VC in DC

What to Expect, When You're Expecting (a financing)

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Maybe your capital needs are expanding beyond the ability of your existing capital sources.  Or maybe you see a special opportunity that can only be pursued with an influx of cash.  Maybe you're ready to take your business to the next level.  No matter the circumstances that have brought you to this post, you're wondering -- Am I ready to do a financing?

The decision to pursue a financing for your small business brings on a process which at times can be daunting, exhausting, tumultous and potentially -- uplifting.  The process itself can seem a little unnatural and it always prompts questions.  So if you're expecting some financing, here's some questions about what you can expect....:

What are the steps in the process?

Step one: Conceptualize your pitch and refine your investment thesis.  Step two: Carefully research potential partners and approach them  via introduction by a third party.  (Hint:The third party must be known and trusted by the target investor partner. ) Step three:  Close the deal by generating multiple interested parties and negotiating the best combination of terms AND partner. 

My friends who have had a financing warn me about S.C.D.C fatigue; what is this?

Yes, of course, Same Circus Different Clowns fatigue is quite common during the financing process.  This syndrome arises when you pitch many different investment groups with the similar investment thesis in quick succession.  The investment groups begin to blend together in your mind.  They may, and often do, raise many of the same issues related to your financing. Each potential partner will also likely offer a unique piece of advice that is contradictary to what the others raised.  And while it might be easy to zero in on the unique, contradicatory advice  --This is the curse of SCDC fatigue. It is better to act on the common advice that you're hearing through this process.   While the fatigue will fade, the experience will remain with you for a long time.

I feel so warm most of the time, and I sweat a lot.  Is this normal?

The sale of part of your business and the involvement of outsiders is sure to prompt some uneasiness.  It is normal to be uncomfortable.  It may pass with time.  However, with the wrong investor partners or barely passable results, it may not. 

How will this affect my business?

Well, while youre' expecting a financing you'll lose some focus on your core business tasks and revenue slippage is common.  Soon after you start the financing process, your business problems will become larger or more numerous, but this is a natural result as your focus is distracted away from daily business operations and becomes fixated on the financing.  Amongst previously funded CEO's this is jokingly referred to as the "problem fairy".  Not to worry, however,  as your problems will go back to normal after the financing.  

Are there any other physical changes?

Some CEO's who raise funds experience "Balance Sheet Hearing Loss" which is an inability to hear your investors' concerns when the balance sheet is flush with cash after the funding.  This will likely be only temporary as cash will reasonably drop over time and then your hearing returns.  Many report that a bad quarter or two restores full hearing almost immediately.  Your CFO will not likely suffer from Balance Sheet Hearing Loss and should be relied upon to help you here.  Remember you guys are a team.

I have heard that you can lose a deal after signing a term sheet, is that likely?

Unfortunately you can lose a deal at any point in the process and many firms will sign a term sheet with you when they haven't completed appreciable diligence.  You need to stay focused and keep driving your company and deal forward.  It can be compared to landing a jet on an aircraft carrier -- don't let off the throttle until after the tailhook has caught the cable.  No deal is done until its done.

I am worried that my new investor directors will want to meddle in my business after the financing, how do I keep them from undermining me?

Well,  like so many other things, this is about communication and boundaries.  Be sure to communicate a lot and be clear about what assistance you would welcome on a regular basis.  Best to be understanding of first time investors or those with few other investments, as they'll be hyper-focused on your progress and seek as much involvement as possible. 

My friends who've financed have told me about post deal depression? I think the acronym was P.P.D?

Yes, Partcipating Preferred Depression isn't uncommon after the close of a financing deal.  Because Participating Preferred stock is common in most small company financing deals, this condition is also fairly common after a financing.  

Participating Preferred stock means that investors receive their investment back prior to any other proceed distribution and then -- additonally -- the investors  participate in the distribution of remaining proceeds at their  ownership level (i.e. 20%) .  You may struggle with a perceived inequity here or wonder if you'll get your fair share of a company sale.  Talk to your lawyer along the way and especially if you're struggling with P.P.D., as he or she will remind you of supporting market conditions and the necessity of honoring signed agreements.

Will things ever be the same afterwards?

No.

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Great article and video about pitching VC's

This article and supporting video go a long way to address some fundamental and important questions people have about their VC pitches. Including how proven do I or the product have to be, how direct should I be and what role does passion play in empowering a pitch.

