Does Gender Bias Exist in VC Funding for Women?



A Babson College study alleges a gender gap exists in venture capital (VC) funding for women, but the research appears to be incomplete. There might be gender bias, but the study doesn’t appear to make such a case.

The study entitled, “Women Entrepreneurs 2014: Bridging the Gender Gap in Venture Capital,” looks at U.S. VC funding for women. (To see the executive summary: http://bab.sn/a9nrza.)

Let’s consider why the study seems to fall short of the mark.

akeeris at www.freedigitalphotos.netFor instance, it’s well-known that women receive less angel funding than men, but it isn’t because of a male-oriented bias.

In the article, Why Women Receive Less Angel Funding Than Men, I cited a study that explained why female-led firms are unsuccessful in capturing angel funds.

Fewer women than men actually apply for angel funds.

For those who do apply, the study’s author reminds us that investors aren’t interested in backing small retail-type micro-businesses.

That’s the ostensible problem with the Babson study. Perhaps I missed it, but the Babson press release and executive summary didn’t address critical information.

Consider these questions:

  1. How many women actually sought VC funding?
  2. Did their proposed business models indicate enough sustainability to warrant VC backing?
  3. Were their applications well-presented?

These are three critical factors.

Readily, I agree women make great CEOs. As I wrote in Why California Corporations Make More Money with a Woman’s Touch, many California business women in corporate leadership positions certainly know how to make money.

Among the state’s top 400 public companies, 44 businesses have women as executives and board members. Thirty-four or 75 percent of the women-led businesses earn three times more revenue and 50 percent more profit than companies with less diversified leadership.

But I remain unconvinced by the Babson study’s conclusions.

“For years, it was believed that women entrepreneurs needed to change their approach to networking, pitching or industry sector in order to secure venture capital,” commented co-authoring Professor Patricia G. Greene. “It is increasingly apparent that many women entrepreneurs have followed these prescriptions, yet they have not been able to achieve proportionate increases in early-stage growth capital.”

Unfortunately, there might be gender bias in VC funding for women, but Professor Greene and her co-authors fail to prove it.

Hence, they provide a questionable set of conclusions.

“The tremendous work within the entrepreneurship ecosystem to support and foster growth of women entrepreneurs, and the findings of this study, demonstrate it is not the women who need fixing; the model for venture capital that has been in place since the 1980s simply does not work for women entrepreneurs,” she wrote.

Nevertheless, the study does provide some valid conclusions:

Since 1999, women entrepreneurs have made considerable progress in obtaining venture capital, however, a wide gender gap persists.

The amount of early-stage investment in companies with a woman on the executive team has tripled to 15 percent from 5 percent in the last 15 years. Despite this positive trend, 85 percent of all venture capital–funded businesses have no women on the executive team. Importantly, only 2.7 percent of venture capital-funded companies had a woman CEO.

Businesses with women entrepreneurs perform as well as or better than those led by men.

Businesses with a woman on the executive team are more likely to have higher valuations at both first and last funding (64 percent higher and 49 percent higher, respectively).

The composition of venture capital firms matters for women entrepreneurs.

Venture capital firms with women partners are more than twice as likely to invest in companies with a woman on the executive team (34 percent of firms with a woman partner compared to 13 percent of firms without a woman partner) and more than three times as likely to invest in companies with women CEOs (58 percent of firms with women partners versus 15 percent of firms without women partners).

There is a declining number of women decision-makers in the venture capital community.

The total number of women partners in venture capital firms has declined significantly since 1999, dropping to 6 percent from 10 percent.

In conclusion, I suspect there might be gender bias in VC funding for women, but three questions must be answered fully before arriving at such a conclusion.

From the Coach’s Corner, here are related solutions:

What Should You Divulge When Asking for Investment Capital? — If your startup is the next big thing, but you want venture capital, you can start smiling. Yes, financing has been difficult to obtain in recent years. But entrepreneurs wanting venture capital have reasons for at least a small celebration – the money is starting to flow again after the Great Recession took its toll.

What No One Tells You about Raising Investment Capital — Investment capital is available during all economic cycles, according to leading consultant Joey Tamer. Ms. Tamer has proven approaches for raising money. “In good times, risk capital is available from all sources, and they compete and sometimes share hot deals with each other; the practice is termed syndication,” said Ms. Tamer.

How Twitter Levels the Playing Field for Small Cap Companies — Good news for venture capitalists and entrepreneurs who are known to kvetch that that their companies fall below the radar screen of Wall Street analysts and the media. It’s widely known that mainstream media coverage seems to favor large companies over small ones. But an academic study shows that Twitter can help such small cap companies gain market liquidity.

To Finance Your Startup, How Bloggers Can Impact Your Quest for Venture Capital — Multi-million dollar venture-capital financing decisions are affected by bloggers and social media. That’s the conclusion from an academic study, “Putting Money Where The Mouths Are: The Relation Between Venture Financing and Electronic Word-of-Mouth.”

