Tag Archives: Funding

How Do You Optimize a Financing Pitch? Seven Suggestions

Situation: A company is drafting a pitch for their next round of funding. They want to reach both current and a new set of investors and highlight the improvements that they’ve made since their last round of funding. How do you optimize a financing pitch?

Advice from the CEOs:

  • Work on a quick demo of the site. This is critical for a software company. The site must clearly and quickly show what differentiates you.
  • When you sit down with potential investors, start your pitch with a catchy statement, e.g., “We’ve all heard about ‘pay it forwards’. I want to talk to you about ‘Job-It Forward’.”
  • Start the presentation with an overview and a simple illustrative explanation so that the audience instantly gets what you are doing. For example, “we’re about generating social capital and here’s an example of how we do this.”
  • Be careful not to drown your audience in detail. Limit yourself to 3 bullets per page. Use graphics rather than words as much as possible. Most people can only absorb a limited amount of verbal information, but they remember pictures.
  • If you’ve already started talking to potential investors, what are your results? What feedback have you received to date? Analyze this and adjust your presentation and pitch accordingly.
  • Can you show a potential funder ROI? For example, if you give us $X, we will generate $Y in terms of return. You want to demonstrate IMPACT! Those who will support you want to see the advantage of investing in you vs. other options available to them.
  • Include a slide showing sources and uses of money spent to date. Show how you will use the money that you wish to raise.

How Do You Focus Your Sales and Marketing? Eight Thoughts

Situation: A company has a technology road map and a flexible set of technical capabilities. To date they have elicited broad interest from a variety of different markets. They currently don’t have the resources to pursue a large number of different markets, and will likely need their next round of funding within the next year to year and a half. How do you focus your sales and marketing?

Advice from the CEOs:

  • A race to generate interest from a number of markets is a valid strategy at this stage of your development; provided that you raise or generate the cash to survive. This caveat describes your critical challenge – determining how long you can afford to maintain and fund a broad strategy.
  • Look at your burn rate and timeline. Pursue options that will generate cash before your next round of funding. Your top objective is to validate your ability to generate revenue prior to your next round.
  • You haven’t yet found the fish. You are fishing and have nibbles but no bites. Look at what your people are doing and start to eliminate options that are less likely to pay off both short and long-term.
  • To preserve development cash, create a new rule. Any project that you accept must come with development dollars. This will eliminate some smaller prospects and targets but will help you to focus on others which are more immediately promising.
  • When one company was in this position, their rule was that the first PO gets the engineers. No PO, no commitment of resources.
  • Another’s company’s policy is that they don’t work for free.
    • A softer version is to give the prospective client 30 days to produce an LOI for the proposed project or you will go elsewhere.
    • Even better is an LOI and $50K up front.
  • A third company’s strategy from the beginning was always to hunt for elephants – even when they had no money. This has worked well both short and long-term. It represented the level of faith that they had in their technology and capabilities.
  • The team needs to hear this message from you.

How Do You Fund a Start-Up? Four Suggestions

Situation: Early stage companies often find it difficult to raise funds from traditional sources. An experienced CEO wants to help certain new companies of which she is aware in two ways – assisting them in receiving funding, and then helping to assure that they reach key milestones.  What is the best way to profitably address this ambition? How do you fund a start-up?

Advice from the CEOs:

  • Build relationships with a few select sets of local investors – venture capitalists, angels, and private investors – with whom you have strong credibility. For a retainer or fee, agree to bring them a number of new pre-vetted companies in the next year, and post-finding, help the companies to succeed and hit milestones. From the companies that you bring to funders, ask for equity in return for securing funding and providing guidance.
  • Put yourself in the shoes of the person who will pay you – what do they want and how do you deliver this for them? Develop statistics from your past successes that highlight your capabilities. Don’t be shy about your accomplishments.
  • What are you passionate about? If the answer is development – linking technology entrepreneurs to strategic partners and then being an accountability partner to assure that milestones are met – this will be your focus and your pitch to both funders and tech companies.
  • Your value is linking the entrepreneur to the funding source and being an accountability partner.

How Do You Ask for Consideration? Four Suggestions

Situation: A company played matchmaker between another company in the concept stage and a funding source. Having performed this service, the company would like to get something in return. There is no agreement in place regarding consideration for this service. How do you ask for consideration?

Advice from the CEOs:

  • A way to introduce the conversation is to say – We’ve been happy to help you identify funding for your company. What kind of role and contribution do you see for us as you move forward? This prompts the other company to confirm the inequity, instead of you, and makes it more likely that they will offer you something.
  • This is really a relationship challenge. You’ve done a great favor for the other company – obtaining funding for an early stage company is a major accomplishment. If there is a good relationship between the two of you it is reasonable to hope that they will recognize this. A minimal way to ask for this is to say – If you get funded we want to be your service provider.
  • In business, many leads are referrals. When we get a good lead, we try to assure that the referral source gets some business from the resulting project. This encourages them to continue to provide us with leads. It also reflects common courtesy. Providing this example may help your case.
  • On option may be to ask for an equity interest. For an early stage company, this is inexpensive as they have not yet established significant value.

Do You Need To Rely on Venture Capital Funding? Three Questions

Interview with Charles Bellavia, CEO, ElectraDrive

Situation: High tech entrepreneurs frequently see venture capital funding as a quick route to enabling their ventures. However VC funding is highly variable by tech sector and company cash needs, and few companies are ever funded. Do you need to rely on VC funding and what are the alternatives?