Here is the article: 

12 Things about pitching VC's

And the video:

Venture Capital goes Back to the Future

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When I first raised venture capital in 1990, the world was a different place but one very similar to today.   Our company was a software business, we were growing, losing money, and achieving trailing twelve month revenue of $1.5M.   Our burn rate, as I recall it, varied between $25k and $75k monthly.   We ended up receiving $1M of vc money at 1x trailing twelve month revenue valuation and we were pleased to get the money we needed to grow the business.   So, we sold 40% of the company and with a 1x liquidation preference (meaning the VC's would get their money out first) -- we gave up a lot.  And our VC's were well positioned to make money on almost any positive outcome.  Which they did. 

This thought is prompted by an excellent article by Matt Asay on cnet.com.  Matt's article talks about the big changes needed in the VC industry -- back to smaller funds making smaller investments in earlier stage companies.    Matt's Article 

At Grotech Ventures, we couldn't agree more with this line of thinking.  For me personally, this shift to a smaller fund doing earlier investments prompted a move to Grotech two years ago this month.   Grotech Ventures made this shift in recognition of opportunity , which was for Grotech, a shift back to its future.

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Being right but not right now

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"There is nothing more powerful than an idea whose time has come."
  --  Victor Hugo

I have wondered about the Hugo quote above from both sides.  Is there anything less powerful than an idea whose time hasn't arrived?

As an investor, it can feel that way when you're backing a company that you believe to the core of your being is right about the opportunity/market/product but whose progression is slow.  For the entrepreneur, this can all be about the power of perseverance.   Which isn't to say that the entrepreneur's persistence is less admirable for its necessity.   It can be tough to hang in there as long as it can sometime to take to realize one's moment in the sun.

This highlights an investor internal dialogue that the adept entrepreneur should seek to engage within investment discussion.  The investor is pondering both whether something is a good idea AND whether this is the right time for this good idea.  Many an entrepreneur can leave a meeting with the correct conviction that the investor believes in their idea but remain confused as why the investor fails to act.

That reluctance to act is often related to doubts about timing.    In my case, I recall my entrepreneurial decision to create a site called myroom.com in 1997 aimed at teenagers.  The site allowed users to create private webpages online and was equipped with a variety of tools including music and page creation wizards.  The thought was this young audience would enjoy the social aspect of their own private space online that intersected with other private spaces.  The userbase, though small, loved it.  I thought then and now, that it was a good idea.   It might have been early.  It was certainly beyond the patience and associated financial support of my backers.

So, if you're going to make a case for something being right with investors, you would be served to make your case include support for why it is also "right now".

Fox Business: The Pitch on 6.28.09

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Vitamin enriched coffee?  Instant Coffee?  Here is another edition of "The Pitch" from Fox Business Network's "Your Questions, Your Money".   They are certainly a great group and I have enjoyed the opportunity to contribute, in a small way, to the show.

Too Big to Succeed?

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We recently encountered the phenomena in popular culture of "Too Big to Fail".   Start ups can often appear to be - Too Big to Succeed -- when the management team size exceeds the need (and budget) at hand.   

Now, let's consider that there are two primary jobs or missions within any start up.  They are build/create product and to market/sell product. In truth these two can frequently be summarized as "Sell product".  Any person who cannot completely and totally relate their job and everything in it to the two primary missions should change what they're doing so that it is matched to the missions.  Otherwise it is time to leave the start up and go to a larger company where more esoteric contributions are valued and rewarded.

We typically see the assembled management team in venture capital pitch.  Just as there aren't jobs in a start up unrelated to the product and its sales, there aren't non-speaking roles for company executives at VC pitches.   If an executive doesn't contribute in one of these meetings to the discussion, they shouldn't be in the room.   It isn't much a spectator sport nor was it designed to be one.   It also doesn't convey good prioritization for an organization whose only real asset is the time and effort of its team.  Silent Sam or Sara raises more questions in our minds about the team and its focus as well as its efficiency.  Questions mean doubts.  Doubts mean no deal.

So here's the point, start ups will often bring a full compliment of management team members to a meeting to impress us with breadth and depth.  The intention is to strengthen their case but in the process they do the opposite by opening the door to suspicion that they may be too big to succeed -- or at least capital inefficient by using our investment to pay an over sized management team. 

