But there are some parts of the process that few people talk about. And they're important; especially for startups raising money for the first time.
Signing a term sheet is only step one. Of course there are many steps involved in getting a term sheet. You'll submit an elevator pitch (followed by a bunch of other things), have numerous meetings, negotiate, etc. — all before you get the beloved term sheet. Getting a term sheet is a significant milestone but if you think the process is smooth sailing after that, think again. Post-signing of the term sheet is when the real work begins!
It might not be worth negotiating the finer points of the deal at the term sheet stage. The fact is, everything can be changed once a term sheet is signed, so negotiating on the finer points of it may be overkill. You may push hard to have very specific language in the term sheet only to realize when you get to the real agreement that it will be re-worded anyway. This doesn't mean you shouldn't negotiate for what you want and believe in, but recognize what the term sheet is: a letter of intent to invest, not a binding or absolute contract.
Due diligence is an "interesting" process. And for most entrepreneurs it's a completely foreign concept and frustrating experience. You've just got a term sheet, you're excited, you're ready to roll, and suddenly you get a rather extensive list of questions and deliverables the venture capitalists would like to see. Furqan Nazeeri does a very good job of explaining due diligence. He even includes a typical list of questions/requirements that Softbank uses (where he works.)
The paperwork is extremely detailed and extensive. Maybe this won't come as a surprise (because legal documentation is in a special category unto itself), but when the closing paperwork for your financing is in a binder so heavy it'll collapse your desk…that's something! And even with good lawyers on your side to wade through things, there's a good chance you'll be neck-deep in legalese.
Most of the deal focuses on negative details. This is the sad truth of legal documentation and contracts. Most of what you'll negotiate, and most of what will be found in the contract between you and the venture capitalists is there to account for potential problems. This can be frustrating because you want everyone on the same page; everyone's excited and eager to turn the business into a success, but here you are negotiating what to do when the shit hits the fan.
You pay all the legal bills. Apparently this is standard practice, although others may tell me otherwise…but it's something that first-time entrepreneurs wouldn't expect. You pay the legal bills of the venture capitalists. So they hand you the money, only to require that some of it go right back (to the lawyers.) Of course you pay your own legal bills too, so that's a potential double whammy. The best advice I can offer is this: Find out what others are paying to close similar sized deals and try to get a cap on fees.
Don't just focus on how much you're raising and what chunk of the company you're giving up. The amount you're raising and what you're giving up in terms of ownership are extremely important, but there many other things to think about as well. For example: the composition of the board of directors.
For entrepreneurs raising money for the first-time there's no experience quite like it, nothing to really draw a parallel to. The best thing you can do is find others that have done it before and get their advice — get them on board as advisers if need be. Find a lawyer with experience in these kinds of deals, especially within your industry. And educate yourself.
I would like to expand my professional contact network to include Business Development, Venture Capital and Business Financing & Investment professionals. In particular, I seek connections that have any involvement with the development, use, or process of Business Plans, Business Financing & Investment or Due Diligence.
I am in need of the opinions and comments of frontline business professionals. After viewing your LinkedIn profile, I would like to add you to my network.
Christopher Mathis Strategic Director for “Funding Roadmap” www.fundingroadmap.com fundingroadmap@yahoo.com 1-941-266-3862
Worth exploring this venture lending model, a hybrid between venture capital and traditional lending
Team
The Plenus team prides itself on its dynamic make up of operational and financial experts from the technology industry. Their combined expertise strengthens the team's ability to identify successful businesses and work fast to deliver the optimal financing solution for its customers.
INVESTMENT PROFESSIONALS:
Moti Weiss Managing Partner and Co-Founder
Ruthi Simha Managing Partner and Co-Founder
Shlomo Karako General Partner
Lee-Bath Nelson General Partner
Timor Arbel-Sadras Senior Principal
Guy Altberg Principal
OTHER PROFESSIONALS:
Ziv Ben-Barouch Chief Financial Officer
Orit Yeffet Controller
Elana H. Barzilay Legal Counsel
Yael Paz Director of Marketing and IR
Iris Orlovsky Office Manager
INVESTMENT PROFESSIONALS:
Moti Weiss Managing Partner and Co-Founder
Moti founded Plenus in 2000, bringing with him over 25 years of experience in high tech corporate and financial management. Previously, Moti was instrumental in turning around Sapiens International (NASDAQ:SPNS), a global software company. Under his leadership, annual sales doubled to approximately $100 million while the company achieved high profitability. As COO, and CFO of Oshap Technologies, a software product developer for engineering and financial services, Moti oversaw the IPO's of Oshap and its subsidiary, Tecnomatix Technologies. SunGard Data Systems acquired Oshap for $220 million. Moti previously served as Chief Economist and CFO of Teus Ltd., a holding company engaged in mergers and acquisitions. In 2000 Moti co-founded Plenus, Israel's pioneer venture lending fund. Under his leadership, Plenus has raised four different funds, saw 9 significant exits and extended its offerings to Mezzanine loans.
