VENTURE FINANCING - REALITY VERSUS RUMOR: Understanding VC's

Venture Financing - Reality versus Rumor with Dick Brown

Understanding VC’s - Of all the players in “the entrepreneurs’ game” the most vilified is the “VC” (venture capitalist). The supplicants seeking money blame VC’s for everything: failing to supply them capital; wanting to run all the companies they finance; owning too much of each venture; and, wanting to make obscene sums of money. Why?

Not surprisingly, these comments are most often made by the newest, most immature entrepreneurs. They seem determined to indict all VC’s … yet, they have scant knowledge and it’s based largely on industry myths … most of which are false. The most vocal of these folks have never met a real, live “VC” and would be tongue-tied-terrified to be sitting across from “a real, live one” at lunch.

The entrepreneurs’ role-model for modern VC’s lies close to Shakespeare's “Shylock, the money lender” Similar to that character, latter-day VC’s are accused of providing money at exorbitant rates … thus extracting their "pounds of flesh" from the innocent and noble money seekers. In reality, as in “The Merchant of Venice”, most VC’s have enviable human qualities (“If you prick us, do we not bleed?”) and can become not only sympathetic characters, but staunch, invaluable allies in most ventures, particularly the successful ones. Let’s look at typical VC’s and the truth behind some of the misconceptions

VENTURE CAPITAL – INSIDE, LOOKING OUT
Venture Capital companies invest OPM (Other People’s Money). Each VC company usually has Managing Partners (MP’s) that invest this money, some of which is usually their own. MP’s are measured (and paid) to generate more profit than the pure investors (“LP’s” or Limited Partners) could make putting their investment somewhere else with similar risks.

A typical Managing Partner is a male somewhere between 40 and 60. Although some MP’s were born with the silver spoon, most made their money by starting ventures that grew into successful companies. They are usually well-mannered, aggressive, experienced executives that have survived more than a few battles. They are adept in money matters and can smell a shaky financial deal better than the most experienced CPA. They have heard every excuse imaginable for failure, yet rarely offer one for their own errors. Although they are considered to be among societies’ “successful”, their past glories become unimportant as they strive to beat their VC contemporaries to that top rung of recognized champions in that industry.

Entrepreneurs Versus VC’s
Scenario #1
Entrepreneurs: We had this fantastic concept for a new venture. We did a great business plan and sent it to some VC’s. None were interested. They’re just too dumb to recognize our potential.

VC’s: Entrepreneurs believe we are sitting with bated breath at each mail delivery, wired and waiting for their business plan. They don’t know we can receive hundreds of e-mails a day and well over 1,000 a year. Most are sent by email and are quickly “chucked” unless they show immediate and unusual promise. The majority of the BP’s we receive predictably fall into disposable categories: small business proposals disguised as ventures; Bill Gates look-alikes (“we’re going to beat his growth, but quicker”); inventions that have already proved impossible to implement or market; deals that require multi-million dollar investments from people with no business or management experience. If you send us a BP that will cure cancer at a prescription cost of $1.49 and do not alert us that it’s coming, you might be better just putting it in a bottle with our address and tossing it into the ocean.

Of every 100 BP’s we receive, 95% are automatic rejects. Of the remainder, three may get funded. One company “makes it”.

Scenario #2
Entrepreneurs: We had this fantastic concept for a new venture. We did a great business plan and sent it to some VC’s. We only needed $150,000. They turned us down. They’re too dumb to recognize our potential.

VC’s: Our latest fund was capitalized at $35 million. We won’t get involved in any deal that needs less than $2 million. We sit on the board of each investment and can’t invest in small deals that will take as much of our management time as large ones. If each returned 20%, which ROI would you pick? (You’ll get our same response for a BP seeking investment in a local company that might grow to regional sales of $750,000 in 6 years. If it ain’t goin’ to be big and potentially dominant, forget it!)

While we’re at it, we also don’t like start-ups. If you were going to invest $2,000,000 would you prefer an existing, rapidly-growing company that’s profitable and needs expansion capital or a raw start-up … albeit with a promising idea … to be managed by some grad students from Stanford? We love bridge financing of existing, profitable companies.

Also, we need to keep an eye on our investments and we nearly always have one or two seats on the Board. These usually meet once a month. If our office is in Dallas, we’re not going to invest in companies in Seattle.

Scenario #3
Entrepreneurs: One of our guys met a VC at a church social. He said they vastly preferred to invest in people they already know and that have proven track records. That’s not fair!

