Category Archives: Finance

“Syl’s Stance: How Entrepreneurs Succeed at Venture Capital Conferences”

The annual cycle of venture capital conferences are again underway, setting the stage for entrepreneurs and investors to seek capital financing. However, gaining the most ROI from a venture conference requires an overall strategy, great preparation and tactical maneuvering throughout the VC conference cycle – namely, from the application and coaching preparation through the entire event day – and beyond.

For those seriously seeking investment from angels, venture capitalists or strategic investors be SUPER prepared and do so well in advance. This includes your team, your product demo, your ‘Investor Ready Business Plan’, and your intro ‘elevator’ pitch (30 seconds to 1 minute).  You need a firm and compelling ‘total investment opportunity story’ that permeates your people, your presentations, and your promotions. All players must be singing the same song and on their A+ game. Be on message and in key across all formal presentations, table discussions, hallway chats and cocktail reception conversations. This is ‘show time ‘folks at every touch point…all day…with everyone – from the moment you arrive in the parking lot until you drive away from the venue. With excellent preparation you will relax and tell your story with confidence.  The day is about moving onward and upward. And importantly, follow up with a thank you to all you meet, an invitation to connect; and be set to immediately send your venture capitalist (VC) presentation deck and your concise ‘Investor Ready Business Plan’ to qualified prospective investors.

For those testing the waters, I recommend you go as an attendee first, read the room, understand the dynamics of the day, make face-to-face connections and gather contact information –most especially from investors, as well as with services providers, who often server as influencers. Consider the best technologies, products, markets, teams and investment stories that gain the best attention, awards and interest from investors. Learn from them – both from their successes and failures. With this first hand intelligence and with the right advisors you, and your team, will be able to become ‘investor ready’ for your own ‘show time’ at the next venture capital conference.

Be well,
Syl

© Strategy Dynamix, LLC All Rights Reserved

What is your perspective?  Please share your thoughts in the comment section below.

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture advisor and interim executive. Syl  has empowered hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle. He has assisted in raising $300 million of capital financing to date. Learn more and connect with Syl at http://www.strategydynamix.com/aboutus/executives.php

Do VCs Have Money to Invest? Usually Not!

One of the more perplexing aspects of venture building is figuring out how to finance your technology and company. A common mistake is assuming that Venture Capitalists (VCs) have money to invest in your venture when you need them. The reality is that VCs at most times have no money available to invest in any new venture. Intrigued? Then read on.

While many entrepreneurs strive to connect with VCs, it is really somewhat of a waste of time in most cases. That is, unless you understand the inner workings of the ‘VC world’, selectively choose the right VC and have good timing.

All private equity funds, including venture capital funds, are run in a similar pattern. They raise money for their fund, invest in companies, wait a while, and then exit those companies for the purpose of trying to make a bundle of money. Each fund has a portfolio of typically 10 to 15 companies with an investment time horizon of about 10 years. Success is measured on the entire portfolio’s performance.

The fund raising period and the initial few years of investment are quite frenzied. This is when the pipeline is built, term sheets signed, due diligence conducted and expectations are high. Then comes the hard work and the wait. Earliest exits are during years 3 to 5, and these are often winners. Years 5 to 8 are when the majority of invested companies are exited and then the laggards after years 8 through 10 (or longer). Of course some sectors have much longer horizons – like pharmaceuticals; while some investor approaches have exits based on milestones much earlier in the technology commercialization or business development  stage.

To use a baseball analogy, the goal for the VC fund portfolio is to hit at least one home run, with the expectation that there will be a handful of singles and doubles. Walks will happen, but most feared are the fouls, or bad bets, that bring down the entire portfolio’s return. The goal for each invested company is 35% or higher ROI – depending on the fund.

So we can see that it is primarily in those first two to three years when a fund has money to invest. During that earlier period, initial investments are made, but also funds are committed or reserved for follow on investment rounds for the same portfolio companies. Thus, as a general rule, from year four onward (or 60-70% of the time), VCs have almost no money left to invest from a particular fund.

The lesson for entrepreneurs is first to be aware of the private equity investment lifecycle. Second, entrepreneurs should try to identify where a particular VC is in their lifecycle. This is not a simple task. One must read the news, ask around in networking circles and perhaps pose the question to the VC. Given the nature of the investment lifecycle the best times for entrepreneurs to connect with VC are when a VC is raising  its next fund or else in the first few years of the new fund. Of course always be cordial as VCs are always building their pipelines. Also, remember that the VC community is a small one and you never know when one VC might introduce you to another who is in the sweet spot of their investment lifecycle.

What is your perspective?  Please share your thoughts in the comment section below.

© Strategy Dynamix, LLC All Rights Reserved

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a venture advisor and delivers venture accelerator solutions. He has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle and helped to raise  $300 million of capital. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php.