Moti holds a Bachelor's Degree in Economics, Tel-Aviv Business School
Email: motiw@plenus.co.il
Ruthi Simha Managing Partner and Co-Founder
Ruthi Simha is a veteran of venture lending in Israel with approximately 20 years of experience in high technology investing. Previously, Ruthi was the Manager of Bank Hapoalim's high tech finance division where she established the banks venture lending activities, making Hapoalim the first Israeli bank to take such an initiative. During her tenure at the Bank, accumulated a portfolio of over 60 startups and a credit portfolio of over $1billion servicing large Israeli enterprises. In 2000 Ruthi co-founded Plenus, Israel's pioneer venture lending fund. Under her leadership, Plenus has raised four different funds, saw 9 significant exits and extended its offerings to Mezzanine loans.
Ruthi holds a BA in Economics and an MBA in Finance and Marketing from Tel-Aviv University
Email: ruths@plenus.co.il
Shlomo Karako General Partner
Shlomo brings to Plenus 20 years of financial experience. Previously Shlomo was with Sapiens (NASDAQ:SPNS) holding positions of Corporate Controller, Finance Director and Vice President of Sapiens' activities in Israel. Prior to Sapiens he was an auditor at Porat & Co., a leading Israeli accounting firm.
Shlomo holds a BA in Economics and Accounting from Tel-Aviv University as well as a Masters Degree in Science and Management from the Polytechnic University in New York. Shlomo is a Certified Public Accountant in Israel.
Email: momik@plenus.co.il
Lee-Bath Nelson General Partner
Lee-Bath brings to Plenus over 15 years of hi-tech and business experience. Lee-Bath has been a venture capitalist for the past 4 years, including managing TDA Capital Partners' Israel-focused venture capital fund, and close involvement with TDA's India-focused venture capital fund. She is an active board member of several private hi-tech companies. Previously, Lee-Bath was a consultant to BRM and a Professor of Corporate Finance at NYU's Stern School. Prior to that she held various R&D positions at IBM and Intel in Israel.
Lee-Bath holds a BA (summa cum laude) and an MSc in Computer Science from the Technion, as well as a PhD in Business from Stanford University's Graduate School of Business.
Email: lnelson@plenus.co.il
Timor Arbel-Sadras Senior Principal
Timor has 10 years of hi-tech and business experience. Previously, Timor worked as a strategy and marketing consultant both as a freelancer in Israel and at Valoris Consulting in Spain. Timor consulted to some of Europe's leading telecom, media and technology firms on projects ranging from growth strategy to market entry and distribution channels. Prior to that, Timor worked for Intel in various project leader and project analyst positions, including overseeing the launch readiness of the Centrino chipset in the Mobile Processors Division.
Timor holds a BSc (Cum Laude) in Industrial Engineering from the Technion, and an MBA from ESADE Business School, Barcelona, Spain.
Email: timora@plenus.co.il
Guy Altberg Principal
Guy has 10 years of hi-tech and business experience. Prior to joining Plenus, Guy held several positions at Comverse (Nasdaq: CMVT) in development, marketing, and sales culminating in a Sales Manager position. In this capacity, Guy managed EMEA high-end product sales and handled deals ranging from $0.5-10mm in countries such as Italy, Holland, and France. In addition, as a project manager, Guy worked with Vodafone (CZ), Optimus (PT) and other Telcom operators.
Guy holds a BSc (Cum Laude) in Computer Science from CUNY Queens College in NY, and an MBA from Ben Gurion University.
