Archive for February, 2009

Don’t Blow it by Being Sloppy

On Friday, we saw a number of presentations by companies looking for startup funding. I found it hard to believe the number of companies that provided fact sheets with mistakes in the financial projections. How stupid can you be! All the work it takes to get to a point where you are finally ready to present your opportunity to a group that might just have what you need most, financing, and your being sloppy stops you dead in your tracks.

I don’t know how many times I have told entrepreneurs that investors, especially active ones, look for a reason to say NO, not Yes. Finding sloppy mistakes in presentations or other documentation is just that reason. There is no excuse for this.

You would think of sending an important customer a new product without making sure it is squeaky clean and in perfect order. Well a prospective investor is your most important customer when you are trying to raise money, and  making sure that every thing is in perfect order is critical. You don’t get many second changes.

My Grandfather used to say “Measure twice and cut once”. Entrepreneurs need to remember and practice this. It’s one thing to find out that an investor just isn’t interested in your type of product or service. You hate to hear NO but it is a little easier to take if the investor just isn’t interested. It is completely different when you find out that investors discounted your opportunity because you were sloppy.

A Good Time To Start a Company?

I spent Thursday and Friday in Palm Desert at an Angel Capital Conference and Forum.  With the economy the way it is and companies shutting down or downsizing, there are more people who are thinking about starting a business. One of the questions that entrepreneurs had was, “is this a good time to start a business?” A number of people think it is. There are plenty of examples of bad economies being a catalyst for starting businesses.

In my opinion, the motivation may be here, but there are a number of things that will make it difficult. First, is funding. In the past, entrepreneurs had a few options that probably aren’t available to the average person. If you needed up to about $50K, you could open up four or five credit cards with $10K limits and max them out. Credit card companies are being significantly more restrictive. So that avenue is probably not open for the time being.

Many businesses were started using Home Equity Loans, but with home values plummeting and lenders being more restrictive, this is probably not a viable option.

So, this leaves us with using funds from an IRA or Retirement Account. Well, with the markets crashing, these accounts have lost significant values.

Banks aren’t back to lending yet. So, we are left with the Government. Let’s hope the stimulus package and the $700M earmarked for Small Business will have provisions for early stage startups.

I don’t believe that the entrepreneurial spirit has died, and people will find ways of getting their businesses started. It will just be harder.

Reading “The Snowball” about Warren Buffet

Now The Snowball is a big book. It weighs over 4 pounds. I mention that because I usually like to read a bit before I go to sleep. This book is so heavy, that it is difficult to read laying down. It puts too much pressure on my arm.

I didn’t know much about Mr. Buffet and I find that I like a lot about how he thinks about business. For example, in one part he talks about how he prefers buying “a good company at a fair, then a fair company at a good price”. It makes sense and then he follows by saying that part of a good company is having a great team and great teams are especially important since they positive affect the valuation of a company.

When looking at early stage companies, we usually prefer “an A team with a B product or technology than a B team with an A product. or technology”. This makes a lot more sense if you add that having this A team together running and growing the company will also positively affect the value of the company at exit. Afterall, we are looking for the positive exit.

I Have No Acceptable Excuse

I noticed that my last post was last October. I have been terribly busy but I should be committed to put something down at least a few times per week. OK, so maybe I will committ to not letting this happen at least in the near future.

I have tried my hand at Twitter and found that, although easier, it does take a committment and works best when you use a cell or smartphone to post. Of course it took me a few weeks before I figured that out.

It is not that I have run out of things to say. If that happens, put a mirror under my mouth to see if I an still breathing. I am determined to make sure I designate some time each week to blog.


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