Pitching To Angel Investors: Focus on the core product or service

Entrepreneurs are always excited about their marketplace solutions and want to talk about it to anyone that will listen. That enthusiasm is critical to start a business because that passion is the only thing that will truly carry them through the process (It’s certainly not the money--trust me!)

Sometimes, however, that enthusiasm causes entrepreneurs to lose focus about what they are conveying as part of their product offerings.

For example, you might have ancillary services or spinoff products that are part of the plan. But cluttering the business plan with numerous potential options for the company will appear diffuse and fragmented to an investor.

It’s better to focus on the core product or service. An investor looks for purpose and clarity of focus in start ups and even early stage companies

This also solves the problem for entrepreneurs who are concerned about protecting their intellectual property. You don’t have to describe the “secret sauce” behind their product--simply focus on the benefits the product or service offers.

At this early stage, there’s no need for a non-disclosure agreement, so put that away. Most investors won’t sign one at this stage anyway, and it will only turn them off. Only in later stages will the investor need to learn more about the IP, and they will be glad to sign it at the due diligence stage.

Best regards,
Hall T.

Pitching to Angel Investors: What problem do you solve?

Pitching to Angel Investors: What problem do you solve?

When seeking funding from an angel investor or other sources of venture capital, the first element they’re going to look for in the executive summary of your business plan or your pitch presentation is the solution to a customer problem. In other words, what problem does your product or service solve for the customer that is unique?

To ensure that you’re going to get the attention of an investor, make sure you address the following in your plan and pitch presentation:

1. Be Specific and comprehensive at the same time. It’s important to give enough detail so the investor understands what you’re doing without giving too much information about the inner workings of the application or service offering. In some cases, it is helpful to express the company’s product/service in a few words such as “We make radiation-hardened memories.” This helps the investor in on understand the company’s offering.

2. Develop an actual elevator pitch. You’ve got one minute to convey how compelling your offering is to an investor. Go! Can you do it?

3. Your problem should be large and compelling - the problem you’re solving should be large and compelling enough that people not only want a solution, but need one and are willing to pay for it.

4. Use numbers to describe the problem. The numbers you present can the problem more compelling to an investor. For example, how many people suffer from a disease or condition that you potentially solve? How much money is wasted on inefficient solutions or methods?

5. Talk about the business solution and not the technology. This is one of the biggest mistakes that entrepreneurs make over and over in their pitch presentations and in their business plans. In short, investors care less about your technology and more about how you’re going to make money. Focusing on that is paramount to getting follow up meetings--you can focus on the technology at the due diligence stage.

6. Tell a story. Talking about the problem you solve in a story format that’s easy to understand can help you present your case in the most understandable fashion.

Best Regards,
Hall T.

Irene Mwathi Talks about Minority Startup

Irene Mwathi Talks about Minority Startup

Where are you from originally?

I was born in Kenya. I came to the US, Washington DC for college and later moved to Austin in 2007.

What university did you go to?

University of Maryland for undergrad and Georgetown University for my MBA


What brought you to Austin?

I moved to Austin to expand my business in IT Consulting.


What is your group's mission?

Minority Start-Up mission is to develop minority entrepreneurs into successful enterprises by providing programs, advise, counseling and access to capital. Austin continues to be one of the most entrepreneurial cities in the country and M Start-Up seeks to help minority entrepreneurs tap into the various resources and opportunities with a focus on investment funding.


What need does it fulfill?

Minority Start-Up will bring both minority innovators/entrepreneurs and investors together. While minority owned businesses have grown at the a rate that surpasses the growth rate of all businesses combined by a rate of 6 to 1, and with revenues twice as high as the rest of the market place, minority entrepreneurs need to seek out investors and vice versa to sustain this level of growth. Today even with higher numbers of African American, Hispanic and Asian innovators, we don't see the level of investment funding as seen in the mainstream market place. M Start-Up aims to bridge this gap providing minority innovators access to investment capital and the Central Texas investment community new opportunities.


What exactly does it bring to startups?

Most start-ups are usually started with a passion to meet a specific need based on a vision/idea coupled with an ideal to make lots of money. However, innovators and especially minority innovators are not prepared to manage a business, build strategies for growth while avoiding risks and setting the path for investment funding. Most usually start looking for investment capital when all existing resources have been exhausted and with a limited or non-existent leadership team.