Email: guya@plenus.co.il
OTHER PROFESSIONALS:
Ziv Ben-Barouch Chief Financial Officer
Ziv brings to Plenus over 15 years of financial and hi-tech experience. Prior to joining Plenus, Ziv served as Chief Financial Officer for Spacenet Inc., a leading US-based provider of wireless and hybrid broadband services. Prior to that, Ziv was the lead Financial Officer at ClearForest, a Plenus portfolio company specializing in text-mining software (acquired by Reuters Nasdaq:RTRSY). Ziv also spent 6 years in a senior management capacity with The Kibbutzim Creditor Arrangement Ltd an Israeli banking and government consortium managing over $1bb of distress debt.
Ziv holds a BA in Economics and Accounting from Tel- Aviv University and an MBA in finance from the City University of New York. He is certified as an Israeli CPA.
Email: ZivB@plenus.co.il
Orit Yeffet Controller
Orit brings to Plenus over 15 years of financial experience. Previously, Orit served as the Sapiens foreign Holding Companies' Accountant (NASDAQ: SPNS).
Orit holds a degree in Sociology and International relations from Bar-Ilan University and a second degree in Accounting and Economics from the Open University of Tel-Aviv
Email: ority@plenus.co.il
Elana H. Barzilay Legal Counsel
Elana has over 10 years of legal counseling experience in the Israeli hi-tech market. Before joining Plenus as the firm’s Legal Counsel, Elana worked as an Associate at Naschitz, Brandes & Co, one of Israel's leading law firms. During her 10 years at Naschitz, Brandes & Co., Elana specialized in commercial law, and had been involved in many high-tech transactions including: M&A, venture capital, venture lending as well as mezzanine transactions. Prior to her full-time position at Plenus, Elana served as one of Plenus' external legal counsels in the majority of the funds’ transactions, beginning with Plenus’ first venture lending fund in 2000.
Elana holds an LL.B from The Interdisciplinary Center in Herzliya, Israel, and a BA in Philosophy and Jewish Studies from Tel Aviv University, Israel.
Email: elanab@plenus.co.il
Yael Paz Director of Marketing and IR
Yael brings to Plenus over a decade of marketing and investor relations experience in the Israeli hi-tech market. Before joining Plenus, she was Director of Investor Relations at ECI Telecom (previously NASDAQ: ECIL), one of Israel's largest hi-tech tech firms, and prior to that, Director of Corporate Communications at Optibase (NASDAQ:OBAS) where she was responsible for the company’s marketing communications and investor relations activities worldwide.
Yael holds a BA in Economics from the Tel Aviv University.
Email: yaelp@plenus.co.il
Iris Orlovsky Office Manager
Iris brings to Plenus over 20 years of experience. Previously, Iris worked at Tadiran in various positions specializing in the fields of advertising, public relations, and HR. During this time, she led a number of employee training and recruiting programs, as well as special event planning and co-ordination.
Iris holds a BA in Economics and International Relations from Hebrew University, Jerusalem.
Many of the companies in which I invest spend more money than they make for considerable periods of time. Given the early stage at which I invest, this is neither surprising nor necessarily concerning (even those companies that could be cash flow positive if they so chose, often go negative in an effort to accelerate their growth). Nonetheless, it is an important factor with which I must deal as I try to help my portfolio companies move forward. After all, at some point any company burning more cash than it makes will have to acquire more money or go out of business.
The typical route for venture backed startups to bring more money into the company is to do a equity financing. The management of that company goes out and pitches various investors and, with any luck, sells equity in the company in exchange for some number of millions of dollars (that process is repeated as many times as is necessary until the company turns cash flow positive, is sold or goes out of business -- even the much coveted IPO is just another sale of equity for cash and if the company remains cash flow negative it will still ultimately need to do a secondary or it too will go out of business).
In the alternative, one way that a company can extend its runway without selling additional equity is to borrow money. There are a number of potential sources of debt for early stage companies. To my mind, the key issue for any company considering debt financing is whether or not the debt will actually extend that company's runway. Often times, proposed Debt will bring money into a company when it is already cash rich (usually shortly after a equity financing) but will bring with it a payment schedule that does not in fact give the company any more time before it runs out of money. In those circumstances, it is hard to see how borrowing the money makes economic sense.