Plus, it can create an odd moment in time (read loss of credibility) when the start up CEO says "we are going to be lean and mean as we grow this" when that same CEO is accompanied to the meeting by 5 vice presidents.  All for a company with an incomplete product and no sales.  When does lean and mean start?   Do we really think the addition of millions of investment capital will cause a company to become "leaner and meaner" than it was before the money?   Capital comes from investors, capital efficiency comes from management.

When these 5 VP's don't all relate to the primary mission or speak in a pitch meeting or otherwise appear to contribute anything obvious - these team members look like a liability and cash drain for any invested capital.  The team looks riskier for its size and less likely to be capital efficient.  It looks Too Big to Succeed.

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The 5 Things People Pitching VC's Don't Usually Know

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Here they are:

1. We see a lot of ideas, all the time, week in and week out.  Most say, if you make an investment in our company, we'll really be able to make progress on all fronts.   Some say, we haven't had much money to date, but look at what we have been able to achieve with little money in a small amount of time.  People that can make progress without money tend to be the ones who make the most progress when they have money.

2. Our scope and interests are limited.  We focus our plans on stage of investment, types of technology and specific geography.  We win by staying close to our plans.  We won't make an exception for you because any off plan successes are considered luck.  Any off plan failures make us look stupid.

3. Market timing can be the most important factor in success.  More important than management or product.  Again, not all the time is this true.   But, if you're late, we are likely to consider it game over.

4. We're in a hurry to produce returns but not necessarily in a hurry to invest as we need to be careful.  Careful in a number of ways including your idea, team and timing.   Your need for the money right now isn't often a factor in our investment process.   Repeating that you need the money now frequently, doesn't change that.

5. Sometimes, you may need to consider that your storyline needs to change.  What you focus on in the pitch is important to proper interpretation.   Commonly, people emphasize the product over the market and the team over the business.   We are investing in the business that will be derived from a market.

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Fox Business Network: The Pitch on 5.30.09

The Fox Business Network has a Saturday show called "Your Questions, Your Money" that answers questions related to small business, start ups and raising money.   I have been on the show a couple of times and will be posting a few clips on the blog.  I have been so impressed with the show and the dedication of the team there.  And it has certainly been enjoyable to participate in the production.  I am grateful for the opportunity.

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Deloitte VC Panel on July 1st

 The talented Ellen Mundell of Deloitte has put together this sure to be interesting event.

Image by mada299 via Flickr Venture Capital Overview – 7/1/2009 Featuring A Panel of Local VCs who are actively investing Wednesday, July 1, 2009 The Greater Washington Area Technology Venture Center (TVC) is pleased to invite you to our next program to hear about the current state of the VC market. Despite the lukewarm – yet slowly recovering! – economy, this group of VCs, each from four different local funds, is actively investing and optimistic about the future.  We are looking forward to hearing from these four well-known and highly regarded VCs:   John Backus - Founder & Managing Partner, New Atlantic Ventures Scott Frederick – General Partner, Valhalla Partners Steve Fredrick – General Partner, Grotech Ventures Sever Totia – Principal, Edison Ventures When:   Wednesday, July 1, 2009, 7:30 a.m. – 9:00 a.m. ·         Registration, networking, and breakfast - 7:30 a.m. ·         Program – 8:00 a.m. – 9:00 a.m. Where: Tech Venture Center 1750 Tysons Boulevard 5th Floor, Room 5052 McLean, VA 22102 RSVP to: emundell@deloitte.com

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Finding Investment Capital or VC: The Fast Path via Matching

If you want to find a match, it is best to understand what you're matching.

All Venture Capitalists can be differentiated on 3 axis; the stage they invest in, the geography they focus upon and their technology opportunity areas.    If you're a CEO seeking money and you don't match up with these, you're really wasting your time.

At Grotech Ventures, we describe ourselves as early stage investors in high potential technology companies.  Our geographic focus, which is a reflection of our personal networks over the last 25 years in the IT business, includes the Mid Atlantic, Southeast and Mountain West.  So if you're outside these areas, because of stage, technology or location, we are not likely to be a good investor to approach with an your idea.   Sure, there might be an exception but those exceptions are never going to be the rule.