Best Practices for New Women Entrepreneurs to Stay Focused — The keys for business women are to plan well, create the right balance, persevere and have the right support system. It isn’t commonly known, but women entrepreneurs inherently have stronger skills than men in key areas. Women are more organized than men in financial and other administrative matters, says a longtime business associate in Washington.

The vision must be followed by the venture. It is not enough to stare up the steps – we must step up the stairs.”

-Vance Havner


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy by akeeris at www.freedigitalphotos.net 

Attracting Investors – Crowdfunding vs. Venture Capital


Despite its democratic approach, how crowdfunding – a vehicle to help entrepreneurs raise money – is remarkably similar to venture capital funding.



Crowdfunding got a stamp of approval as a stable source of raising capital for both established companies and startups. This, following a 2013 study by Wharton management Professor Ethan Mollick.

The trend is made possible by Web sites. The sites make it affordable and easy for entrepreneurs to raise cash.

Ironically, crowdfunders are just as savvy as traditional sources of funds – venture capitalists – in picking the winners in which to invest.

imagerymajestic“They are looking for similar signs of quality,” says Dr. Mollick. “There are things that increase the chance of being [crowd]funded if your backers don’t know whether you’re going to be successful yet.”

He examined Kickstarter, a crowdfunding site, for clues in how donors evaluate possible investments.

Entitled, “Swept Away by the Crowd? Crowdfunding, Venture Capital and the Selection of Entrepreneurs,” he studied 3200 projects – hardware, product design, software, and video games.

Funding priorities

The professor examined the funding priorities of investors:

“Does the project creator have experience in the field? Do they have a prototype? Do they have an endorsement from a prominent organization or individual? Those factors increase the chance a company is going to be successful, and they’re things a venture capitalist looks for as a signal of success. They seem to be the things crowedfunders look for, too.”

For example:

“You either believe that we have an existing system that makes sure the best computer science people work at Google and the best entrée funding is given by venture capitalists … or you believe that talent and opportunity are more widely distributed and that because of differences in opportunity, geography and background, people don’t have similar chances,” states the professor.

“What makes crowdfunding so interesting is that this puts the possibility of creating things in the hands of more people,” he adds.

Veronica Mars

The movie, “Veronica Mars,” is a good case study.

Creator Rob Thomas set a $2 million goal. Warner Bros. pledged n marketing and distribution support for a limited theatrical run.

The objective was attained in just 11 hours on Twitter. Later, 91,585 backers funded $5.7 million in a 30-day period.

Twitter’s role is not a surprise. Here’s how Twitter levels the playing field for small cap companies.

Kickstarter touts more crowdfunding successes: 10 percent of entries at a Robert Redford Sundance Film Festival in 2013.

“Something’s happening: There’s a lot of money flowing, there’s policy and there’s promise. It’s the culmination of a bunch of things we care about,” adds Dr. Mollick.

“Trends like this have been coming together for a long time now,” he says. “Is it more democratic? Yes. But quality seems to matter, and that’s important and interesting. There are still a whole bunch of interesting questions that we don’t have answers to.”

Read his paper here.

From the Coach’s Corner, millions of entrepreneurs, investors and job seekers are excited about the Securities and Exchange Commission’s crowdfunding rules.

Here are more resource links:

What Should You Divulge When Asking for Investment Capital? — If your startup is the next big thing, but you want venture capital, you can start smiling. Yes, financing has been difficult to obtain in recent years. But entrepreneurs wanting venture capital have reasons for at least a small celebration.

How to Attract an Angel Investor — Now that a UNH study indicates early stage financing by angel investors is more advantageous than venture capital money, what now? An angel investor offers seven tips.

8 Strategies to Consider Before Starting A Tech Business — Before you launch a tech business, here are eight salient strategies to remember.

“If you can dream it, you can do it.”

-Walt Disney


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo courtesy of imagerymajestic at www.freedigitialphotos.net

How Bloggers Help Startups Get Venture Capital



Multi-million dollar venture-capital financing decisions are affected by bloggers and social media.

That’s the conclusion from an academic study, “Putting Money Where The Mouths Are: The Relation Between Venture Financing and Electronic Word-of-Mouth.” See the 2012 report here.

But blog coverage can be tricky. The research shows VC applicants should be strategic in soliciting publicity. The right strategy yields a higher funding amount and valuation.

bwoman stockimages at www.freedigitalphotos.netPublished in Information Systems Research, the study was led by Rohit Aggarwal, an Operations and Information Systems professor at the University of Utah.

“I talked to VCs from many top VC groups, and VCs in general rely on few popular blogs such as TechCrunch, GigaOm, and Venturebeat,” said Professor Aggarwal. “Given their reading behavior, these findings totally make sense.”

But there’s a downside. Beware of the possibility of negative blogger reviews.

“After all it is more of a rejection process than a selection process,” explained the professor. “VCs want to sift through the pile of startup plans on their desks quickly, and are essentially looking for a reason to reject a plan and move on.”

