, in this case). I plan to ask the panel a few questions to kick things off, followed by questions that you can submit in the comments below, and then audience questions.
The series is free but you need to register to attend.
We look forward to seeing you there!
I am excited to announce that Joel Lanik from Frontier Capital in Charlotte, NC will be the featured VC for the first Meet The VC event of 2009! The session will take place on Wednesday, January 14th from 7:30 to 9:30 am.
The basic format of these gatherings is a question and answer session delving into the fund raising process, venture capitalists’ investment criteria, and specific venture capital firm profiles. I plan to ask Joel about 10 question to kick things off, followed by questions that you can submit in the comments below, and then audience questions.
The series is free but you need to register to attend.
We look forward to seeing you there!
If you want to be good at something, you need to practice. A new Harvard Business School working paper shows that this sensible advice also applies to entrepreneurs. The study compared entrepreneurs with a successful track record with first time entrepreneurs and those who had failed in the past. Not surprisingly, the entrepreneurs with past success were more likely to succeed with subsequent ventures (30% vs. 18% for first-timers and 20% for entrepreneurs who had previously failed). Their success derives from two factors: their own skills, especially in terms of market timing skills, and the perception of those skills by customers and investors. Investors who recognize an entrepreneur’s market timing skills are more likely to provide outside funding, and this funding helps contribute to more successful company outcomes. In effect, success begets success. Interestingly, top-tier investors did not seem to make a difference in this study in terms of successful outcomes relative to the experienced entrepreneurs. The authors theory of “success begets success” shows that successful entrepreneurs are able to attract better resources and thus in the case of investors, do not have as much need for “added-value” as the less proven entrepreneurs.
You can access the 2008 Harvard Business School Working Paper, “Performance Persistence in Entrepreneurship,” by Paul Gompers, Anna Kovner, Josh Lerner, and David Scharfstein paper here (pdf).
If you have not seen the news from The Atlanta Business Chronicle or TechJournal South, 2080 Media (aka PlayOn Sports) has raised $3 million in a round led by Imlay Investments with Noro-Mosely Partners participating. What you may not have heard is that ATDC Entrepreneur in Residence MIke Eckert is going to be joining PlayOn's board along with Greg Foster of NMP. What I know that you have not heard is that the company joined ATDC last week.
PlayOn is a digital media company providing an end-to-end solution for the production, management, and distribution of professional quality TV-like live events over the Internet at a fraction of the cost of traditional television. Led by David Rudolph, the company is technology and asset spin out from Turner Broadcasting. More then four years has been spent testing and perfecting the PlayOn platform.
PlayOn's initial market focus will be on sports content. The company has seen demand from organizations such as universities, high schools, and leagues to generate media exposure for their sports and programs. Aside from the direct financial benefit the exposure provides, it also has a positive effect on recruiting, alumni cultivation, and general awareness. Media entities have also desire the exclusive sports content that PlayOn enables them to create and distribute.
PlayOn is shooting for the big space between user generated content at YouTube quality and what you see on ESPN every day. Should be an exciting to watch the game unfold.
A few weeks ago, I teased that strategic fundraising is investor-centric, milestone-driven, realistic, targeted, anticipatory, and market facing. So let's start with the first attribute and discuss what it means to be investor-centric.
In my experience, investor-centric fundraising is a capital marketing effort focused on the needs of investors. This sounds simple, but in practice it is quite difficult. Why? Often entrepreneurs don't view their equity as a product nor their investors as customers.
The first step in implementing investor-centric fundraising is to identify who will invest in your company and why. You have probably heard about the various "types" of investors ranging from friends and family members to institutional venture capitalists to banks and public investors. Generally speaking, each type of investor has a common set of attributes that provides clues on how you should market your investment opportunity. For example, friends and family members are usually not sensitive to valuation or dilution; however, these issues are very critical for venture capitalists and sophisticated angel investors. With that said, be careful and use these generalities with care. In the "real world" you will find many exceptions to these general stereotypes. Don't be surprised if you find an angel investor demanding sophisticated deal terms, or a venture capitalist driven by both financial and non-financial considerations. While you can initially group investors based upon a high-level classification, remember, there is no such thing as a "typical" investor and your job as a fundraiser is to understand the specific attributes of the specific investor that you are targeting.