“Differences Between Accelerators and Incubators”

There is great interest in venture creation these days and many are wondering about the opportunities and differences between accelerators and incubators.  Let me share some recent history and some specific comparisons from my direct experience.

The new generation of accelerators was spurred on by the USA President’s “Start Up America” initiative a few years ago when he called upon Michael Dell, the Kaufman Foundation, TechStars and others, and asked them to replicating their efforts across the country. The goal was to stimulate start-ups to help the economy based on the understanding that two-thirds of all new jobs in the USA are created by small businesses.

Other players, the Angels and Venture Capitalists (VCs), who earn money from financing successful novel and risky technologies and business models, view accelerator programs as an answer to addressing the constant challenge of the VC system – which is how to find and effectively evaluate the most innovative and promising teams and technologies.

In places like New York City, Mayor Bloomberg and the Angel and VC communities support the accelerator concept as one method to ramp up innovation across NYC’s fashion, media, finance and other sectors and to position the City to compete head to head with the long standing venture creation ecosystems of Silicon Valley, CA and Boston, MA.

In the past 18 months the buzz and momentum for accelerator programs in NYC and across the country has exploded – with some franchises expanding globally.  It is an extremely exciting era – again!

So now, here is my view of the key differences between Accelerators and Incubators:

ACCELERATORS:

  • Mostly private, profit-driven, and private equity/venture capital owned
  • Offer short term programs of about 90 days
  • Each program has few participants (typically 10 to 12 teams/companies)
  • A few participants may have funding before they start the program, but most participants do not have funding when they start
  • Offer cash (equity) for ownership in amounts of between US$6,000 to US$30,000 for equity ownership of between 4% to 10%
  • Most suitable for IT, web, mobile businesses; emphasis is on building an app  or prototype during the program; not necessarily to build a full business model
  • Programs end with a demo day (the big test)
  • After demo day – participants are out in the street (since only temporary space provided) but some programs continue to support alumni by introductions and with an accelerator alumni network – though activity levels and value vary by organization
  • Most accelerators have a few lead service providers (sponsors) along with the sponsoring angels/VCS who have first pick of the talent and ventures
  • Most have a list of mentors prepared by the Accelerator– who may or may not be investors, and who are matched up and then accepted, or not, by each participating venture based on fit, etc.
  • Mentors are usually not compensated during the accelerator program
  • Accelerators are criticized by some entrepreneurs for low valuation (example: $20,000 for 10% share = $200, 000 valuation – post money)

INCUBATORS:

  • Most are university or government agency run* (though some private sector models exist)
  • Driver is economic development by Economic Development Agencies (for job creation benefit) or else technology transfer driven by Universities (for licensing revenue benefit) and the federal government agencies (about 700 in the US Federal Lab Consortium for Tech Transfer)
  • Allow “slow development” incubation, and multi-year approach for technology commercialization
  • EDA and University models usually offer a three (3) year tenancy/lease – though some tenants stay longer, if vacancy at the location,  progress or other factors
  • Usually suitable for highly engineered product or technology that requires long term R&D (5 to 20 years) and are capital intensive (i.e. life sciences, medical devices, engineered product or system, energy solution, etc.)
  • Services and programs are typically provided by outside service providers on behalf of the incubator– some on paid basis, and some on pro bono basis
  • Offer some introductions and guidance for transition from incubator to new location
  • Criticized for being real estate driven

In my opinion the verdict is out about which model is the most successful for creating venture value. I predict a new model will emerge soon to displace both incubators and accelerators as they now exist. Until then I encourage entrepreneurs and investors to continue the beneficial community building through networking, meetups, incubator activities and accelerator programs. Through such cross-pollination we will inevitably create the next iteration.

I would love to hear your observations in the comments section.

Onward and upward!

© Strategy Dynamix, LLC All Rights Reserved

About the Author
Sylvester (Syl) Di Diego, Managing Partner, Strategy Dynamix, LLC is a  venture consultant  He has assisted hundreds of entrepreneurs and investors to successfully navigate the venture growth lifecycle. Syl also provides services through Incubators and Accelerators to their tenants and participants, managed an incubator fund, worked in an accelerator and is active forming new accelerators. Learn more about Syl and connect with him at http://www.strategydynamix.com/aboutus/executives.php.

Business Plan FAQs and Answers

What is a business plan?

A business plan is a communication tool to align understanding and influence stakeholders to make decisions, affirm commitments and to take action.

A business plan is the summary of a business model and total viability of a business opportunity.

A business plan is the summary of the purpose, objectives, strategies, activities, and financial profile of a business entity or other organization.

A business plan is a living document that reflects current status and directs to future state.

Why do I need a business plan?

A business plan is needed whenever you intend to start up, lead, operate, finance, grow, reposition, turnaround, merge, acquire, exit or close a business.

Who is the key audience of a business plan?

The key audience includes all stakeholders of a business such as investors, bankers, board members, management, employees, certain alliance partners, and certain customers. 

