Betting on the success of a start-up
Posted by john in Austin Hill, angel investing, startup on March 20th, 2008
Full-time entrepreneur, part time angels investment instigator and one of our partners at MSU, Austin Hill, likes to ask an entrepreneur looking for finance:
“What’s the bet i’m making with this investment ?”
It’s a great question … but what a lot of first time entrepreneurs don’t appreciate is that the answer to the question depends on who is asking it ……. and this is particularly so when you are raising capital from angel investors.
Let’s say an entrepreneur’s ambitious vision for his/her company is to become the Trip Advisor of the financial services industry, but right now the company is just in its infancy.
If the entrepreneur was pitching to a VC that had relatively deep pockets and was looking to fund a good idea to it’s conclusion (or at least for a couple of rounds of financing), the answer to the question might be along the lines of “You’re betting that people will be as willing to share their financing experiences to help others as they are their holiday experiences”
If however our entrepreneur pitches an angel investor for a few hundred thousand dollars, thus enabling the business to have been fleshed out more before approaching a VC for a larger investment, the answer should be very different “You’re betting that with a few hundred thousand dollars I can develop a website that will have enough traction to prove to a VC that their is a good chance that people will be as willing to share their financing experiences to help others as they are their holiday experiences.”
This bet is more about short term execution than long term vision. The long term vision is important to the angel investor, but typically he/she won’t able to fund the idea to its conclusion thus increasing the risk and changing the bet.
Founder get Founder campaign launch !
Posted by john in Finance Dept, angel investing on February 19th, 2008
Investissement Quebec is piling a lot of money into promoting the benefits of succession planning recently and whilst not directly relevant to our area of interest (start-up’s) there is a mutually important economic message:
Get the money into the hands of the next generation of guardians in a timely, smooth manner !
I mentioned in a previous post that MSU had been described as "…an agency that encourages successful entrepreneurs to become angel investors." We see this as one of the best forms of succession planning possible and will continue to strongly encourage it ,but there are other variations on this theme.
Just recently David Crow, originally from Austin, Tx but now living near the beautiful shores of Lake Ontario blogged about how in thriving markets successful companies seem to spawn founders of new companies.
So para-phrasing a question he asks "Where are the Montreal companies that spawn founders ?"
I wasn’t in Montreal to remember the heady days of Softimage, but that’s still the company most people seem to refer to when this subject is discussed locally – and according to the NY Times, that happened in 1994 !
My limited digging around has also shown that Dialogic has spawned a few other founders, as has Telesystem, Mamma.com, E-Fundraising , Zero Knowledge/Radialpoint and AskMen.com but I would be really interested to hear of other successful Montreal companies that have gone on to spawn a new set of founders.
We’re in stealth mode!
Posted by john in Marketing Dept on February 17th, 2008
Anyone one who knows us well may have wondered why our friend Roberto Rocha described MSU in yesterday’s Montreal Gazette as:
"…an agency that encourages successful entrepreneurs to become angel investors."
Whilst this is accurate (and provides material for another blog post, to come shortly), it’s not the full story … because we are in stealth mode !
For those who didn’t catch the post on companies in stealth mode, you will know that I think operating in stealth mode means 1 of 3 things:
- You haven’t quite worked out what your doing.
- You think your idea is so amazingly great and original that if anyone heard about it they would immediately drop what they are doing and do the same.
- Your project needs hype to have an impact and you don’t want to water down your marketing impact when you actually do launch.
One of the above is correct and when we come out of stealth mode we will take a vote on which one of the above our readers think is correct!
(If you do know what we are up to you are probably one of our "insiders" – so keep it to yourself as we don’t want break our stealth mode quite yet!)
The long or short of pitching angel investors
Posted by john in Reseau Anges Quebec, Standout Jobs, angel investing, cozimo, startup, xtranormal on February 16th, 2008
Standout Jobs, Cozimo and Xtranormal have recently been pitching their businesses at DEMO. These pitches were all well received by the audience – and one of the key reasons for that is that they were prepared specifically for that audience. In other words, to deliver a good pitch it is essential to understand the motivation and objectives of your audience.