So, the investment stage of the investor is the right starting point.  Seed investors won't want to look at your Series B round, for example, and if you're pitching a Series B -- you really don't have time to waste as you're already running an operating business.  As a practical matter, investors will do seed/early, Series A and B rounds, later stage (Series C+) or expansion capital so I don't want to split hairs and advise only approaching those with very specific focus.  But one gets the idea, investors don't like leave their comfort zone or neighborhood.

What is the VC's neighborhood?   Investment historical data is that 80% of all Venture Capital is invested within 200 miles of the VC's office.  It is by and large a regional business.  Yes, there are VC's that invest nationally and internationally. But, the bottom line is that VC's want to be close to their investments literally and figuratively.   While I don't have data to support it, I would speculate that the earlier stage investors want to be even closer than the 200 mile average.

At Grotech, we talk about staying close to the technology areas and markets we understand and are capable of delivering the best value to our entrepreneurs.  And while that varies, to some degree, by individual, we know what we don't know.   If you're the latest thing in alternative energy, take it to someone who will "get" your idea and admire your insight.    I wrote in an earlier blog about the best way to get a VC firm attention.  The jist of which was; the current CEO's are an important conduit and filter.  Those current CEO's are also a clear analog about the comfortable technology areas of the VC. 

The start up CEO needs one yes answer to the funding quest.  The fast way to achieve it is to narrow the search at the beginning by matching the idea, stage and geography to the right candidates.

This article has been updated from the original post with the supporting video from Fox Business Channel.

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Berkery Book

Dermot Berkery has produced a well written book on raising Venture Capital.  I have been using this book in my University of Maryland and American University classes this year. 

Dermot is a general partner with a European vc firm that focuses upon Ireland and the United Kingdom.  He is an early stage investor.

The book is an informative and practical to raising Venture Capital.

Details are:  Berkery, Dermot, Raising Venture Capital for the Serious Entrepreneur, McGraw Hill, 2008.  ISBN 10: 0-07-149602-5

Why VC's don't back Husband and Wife teams

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As a rule, VC's tend not to back husband and wife teams or other "family" dominated management teams.   This rule strikes many successful husband/wife or family teams as a misguided or perplexing.

Now like any rule, there are exceptions.  One of the DC area's most successful software companies, WebMethods, was led by a husband/wife team and was venture backed.   So why don't VC's tend to support family teams?

The offered explanation is two fold.  First, the introduction of a family element into an investment decision carries with it an incremental measure of risk.  That risk, the family risk, is that divorce, disagreement or dispute will render the management team ineffective or incapable of managing the enterprise.   Further to that, since it is a family -- undoing the deadlock can be problematic or impossible for an outside investor.   Second, research and experience has shown that the best available management talent will not gravitate towards a family run business.  The best talent has skills and ambition.  They won't join a situation where upward mobility may be limited by family relations.  If the boss' son is in line for the promotion  --  the merit driven achiever may lose out for reasons neither fair nor performance based.  Given that there is always demand for the best management, the people that make up that pool have a lot of choices.   And they will choose, typically, to avoid the family run business.

So, that's why VC's shy away from the family business model -- higher risk and greater challenges to building a world class team.  This isn't to say that they aren't exceptions to this rule.  There are many.

But if you're going to try and raise money from VC's, this is the bias of many to stay away from the family component and one is better to know that going in.

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Grotech Capital Group becomes Grotech Ventures

No $30,000 naming consultant here, don't you know.

Kidding aside, our new name and website are oriented to refreshing the greater community's awareness of our continuing focus on early stage Information Technology investing.   As 25 year old firm, Grotech has recognized and realized many industry, segment and compay opportunities. The focus upon the best early stage companies has been a consistent theme throughout 7 Funds.  The box below summarizes our positioning.

If you didn't arrive at this blog via our website, please take a moment and check it out at http://www.grotech.com

The Well Deserved Reputations of Local VC's

Any CEO attempting to raise money and succeeding at generating real interest is well advised to determine the respective reputations of potential partners.  This isn't to say that every comment will have a basis in fact.  Many will not.  But a reputation is well earned for most people even if it is not universally consistent.

In any competitive situation, juices will flow, tempers may flare and verbal restraint will diminish in the heat of the moment.  Jibes and snarky remarks can characterize the dialogue when competitors discuss each other.  Obviously, this is completely natural. I am always struck by how competitive forces do play out.  Sometimes it verges on the comical, the joke I tell is of the local attorney innocently inquiring whether a local legal competitor "has gone back to pig farming?".   Now, I exaggerate for effect but the questions about competitors can often be pointed and loaded.   Then again, you owe it to yourself to run down the pig farming angle if you're going to rely on that attorney.