VC’s: Nobody said “the game” had to be fair. If you were in my position, who would you pick? Raw neophytes? Want to get our attention? Take 2 or 3 of us to lunch and make a great pitch. Maybe then you’ll begin on the path to become “someone we know, trust and believe in!”

Scenario #4
Entrepreneurs: The guy that met the VC at a church social said VC’s generally expected an investment to return 5-10 times on their money in 3-5 years. That’s obscene and outrageous!

VC’s: He neglected to mention that’s for one of our successes. If we invest in 10 companies, 3-5 will go bust; another 3-5 will survive as “the living dead”, but never go anywhere. One will be a moderate success and one maybe will result in the 5-10 times case. We work hard to increase these numbers. Overall, our ROI varies from year-to-year but historically has run 8% to 30%, depending on our luck, the general economy and a couple of pages of other variables. Sometimes, we even have losses.

Incidentally - in business there’s no such thing as an “obscene profit” and we’ll grab all we can find that are legal.

Scenario #5
Entrepreneurs: One of our guys met a friend at a college reunion. He’d heard bad stories about VC’s and warned against having anything to do with them because “VC’s all want to run your company.
VC’s: That’s pure nonsense. A Silicon Valley VC once described it this way: “We want to supply the bullets, not fight the war.”

Sometimes this label gets stuck on us when one of our companies gets in trouble. By now, you should know we’re in business to make money. If one of our investments starts going bad, we must try and save it. First, we do the best we can to work with current management. In extreme cases, we may need to replace some of these people. This is a last resort and very dangerous for the company, our investment and our partnership. When pushed to the wall, we’ll bring in a “troubled company” consultant, but not one of our own people. If one of our companies “tanks” all the MP’s get a ton of grief from the LP’s.

Finally, I have already run three companies and have no desire to do this again. Right now I’m a MP here and helping to run this partnership. We are not only under severe pressure to make profit, but when our current fund becomes fully funded we’ll start a new one. We’ll go to our current investors first and if they’re unhappy with our performance and the returns, they’ll say, “No”. Our investment community is very small and bad news travels fast. We could have a tough, tough time raising new capital.

Scenario #6
Entrepreneurs: We had this fantastic concept for a new business. My father knows a VC at his country club. He invited us both to a round of golf and over drinks; the VC asked me and my team to make a presentation to his firm. I noticed he wore the gold “beaver” ring, signifying he had graduated from MIT.

I brought three others of our team and since I guessed my father’s friend was an engineer, I decided to have our “chief technical guru” make the whole presentation and prove how smart we all are. Our guru went at it for 45 minutes and filled his talk and white board with dozens of obscure abbreviations and advanced techno-jargon. When he finally took a breath, one of the VC’s interrupted and asked for a “pit break”. Five VC’s left for the break and only one, the most junior, returned. A week later we got a letter. They turned us down. They’re too dumb to recognize our potential.

VC’s:
We’re interested in making money, not trying to understand every facet of new technology. New, but professional, management teams split up the presentations, use slick visuals and stress: how unique the opportunity; how tempting the market; how safe the entry; and, how huge the return. If I want to be overwhelmed by technical data, I’ll rent a Stephen Hawking CD.

Scenario #7
Since we’re almost finished, I thought I would “fess up” to one area where we may just take a teeny, tiny advantage – on rare occasion – and, of course, only in limited circumstances.

We’re financial experts and “survive in the streets” by negotiating deals. When we prepare to offer an investment, we spend a lot of time establishing our “valuation” of the deal. That is simply, what we think the whole opportunity is worth and how much we’re willing to spend for what percentage. We all agree on the numbers and set up a meeting with the entrepreneurs.

We enter fully-prepared. I usually start-off by innocently inquiring: “We think we might be interested. Tell me how much money do you need and, assuming we do a straight equity deal, what percentage ownership are you willing to part with?”

As many times as this has happened, I still get amazed. Their team has not considered how to answer this basic query. Further, there probably isn’t a real financial guy on their team and they’ve adamantly refused to pay for sophisticated legal and knowledgeable financial counsel. After an awkward silence, the CEO usually blurts out something like: “Well, we know we need at least $3,000,000. What do you folks think is fair?”

In that one sentence, they have just “given away the store”. Next I respond: “We’re prepared to give you this check for $2,750,000 (reaching in my pocket and putting it on the table in front of them) on Monday in exchange for 90% of your stock”. They’ll mumble and caucus, groan and caucus, complain and caucus until they “reluctantly agree to 82%” and we close.