But there’s a downside. Beware of the possibility of negative blogger reviews.

Early funding rounds 

He indicates blog coverage has a strong effect in the early funding rounds. But the impact of the publicity diminishes in later rounds.

“This makes sense, because in the early stages, all they may have is a dream of what they could be,” explained Professor Aggarwal. “As time passes, users, usage, and other accounting measures start to give a better signal about their actual potential.”

To be sure, private equity funding has been a successful approach for the world’s biggest technology companies, such as Amazon, Apple, Google and Microsoft.

Startups need the funding to develop products, recruit employees, pay vendors, and for marketing. In the dot.com heyday, an aggregate $135 billion was raised from VCs in one year.

Since 2000, the total annual VC funding has been more than $25 billion annually. The beneficiaries typically have been IT entrepreneurs.

The study’s co-authors are Harpreet Singh of the University of Texas-Dallas, Ram Gopal of the University of Connecticut and Alok Gupta of the University of Minnesota.

It’s also interesting to note the University of Utah’s David Eccles School of Business has programs in entrepreneurship, technology innovation and venture capital management. It launched the country’s largest student-run venture capital fund with $18.3 million.

From the Coach’s Corner, here’s additional recommended reading:

Eight Strategies to Consider Before Starting A Tech Business — Before you launch a tech business, here are eight salient strategies to remember.

What No One Tells You about Raising Investment Capital — Downturn or not, investment capital is indeed available. That’s true during all economic cycles, according to leading consultant Joey Tamer.

What Should You Divulge When Asking for Investment Capital? — If your startup is the next big thing, but you want venture capital, you can start smiling. Yes, financing has been difficult to obtain in recent years. But entrepreneurs wanting venture capital have reasons for at least a small celebration – the money is starting to flow again after the Great Recession took its toll.

How to Attract an Angel Investor — Now that a UNH study indicates early stage financing by angel investors is more advantageous than venture capital money, what now? An angel investor offers seven tips.

Why Women Receive Less Angel Funding Than Men — It’s well-known that women receive less angel funding than men, but it isn’t because of a male-oriented bias.

“Persistence, persistence, persistence. I’m surprised how few entrepreneurs follow up.”

-Mark Suster


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





Photo by stockimages at www.freedigitalphotos.net

Best Business Strategies to Get Tech Funding



If you have a tech startup looking for funds, you already know the competition is intense. But there are strategies that will help you to get funded. Investors revealed their preferences for funding technology firms at the 2012 Consumer Electronics Show (CES) in Las Vegas.

On her blog, the chair of the CES venture capital panel, Joey Tamer, writes “each early stage fund planned to invest in a Series A for four or five new early stage companies during this year.”

Ms. Tamer is a strategic consultant to entrepreneurs in technology and digital media, and to experienced consultants in all fields to maximize their practices (www.joeytamer.com).

Joey Tamer

        Joey Tamer

“In the case of Jerusalem Venture Partners, Yoav Tzruya reported that this number represents no more than 1 percent of the 600 companies JVP reviews each year for its early stage fund,” says Ms. Tamer.

“Kevin Spain of Emergence Capital which has a focus on B2B applications, and Chris Petrovic of GameStop Digital which is a strategic investor/acquirer of game companies, as well as Habib Kairouz of Rho Capital agreed with the plan for four to five new deals this year,” she adds.

Improved environment

“We are in a boom period again, this time for the number of early stage companies in play in the market,” Ms. Tamer explains. “The continuing trend that allows for new technologies and applications to be built with many off-the-shelf tools, using world-wide technical expertise, for much less capital, has created many new companies competing for the funding resources available.

“The new trend of incubating companies in accelerators has added some seed capital to these concept-companies to get them through their initial product development,” she says. “But then these companies need to get some traction in the market, hopefully to significant revenue, before they can hope to move from seed capital to Series A.”

Optional strategies

Ms. Tamer indicates you have options to consider if you can’t get from seed to Series A or from Series A to Series B.

“Early stage companies not attracting that critical Series A or Series B funding should consider connecting strategically or through acquisition or merger with other similar-stage companies to create a stronger offering for funding,” she advises. “Aligning with other early companies that would enhance your market position or extend your product offerings or brand, you might attract that essential next stage of funding.”

She explains a developing trend.

“Kevin Spain added a new point, that he sees a strong emerging trend in B2B and enterprise applications using the new technologies that are mostly focused on the consumer market now,” she writes. “He advised companies to look for those B2B market opportunities for their current B2C products and applications. A doubling of your target markets, which rise and fall under different economic conditions, may present a strong offering to investors.”

She explains the motivation of two investors.

“Scott English from Hearst and Chris Petrovic of GameStop approach their investments as strategic additions to their portfolios, rather than as pure venture investments –even though each has a different priority for these investments,” she explains.