As it relates to VC's, we know more about each other than we can freely or readily say. We have a sense for which VC's will attempt to "grab the steering wheel" once they're in the car. There are a few good ones, there are some great ones. Some are difficult. Some are cheap. Some are cheap, difficult and frequently drunk after 10pm. You get the point. Ask around. Ask plenty of others what they know about your potential partners.

Now you may hear a few bad things about good people and a few good things about bad people, but a consistent picture always emerges that tells a reliable story.   The reputation of the individual partner will often be of greater importance than the reputation of the firm but it pays to be cognizant of both. The reputation story is one you should know and carefully consider before moving forward with a firm. 

The Fast Path to Credibility

The first step on the fast path to venture capital is the entrepreneur credibility.   The best way to establish credibility is for the entrepreneur to discuss 3 things:

1. What the entrepreneur knows

2. What the entrepreneur believes

3. What the entrepreneur doesn't know

The first point, what the entrepreneur knows is the body of their work experience and knowledge.  Someone who has spent 17 years in database technologies clearly establishes credibility in the subject area.  If the entrepreneur fails to establish credibility within the subject matter of the investment, it is likely to be a short dialogue.    A casual observer would likely be surprised at the high frequency of business plans by people without knowledge of the technology, industry or marketspace.

The second point, what the entrepreneur believes about the future should clearly relate to their aforementioned knowledge of a marketspace or technology.   This is the opportunity at hand.  For the VC, the question is related to both the first two points and their interaction.  Is this a credible person?  And, if yes, would this person being in a position to see an opportunity in this market?   The first yes does a lot to provide foundation for the second yes.

The third point, what the entrepreneur doesn't know speaks to a number of fundamental concerns.  Foremost of which is the self awareness of the entrepreneur.  A self aware entrepreneur who offers that they haven't ever sold, marketed or run a company gives an investor comfort that the individual entrepreneur will seek and accept assistance.  For the investor, the response can be "ok, we can get you folks to do that".  It also begins to highlight the funds needed and the use of funds.  Even more importantly, if an entrepreneur describes uncertainty to market acceptance, pricing or other items that will only be known with investment of resource and the passage of time -- those uncertainties describe the inherent risk framework that an investor needs to surmount to move forward.  When an investor isn't comfortable with the source or amount of risk, they won't invest.   Now, the may know the risk fully and still invest or not, but it is a rare investor that will proceed with a handle on the risks.

Communication of what one knows, believes and doesn't know is a clear way to establish credibility, trust and rapport between entrepreneur and investor. 

 

More thoughts on pitching VC's

A friend directed me to a great post on the subject from Benjamin Yoskovitz. Ben is the CEO & co-Founder of Standout Jobs, a venture-backed startup founded in 2007.   

http://www.instigatorblog.com/5-lessons-learned-from-pitching-vcs/2007/05/10/

Ben's post does a great job of capturing the spirit of a well executed VC pitch.

Seed Round or A Round: What's the difference?

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The conventional wisdom differentiates a seed or A round based upon the amount of money raised by the startup.  The crossover amount is typically around $500k.   This is only half the story, however, as the distinction between a Seed Round and a Series A round goes deeper......

I think the better definition would point to how much has been accomplished by the company.    For both Seed and A Rounds, the company  often may have an unfinished product in an unproven market.   But how unfinished is the product?  And how unproven is the market?  These levels of distinction are far better indicators of the necessary corresponding investment.  And almost more importantly, how defined is the entrepreneur vision?  The incomplete product is ok, we expect that.  Unknowns about the product and market are expected as well.   

But that said, it is striking how many entrepreneurs arrive with the conception that a seed round should allow them to receive investment for a unfinished product (it does) for which they don't yet have a clear, crisp vision (it does not).  Simply put, a Seed Round investor can be made comfortable with an unfinished product in an unproven market so long as the entrepreneur has the clearest of ideas about product and market.    Frequently, people arrive with a request to fund a hunch as this is their perceived view of seed rounds' purpose.   And I'm sure there are investors ready to fund hunches, though they are likely the product of pre-existing relationships and previously profitable demonstrations of intuition. 