Minority Start-Up brings expertise, counseling and advice for every startup right from the start, to prepare them for sustainable success. We know where the resources are in our community, therefore we can create a critical path of success for minority entrepreneurs through coaching, helping them navigate the various service delivery organizations while holding them accountable and then presenting them to the financing mechanisms. The key element we seek to address is "What do entrepreneurs need during development to prepare for funding and what do they need to do post financing to reach milestones?"


What type of startup would benefit from your group?

African American, Hispanic, Native American, Asian American and Women Owned Businesses. We welcome any startup to reach out to us.

What was the most challenging aspect of starting up the initiative?

While there is a critical need for an organization that works with minority businesses and one that understands the challenges they face right here in Texas, the challenging aspect for us is convincing the startups that they need to start laying long term strategies right from the start consulting with people with the right expertise. The other challenge we face lies in getting funding and sponsorship to build the necessary programs that go beyond the basics of starting a business. Hiring senior management or qualified people is usually expensive for a startup, while consulting on an as needed basis cuts costs dramatically while providing much needed value. As an organization we hope to provide ongoing services at a lower rate and get ongoing support through various funding sources.


What advice do you have for entrepreneurs?

The current financial market makes it harder to get funding, but those who prepare and prove themselves will be better positioned to thrive and receive investment funding.


What Austin-based resource have you found to be the most helpful and why?

While we have worked with alternative funding sources throughout Austin to help entrepreneurs get funding, we find the Austin Entrepreneur Network a great resource for investment funding. They hold continuous funding forums and provide access to the Austin investment community where minority entrepreneurs can pitch ideas.

What about your upcoming conference?

Go Big or Stay Home - GO BOSH conference 2011, is an innovators, entrepreneurs and investors conference brought to you by Minority Start-Up Association of Texas, designed to facilitate knowledge sharing, relationship building and deal making amongst Central Texas Minority Businesses. The conference will be held on October 21st, 2011 at the Longhorn Stadium Event Center, Belmont Hall from 12.00pm - 9.00pm.

The conference is for anyone in need of inspiration, looking for tips for success or anyone who is wondering how to get an idea off the ground, develop it and commercialize it. Come network with other entrepreneurs and innovators and share your journey.

Thanks

Terry Hazell Talks about Entrepreneurs & Self Promotion

Entrepreneurs & Self promotion: don’t oversell, but don’t undermine either--by Terry Chase Hazell

Self-promotion is an important part of entrepreneurship. The fact is, many early employees, partners, and funders join a company based on an assessment of the entrepreneur. And yet many entrepreneurs—especially women – hate to talk about their own accomplishments. This can be a big mistake. As you develop your company summary or pitch, you should also develop a personal pitch that balances between overselling yourself and undermining your accomplishments.

In Texas State’s RampCorp program, one of the 16 “ramps” participants study to grow their business includes Self-Promotion. Women develop a professional biographical sketch, or “bio.” For entrepreneurs, the bio may be more important than the resume, because it’s used in many contexts—business plan, website, speaking engagements, LinkedIn profile – and for those seeking funding, your bio is summarized in your pitch.

Where to start? At RampCorp we’ve developed a tip sheet for women entrepreneurs (men need this too) that walks you through how to prepare your biographical sketch. You can download it at this link. RampCorp Biographical Sketch Tips

The Ramps Biographical Sketch Tip Sheet is organized into 5 sections:

1. Tips list for developing your sketch
2. Lists of words to use and words to avoid
3. Example sentences from and links to leading women’s bios & fill in the blank sentences
4. Biographical sketch checklist
5. Form to complete your own sketch

In addition to preparing your bio using the tip sheet, I also recommend the following resources:

• Book: How to Say it for Women, by Phyllis Mindell
• Slideshare: Caroline Cummings: Authentic Self Promotion for Women
• Blog: Carol Goman

If you complete your bio and would like us to review it, send it to us at www.txstate.edu/rampcorp/contactus . We’ll comment on the first 5 bios posted!

