VC in DC

Know thyself, know thy competition better

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The fastest and most direct way to start up success is an acute, deep understanding of your competition.   It is also the most powerful evidence that you can present to potential investors.

Consider the case of an entrepreneur who arrives with a complete understanding of competitors' products.  This conveys insight into market, opportunity, sales strategy and product superiority.     Alternatively, if the entrepreneur doesn't demonstrate that understanding it undermines everything and I mean, everything, within a business plan or proposal.  The management loses credibility as does do the financial projections.   Without that demonstrated understanding of competitor strengths and weaknesses,  assertions sound like wishes instead declarations of knowledgable intent.

I often advise young people that are striving to contribute and advance in an organization that nothing can differentiate oneself as powerfully as being an expert on the competition.   It is available to all but sought by few.   Being a known "expert" on the competition will bring people from across the organization to one's door step.  Which, if you're young and interested in moving up, is an unparalled platform for recognition.

On the other hand, you may be an entrepreneur and interest in raising VC (ie, you're reading this blog), and if you want to blow the doors off at venture capitalist presentation -- leave no one doubting your complete command of the competitive situation.  Doing so will build positive conviction about you and your deal.  For that matter, nothing will take your further in quest for start up success.  It also makes a lot easier to access investment.

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JMU COB 300 Business Plan Competition

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Some 8 years ago now, I joined with some other alumni to launch a business plan competition which is now in its eighth year.   By way of background, the College of Business at JMU requires business majors to complete a single, 12 credit hour course in which students are paired into cross functional teams (management, marketing, finance and accounting) to develop a business plan.  Each year over 140 plans are produced by the student teams across Spring, Summer and Fall sessions.   The competition invites the teams to enter their plans following the completion of the calendar year each January.  Typically, 30 to 40 teams submit entries and in late spring the Final 5 compete on a Saturday morning.  Parents, friends, faculty and alumni gather to watch the competition.  

Tension runs a little high for the students (and moreso for the parents) and the day concludes with trophies and scholarship prizes totaling $26,000.  Alumni present as judges as well other alumni provide the scholarship monies.

It is a challenge for the students to compete in front of a packed house in a pressurized moment for real money in scholarship prizes.    My suspicion is that they leave this competition an inch taller and they should.

Off all the things I do, few give me the satisfaction and pride of this event.  If you have an interest or opportunity to attend next year, please do so. 

Here's a link to an article about the competition:

JMU Business Plan Competition 2009

Here is a 2004 video on the competition.

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Excellent Blog Entry on Business Plans for raising VC

Pete Kennedy's entry on the GrowThink blog is another excellent contribution to a valuable and insightful site.   

http://www.growthink.com/content/how-write-business-plan-raising-venture-capital

Business plans that write themselves

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I spoke with a George Mason University MBA class Saturday morning as a kick off to a Capstone class that requires them to break out into teams to prepare a business plan.  I don’t envy them.   It is hard work even when you know what you’re doing and harder still for a first timer.  In my talk, I shared my thoughts on making the business plan creation process easy.

The best method advice for business plan preparation that I’ve gotten came when someone refused to read the one that I had written. 

I related to the students my experience pitching to Ann Winblad of Hummer and Winblad almost 20 years ago for a fledgling electronic mail software company.    Ann wouldn’t let me deliver the standard power point pitch or otherwise rely upon my prepared business plan materials. 

Instead, she asked me to tell her what my assumptions were about the future.   

So, the correct answer would have been:

1.                  We believe there will be a market for electronic mail software on personal computers.

2.                  We believe that we will be able to build a competitive product for this emerging market.

3.                  We believe that we will be able to sell this competitive product profitably and grow our company.

4.                  We believe that having accomplished the first three, we will be able to sell our company for a sufficient amount to deliver a good return for investors.

I wasn’t skilled enough to give Ann that answer twenty years ago. And, she didn’t invest.  But I have used the assumption definition approach to create and evaluate many business plans over the years.

To be clear, any business plan is predicated upon assumptions about the future.  Some in the control of the management team and many outside it, a business plan describes those future assumptions, identifies the opportunities created and describes the actions to realize those opportunities. 

No investor will support a company without agreeing to the assumptions.  The easier and fastest way to qualify an investor is do so with the underlying assumptions.  If an investor, for example, doesn’t agree that there’s a market or that you’ll be able to build a competitive product – well you can save each other some time.

I tell entrepreneurs that identifying and understanding their assumptions is the backbone of any business plan outline.   In fact, one could argue that the business plan is well on its way to completion when the entrepreneur is confident that the assumption list is thorough.

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Smart Fly, Dumb Fly

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The great entrepreneurs and the people that back them have long acknowledged the power of believing what you believe intensely, at least and until you don't believe that anymore.

Sometimes called the dumb fly, smart fly approach.  The dumb fly keeps banging away on the same spot on the window trying to pass through.  The smart fly keeps hitting different spots to find the opening from the willingness to experiment on the point of attack. 

For most start up entrepreneurs, the unwillingness to try and fail while continuing iterating an approach is the seed of failure.  Experimentation and innovation are the pathways to success.   My dialogue with CEO's usually involves a lot of conversation about it being ok to progress with failed experiments.  In my experience, the start up CEO that doesn't iterate, adapt and grow is the one left behind by the company's success.

As VC's, we are perfectly happy to see it all work out perfectly on the first attempt.  Then again, we don't always expect it to and the CEO needs to be comfortable with that.

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JMU Business Plan Competition

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The James Madison University College of Business is now in the top 5% of undergraduate business schools according to BusinessWeek.   A good part of this ranking is the quality and dedication of the staff.  Another component is the innovative COB 300 class. 

COB 300 is a 12-credit, team-taught integrated academic experience, which has been required of all COB Bachelor of Business Administration degree students since the late 90s. For the past five years, the College of Business and alumni have sponsored a business plan competition for the top five plans produced by the students.   I have been involved with this competition since the beginning and it is one of the most rewarding things that I do.

Student teams from COB 300 are invited to submit business plans. The COB 300 faculty select semi-finalists from more than 150 business plans which are developed and presented annually by COB 300 students. These business plans are then reviewed by an external judge's panel. From the semi-finalists group, 5 student teams are selected as finalists. More than $17,000 in scholarships and awards are presented to those teams that participate in the Business Plan Competition finals each April.

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