“The first point made was to conduct your due diligence about how strategic investors value their target companies,” Ms. Tamer says. “Hearst, for example, is a later stage investor focused on financial ROI to Hearst first, and strategic value to the portfolio second. GameStop, focused on early stage game companies, values its acquisition targets first as an operational addition to its portfolio plan (does the company add to GameStop’s infrastructure, product mix, learning about new markets, or strategy) before financial and ROI considerations.”

She explains some lessons:

  1. Do your homework about your company’s “fit” with what an investment group might be seeking.
  2. Talk with other companies in the investor’s portfolio.
  3. Narrow down your list and your efforts to those investors that prefer your company’s stage, market sector, and your possible enhancement of their portfolio’s current companies.
  4. Some strategic and corporate investors function very much like venture capitalists, and others have different priorities. So, after your due diligence, and as you enter discussions, read the deal’s restrictions and the detailed legal conditions before negotiating or accepting any investment.

Critical factors to help you win

“Norm Fogelsong of Institutional Venture Partners, a later-stage venture fund, insisted that your company’s vision must be big, very big, to attract the rounds of capital needed to become a major player,” she points out.

“The panelists agreed that they are very focused on execution, in particular execution on market penetration,” Ms. Tamer advises. “After you have been funded on your product’s unique value, it is time to turn your attention to your market, especially your customer acquisition and retention strategies, tactics and results.”

She provides another insight: “Yoav related that he looked for CEOs with deep market savvy, a founder who knows his or her product and its market realities, and has a strong go-to-market strategy.”

Ms. Tamer shares the insights of Sharon Wienbar of Scale Venture Partners, a later stage investor, who wants to minimize risk three ways:

  • Proof of market responsiveness: Does your customer commit to your vision of your product’s value, price and use?
  • A business model that prioritizes customer acquisition and retention: Do you have a plan that acquires each new customer quickly and for less and less cost of acquisition?
  • Compelling metrics: are your projections for market penetration, growth and profitability backed up by proven metrics?

“So, amid the growing competition for capital we are seeing this year, particularly in the consumer market, investors’ focus seems to move quickly from unique technologies and applications to strong execution,” concludes Ms. Tamer. “Early stage companies need strategies to present compelling offerings to investors, and an increasing focus on market execution that leads to growing a big company and taking significant market share.”

Hope you enjoyed these insights. As usual, Ms. Tamer speaks and writes with authority.

(Note: I’m very familiar with Ms. Tamer’s expertise. She is a fellow member of Consultants West, www.consultantswest.com, a roundtable of veteran consultants in the Los Angeles area.)

From the Coach’s Corner, here are more of Ms. Tamer’s valuable insights:

“If you can dream it, you can do it.”

-Walt Disney

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

What Should You Divulge When Asking for Investment Capital?



For many startups, it makes sense to grow organically. But for others, the answer is to seek capital.

So how do you get investment capital? Certainly, it’s critical to make the right presentation to investors.

Such entrepreneurs typically ask noted financial strategist Joey Tamer how much information they should reveal for venture or angel capital.

They turn to her because she’s a strategic consultant to entrepreneurs in technology and digital media, and to experienced consultants in all fields to maximize their practices.

Joey Tamer

       Joey Tamer
www.joeytamer.com


Ms. Tamer says entrepreneurs also typically express these concerns:

  • “I’m not quite ready for a big investment until I get more early traction.”
  • “Will I weaken my position by showing how much I need and how soon I need it?”
  • “Will what I’m looking for move around the community to everyone and shouldn’t I be selective in what I say?”

What’s her response?

“The answer is to stand up and lay out your plans and your rationale,” she blogged in explaining how much an entrepreneur should tell investors when pitching for capital.  “You must treat all investors as if they will become your partners, starting immediately. If you are taking a pitch meeting, you might as well pitch.”

She astutely reminds clients that investors of all stripes do their due diligence. She warns you risk not getting a second meeting, if you aren’t candid and informative.

“It is acceptable to take a short meeting — 20 minutes maximum – or two with potential investors, to get on their radar about your idea, even before you are ready to approach them for an investment,” she explains. “You can report back on your progress of reaching your benchmarks. This establishes an early relationship with them, and allows them to watch you deliver the benchmarks you promised.”

For an example, she suggests a possible scenario:

“Suppose you are looking for angel capital now, and you are presenting to an early stage boutique venture capitalist, who invests in revenue-generating companies, but who sometimes will step down to a seed round of a few hundred thousand dollars.”

Her recommendation:

“Pitch what you want now: say $250,000, and show what you will use the funds for, and what benchmark you will reach with that seed round,” she says.  “Your potential investor might provide it and add a deal structure to his position for the next round, giving him right of first look, or protecting his investment in certain ways, even setting aside all or part of your next round.”

What’s next?

“Next you say you want to raise a Series A round after some specified consecutive months of growth,” she asserts. “You say when you expect that moment to arrive (what Quarter of what year), and what benchmark you will reach in what Quarter of what year with that Series A round.