For years after they’ll tell how greedy and vicious we were, never understanding it was their own fault for not being prepared for a tough, “knock-down” with highly-experienced negotiators. And, think of their awe if they knew the percentage we’d internally agreed upon before the meeting was 43%

You can’t send little kids out to play hardball against the Yankees and expect to win … but, with a lot of preparation you may be able to score a couple of runs. We come complete with an impressive amalgam of well-connected, powerful business associates and can help fledgling companies avoid making similar, dumb mistakes.

… That’s the end of VC stories for today.

Entrepreneurs: Thanks. Maybe we just learned something.

-30-

For more information, please visit Dick's TNNW Bio.





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VENTURE FINANCING - REALITY VERSUS RUMOR: Understanding VC's

VENTURE FINANCE - REALITY VERSUS RUMOR: Outside, Looking In

Venture Finance - Reality versus Rumor
with Dick Brown

Entrepreneurs are asked: “Where do you plan to get funding for your venture?”

Most give the same response, “Venture Capital companies”.

Yet, not one entrepreneur in ten knows anything about this financial industry nor how it works. The following (along with a few “rules of the road”) may help.

Venture Capital companies invest OPM (Other People’s Money).

Investors give money to the VC’s to earn a higher return-on-investment than more traditional investments such as the stock market or bonds. The VC’s role is to make as much money as possible while assuming prudent risks. Their target is a very high ROI. Venture Capital became a fledgling US “happening” in the 1950's … initially financed by wealthy individuals and small investor syndicates.

Not so long ago, there was only one venture capital company, American Research and Development in Boston, founded in 1946 by Ralph Flanders, president of Boston’s Federal Reserve Bank and General George Doriot, a native of France who taught at the Harvard Business School and had served with the American Army in World War II.

Early on, AR&D made a modest investment of some $70,000 (for 77% of the company!) in a then unknown computer company known as Digital Equipment Corporation. Their modest investment blossomed into a value of some $100 million as Digital flourished.

AR&D caught a lot of attention in the staid, New England banking community. The potential for huge profits soon spawned a number of new, copycat VC’s and the formation of these became a major sport in the US financial community. In just a few years, it was estimated that there were 725 VC’s operating in the US … up from 507 only three years earlier.

Why this breakneck growth? The average annual return on VC funds was 48%, 40%, and 36% for 1995, 1996 and 1997 respectively … and, the industry as a whole had averaged 13.1 percent annual returns over two decades … Not too shabby to the existing bankers used to financing cars, boats and houses. Private equity such as VC’s became the fastest growing market for corporate finance.

Venture capital really blossomed until “Black Friday”, 14 April 2000, when the Internet craze crashed and the NASDAQ composite index dropped by 355.49 points. Analysts and investors wrote off the IPO market as retail and institutional investors quickly wised up to the game. The halcyon days of B2C’s and B2B’s that acquired market cap values greater than Ford Motors came to a shrieking halt.

Today, VC’s have bounced back, even in our current recession. Although venture capitalists now longer pour money into “the Internet”, it is now earmarked for different kinds of companies. The actual industry targets change constantly, but the “acid test” is:

1. The ability of a company to grow rapidly;
2. To dominate or be a major factor in a specific market segment; and,
3. Be attractive for an IPO - so the VC’s and their investors can cash out and “get liquid”.

Rule 1: If your company doesn’t have these characteristics, VC’s are not interested.

All VC funds seek very high ROI’s where there is inherently more risk than with other investments. In the early days of venture capital, if you traced back the actual source of the working capital you would quickly find that most of it came from wealthy families such as the Rockefellers and Rothschilds. Today, the great majority of money going into venture capital funds comes from institutional investors.

In any VC fund, part of the capital may come from the VC’s inside partners and some of the money will usually come from wealthy, private individuals or institutions that probably made a great return on their last investment with the same VC fund.

It’s not a game for the small investor. For instance, the minimum investment for a limited partner in Highland Capital Partners in Boston is $10 million.

The traditional hunting ground of VC’s has always been high-tech and its cousin, biotech. These markets are attractive since they are:

• Volatile and rapidly changing,
• Founded on continuing advances in leading edge technology,
• “Non-traditional” industries with few entrenched leaders. (It’s much easier to form an Apple, Netscape or Amazon.com from a industry void than it is to try to dislodge market share from traditional corporations (“gorillas”) such as US Steel, General Electric or Prudential Life Insurance.