About the Author: Terry Chase Hazell is Director of Texas State RampCorp, a program to help women entrepreneurs start their first scalable venture. She is a member of the national advisory board for Springboard Enterprises, which has helped women raise $5 Billion in capital. She serves as part of the 17 member state committee that makes funding recommendations on regional applicants to the Texas Emerging Technology Fund. She is a charter member of the White House initiative StartUp America Partnership’s women’s high-growth entrepreneurship committee. Her specific expertise is biologics manufacturing, and she has founded two biotechnology-related spin-out companies from the University of Maryland.

About RampCorp: Texas State RampCorp is an incubation and training program for women entrepreneurs launching their first scalable business. Women who are or who want to be entrepreneurs receive coaching from experienced investors, executives, inventors, and other women entrepreneurs who have built scalable

Poll on Challenges Facing Small Businesses

The TxEN is interested in learning more about the challenges facing small businesses. We are working with the Financial Services Forum – a non-partisan financial and economic policy group representing the largest financial institutions operating in the United States to conduct a survey of small business owners.

We invite you to participate in this brief on-line survey. We hope you can take a moment to share your thoughts and opinions about the current business climate and obstacles and frustrations affecting companies like yours. Your feedback is very important to us.

This is NOT a sales solicitation, nor will it result in any attempt to sell you anything. This is a research project regarding business conditions and job creation, for which your cooperation is greatly appreciated.

Please note that any information shared will only be used for internal research purposes, and will be treated confidentially. Responses will be consolidated into an overall report, which will reflect categories of comments. The report will not identify the input of individual respondents.

The survey will close at 5 p.m. EST on Monday, September 26th.

To participate in the survey, please click on the link below or copy and paste it into your web browser:

http://masurveys.com/nrisurvey2

Please give us your input.

Best regards,
Hall T.

Terry Hazell Talks about RampCorp

Terry Hazell Talks about RampCorp

What is RampCorp?

RampCorp is training, coaching and networking program specifically designed for women who are or who want to be entrepreneurs. Over a period of 25 weeks, meeting one night per week, participants will learn the aspects of launching and growing a business, receive many hours of one-on-one coaching and increase their network dramatically. About half will start a company or change their company’s business model. See can see the list of companies at this link. . We provide some free resources, too.


Who is involved?

Many participants say the coaching is their favorite part. Great coaches like Robin Curle, Laura Bosworth, Laura Kilcrease, Kathy Lindauer and Mary Haskett make the program. Robin Curle has led several companies to multi-million dollar revenues and has been named a “galaxy of entrepreneurship”.

Mary Haskett has run several companies ranging from a skydiving school to a missile launch training SaaS company and her current company is named Top 50 startups by Kauffman Foundation. Laura Bosworth has led product launches and $100 Million programs at large companies. Laura Kilcrease, Investor in Residence, knows how to position companies for funding. Kathy Lindauer, Lawyer in Residence, shares legal topics and weekly legal tips.

Also, members can continue for a second 25 week session. New members benefit from learning from returning “2nd year” women slightly ahead in their entrepreneurial efforts.

Applications are open until late October. You can apply here.


What is your favorite part?

When a woman joins without a business idea, finds an idea, launches and then one night announces a major milestone. A few weeks ago CEO of a newly formed El Paso venture announced she had made her first sale. To me it was the home team winning the super bowl!


What will you include in your upcoming blog series?

I’ll be sharing some of the RampCorp resources and tips on self-promotion, scalable business models, technology transfer and getting ready for due diligence.

Best regards,
Hall T.

Charles Doty of BlueShift talks about Entrepreneurs Transitioning

“Real artists ship.” That statement is attributed to Steve Jobs circa 1983. The message, whether Steve really said it or not, still resonates at Apple.

A successful entrepreneur is first of all a competent risk taker and a visionary; someone who sees an opportunity that few if any others can see, and is willing to take on the task of developing that product or service and targeting it so that the market will embrace it. For now I will refer to that generic successful entrepreneur as Bob.

Bob started his company with a team of dedicated developers who believed in the company and themselves equally. Whatever the obstacles, they were committed to confronting and overcoming them. Work eighty hours a week – no problem. Solve a problem that has never been solved – they will do it. Find a way to do it twice as fast at half the price – you got it. People like this are required if a start-up is to have a chance of getting off the ground.

You know about the runway analogy. The capital investment is the runway and the company is the plane. The idea is that the company must build up enough speed to take off before they run out of runway. Once in the air they have to keep the engine running to stay aloft. Getting off the runway typically means producing revenue, and that means “shipping” i.e. delivering product. Producing revenue means continuing operations which, when successful, requires a markedly different management approach than start-up development.