“You can say that you will look for a growth round following Series A, once you can track the speed of your growth, and can assess competition and market conditions at that time,” she adds.

Ms. Tamer says this illustrates that you understand the big picture – that you fully grasp investors’ concerns about scalability and their likely return on their investment.

“If you look to your investors as long-term partners, this early truth telling and planning sets your relationship on the right path,” she points out.

(Note: I’m very acquainted with Ms. Tamer’s expertise. She and I are members of an organization, Consultants West, www.consultantswest.com.)

From the Coach’s Corner, here are informative resource links:

What No One Tells You about Raising Investment Capital — Investment capital is available during all economic cycles, according to leading consultant Joey Tamer. Ms. Tamer has proven approaches for raising money. “In good times, risk capital is available from all sources, and they compete and sometimes share hot deals with each other; the practice is termed syndication,” said Ms. Tamer.

Eight Strategies to Consider Before Starting A Tech Business — So, you’ve got an idea for a tech business, but you’re unsure about your prospects. Do you know what are important strategies to consider before starting a tech business? Joey Tamer is a strategic consultant to entrepreneurs in technology and digital media, and to experienced consultants in all fields to maximize their practices. She knows the answers.

“If you are beginning your company with Other People’s Money, it is good to have a strong relationship with the Other People and their Money.”

-Joey Tamer


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.






8 Strategies to Consider Before Starting A Tech Business



So, you’ve got an idea for a tech business, but you’re unsure about your prospects. Do you know what are important strategies to consider before starting a tech business?

Joey Tamer is a strategic consultant to entrepreneurs in technology and digital media, and to experienced consultants in all fields to maximize their practices.

She knows where to find capital and she is a wonderful person with whom to work – a true professional.

Joey Tamer Joey Tamer, www.joeytamer.com


Here are Ms. Tamer’s answers to questions on how to launch a tech business:

Q: How much capital do you recommend?

A: Have at least one full year’s capital to support yourself and the costs of your business before beginning; have six months of capital liquid at all times. Nothing kills a business like lack of capital. Recovering from an under-capitalized business failure, particularly one fueled by debt, can take years. Beyond that, you are likely to make mistaken decisions based on the pressure of your debt. Capital allows you options and room and time to stumble.

Q: What kind of support system do you recommend?

A: Ensure your partner’s support. No matter what kind of business you start, get your partner’s support. Nothing will erode your joy or confidence at becoming an entrepreneur faster than negativity at home. What does your partner really feel? If you have chosen a business partner, ensure that partner’s support by creating clear legal documents spelling out ownership, roles, and responsibilities, including a buy/sell agreement, should one of you change your mind.

Q: What do you mean by planning for the hidden year?

A: Understand that there is at least a full “hidden” year in beginning your own business. This includes the thinking, the planning, the testing, the preparation…before you actually get into play, begin to raise capital, or bring your service to a client or your product to a market. Plan for the time and cost of this hidden year.

Q: What about assessing the risk of capital?

A: Whether you risk your own money to begin your business, or your extended family’s and friends’, or outside investors’, be careful to understand the impact of taking this money for your venture: what it will mean to succeed, and to fail with it; if and how it needs to be paid back or rewarded. If possible, build your first business simply, without needing outside investment, to go up that learning curve with less pressure. If possible, do not risk your mortgage or your pension to build this first business.

Q: What about starting a service vs. a product business?

A: Product businesses require more time and capital to build than service businesses. Certain back-bedroom businesses, particularly Internet-based ones, can reduce your capital outlay. Consider building a service business, like consulting or internet-based services, focused on your professional expertise, for your first business. If you do build a back-bedroom Internet business, put out your product or service as soon as possible, even as a “free trial” offering, so you can understand the market response.  From this response, you can adapt or expand the product or re-direct its target market before too much time or capital is committed to an untested idea.

Q: You offer a great reminder that business is not revenue and revenue is not profit. Can you explain?

A: You may be fooled that you are working successfully because all of your time and thoughts are absorbed by the new business. Not true. Being busy does not necessarily create revenue. And revenue coming in does not necessarily create profit. Learn to work smart, not hard and to judge whether you are adding any profit to your pocket – what remains after the business costs and the taxes, including a reasonable salary to you. The IRS considers any business that does not show a profit within the first five years to be a hobby.

Q: You recommend getting needed expert help by creating a virtual team. How so?

A: There is much that you are expert in; there is much you do not know. Get the help you need from industry experts in start ups, technology, finance, marketing, law and so on. Network among your colleagues, friends and groups to find these experts, and pay the experts what they are worth. Get at least five references on each candidate and check every one.

Be clear what you need, what the expert will provide, and what costs you will pay for that help. If your expert does not completely please you during the first couple of months, determine what needs to be done to get you satisfied. If that fails in the next 30 days, find another person to help. You can create your initial staff through virtual teams, avoiding the complexity and legal demands of employing folks.

Q: Finally, you advise staying flexible and create no blame. What do you mean?