There are, however, circumstances in which debt makes a pile of sense for a company. I recently received a newsletter from Lighthouse Capital that spoke directly to the issue. A buddy of mine named Anurag Chandra, who is a Managing Director at Lighthouse, wrote an article on how one may reasonably assess the appropriateness of venture debt for your company. I found the article to be a valuable overview of the issues at hand and Anurag has kindly agreed to let me reprint it here. So without further ado, here are Anurag's thoughts on venture debt.
There is no question that in today’s fundraising environment, capital efficiency is paramount. Ray Lane, among other industry leaders, has commented that a software startup should require no more than $20-25 million to achieve positive liquidity. This means that today’s entrepreneur needs to stretch every dollar to achieve success.
Making equity dollars last is particularly important – since they come at the high price of forking over a percentage of company ownership. Although the price is high, these precious equity dollars are often a critical factor in an emerging company’s success. Yet taking this equity investment means accepting painful dilution due to the low valuations given to companies at this early stage. So what’s the alternative?
Enter venture lending Venture lending offers a low-cost method for venture-backed companies to leverage fixed assets and their enterprise value to get more runway out of their equity dollars. These types of loans can give a young company the extra time and resources needed to reach major product or customer milestones. And, being able to achieve important milestones such as shipped product or securing a first customer can provide real uplift in valuation and significantly reduce dilution at the next VC financing round.
Venture lending is usually offered in two forms: “growth capital” and equipment financing. Growth capital provides operating capital that can assist in product development, product or geographic expansion, acquisition of complementary technologies, or just about any key operational imperative. Typically the cost of such capital is interest, along with principal, paid over a fixed period of time (generally 24-48 months, depending on the company’s risk profile) and a small pledge of stock warrants. There may also be a “final payment,” which helps the lender earn the appropriate risk adjusted yield, but pushes off the cash outlay by the borrower to a future date so it doesn’t have to part with precious (and typically more expensive) dollars in its early years. Some flexible providers are even willing to structure deals that provide companies with a period of interest-only payments to help preserve cash at critical junctures for a company. Meanwhile, equipment financing allows a company to borrow against the equipment it purchases, such as computers, manufacturing equipment or other assets, and frees up the equity dollars that would have otherwise been spent to obtain such items for higher value add use, namely research and development or sales and marketing. Like growth capital loans, the lender receives monthly payment of principal and interest plus warrants and possibly a final payment.
Both forms of venture lending are available to promising early-stage startups backed by top-tier venture capitalists, usually when they are still cash flow negative. Venture loans may either help you raise less equity than you otherwise would have or help you increase the total amount of capital available to your enterprise with less dilution. From a financial planning point of view, venture loans can be an attractive insurance policy. If there’s risk that critical milestones may slip, having the ability to borrow and extend runway so those milestones can be safely achieved insures a trip to the equity fundraising market with a better valuation. If the milestones are not in jeopardy and you ending up not borrowing, your worst case is to have given away warrants that typically amount to less than one or two percent of dilution. (Compare this to raising money at a lower valuation by having to go to market with those significant milestones not achieved).
Bank loans vs. venture loans Established companies leverage their balance sheet assets through typical asset based debt products offered by commercial banks. Venture lending is territory that most banks are wary to enter because early-stage companies just represent too much risk for traditional banks because such companies have no tangible assets. Typical bank financing is tied to receivables. You must have sales revenue and probably “meaningful” sales revenue to attract bank financing. Even then, an established company with a steady, predictable revenue stream can use accounts receivable financing at best to smooth out cash needs, not leverage its enterprise value to extend runway. For a company that is cash-flow negative or just starting to achieve revenue, it’s worse because it’s tough to rely at all on a formula based A/R line for expansion and growth. If you miss a monthly or quarterly revenue projection, chances are you’ll have less in receivables than anticipated and may have to pay down your outstanding on your accounts receivable line of credit.
Having said that, there are banks that offer venture loans to early-stage companies. But be careful. At smaller dollar amounts bankers can convince their credit committees and the federal regulators that monitor their bank to make “aggressive” venture loans, but it is with the understanding that the goal is to grow the lender into a traditional commercial credit, replete with financial covenants and asset-based borrowing, which box in a company. Either it’s the proverbial “banks are only willing to lend you money when you don’t need it” or it’s that the typical slippage in a startup’s projections necessitates a talk with the banker about “waiving” a covenant violation. Banks also typically require young companies to maintain their deposits with them and require a “right of offset” in the loan agreement. This right of offset can be used by the bank at its discretion to pay down the loan in an event of default.