Today’s VC’s are also interested in “derivative” and newer, emerging markets, such as “Green Products”

Rule 2: If your company doesn’t have “hot products in hot markets”, VC’s are not interested.

You and I Start a VC firm - Probably we both have had successful, management careers (maybe in high tech) and have made money for friends, outsiders and ourselves in a couple of our career stops. We know some of these people have faith in our judgment and they have funds to invest.

First, we form a type of company known as a Limited Partnership (LP). You and I are the General (or Managing) Partners and our investors are the Limited Partners. As the name implies, the investors’ losses are limited to the amount they choose to invest. The situation is very different for you and me. An LP is not the same as a corporation. As the Managing Partners in an LP as, we can be held personally liable for anything we do that is criminal, stupid or ill advised. We can also be on the hook for the liabilities of the LP. Newer forms of companies, such as a Limited Liability Partnership (LLP) limit the extent of this personal exposure.

Let’s say we plan to start “small”” and our first fund will be only $10,000,000 of investors’ money. Just as any entrepreneurs, we plan get this money from friends and insiders. We work on their expectations that our expertise and VC fund will outperform almost any other investment they may consider. We may invest some of our personal money as well. Our sales job is to get the $10 million and this usually takes us 3-6 months, along with a great deal of legal work.

As Managing Partners, you and I earn a management fee, usually 2% (and unusually as high as 5%) or $200,000 to $500,000. This takes care of our initial salaries, expenses and the outrageously expensive offices that most VC’s occupy, from Sand Hill Road in Palo Alto to State Street in Boston. In addition, we receive 20% of the net profits of the fund (Most VC deals are "two and 20").

[Let’s say we’re a well-established VC creating a $1 billion fund with only a 2% fee. That’s a whopping $20 million fee. Most mature VC companies have around 10 partners. If half the fee goes to overhead and the rest is split amongst the partners, that’s $1 million each!]

The split of the profits from the fund is determined in the partnership agreement and each one may be somewhat different. Since we’re new VC’s, maybe you and I don’t begin to profit from the investment side until all our investors make money. Or, maybe part of our management fee must be repaid first or deducted from our long-term gains.

The VC company management earns a fee on all the profits. This is called the “carry”, the percentage of the return on their limited partners investment that they collect.

As a “rule of thumb” the VC Company typically keeps some 20% of the profits from the investments, with 80% going to the investors

As soon as we fully subscribe the fund we want to begin making investments. Our investors did not give us their cash so it could sit in a bank. They get very unhappy if we don’t actively make investments.

[Incidentally, when Limited Partners subscribe to a fund, they do not usually write a check for the entire amount. If they are old, trusted LP’s, they may just be called from time to time for specific amounts for specific deals. However, they are expected to immediately respond, without delay, and fulfill their commitment. The consequences of not meeting a “capital call” can be severe, including the loss of any capital previously committed.]

More typically, LP’s may sign a subscription agreement, pledging to invest specific amounts at specific times (e.g. $2 million a quarter for 2 years). These are also called “tranches” or installment payments.

As new VC’s we have a predilection to make investments in companies and technology that we already understand. Our first checks will probably be written to companies we already know or to kinsmen that are starting new ventures or need additional funding.

Since our “kitty” is only $10,000,000 we set a limit of the amount we’ll invest in any deal. Let’s say it’s 5% or $500,000 for each deal. So, we can do a maximum of 20 deals (also establishing a budget for our “troubled” investments that will require additional capital). As prudent risk takers, by spreading our money into several investments we have limited the chance of losing everything with a single, bad decision. We will also cap the minimum amount we’ll invest in any one venture since our time is valuable and limited as we always become involved in our investments, usually as directors.

Rule 3: If your company is looking for “small money” (say less than $500,000 for a new or “boutique” VC or much more for a large firm), VC’s are not interested.

Early in our venture fund, we’ll probably go into several “syndicated” deals where two or more, unrelated, VC funds all invest in the same venture. Often one of the groups, the lead investor, will perform the overall due diligence and negotiations. We all split up the investment required and then we pick one or two of the different VC people to sit on the board of directors to watch our money.

Such pooling of funds is very attractive for us. We get to know a lot of other VC’s and industry executives. We learn more as we begin to be asked to participate in deals where we don’t have direct expertise. We begin to sit on many boards of directors and we get to know people that are directors and officers in multiple companies.

