Fanminder Blog

<I wrote this post a couple of days ago and am just now publishing it>

A little down in the doldrums today, can’t quite put my finger on it, but i’ll try: It was just one of those days where there seems too much to do, too many different sets of opinions, and the goal post seems far away. Writing is beginning to be therapy, so bear with me while I get it out.

Maybe it’s because i’ve absorbed too much info in the last two days and I need time to sort it out, it all feels like noise right now. It’s funny, because we’ve spent these days meeting awesome new people who are committing to help out and who we’ve already learned so much from, so why be upset? Yesterday and today we:

• Reviewed many of our key cash flow assumptions with an experienced CFO at a 150 person start-up
• Learned about accounting and bookkeeping needs from an accounting firm we are thinking of using once funded,
• Ripped into our direct sales approach with a leader of sales team at a comparable-type fast growing company,
• Pitched our banker who provided constructive criticism on our investor pitch. She shared excellent advice but it will result in a major overhaul of just about the entire pitch. <sigh>…tiring but so necessary.

This entrepreneurial gig isn’t for the faint-hearted – or the person who can’t keep re-inventing, staying flexible, taking input and revising on the fly.

Here’s some of the key advice we received over the last two days:

• Ditch the busy powerpoints. Anyone who knows me will be laughing right now. I guess Intuit taught me a very detailed ppt approach that I need to unlearn – shifting those pages to appendix and follow-up slides…need to remember above all, it’s a conversation and they’re going to be looking at us, not the slides.
• They’re not competitors silly, they’re your acquirers! When we’re discussing the competition, the investor is really thinking “Which one of these companies is going to buy this company??” I also liked advice we heard about ensuring you realize that anyone who buys your company is going to change its culture to the culture of the acquirer, so pick a company that matches your style or else be ready for significant disappointment at best.
• How will the Investor make money? Investors want to know when they’re going to get an exit, for how much. They are looking to reduce risk as their #1 priority. Repeat after me “Have we demonstrated this idea will work for millions of people? We need to address a huge space.
• Pre-funding, many advisors will be very helpful, usually for reduced or no fees. There’s no shortage of advisors (such as accountants, CFOs, and lawyers) who will work for reduced or no fee very early on, providing insight, critiques, and help to get going. If and when you get funding, they come on board and get paid. This seems to be part of this great start-up infrastructure here in the valley. I love these people.
• There’s about one million types of insurance we’ll need: Product liability, errors and omissions, officers, umbrella, theft, disability…and a million taxes to pay. OMG. And this all before the economic meltdown and our era of burgeoning government.
• We can make a inside salesteam work - Our sales advisor created a very compelling case for why we should focus on hiring inside versus in the field, not the least of which is because she’s done it successfully. It’s one of those areas where we’re going back to the drawing board and incorporating this advice plus some others to re-think the acquistion plan.
  
• Sub-lease! The office we visited is about $35/sq foot – an outrageous sum of money. One advisor said “be a light company…don’t sign anything long term, keep laptops only, don’t do anything or buy anything you can’t drop in a box and haul to your next office as soon as you get an offer for lower rent. I’ve seen alot of companies go belly up due to expensive leases.” Good advice! We’ll take it. I was hoping for more like $5/square foot from a company with too much space on their hands.

By now you’re realizing I’m a shnuck because this is good advice and there’s no reason to feel down. And you’d be right. So there you have it.

Ok, time for a little TV. I’m going to watch the series finale of The Shield.
I’m not letting our cat in, he is ripping up our furniture.
Instead I’m going to pet our dog, Koby.

Long post, apologies in advance. Hope it’s helpful.

So as I’ve been saying if you’re seeking funding for the first, go attend a bootcamp put on by any number of angel forums. We attended the Keiretsu Bootcamp, put on by the Keiretsu Angels Forum, the largest angel forum in the U.S. (no place on web to link to, so my post will have to suffice )

If you’re an entrepreneur, you should go to a bootcamp.