For the entrepreneur that lacks those relationships and intution track record, clarity is key.

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How money for how much equity?

Microsoft's Don Dodge has written a great blog entry related to the start up entrepreneur's frequently asked question of how money for how much equity.  I am meeting more and more successfully boot strapped entrepreneurs for whom the venture capital funding decision is a option and not a requirement.

See Don's entry:

http://dondodge.typepad.com/the_next_big_thing/2007/08/how-much-equity.html

Joining Grotech Capital Group Announcement

Venture firm Grotech Capital Group announced today that Don Rainey has joined the firm as a General Partner.

“We are very pleased that Don Rainey has joined us.  His deep operating background, connections and extensive venture investment experience make him a perfect fit for Grotech, with its value-added approach to venture investing,” said Grotech Managing General Partner

Frank Adams

.  He added that “Don’s addition represents an important element of our focused, technology venture strategy.” 

Ready for Venture Capital?

Cover of Catch-22

One of the most frequently asked questions from entrepreneurs is "How can I approach Venture Capitalists without a complete management team given that the VC's value management teams highly in their decision and I need VC money to recruit that very management?".  Which the prompts the follow on question, "Isn't this a 'Catch-22' situation?". 

They are good points.   For early stage investors, this is a commonplace dilemma.

My answer is that a VC needs to hear three things from an entrepreneur.  They are what the entrepreneur knows to be true, what he believes to be true and what he doesn't know.

First, what the entrepreneur knows.  This is the domain expertise that embodies the entrepreneur's unique point of view on an industry and the opportunity.  For example, ten or twenty years in any industry provides perspective and insight into the market and its unmet needs. 

Second, what the entrepreneur believes.  This is the essence of the entrepreneur's vision about the possibilities associated with the application of time, money and resource to aforementioned market opportunity.   The entrepreneur can lay out  a view of investor money, recruited talent, product development, marketing launch and company grow based upon the current conditions and investor involvement.

Third, what the entrepreneur doesn't know.   This frames the questions that time, money and resource will answer.   Will customers accept this new approach?  At what price?  Can we compete?  What will others do?

All of which is to say, early stage investors don't need companies to be completely staffed.  They need entrepreneurs to be powerfully self aware of the things they know, believe and don't know.  In that context, everybody can be on the same team going forward.

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Capital Connection 2007

The Mid Atlantic Venture Capital Association does a fantastic job with this annual venture capital fair. I had the honor of co-chairing the event this year with Joe Zell of Grotech Capital and Tim Meyers of Updata Capital.   The staff of MAVA delivers a top notch event and the companies are well coached.   

This year and next year's event are at the Marriott on the Inner Harbor in Baltimore which is a wonderful venue.

The presenting companies this year included the following:

3CLogic Aberro, Inc. Agility Healthcare Solutions Bay Bridge Decision Technologies, Inc. BoxTone Centice Corporation CMWare, Inc. Command Information Inc. COOP Systems Datacaster Corporation DoublePositive Marketing Group, Inc. eTelemetry, Inc. Exponential Storage FiberZone Networks Formatta Corporation Hook Mobile Inlet Technologies Innovectra Corp InterAction Laboratories Kaulkin Information Systems (KIS)

LPP Combustion LLC Millennial Media, Inc. Neurotic Media Persay Inc. Persystent Technology Corporation Portico Systems Privacy Vaults Online, Inc. d/b/a Privo Privaris, Inc Revive Systems, Inc. Secure Elements, Inc SIPeerior Technologies, Inc. SMBLive Tildenwoods Corporation Triumfant Incorporated Voyport LLC VPIsystems Wasabi Systems WebSolve, Inc. Ziptronix Zylaya Corporation

 

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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The Best Way to get a VC Firm's Attention

Entrepreneurs frequently ask "What's the best way to get the attention of a VC Firm?".  My answer is to use leverage the existing relationship between a VC and their CEO's. 

For the entrepreneur, the drill is to find CEO's within the VC's existing portfolio who may have applicable industry, technology or market domain expertise around the entrepreneur's company.   The entrepreneur approaches the CEO and pitches the company.  With any reasonable uptake, the CEO is now well positioned to introduce entrepreneur to the right partner at the VC firm. 

This approach also has the benefit the existing CEO being a trusted, knowledgeable colleague and qualifies as the best kind of introduction. 

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