Independent venture lending providers, particularly ones that are private companies, have the ability to structure flexible deals that give you true runway extension. And, the better funded ones can support their companies with these structures at higher dollar amounts and through a startup’s maturation process. The established venture lenders also know how to evaluate and manage the risks involved in dealing with early-stage companies. They are willing to take a lien on a company’s assets when no real assets exist in anticipation of success.
Less expensive in the long run Perhaps the greatest benefit of venture lending is that it injects money into a business without heavily diluting the equity stake of the entrepreneur or venture capital investors. While equity dollars are necessary in financing a company’s development and a typical prerequisite to obtaining venture loans, they come at the high price of sharing significant ownership. Venture loans can be a real aid that can enable an early-stage company to have access to low-cost capital and minimize entrepreneurs’ and VCs’ dilution. An added benefit for VC’s is that they can improve their ROI on a given deal by encouraging their portfolio companies to take on a responsible mix of debt along with their equity dollars.
Consider this example. A communications startup determined that they needed a round of financing totaling $47 million, of which $8 million would be needed for equipment. They evaluated whether it was in the company’s best interest to finance the equipment using debt or equity. In other words, they were weighing whether they should raise $47 million from VC’s, or $39 million from VC’s with the expectation of financing the additional $8 million of equipment through a venture lease. After taking a careful look at options, they concluded that the larger equity sum would cause significant dilution that would be costly to company employees at time of liquidity; meanwhile the venture lending route would preserve more of the employees’ stake in the company and simultaneously create a stronger balance sheet.
Choosing a venture lending partner When considering venture loans, it is important to ask key questions that will determine if the provider is going to offer you the flexibility and resources needed to help finance growth of your company.
Important questions include:
Is the lender really offering you cash runway? Or do they require cash balances equal to the amount your borrowing? Will most of the loan be paid back before you run out of cash? It’s important to examine exactly what the lender is offering. If the deal comes with too many restrictions, chances are you need a more flexible partner that will work with you to structure a deal that accommodates your company’s specific needs.
Does the lender have a track record of supporting its companies through various market cycles? Every startup has hiccups. The need to restructure debt can happen to the most promising of companies. Ask your lender for case studies or referrals where they’ve demonstrated an “investor's mentality” of supporting its companies through various market conditions. If the lender is a bank, is it their ultimate goal to help you achieve market success or is it to grow you into a traditional commercial credit customer? Beware of the limitations of commercial banks that claim to offer venture loans. Often times, they will finance an initial deal, but their goal is grow you into a commercial credit customer. Plus, they are burdened with heavy regulations that make it difficult to offer the kind of flexibility that startups often require.
Does the provider understand your market and your requirements for success? While venture lenders don’t take board seats and offer the same level of day-to-day guidance companies as venture equity investors, it is critical not to underestimate the importance of the partner with whom you'll be working. The better he or she understands your business and the market you are playing in, the less likely they are to view your success or promise
Not surprisingly, Anurag, as a venture lender, puts a positive spin on the debt world. I believe that both debt and equity can serve a company well. The crucial question is how much the money will cost (in equity, interest, management time, etc.) and will it materially increase a company's options.
The attached IRR Multiplication Table is a very useful reference tool.
The data table calculates IRR by years (x-axis) and multiple (y-axis).
I suggest printing it out and keeping it by your desk.
When you are on the phone you can impress your friends/boss by quickly reeling off the IRR on a 5x over 5 years (38%), 10x over 6 years (46.8%), 3x over 3 years (44.2%) etc.
This is what my valued friend, Koh Soo Boon, Managing Partner of IGlobe carries around her purse. A secret weapon that all angels / VCs should equip
The attached IRR Multiplication Table is a very useful reference tool.
The data table calculates IRR by years (x-axis) and multiple (y-axis).
I suggest printing it out and keeping it by your desk.
When you are on the phone you can impress your friends/boss by quickly reeling off the IRR on a 5x over 5 years (38%), 10x over 6 years (46.8%), 3x over 3 years (44.2%) etc.
This is what my valued friend, Koh Soo Boon, Managing Partner of IGlobe carries around her purse. A secret weapon that all angels / VCs should equip
Gingko Capital is changing the way businesses are funded, and it is doing so 15 minutes at a time. Use your fame to fund a business.