The day was $125 very well spent. There were nine sessions across all the key areas needed for funding, each generally excellent. Some seemed a bit long, some a bit boring or rote, but usually each was dense with hard-earned experience from experts in their fields…here’s the list:

• Greta Mowry, Verge
• Jeffrey Schox, Schox PLC Patent Group
• Mark Wiser, Wiser Marketing Group
• Chris Andersen, Atlas Business Advisors
• Larry Kammerer, Mohler, Nixon and Williams
• Scott Smith & Teresa Pahl, Hanson Bridgett
• Keith Zachow, Omega Valuations

You can download my summarized notes of the bootcamp:

Download keiretsu_bootcamp_11708_notes.doc

Apologies in advance is too much of it is cryptic, I wasn’t writing it at the time for an audience but believe I should share with others who can’t easily attend. Email me if you find something interesting enough to drill down on.

There was an eclectic mix of companies in attendance, about 35 total. I think we were the only mobile company there:

• Pollution control
• Online games
• Talent marketing
• Order a cab through the internet
• Wellness spa in Hawaii
• Organic and ethical food café
• Where to go stay and eat if you’re gay
• A coach for SMBs
• “Green” real estate investors
• Premium fashion developed under sustainable line
• High quality prosthetic limbs
• Web platform for direct food distribution from farmer to wholesale
• Small molecule pharmaceutical
• Carpet recycling
• Packaged raw foods, minimally processed
• Open source platform for middleware to do cloud computing
• Plasmas for diagnostics and treatment
• Drive a real car in a virtual world (hmmm…)

As with many events we’re attending these days, I’m finding it comforting and invigorating to be around like-minded and similar goal-oriented entrepreneurs.

Here were a few of the highlights:

Great info on how to develop your offering strategy – Very “P&G-like”, I imagine this could have been quite eye-opening for many attendees if they don’t have that background. Many good things to remember, such as:

• Don’t forget the marketing budget needed to support growth
• Find the influencers to the sale
• Are you an incremental or replacement spend product?
• Are you a product that offers “more for more”, “more for less”, “more for same”, or “same for less” etc..
• Investors are going to speak with your customers, better get them ready

I never knew Patent Law could be so interesting! – Peter is an awesome presenter and seemed to know his stuff cold. And he has this wickedly dry delivery style. I never seemed to put much stock into patents, and I’m still not quite sure what to make of them. That said, we learned many things that bust up myths about patents. Bottom line is that I’m going to pay a closer look to IP and likely file a patent(s) as soon as we have money to pay for it.

Finally, here’s a semi-random collection of tips that seem important One note: After all these years in corporate america across marketing, product development, and business development, it was a both humbling exciting to realize that there’s still so much to learn out there. So have fun…
On the pitch Purpose of a first pitch is to get the date, not to get married. Keep it short and so easy to absorb that a listener can explain it to someone else.

Which financials to create? Only the Cash Flow Projections. If they ask for more, they’re either shining you on or not a savvy investor. Don’t provide  more than a year past the cash running out, 2-3 years typically.

During due diligence When speaking with investors: Make sure we hit our commitments to the business during due diligence. Stay focused on what’s right, not what they want us to do.

Using the funds Clearly outline how we intend to use the funds. Keep in mind that after using all the funds we need to explain how the company is now more valuable.

Structuring the deal All terms are negotiable. Convertible notes may be on the wane with the economy. No matter what you created before the investor, investors will trot out “market says this or that.” Raise enough capital so you don’t get “jammed” down the road because you took too little. Don’t’ get angel funding from non-accredited investors. Look out early for investor conflicts between rounds.

How many board members? 3-5 is typical.

Valuing your company Value is determined by supply and demand so there’s no right or wrong answer. Go out and build a “market” for your company and get a higher valuation. Make sure you like your investors as you’re getting married to them for the life of the company.

Due diligence Don’t keep the round open too long – it’s like a house becoming stale on the market. And, wow, you’ll need to spend 8-12 hours/week supporting the deal. Be super responsive to questions from investors and pass around each person’s questions and your answers.