Knowing your audience is also important when it comes to pitching potential investors. Some time ago Brad Feld published a list of questions that a pitch to a VC should address. We have developed a set of questions that we think are more applicable to pitching angel investors:
- Set the scene – Explain why the space your business operates in is interesting to you and should be interesting to an investor.
- What is your vision for the business? How will you be perceived?
- What is the need you are trying to fulfill? Who specifically has this need? What is the intensity of demand? ( ie are potential customers/users willing to invest time or money to satiate the need?)
- How many potential customers/users have this need ? (ie How big is the market?)
- What is your offering? How does it fulfill the need of your potential customers/users? What stage is it at (idea, beta, in production)?
- What are you competing against? What differentiates your offering from others and why does it matter to your users / customers?
- How do you generate revenue?
- What is your strategy for attracting and retaining customers / users?
- What relevant experience or insight does your team have for executing this strategy?
- In addition to money, what other resources are you lacking right now? (e.g. key hires, key relationships, etc)
- How will this investment fit in with the overall financial plan of the company? (e.g.Enough funds until profitability (no further investment anticipated) or Interim financing round (how long will this funding last))
- What business milestones will this investment enable you to reach? Why are these milestones significant? What key perfomance indicators can you use to track progress towards the milestones?
- Are there any other material matters ? e.g. Outstanding debts, important contracts, specific timing requirements for an investment etc.
Whilst some of these questions might appear to invite broad sweeping answers – that is not the idea. Be tight, be concise and debate each question thoroughly before you answer it.
We will continue to refine these questions based on feedback from entrepreneurs, Reseau Anges Quebec and NAOQ.
2008 – The Year of the Individual !
Posted by john in Marketing Dept, role models, startup on January 3rd, 2008
The start of a new year is often seen as both a time for reflection and for looking to the future.
On reflection I recognise two major movements in Montreal in 2007:
- The "self activation" of Montreal’s entrepreneurial community – primarily through Barcamps, Democamps and Tech Breakfasts.
- The closing of the gap between the franchopone and anglophone entrepreneurial communities.
As others have commented we have come a long way in a short amount of time and this progress is both exciting and encouraging for Montreal and also for Canada.
Looking forward, I implore Montreal’s new wave of entrepreneurs, angel investors and VC’s to work hard, work fast and work smart.
There are a few things that I would like us to try and keep in mind as we push on into 2008:
- We are not the first to face any given problem – but realising that it is a problem means that at least we now have an opportunity to do something about it.
- We will not achieve great success by working in a vacum:
- Life is a competitive process – decide if you are training to win the New York marathon or finish a sponsored 5K fun run. Both are worthy goals but each requires a different levels of commitment .
- Life is a collaborative process – helping other people achieve their goals does not necessarily hinder you achieving yours. Surround yourself with worthy training partners that will push and motivate you to do more.
- Make decisions ! Some people succeed, some people fail and some people drift along in between. Drifting is the worst option of the three (and it is an option you chose). Be prepared to fail at something so that you then have the time to succeed at something else.
- Time does not stand still so don’t be fooled into thinking that "quality of life" is a substitute for hard work – it is a product of it !
- And for those entrepreneurs trying to launch a new business in 2008 – please remember, if everyone says it looks like a dog and sounds like a dog …. but don’t seem to want to pat it … then perhaps its not a dog (and that’s not a good thing)!
On a final note, a city is only as good as its people make it.
When we talk about "Montreal" needing this or that we must remember is that is is individuals who must make decisions and individuals who must take actions in order to fulfill these needs – and its not "Montreal" who benefits from these individuals actions – its other individuals !
I know many individuals who have contributed to the successes of 2007, but I know many more who have already agreed to contribute more in 2008 – so to all of those individuals and any others that are so inspired to contribute – THIS IS YOUR YEAR !
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