Finding Capital: The Technology Center Process
H. Randall Goldsmith, THE JOURNAL RECORD
Venture capital in the New Economy has doubled. In spite of that fact, the amount of investment capital is challenging is as ever to access. The amount of money has increased and so have the number of deals.
Some venture capitalists report seeing five to seven times as many deals as last year. That means fewer than 2 percent of deals reviewed are getting funded. Part of the reason is the amount of money in each deal is higher. Another major factor is the number of e-commerce deals, which attract more and larger investments, has increased 1,000 percent in two years. And we find when considering investments made by venture capitalists in Internet deals, only 12 percent of investment dollars go into start-ups.
Given the level of competition in today's market and our remoteness to the hot capital markets, the Tech Center expends considerable resources in helping companies prepare for the day when they get the opportunity to make their pitch. Some Tech Center clients have been around the block before and need little or no coaching while most are new start-ups and are receptive to all the assistance they can get.
The process goes something like this.
New clients are given an opportunity to share their business concept at an initial meeting. Questions are asked, recommendations are made, and clients are given a self-scoring business plan evaluation and an outline for an oral presentation. The client leaves the meeting with a variety of action items. One is to score their business plan. The reasons we require this step is to ensure the client has included all the information an investor expects to see and to minimize the number of times our staff must read the plan. In most cases, new clients must rework their plans to reduce the length, strengthen the financials, and clarify why their opportunity is uniquely superior to the competition.
Another action item is to develop a "stand up" presentation supported with visual aids, preferably a computer-based "power point" presentation. The initial challenge is limiting the presentation to a maximum of 20 minutes.
Investors know what critical information they want to hear. They want to be informed but not educated on the product, market or industry. Investors want the entrepreneur to sell them on why the business venture is a good investment opportunity. One of the most common mistakes entrepreneurs make is spending their valuable time selling their product in lieu of selling the business opportunity.
When the entrepreneur is prepared to make a presentation, the client schedules a dress rehearsal before Tech Center staff. …