Andy Warhol predicted that everybody would get 15 minutes of fame, but even he couldn't have envisioned how far those 15 minutes would go. At Gingko Capital, we offer instant fame seekers their 15 minutes in return for a payment that will go towards supporting fledgling businesses.
Gingko Capital offers users their 15 minutes of fame for the price of $15.00.
For that payment, fame seekers are featured to an international audience on Gingko Capital.com as well as other sites to which content is fed through RSS and XML feeds.
Click here to book your 15 minutes of fame:
Further, Gingko Capital is giving away a whopping $15,000 to the first person who helps refer 1,500 people and other subsequent prizes as well. This is in addition to the standard payment of $5.00 per referral (refer someone). Gingko Capital charges no per-click fee, no annual subscription and no maintenance fees, merely a one-time $15.00 registration fee.
"Too often, solid businesses go under simply because of a lack of further funding, even when they have a good thing going, With the money raised from Gingko Capital, we hope to help innovative entrepreneurs realize their dreams and give everybody the fame, at the nominal rate of a dollar a minute that they seek."
Gingko Capital is changing the way businesses are funded, and it is doing so 15 minutes at a time. Use your fame to fund a business.
Andy Warhol predicted that everybody would get 15 minutes of fame, but even he couldn't have envisioned how far those 15 minutes would go. At Gingko Capital, we offer instant fame seekers their 15 minutes in return for a payment that will go towards supporting fledgling businesses.
Gingko Capital offers users their 15 minutes of fame for the price of $15.00.
For that payment, fame seekers are featured to an international audience on Gingko Capital.com as well as other sites to which content is fed through RSS and XML feeds.
Click here to book your 15 minutes of fame:
Further, Gingko Capital is giving away a whopping $15,000 to the first person who helps refer 1,500 people and other subsequent prizes as well. This is in addition to the standard payment of $5.00 per referral (refer someone). Gingko Capital charges no per-click fee, no annual subscription and no maintenance fees, merely a one-time $15.00 registration fee.
"Too often, solid businesses go under simply because of a lack of further funding, even when they have a good thing going, With the money raised from Gingko Capital, we hope to help innovative entrepreneurs realize their dreams and give everybody the fame, at the nominal rate of a dollar a minute that they seek."
If I didn’t see it with my own eyes, I wouldn’t believe it, but Wilson, Sonsini, Goodrich, and Rosati, one of Silicon Valley’s dominant law firms (as in Apple, HP, etc), has created a free, online term sheet generator . This is the site’s description of the tool:
"This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents."
If you are raising venture capital, this is a great tool for you.
If I didn’t see it with my own eyes, I wouldn’t believe it, but Wilson, Sonsini, Goodrich, and Rosati, one of Silicon Valley’s dominant law firms (as in Apple, HP, etc), has created a free, online term sheet generator . This is the site’s description of the tool:
"This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents."
If you are raising venture capital, this is a great tool for you.
1. What quantitively and qualitatively are you trying to achieve? How do you measure success? What is success to you? After 10 years of doing this, what do you hope to achieve?
2. How does the company make money? This may not seem like a question you need to ask, but what is important is where the cash is coming from and how it is disseminated through the company. If management can’t provide a clear answer, there may be a problem.
3. Are our customers paying up?
If there's one thing that will make or break your company, it's cash flow.
Cash comes from sales. But a sale isn’t cash, until the customer actually forks it over. Express your concern about sales growth compared to receivables.
4. What could really hurt – or kill – the company in the next few years? Doing things right in business has gotten a lot of press in recent years. Results are what really matter, and results come from both ideas and execution, but the biggest enemy of great execution is mistakes. The problem with mistakes is that they creep
up on you. Are we prepared to handle unexpected events? Ask management to consider “the worst case
scenario.”
5. Do we know what our competitors are doing? Competitive intelligence gives you hard facts on which to
base decisions about marketing tactics, R&D investments, product launches and overall business strategy. Is
our company a leader, follower, or niche competitor in our industry category? Are our costs lower, sales
brisker, our margins deeper than our competitions?
6. If the CEO left tomorrow, who would run this company? An organization’s fate is more important than the
fate of its current leadership. It is imperative to have a contingency plan in place and be grooming others on the team at every level of the organization.