Rule 4: If the people in your company don’t know any VC’s (or, have friends in other companies already financed by VC’s), VC’s will not be interested. The “club” despises outsiders.

We learn even more about different businesses. Even better, we get to know a very large number of people, some very rich and powerful. We’re beginning to become members in an intriguing, worldwide club. We love it!

Next, we want to expand our VC business. How do we do that?

We start another fund.

In the VC business, once an individual fund is fully invested, that fund is closed to any new investors. Therefore, each time a VC wants to raise more investment money, they must start a new fund. The participants in each fund may be very different people or companies ... and, if we didn’t do very well for our investors in our last fund, this is a certainty!

Such partnership funds also have a specified, fixed life … usually ten years.

We have to make money for our investors since our ability to start new funds is directly related to our past performance. If we have poor performance in a couple of our funds, we may not be able to raise money for the third and following ones. We are always looking for new money from investors and trying to get the largest ROI for our current investors.

Sound familiar? VC’s have exactly the same problem running their business as you do. VC’s even go out of business if they make some really bad investment decisions. Ain’t capitalism wonderful?

As new VC’s, you and I are very sensitive about our investment decisions. We hear from our investors (passionately and loudly) when we make bad decisions. This is not a pleasant occurrence.

Our investors are looking for “home runs”. This is not really surprising since we probably promised the long-ball when we originally took their money.

We discover a wonderful way to cover our butts for those of our investments that might turn out to be only singles ... or, God forbid, strikeouts.

We probably decide never to go into a deal as the sole investor and we develop a preferred list of the VC’s as our potential partners. Not surprising, this wish list probably contains all the larger VC players. Usually, one of these assumes the monitoring role for each investment and this way we can avoid becoming directors. Also, we don’t have the staff, time and money to watch anything outside our limited geographical area.

Rule 5: If your company is in an area that has few VC’s and/or would require significant travel time/expense for any to visit you, VC’s are not interested.

Now, if one of these deals goes bad and our investors’ call to complain, we can always say:

“Look, the guys from LF Rothschild brought us into that deal. They knew the principals from an earlier venture. LFR did all the due diligence and promised us a major success. Even Sevin-Rosen came in as an investor. It really isn’t our mistake.”

Thus we neatly transfer the blame from us to LFR and avoid an angry investor in our fund. And that, my friends, is exactly why there are so many “shared deals” and so few with a sole VC involved.

“Success has many fathers. Defeat is an orphan.”

This lemming principle ... “it’s all the fault of that crazy rat in front!” ... extends far beyond just the sharing of investment positions. VC’s all read the same trade magazines and they share nearly exactly same perceptions of many industries and what companies/products are hot or cold.

Rule 6: Raising money for areas that are “off the radar” (unknown) or perceived to be cold by VC’s is very difficult.

This is just a beginning along with a few rules for “The VC Game”.

Dick Brown is President/Founder of American World, a consulting company that helps entrepreneurs that are seeking capital. He has known dozens of these folks and has written or reviewed hundreds of Business Plans. He is author/publisher of two books - “How to Raise Money, the Truth”, a “how-to” for entrepreneurs and “The PC Revolution, an Anarchist’s Journal”, a first-person history that exposes the people and events that created the most brutal upheaval in the history of the computer industry. When it ended, giants such as Digital, Data General and Wang were out of business. Dick was an active participant. He knew all the players and lived with them throughout the insurrection.

Web: http://www.amerwld.com/
Email: dick@amerwld.com

Dick’s books and more information are available at: http://www.amerwld.com/

For more information, please visit Dick's TNNW Bio.





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VENTURE FINANCE - REALITY VERSUS RUMOR: Outside, Looking In

VENTURE FINANCE - REALITY VERSUS RUMOR: On Being an Entrepreneur - Two Fables

Venture Finance - Reality Versus Rumor
with Dick Brown

An entrepreneur’s most common question is “How do I get funding for my venture?

Maybe: … You're sitting in the weekly Staff Meeting and your boss is droning on about profits, productivity and work ethics. You're wishing he'd finish so you could get to the golf course earlier. Suddenly a freak set of random synapses fire in your grey matter. You think of “Popovers” and how you enjoyed them in the UK. You wonder why no one ever seems to make them in the US. It’s something called “an idea” and it sticks in your head.