A: Running your own business is not for everyone. If you don’t like it, or you find it too overwhelming, or it is more trouble and cost than it is worth, close the business. Eight out of 10 businesses fail in the first two years; of those remaining, another eight out of 10 fail by year five. To fail at your first business is not to fail as a person. If you liked running your business but it failed due to unanticipated market changes, or unexpected product competition, or some other factor, learn from what happened, assess the risks, and build your second new business. Life is long, and filled with opportunity.

Note: I’m proud to say I’m well-acquainted with Ms. Tamer’s credentials as we have worked together more than a decade in a professional association of consultants .

From the Coach’s Corner, here are more of Ms. Tamer’s insights:

10 Characteristics of a Successful CEO — This is a 10-part series on CEO leadership by Joey Tamer, www.JoeyTamer.com. She is a consultant to experienced consultants in all fields to maximize their practices. She has also been a strategic consultant to entrepreneurs in technology and digital media.

What No One Tells You about Raising Investment Capital — Tepid economy or not, investment capital is indeed available. That’s true during all economic cycles, according to leading consultant Joey Tamer.

What Should You Divulge When Asking for Investment Capital? — For many startups, it makes sense to grow organically. But for others, the answer is to seek capital by making the right presentation to investors. Here’s how.

The 6 Values for Your Financial Protection — Debt is the catalyst of all financial woes, says esteemed associate Joey Tamer. Here are her six values to avoid financial traps.

Funding Options to Navigate This Marketplace Bedlam — Uncertainties regarding Wall Street, actions by the Federal Reserve, and funding often set off alarm bells. But if you’re looking for capital, there are reasons to hope, according to leading consultant Joey Tamer.

Logic will get you from A to B. Imagination will take you everywhere.”

– Albert Einstein 


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.






Breakthrough Strategies to Land Venture Capital in 2010



Dec. 18, 2009


If you follow eight tactics suggested by premier financial strategist Joey Tamer, my sense is that you will greatly enhance your odds for landing venture capital.

She shares her expertise in a Wall Street Journal blog, Strategies for Finding Venture Capital in 2010.

Ms. Tamer is an expert consultant for early-stage technology and media companies whom I rely upon as an authoritative source on finance-related matters in my Biz Coach columns.

Whatever Ms. Tamer says, you can take it to the bank with confidence. 

__________

Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

How to Attract an Angel Investor



If you’re looking for an angel investor as an early stage company, you know you need to present a well thought-out plan, right?

Basically, your product must be superior with a competitive advantage and your team must be highly competent.

Not only will you get the funds you seek with an angel investor, you’ll get added value in expertise. Angels will give you added experience, executive wisdom, contacts and creative ideas.

You might also find they’re more advantageous for your venture vis-à-vis going the initial public offering route.

woman glasses b&wWhy?

Early-stage financing by angel investors is more advantageous than venture capital money.

That’s according to a University of New Hampshire study.

The 2009 study – “Initial Public Offerings and Pre-IPO Shareholders: Angels Versus Venture Capitalists” – shows evidence of under-pricing by venture-supported IPO groups in initial public offerings vis-à-vis angel investors. The study was conducted by Professors William C. Johnson and Jeffrey E. Sohl.

So what else do you need to know to land an angel investment?

Noted angel investor John B. Dimmer offers seven tips.

Acknowledging the difficulties of entrepreneurship, the successful angel investor in Tacoma, WA, likes technology.

Mr. Dimmer says he looks for tenacity.

“I want people with the moral integrity and intestinal fortitude to make the difficult journey through the Valley of the Shadow of Death and come out the other side,” explains Mr. Dimmer.

“It’s fun to greet them on the other side, hand them a margarita, and toast the success of their achievements,” he adds.

Mr. Dimmer’s graciously explains his comprehensive approach in how he selects investments:

Q: What mistakes do new companies make in applying for funding?

A: As I indicated, people are the single most important element in making an investment. As such, I generally don’t see business plans unless I know the people who are involved, or I know someone who knows the people involved. I think that to a large extent, most venture investors share this philosophy.

The business plan always comes first. I want to see a compelling market opportunity, and I want to know how the company intends to capture a meaningful share of that market. Mistakes I often see in this segment of the presentation almost always center around unrealistic sales assumptions. Overly aggressive projections relative to the percentage of market share the company will capture is one common mistake. Another mistake is a fundamental lack of understanding of the sales cycle, and the organizational structure required to produce the target revenues.

Q: Preference on projections?

A: Three years worth of financial projections is adequate, but five years is preferred. I would like to see the first year broken down into some detail, but future years can be prepared on a condensed basis. Having been involved with a myriad of start-up companies, I know that the financial projections will not be accurate; however, the forecasts provide valuable insight into the thought process of the people involved.