7. How are we going to grow? Continuous quality improvement is the hallmark of successful companies, worldwide. Does the CEO’s growth plan call for consciously developing and introducing improved versions of its own current products along with significant technological advances?
7. Are we living within our means? A company cannot grow if they are spending money today that will be needed for bills tomorrow. Are our key expenses, especially salary and benefits, under control?
8. How much does the CEO get paid? Is the total company properly tied to long-term corporate performance? Most people don’t take the time to do the math – salary + bonus + stock, etc. The final compensation number is what you must have in mind when judging whether the CEO is paid fairly.
9. How does bad news get to the top? Typically, bad news travels down, not up. Bad news has to get to the people that can do something about it. Create a system that guarantees anonymity and eliminates fear of reprisal – whether it’s an employee hotline, survey or third-party reporting service.
1. What quantitively and qualitatively are you trying to achieve? How do you measure success? What is success to you? After 10 years of doing this, what do you hope to achieve?
2. How does the company make money? This may not seem like a question you need to ask, but what is important is where the cash is coming from and how it is disseminated through the company. If management can’t provide a clear answer, there may be a problem.
3. Are our customers paying up?
If there's one thing that will make or break your company, it's cash flow.
Cash comes from sales. But a sale isn’t cash, until the customer actually forks it over. Express your concern about sales growth compared to receivables.
4. What could really hurt – or kill – the company in the next few years? Doing things right in business has gotten a lot of press in recent years. Results are what really matter, and results come from both ideas and execution, but the biggest enemy of great execution is mistakes. The problem with mistakes is that they creep
up on you. Are we prepared to handle unexpected events? Ask management to consider “the worst case
scenario.”
5. Do we know what our competitors are doing? Competitive intelligence gives you hard facts on which to
base decisions about marketing tactics, R&D investments, product launches and overall business strategy. Is
our company a leader, follower, or niche competitor in our industry category? Are our costs lower, sales
brisker, our margins deeper than our competitions?
6. If the CEO left tomorrow, who would run this company? An organization’s fate is more important than the
fate of its current leadership. It is imperative to have a contingency plan in place and be grooming others on the team at every level of the organization.
7. How are we going to grow? Continuous quality improvement is the hallmark of successful companies, worldwide. Does the CEO’s growth plan call for consciously developing and introducing improved versions of its own current products along with significant technological advances?
7. Are we living within our means? A company cannot grow if they are spending money today that will be needed for bills tomorrow. Are our key expenses, especially salary and benefits, under control?
8. How much does the CEO get paid? Is the total company properly tied to long-term corporate performance? Most people don’t take the time to do the math – salary + bonus + stock, etc. The final compensation number is what you must have in mind when judging whether the CEO is paid fairly.
9. How does bad news get to the top? Typically, bad news travels down, not up. Bad news has to get to the people that can do something about it. Create a system that guarantees anonymity and eliminates fear of reprisal – whether it’s an employee hotline, survey or third-party reporting service.
Was invited as a judge in the NUS Technopreneurship course by Douglas Abrams
(That's the back of my head.) Caught up with a bunch of friends, Patrick and Jeff and met a bunch of new ones.
As I listened to the pitches, the young entrepreneurs got me thinking about technological innovation and business inovation - How to create the right innovation portfolio. The most radical innovation combine the two seamlessly
This was actually a band that enabled you to detect whether you had been in the sun for too long- presented by one of the companies.
VCs invest in innovation; new ideas, new products, new services, and new approaches to the marketplace that result in opportunities to build new businesses.
Over the years, entrepreneurs have been mostly known for technical innovations. And there are many great companies that have been built on top of technical innovations like Intel, Cisco, Oracle, Apple, and arguably Microsoft.
But I wonder if business model innovation isn't as powerful, maybe a more powerful opportunity to build a new business. If you think of Federal Express, Google, Netflix, these companies were built on business model innovations. Of course, there has to be some technical innovation around the edges, and in the case of Google, you can argue it was a combination of both technical and business model innovation that powered its rise, but nonetheless, these businesses have grown because they offered customers a new way to do something that had not been offered before.
You don't always have to invent the new business model. Google didn't invent paid search, Overture did, but they executed it better and reaped a large portion of the rewards for that innovation.
The company, called Bag, Borrow and Steal, is bringing the "netflix rental model" to the fashion accessory market, initially handbags, but over time possibly much more. That's right, for a monthly fee, you can have any handbag you want for as long as you want it, then you send it back and get another one.