One of the most important attributes to identify is an investor's motivation for investing in your company. You will rarely find an investor that shares your passion for you company's technology, products, or the market that you serve. In most cases, an investor is not motivated by the innate qualities of your company but rather, they are motivated by what an investment in your company enables. For example, some angel investors are motivated to make a difference in their local communities, most institutional investors are motivated to provide a financial return on someone else's money, and many corporate investors are primarily motivated by strategic benefits that an investment can generate. While each investor's motivation is different, every investor is motivated by something. The key is to identify that "something" for the specific investor that you are targeting and to market your opportunity accordingly. In those situations, when you discover that your opportunity is not consistent with an investor's motivation, don't waste your time trying to convince an investor of the merits of your opportunity, but rather spend your time finding another investor.
Another critical step is to understand your investor's approach/strategy to investing. Do they prefer to invest alone or with others? Are they willing to invest in an opportunity with technology risk? Are they looking for gargantuan billion dollar markets or are they comfortable with highly profitable market niches? You can find answers to these questions by perusing an investor's website and, more importantly, by networking with other entrepreneurs and connected professional services firms to receive insights on not only what an investor says, but what they actually do!
Entrepreneurs that are investor-centric clearly differentiate themselves from their peers. Such an approach saves critical time by focusing only on investors that are truly a fit for your company and ultimately positions you to negotiate an investment that is a "win" for both your company and your new investors.
For more information on choosing an investor:
Inc. Magazine
Venture Choice
At the most recent version of Meet the VC, the entrepreneur community of Atlanta had the pleasure of meeting with Vimal Patel. Vimal talked a bit about his firm, Silicon Valley based Sierra Ventures, gave some helpful tips to our entrepreneurs, and put in a good word for the Atlanta community.
The Numbers
Sierra Ventures sees 2,000 – 2,500 deals a year and they sit down with 50-75% of them. Most of the deals come to the firm through referrals. Due diligence is completed on about 75 deals and term sheets are given to approximately 20 companies a year. Twelve a year will close.
The Attitude
During the economic slowdown, VC's are looking to extend the cash runway of their deals, cut costs, and streamline operations. For new investments, VC's are looking for recession-proof stories and if the case is good, they will keep spending. The VC's are paid to invest money that has already been committed and they are looking for good opportunities to do it.
Entrepreneurs: Tips
- A successful management team is made up of a CEO who can hire well and open the right doors and a technology person who is passionate and knowledgeable about the industry
- Effective product management is a key driver for success. Be sure to clearly define what the product is, understand the market, how your product fits and how you are going to sell it.
- For your pitch, 12-15 slides {Sample presentation file} is plenty!
- During due diligence, the VC will ask your customers three questions: Why did you buy the product? Why did you chose this particular product/company? How much money are you going to spend on this product in the next year?
The Good Word for Atlanta:
The capital efficiency is great in Atlanta. The area is less flashy and not caught up in the buzz and that can prove to be very fruitful when cash is short. Vimal says that he has never seen anything like ATDC in the country! ATDC is a great resource and the executive talent in the region is also very good.
I am pleased to announce our second monthly Meet The VC event will take place on October 17th from 7:30 to 9:30 am. I am doubly pleased to announce that our featured VC in October will be Vimal Patel of Sierra Ventures who will be making his way to ATDC from Menlo Park, the heart of Silicon Valley.
The basic format of these gatherings is a question and answer session delving into the fund raising process, venture capitalists’ investment criteria, and specific venture capital firm profiles. I plan to ask Vimal about 10 question to kick things off, followed by questions that you can submit in the comments below, and then audience questions.
The event in September went off well with a great deal of energy for early in the morn. The series is free but you need to register to attend.
We look forward to seeing you there!