What are the major elements in a business plan?

The major elements of a business plan are: executive summary, business description, pricing, technology, patents, market, R&D, product development plan, go to market plan, operating plan, personnel plan, financing plan, financial statements and related information, and exit plan.

What are the common pitfalls of a business plan?

Most business plans are too long, incomplete, unconvincing, not compelling and/or out of date.

What is the recommended length of a business plan?

A business plan should be ten (10) pages including a one (1) page executive summary. Significant supporting data should be selectively included as addenda to the business plan.

How long does it take to prepare a professional business plan?

The time to prepare a professional business plan varies depending on the status  of business model design, prior strategic thinking, availability of various elements of the business plan including understanding of customers and markets, availability of key data, status of the financial model,  availability of key executives involved in the process, and experience of the business plan writer/facilitator.

An experienced business plan consultant can provide an accurate estimate of time required to prepare a revised professional business plan based on a brief look at your current information or business plan draft.

How often do I need to update my business plan?

A business plan should be updated whenever there are significant changes to your strategy, products, customers, competitors, alliance partners, profits, or valuation; significant changes to government regulations or industry structure; or when you are trying to convince a stakeholder to make a decision on partnership, financing, investment or any other material strategic change.

What are resources for creating a business plan?   

Get started with general information at Small Business Administration 

Obtain advanced assistance to access and gain deals with investors with professional management consultants like Strategy Dynamix, LLC.

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Strategy Dynamix, LLC empowers people to ReDesign, RePosition and ReLaunch technologies, products, services and businesses – from concept to execution, since 2001.

The 5 Reasons VCs Invest in Ventures

Entrepreneurs are challenged to find and convince serious investors to evaluate and actually finance their new ventures. There are common characteristics that attract venture capitalists (VCs) as well as other investors – whether family, friends, angels, or strategic investors. Designing your business model with these five key components will contribute to success in financing your new business.

First, there has to be a big market opportunity. The total market itself has to be substantial – well over US$1 billion or more depending on the sector, and there must be a large ‘available market’ for the company’s product or service. Of course, one also must convince potential investors you have a realistic go-to-market plan and scale up plan to access and play in the market.

Second, the offering, whether technology, product or service, has to be new, novel and competitive. The new or novel features, benefits and performance characteristics have to be at least several magnitudes of improvement over alternative available solutions. And these advantages have to be well protected in order to provide a sustainable leading competitive advantage over a significant period of time.

Like all competitive endeavors, a team of stars is a must. Individuals have to be outrageously excellent leaders in their field with relevant accomplishments to propel the venture forward and upward. More, the combination of talents of the team has to be significantly complementary and the cooperation among members has to be evident and robust.

Fourth, an extraordinary financial opportunity has to be clear. Projections must demonstrate top line revenue growth potential with attractive cost and profit structure that drive great cash flow generation. Most importantly these measures need to be rooted in specific go-to-market plan and scale-up plan that are convincing and defendable.

Finally, the investment opportunity must fit with investor’s criteria. Not only must target financial metrics be available – including meeting the hurdle rate for Return on Investment (ROI), but just as critical is the fit with the investor’s preference for certain sectors and geographic locations.

To conclude, entrepreneurs and leaders with a business design for a new venture that is composed of these five critical components are well positioned to attract investor interest in a viable business. It is your job to articulate these characteristics in a compelling manner in your business plan and in person to close the deal!

Best, Sylvester Di Diego

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The 5 Signs of a Viable Business

Whether you seek to gain more clients, become more competitive or to raise capital the burning question is – What makes your business viable?

Viability has to do with your ability to identify and meet a need like no one else. Your offerings delight customers and satisfy their urgent needs. People can not wait to place their orders. Customers enjoy using your product, technology or service and engage with it as often as possible. Your offering makes their life easier, solves their important problems. Customers readily spread the word and enjoy telling their friends and associates. They become your biggest fans.

Viable businesses are profitable for your company. There is a low cost structure and good profit margins – at certain volumes. Because the offering is special with high customer value, one can imagine that profit levels can be maintained for long periods.

Growth opportunities abound for viable businesses. There are good prospects for growing demand in your home market, good potential for global expansion and often additional opportunities to extend your core technology or value proposition into ancillary products and contiguous markets.

Partners are easy to find for viable businesses. Whether you need to recruit professional employees, alliance partners, research collaborators or distributors, they all easily understand there is a real business, can readily see the value for customers and appreciate the competitive strengths.

Finally, viable businesses offer positive prospects and can raise financing in any market environment. Bankers, angels, venture capitalists and strategic investors can understand and measure the total attractiveness of the business model, the value proposition and see positive revenue, cash flow and return on investment (ROI) potential.

So rest assured that with these five compelling attributes of a viable business you will be swimming in customer loyalty, pumped up employees and delighted stakeholders!

Best,  Sylvester Di Diego

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