I have no idea if this business model will work in the fashion accessory market, but if it does, it would represent a new way to market fashion accessories. It could be a very large opportunity.
This company (Ideal Fit fits you ideally) has a good pitch - and it aspires to reduce returns to <5% by body shape recognition
As the technology business becomes ever more competitive, with developers building things right and left, with less need for significant investment, and the globalization of the technology marketplace, I wonder if technical innovation is going to become harder to produce and if business model innovation is going to become more important.
For those who would like to get a heads-up in pitching to VCs, check the below out
Was invited as a judge in the NUS Technopreneurship course by Douglas Abrams
(That's the back of my head.) Caught up with a bunch of friends, Patrick and Jeff and met a bunch of new ones.
As I listened to the pitches, the young entrepreneurs got me thinking about technological innovation and business inovation - How to create the right innovation portfolio. The most radical innovation combine the two seamlessly
This was actually a band that enabled you to detect whether you had been in the sun for too long- presented by one of the companies.
VCs invest in innovation; new ideas, new products, new services, and new approaches to the marketplace that result in opportunities to build new businesses.
Over the years, entrepreneurs have been mostly known for technical innovations. And there are many great companies that have been built on top of technical innovations like Intel, Cisco, Oracle, Apple, and arguably Microsoft.
But I wonder if business model innovation isn't as powerful, maybe a more powerful opportunity to build a new business. If you think of Federal Express, Google, Netflix, these companies were built on business model innovations. Of course, there has to be some technical innovation around the edges, and in the case of Google, you can argue it was a combination of both technical and business model innovation that powered its rise, but nonetheless, these businesses have grown because they offered customers a new way to do something that had not been offered before.
You don't always have to invent the new business model. Google didn't invent paid search, Overture did, but they executed it better and reaped a large portion of the rewards for that innovation.
The company, called Bag, Borrow and Steal, is bringing the "netflix rental model" to the fashion accessory market, initially handbags, but over time possibly much more. That's right, for a monthly fee, you can have any handbag you want for as long as you want it, then you send it back and get another one.
I have no idea if this business model will work in the fashion accessory market, but if it does, it would represent a new way to market fashion accessories. It could be a very large opportunity.
This company (Ideal Fit fits you ideally) has a good pitch - and it aspires to reduce returns to <5% by body shape recognition
As the technology business becomes ever more competitive, with developers building things right and left, with less need for significant investment, and the globalization of the technology marketplace, I wonder if technical innovation is going to become harder to produce and if business model innovation is going to become more important.
For those who would like to get a heads-up in pitching to VCs, check the below out
In a VC community, there will be the old guards who specialize in investing in companies，business model, industries. The other extreme is “new economy VC” who specialize in backing talented people and the entrepreneurial team only. Then there are the ones in between who are somewhere in between, with a varying spectrum of focus.
Instructions
Difficulty:Moderately Challenging
Things You’ll Need:
A wide network
Himility to learn
Adaptability
Step1
Ask yourself the following regarding your venture: Is it a big market? - off target in a big market – can still make it - off target in a small market – dead - how much will shift to the Internet?
Step2
Can your product or service win over and defend a large share of the market? -What kind of competitive position will you have? -What makes your products or services unique enough to ward off copycats? -Can you stake out a significant chunk of your market and defend it? Can someone reproduce what you are doing overnight?
Step3
Can your team do the job? Getting a VC doesn’t equal success. Don’t be confused. VC is not a simple process – time-consuming. VCs and entrepreneurs have different risk profile. Entrepreneurs are supposed to embrace high risk and hopefully reap the concomitant high rewards. VCs embrace less risk because they are diversified across a portfolio. Limited Partners who invest in venture capital funds take on even less risk and their returns are therefore lower.
Tips & Warnings
People have no hesitation paying for a need i.e. when it is raining, people will not take a bus but readily pay for a taxi. The trick is to develop the acumen to identify a need. More importantly, one has to discern between a need and a want / nice-to-have. Better still, the product/service must both fulfill a need and create pleasure.
I just checked and there are 927 Harvard Business School alumni who list their industry as venture capital and according to the NVCA, there are 798 venture capital firms in the US. So, on average, you can expect about 1 HBS alumni per fund. If you aren't a HBS alumni, you can form a joint venture here
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