The most common mistake companies make in this area is a failure to understand and exhibit the financial metrics of their particular business. For example, software companies should normally generate 90 percent gross margins. If you are coming to me with a software investment, and your forecasts show a 55 percent gross margin, unless you have a very good answer as to why you deviate from the norm and how you are going to make money, I will assume that your business will fail because you don’t understand the financial metrics. Likewise, if you present me with an opportunity in the professional services space, which normally generates 50 percent gross margins, and you tell me that you are going to generate an 85 percent gross margin, I will assume you don’t know your financial metrics and pass on the opportunity.

Overly aggressive projections relative to the percentage of market share the company will capture is one common mistake. Another mistake is a fundamental lack of understanding of the sales cycle, and the organizational structure required to produce the target revenues.

Q: Structuring the deal?

A: Angel investing is risky business, with many of the portfolio companies ultimately failing. Accordingly, angel investors need to see an opportunity for substantial returns in order to offset the losses on bad deals and generate a reasonable return on the entire portfolio. What kind of a return is required? Well, a lot of that depends upon the timeline between the initial investment and exit, but traditional metrics suggest angels are targeting five to ten times their money back from a successful deal. It should be a given that any company approaching me for funding will have established the asking price for my initial investment.

Q: Exit strategy in proposals?

A: This should include the type of exit transaction, which may be a merger, an IPO, or something else, the timing associated with the exit, and the valuation metrics at exit. The mistakes I see here fall into one of two categories, those being an initial valuation that is set too high, or an unrealistic assumption about the exit timing and valuations. As the exit strategy is simply a forecast of a future event, my solution to either of these problems would be to try and negotiate a lower initial valuation.

As an example, I recently looked at a company that had their financing pulled out from under them. They had a big business opportunity ready to go, and needed capital to execute. While I liked their business plan, I felt their valuation was exceptionally high. I compared their valuation metrics with those of similar publicly-traded companies, and found that I could own these public companies for about 20 percent of the price they were asking. I ultimately went back to them with a proposal, but slashed their valuations. They weren’t too happy and so went looking for money elsewhere, presumably under different deal terms.

Q: Legal controls?

A: I believe that items such as voting rights or preference provisions should be allocated and enjoyed equally between all the parties involved with a company. Periodically I see instances where the founders have preferential rights to voting or liquidation. I’d like to think that we are all on the same team, which means if one person wins, we all win. Preferences then make it possible for one party to win, and another to lose, cause the creation of multiple agendas and ultimately lead to failure.

Q: What are the components of a successful presentation?

A: It’s pretty simple: brevity, clarity, honesty. A quality opportunity should be somewhat self-evident. I might need a little help starting down the path, but if I don’t pick up on it pretty quickly, I’m never going to buy into the deal. So, don’t be too long, don’t get overly complicated, and don’t try to pull a fast one on me.

The other thing I am going to look for in a presentation is the ability of the entrepreneur to think on their feet. If you really know your stuff, this shouldn’t be too hard. I periodically like to ask questions where I already know the answer just to see if the entrepreneur knows what they are talking about. Likewise, I sometimes like to ask questions that are outside the box just to see how the entrepreneur handles obtuse ideas. If you know your stuff, you can digest the inquiry and quickly formulate a meaningful response. If you stumble, you don’t know your stuff, and if you don’t know your stuff, I don’t want to give you any of my money.

Q: What trends would you care to predict?

A: I do not consider myself a visionary, but I’ve certainly worked with visionaries. My strengths come in the form of listening and then determining if there is a realistic opportunity for the vision to be commercially implemented within a reasonable time period. The only prediction I will make is that as our world advances, each advancement creates more opportunities…More opportunities for services, products, and technologies to be developed and delivered to consumers. The world of the entrepreneur is expanding at an ever-increasing rate, and I don’t see this changing any time soon.

From the Coach’s Corner, the other articles featuring Mr. Dimmer:

“If a business does well, the stock eventually follows.”

-Warren Buffett


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





What No One Tells You about Raising Investment Capital



Investment capital is available during all economic cycles, according to leading consultant Joey Tamer. Ms. Tamer has proven approaches for raising money.

“In good times, risk capital is available from all sources, and they compete and sometimes share hot deals with each other; the practice is termed syndication,” said Ms. Tamer.

“In downturns, venture money is available from venture capitalists who have raised their funds recently, in the past year or so, and have not yet deployed all the capital,” explained Ms. Tamer. “In bad times, funds that are near the end of their seven to 10-year cycle will use their capital to safeguard existing portfolio companies and will commit to fewer, if any, new investments.”

Joey Tamer  Joey Tamer, joeytamer.com


Ms. Tamer has helped to capitalize start ups and in-house ventures within the Fortune 500 to launch, build and expand technology companies. She advises product and service companies on their growth and profitability.

She has consulted since the early days of the PC through to her Web 2.0 and Web 3.0 clients of today. Her clients have included: J.P. Morgan Capital, Sony, IBM, Apple, Hearst, Blockbuster, Technicolor, Harper Collins, NEC, Time-Warner, Agfa and Scitex, and many early-stage ventures. As you might expect, she’s regularly invited to chair venture and investment panels in technology sectors.