Advice from Charles Bellavia:

  • The first question to ask is what you want from VCs. In the past they brought both contacts and funding. Now, generally, they just bring funding. So ask three questions.
  • Can you fund the company out of your own pocket?
    • Far more companies are funded by founders, friends and families than by VCs. However self-funding demands conditions.
    • Cofounders should have alternate income sources so that they can operate without salaries for periods of time.
    • Watch the life stages of start-up cofounders. Avoid joining a start-up when your kids need your attention, especially during their teen years. Can you forgo regular income if you are paying for college? If an annual 2-week summer vacation is important, don’t join a start-up.
  •  What is the minimum funding needed for the company?
    • What funding do you need just to prove your technology and generate cash?
    • Focus is key. People will suggest variations. You have to know your path and whether variations will help or distract.
    • Stay with your core idea and think in terms of product generations. Build fitting variations into future plans if they will delay initial launch.
  •  How do you keep project workers motivated?
    • Plan for turnover. Know who is key to the project, and where you need back-ups.
    • Start-up life is all consuming. When the picture on the wall is crooked, everyone jumps to straighten it out.
    • Have fun and make it fun. This needn’t be expensive, like parking lot pot-luck barbeques with a CD deck and music.
    • Be generous with simple, low cost recognition. Acknowledge employees for who they are and where they came from. This is especially important when you have diverse employees and builds camaraderie. One company has pot luck lunches and employees are asked to bring their national dish; the food is wonderful and helps employees to appreciate one another.

You can contact Charles Bellavia at cfb@electradrive.net

Key Words: Funding, Venture Capital, VC, Bootstrap, Self-fund, Friends, Family, Income, Salary, Founder, Life Stage, Focus, Core, Iteration, Turnover, Fun, Recognition

How Do You Fund Growth? Five Points of Focus

Interview with Hannah Kain, President & CEO, ALOM

Situation: While funding from banks and institutional sources has been challenging in recent years, growing companies need to fund their growth. How have you funded your company’s growth?

Advice from Hannah Kain:

  • We focus on frugality and prevent wWhile funding from banks and institutional sources has been challenging in recent years, growing companies need to fund their growth. How have you funded your company’s growthasteful spending. However we invest in tools that enable staff to purchase wisely and stay ahead of customer demands. We also collaborate with vendors to manage costs.
  • As a result, the last two years have not forced us to change how we fund growth. We are getting large contracts and work globally to solve customers’ logistics challenges. Our challenge has been moving from centralized distribution to strategically placed centers around the globe, increasing inventory costs and cash needs.
  • Where we have changed is in how we negotiate terms and credit with our customers. We manage vendor accounts payable to maximize cash flow while treating them as business partners. This requires close vendor communications to assure that everyone’s needs are met.
  • We have been cautious with our banks and seldom dip into credit lines. Managing vendor payments has been more effective.
  • Essential to vendor communications are open sharing of information and goal setting. We work to create a team atmosphere. This is similar to what we do in our offices. In our experience, instilling the right culture is far more powerful than financial incentives.
    • We share information through all-hands company meetings and regular updates so that everyone gets the full picture.
    • We also share information with our vendors so that each side is aware of the other’s needs.
    • We create an annual one-page business plan for the company, and parallel plans down to the supervisor level. Performance against plans is updated regularly to assure that we remain on top of situations.
  • We focus training on new tools. Our staff gets technology they need to be successful.
    • We generously provide technology to our employees, provided that they give a logical business rationale. This includes home computers, iPhones or Applets to help them do their jobs.
    • Similarly, when a vendor or customer asks for a service improvement or a new service with a good business rationale, we invest to support this.
  • These methods have allowed us to finance most of our growth internally.

You can contact Hannah Kain at hannah@alom.com

Key Words: Funding, Bank, Institutional, Growth, Spending, Tools, Empower, Customer, Demand, Costs, Vendor, Cash, Needs, Terms, Credit, AP, Partner, Payment, Information, Sharing, Goal, Culture, Performance, Technology, Service

How Can Business Contribute to the Future of Technology Education?

Interview with Muhammed Chaudhry, CEO, Silicon Valley Education Foundation

Situation: A critical component for the future of technology in the US is a workforce trained in math and the sciences. In Santa Clara County, California – the heart of Silicon Valley – only 49% of high school students complete University of California/CSU qualifying courses, and only 26% of Hispanic students. How can private industry contribute to the improvement of education and the training of future workers?

Advice from Muhammed Chaudhry:

  • Silicon Valley Education Foundation’s objective is to make Silicon Valley the number one region in California in student readiness for college and careers. It has been shown that the top predictor of college success is the completion of Algebra II in high school.  Our primary program – Stepping Up to Algebra – focuses on students and teachers to increase the number of students who are ready for Algebra I in 8th Grade. To date 2,500 kids have gone through our program.
  • We actively encourage private industry to get involved in our programs and to invest in solutions that work. We call this involvement Work, Wealth and Wisdom.
  • Let’s talk about Work:
    • Our aim is for every business person to make it a priority to invest time in public education. This takes an investment – we ask for a consistent investment of 4-5 days a year.
  • Next is Wealth:
    • We encourage every business person to sign up to our Sustainer Program. The commitment is modest – only $5 per month to support our activities.
    • We encourage corporations to Adopt a Classroom for $10,000.
  • Finally we have Wisdom:
    • We encourage business people to get involved. We need help designing technology products that enhance learning and in formulating a blended learning approach.
    • We need to improve the enabling of technology in our schools to improve individualized learning to maximize the potential of each student.
    • We need support and involvement in policy work by contributing business thinking. Education has lessons to learn from business.
    • There is room for innovators who are interested in social benefit and long-term investment with profit as a secondary consideration.

You can contact Muhammed Chaudhry at muhammed@svefoundation.org

Key Words: Technology, Future, Education, Workforce, Math, Algebra, Science, College, Preparation, Work, Wealth, Wisdom, Investment, Engineer, Software, Funding, Learning, Policy, Innovation