Last month, a new west coast venture capital fund that is focused on i-Phone applications, was profiled in the national press and revealed a surprising statistic. Since its inception earlier in 2008, this fund has reviewed 2500 deals and made investments in only four companies. That’s right – the fund has invested at a rate of one investment per 625 deals reviewed. While few details are available on the 2500 deals reviewed, I would hypothesize that more than half of these deals were DOA (Dead On Arrival) because they were just "thrown over the transom" and/or poorly positioned from the start. Clearly, securing a proper referral into an investor is critical. However, even if you cut the above ratio in half, the odds against attracting venture capital remain significant. To improve these odds, I often encourage entrepreneurs to approach fundraising similar to how they approach going to market: strategically.
From my experience, a strategic fundraising campaign is composed of several key attributes. Strategic fundraising is investor-centric, milestone-driven, realistic, targeted, anticipatory, and market facing. Over the next few weeks, I will blog on each of these attributes. In the meantime, check out a fundraising strategy template in our library that we use with our clients to organize their fundraising activities.
A packed house filled up TSRB this week for the quarterly DLA Piper Venture Pipeline event.
John Hurley kicked things off by talking a bit about DLA’s Venture Pipeline program. Venture Pipeline is a dedicated team of non-lawyers experienced in technology, startups, and the venture capital markets that take a formalized approach to helping entrepreneurs raise capital on a no direct fee basis.
The VP approach has three tiers: screen by applying VC standards to gauge potential for success; scrub by critically accessing the business plan and provide coaching/feedback on investor docs and presentation; and shop to introduce clients to the right funding sources through the right channels.
John then shared some interesting numbers on VC investment in Georgia for the first half of 2008. John and his numbers were upbeat. The Southeast market is moving up. But money does continue to move to later stage investments where there is less risk.
In the first half of this year 40 companies in Georgia closed institutional funding. This includes ATDC member companies Biofisica, Clearleap, Global Crypto, Qualtre, Solohealth, and Suniva as well as nine companies that have graduated from the incubator program. These 40 Georgia comapnies raised a total of $282 million, well ahead of the pace of 2007, while the number of deals declined from 43 to 40. You can chalk up the diff to the Suniva effect.
From a round type things looked like this:
- Seed: 3%
- Series A 24%
- Series B 11%
- Bridge 14%
- Later 32%
And 16% was other (whatever in the heck that means).
Even more interesting then the round type is the stage of the company when they raised funds:
- Startup: 3%
- Product Dev: 19%
- Clinical Trials: 8%
- Product Avail: 59%
- Profitable: 11%
Clearly well over 70% of companys getting venture funding in Georgia have product on the market. And that 3% number in "Startup" equates to one company.
After John layed all this out Doug Spear moderated a spirited discussion by Lon Chow of Apex Ventures, Carter Griffin of Updata, and Garheng Kong of Intersouth. The key takeaway from this discussion was that Atlanta is a very attractive market for venture captial investing due to diverse deal flow, deep management talent, good infrastruture, collaborative effects, and our risk taking attitude.
If you are eager to learn more about the VC environment in Atlanta wrangle yourself an invite to this next quarter.
Several weeks ago on my personal blog I mentioned that ATDC was going to get involved and create some programming to help improve the startup ecosystem in Georgia. I am pleased to announce the first leg of this effort.
ATDC, with ongoing assistance from Noro-Moseley Partners, has put together a monthly series entitled "Meet the VC". These sessions will serve as a platform for local as well as out of town venture capitalists to engage with the ATDC and the broader Georgia entrepreneur community. These sessions will be open to anyone that cares to attend and not exclusive to ATDC member companies.
This effort has several objectives:
- Introduce top tier local, regional, and national venture capital firms to our market and the investment opportunities available in Georgia;
- Educate the entrepreneurial community about the fund raising process;
- Deliver insight into venture capitalists’ investment criteria;
- Provide specific venture capital firm profiles.
Alan Taetle from Noro-Moseley Partners will open the series on Wednesday, September 17 in the Hodges Room on the 3rd floor of ATDC. We are going to play around with the timing of this as we go but registration for this event will begin at 7:30 am with the program starting at 8:00 am and running for an hour. The series is free but you need to register to attend.
In October we have Trinity Ventures out of Menlo Park slated followed by Frontier Capital from Charlotte in November.
We look forward to seeing you there!