“Capital strategies allow the CEO to know what kind of money – private, angel, VC, strategic corporate – to take at what time to drive up the company’s valuation, and to keep control of the board,” she said. “These strategies are sensitive to economic times as well.  I do not find capital for companies – that’s the job of the CEO. Another major strategy I prefer involves identifying sources of non-equity capital – strategic alliances and alternative revenue sources, bringing in early revenue rather than giving up equity at a low valuation.”

She graciously answered questions about raising funds:

Q: Regarding your five strategies for raising investment capital, you suggest creating a “unique product or service in an empty space.”

A:I often help my clients define and present their unique value proposition (UVP) – the special technology or service offering or business model that makes their company different, more valuable, and more likely to succeed than their competitors.  CEOs are often too close to the business to do this easily.

During one “down” year, I defined one company’s UVP and wrote its pitch piece for its first round of outside capital, and with these documents they sold the company within eight months during a difficult investment year. Sometimes the right pitch to the right audience works regardless of the economic conditions.

Q: You warn about defensibility.

A: The product or service must be defensible from “copy cats.”  Companies must beware of “proving the market,” only to have a large company duplicate their efforts and take away their market share.

Q: What do you mean about scalability?

A: The product or service must grow quickly enough (scale) to offer institutional investors a 10-times return on their investment in the first five years.  Private investors are sometimes more patient or expect a bit less of a multiplier.

Q: What is your thinking about management?

A:Investors trust management teams with a proven track record of prior successes. First-time entrepreneurs should gain commitments from experienced players and advisors.

Q: How much capital should be requested?

A:Companies asking for too-little capital often are dismissed as naïve. Capital strategies should define the current round and the subsequent round that will be needed to reach break-even and to predict profitability. Also, CEOs must understand the criteria required by each kind of investor – private, angel, boutique VCs, tier-one VCs, corporate strategic money, and when it is best to engage each kind.

Q: What do you recommend to get investors’ attention?

A: Here are four strategies:

  1. CEOs must master a 30-second sound bite of their unique value proposition and the potential return on investment (ROI) for investors. CEOs must be able to speak and write this sound bite in one or two sentences. For investors, this is the uniqueness that will result in a significant return on investment.
  2. Write a pitch piece – a business plan in sound bites. The secret sauce of this pitch piece is to tell the story addressing the investors’ interests in clear powerful language.  Use text (3 pages maximum) or PowerPoint (10 slides maximum).  Tell the value story to the investors, not the whole story.  Have full financials prepared.  Investors read a summary, then the financials.  Then, if they are interested, they read more or ask more. Long business plans are rarely read these days. Even 10-page executive summaries can be ignored.
  3. Don’t apologize. Tell the plain truth. CEOs should not aggrandize their company or UVP. An investor will discard the offer if he or she needs to verify the truth of the presentation.
  4. Take a power position when asking for the investment. Don’t be shy. CEOs should say what they have, why it is unique, why it will create an ROI, and what they need for capital, simply and with confidence.

Q: What techniques are best for presenting an opportunity?

 A: I suggest three:

1. CEOs should explain the amount of the raise they are seeking at the beginning.  Investors want to know this as soon as they understand the opportunity.  This should be part of the 30-second sound bite, and stated in the first couple of slides or paragraphs of the presentation.

2. Early in the presentation, the CEO should define the projected ROI, to keep the attention of the investor.

3. CEOs should then back up their request with their pitch, in positive language and a slow, confident tempo. In the first few minutes, the CEO should define the UVP, the amount of the raise and projected ROI, and the company’s defensibility and scalability.  Then, be ready to back up these assertions. At this point the investor may ask questions rather than listen to the pitch.  Often CEOs get only a few minutes before being interrupted – these minutes need to make the company’s case.

(Disclosure: I write with utmost confidence about Ms. TamerI’ve had the opportunity observe her and her expertise on numerous occasions.)

From the Coach’s Corner, here are more of Ms. Tamer’s insights:

10 Characteristics of a Successful CEO — This is a 10-part series on CEO leadership by Joey Tamer, www.JoeyTamer.com. She is a consultant to experienced consultants in all fields to maximize their practices. She has also been a strategic consultant to entrepreneurs in technology and digital media.

The 6 Values for Your Financial Protection — Debt is the catalyst of all financial woes, says esteemed associate Joey Tamer. Here are her six values to avoid financial traps.

Funding Options to Navigate This Marketplace Bedlam — Uncertainties regarding Wall Street, actions by the Federal Reserve, and funding often set off alarm bells. But if you’re looking for capital, there are reasons to hope, according to leading consultant Joey Tamer.

8 Strategies to Consider Before Starting A Tech Business — Before you launch a tech business, here are eight salient strategies to remember.

“An investment in knowledge pays the best interest.”

 -Benjamin Franklin


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.






Seattle business consultant Terry Corbell provides high-performance management services and strategies.