This is a difficult transition for Bob. He has been a founder-driver of the company since its inception. He has made quick decisions that cut across organizational lines, and he has been the final arbiter in internal disputes. Up until the transition, he has been the one person that accounted for the company’s value: the investors and employees alike trusted him to drive the company to success. The risk is that Bob is unable to envision how the company will succeed after the transition, or he may fear failure because he does not feel that the company is ready. He may see runway extension, that is additional investment, as a recurring goal – in fact it may become his only goal. At some point, however, runway construction (additional investment) stops.

When it is time for the commercialization transition, it is probably time for Bob to bring some new people into the company. These new people will not necessarily be people who would have been valuable in the early stages, but they are likely to make the difference between success and failure during and after the transition. They will facilitate a competent organization that works with processes that drive continuous improvement as a way of achieving excellence. Bob’s role in the company should now change dramatically. The organization will change, and the tendency for Bob to make snap decisions and cut through organization lines to steer the company directly will become detrimental to success.

If Bob does not allow and enable the transition, what is probably the greatest achievement of his life may well end up in the weeds, much like an airplane that goes off the end of the runway before it achieves liftoff speed.

Charles Doty, of BlueShift Consulting

Austin Startup Week

Austin Startup Week happens this week. Modeled after the Boulder Startup Week in Colorado, the event highlights the startup community with events, pitches, meetups and more. Organized by Jacqueline Hughes, the event showcases co-working spaces, successful startups, soon to be successful startups, and other facets of the Austin startup community. Check out the site here for more details: http://www.atxstartupweek.com/

Charles Doty of Blueshift Consulting talks about Succession Management

Charles Doty of Blueshift Consulting talks about Succession Management

What can possibly happen? One of my business partners refers to the six D’s: death, disability, disagreement, divorce, disengagement, and disaccreditation.

When a key person in a small to mid-sized private company dies unexpectedly, his company may die with him. The value of the company is likely to decrease rapidly unless an effective Succession Management project is undertaken quickly.

Succession Management is a process developed to help companies get through the Succession Transition while maintaining the value of the business. A tremendous amount of value can be gained or lost during a Succession Transition, and many companies are underprepared to deal effectively with the crisis.

Each company is different, and often the problems are less related to the business itself and more to the relationships between individuals and groups who own the company, a roles and rules issue.

Assessment

The first priority for a Succession Manager is to understand the owners’ needs and objectives during the transition. The first phase of this effort may not take long, but the entire effort is an ongoing process that continues through the entire transition. Then the current status of the company should be determined with a report on financial status, business processes, personnel, and anything else that is important to understanding the value of the business.

Operations

It is vital to maintain the value of the company, continue to operate the business, and assure all involved that it will continue in the future. It may be that the end result will be replacing the missing person or sale of the business. Whatever the ultimate resolution, the future value of the company will be maximized by maintaining good relationships with personnel, supply chain partners, and customers.

Resolution

To see more about roles and rules and to find out how good outcomes are achieved, check our future posts.

Do Angel Investors Ever Have Down Rounds?

I met a new investor contact last week who happened to be a venture capitalist. At the start of the discussion he posed the question -- Do angel investors ever have down rounds? A “down round” is an investment of capital at a value below the previous fund raise. In thinking back over the last five years, I had to admit I hadn’t seen a down round in that time. In fact, I haven’t heard of anyone even suggesting such a thing.

There are several reasons for this. Previous investors don’t want to see any dilution. Entrepreneurs don’t want to admit they didn’t hit their milestones. Valuations at this stage are based on negotiations more than facts.

He went on to say that as a VC he sees quite a few deals coming to him that have $3M to $5M in revenue but their valuation is at $60M. $60M? After numerous angel rounds --all at increasing valuations they pushed the valuation out of the stratosphere.

So what can the VC do with this deal? Nothing. There’s no way they can fund it at that valuation. The entrepreneur operated under the false assumption that eventually the company would catch up to that valuation. But sadly, no.

My question to entrepreneurs is, “Do you really know what the value of your company is?”
“Do you know what it would take to raise the value of your company?”

Best regards,
Hall T.