Over the next couple of weeks “popovers” keeps jumping into your conscientious. You spend some time on the Internet and find that cooking popovers correctly is dicey and home cooking usually results in more failures than successes. By sheer coincidence, a small footnote describes a tiny modification to the cooking-cup that produces perfect popovers, every time. More research reveals these modified cups are not commercially available … and, they're not patented. You think for a while and apply for one.

You buy a book: “How To Be An Entrepreneur” and start thinking how to find the money you'd need to make your popovers (and the “magic mix”) a success. Each time you “get rational” and instinctively pull back because you realize you're a mid-level manager in a very large company and don't know a damn thing about baking, much less selling, popovers – but the market opportunity is so huge!

Or … You're “Sarah”, a young, single woman in your 20’s. You joined the seven-million US unemployed some weeks ago. Your cash reserves are slowly disappearing and although you were a computer programmer, you can't find a job. It’s time to consider another career path. You make a small, financial commitment and take some aptitude/attitude tests.

One of the test questions really grabs you. It’s a list of different occupations to rate and one of these is “entrepreneur”. You choose “entrepreneur” first every time. You join a local “Entrepreneurs’ Club”.

Then … Two more capitalists, Mark and Sarah, have been formed, dropped into “The Game” and begin to radiate their unique patterns. Mark has already found his venture. Sarah is seeking one.

There are 2.5 million small businesses in the US, generally limited to small, well-defined markets with limited growth potential. Most can be started at very low cost and are funded by the “3F’s” (family, friends and fools). These are not the high-growth “ventures” that professional investors seek.

Mark discovered that launching his venture and locating the substantial capital he needed would require devoting full-time for several months and most of his money. After a long and scary analysis, he decided to make the commitment. He quit his job and felt free for the first time in many years.

Sarah loved her “new entrepreneurs environment” and immediately saw the potential of all the new, “social networks” and joined several. Within a short time, she'd created contacts like herself all over the world. She still hadn't conceived a venture that seemed to fit, so she hung out a “consultant” plaque and appointed herself “President”. Then she acted as support to the people that had found niches and planned to latch on to one of these ventures … most of which were really small businesses.

She (and her compatriots) became fully occupied with the technical aspects and minutia of the individual enterprises. There was no time to read business books, attend outside meetings or cultivate people that were not already insiders. Further, they all were “technical people”, uncomfortable with “business and sales types”.

Collectively, they had created an active, homogeneous community: “the world we live in, according to us”. They all believed they'd “just have to succeed” since sparkling stories of Gates, Jobes, Woz, Page and Brin danced in their heads. The cycle was easy: invent some venture; go to the VC’s; expand insanely fast; do an IPO; … finito. Easy!

Mark had hardly begun work on his Business Plan when he ran into a wall. He found he didn't understand many things. Fortunately, he had a life-long friend, Dave, that was the VP of a well-known company. Mark got Dave’s pledge to join the new company after funding was obtained – and, to help in the search for money. They added a couple of very experienced, professional managers. They also joined a social media, LinkedIn, and were able to made “deals” with both a prestigious, national accounting firm and a well-known, “entrepreneurial” law firm, both for: “little payments now; big payments when we make it – plus all the popovers you can eat.”

Together, the four insiders worked out a coherent Business Plan with hefty growth and profit potential for investors. They had play-acting sessions and prepared to the point they could exchange roles and still give the same answers to 95% of any questions. They mutually decided that VC’s could help them more than angels and narrowed the final capital search.

Sarah and her friends grew catatonic when they finished their little business plans and began to learn that VC’s not only refused to finance any of them, but hardly bothered to acknowledge their submissions. They couldn't square their myopic myths with reality - Most VC’s won't even look at deals of less than $2 million and have standard barriers to supplicants wanting: “$150K so that I can eliminate all my personal financial worries while I code my software or build my site”.

Before they began, none of these neophytes ever stopped to ask themselves if they had the type of business that could attract outside money. So, for all the hours Sarah invested, she still needs a job and just became another disappointed dilettante that proclaims: “all VC’s are meaner than Jacob Marley and won't support America’s entrepreneurs”.

Mark got his VC funding and after the usual start-up bumps is doing quite well. Dave invented a clever incentive program that attracted entrepreneurs to sign on as independent, commission-only sales representatives. They recruited these people across the US using LinkedIn and Facebook. This saved a ton of money earmarked in the original BP to hire people. Mark and Dave spent it on increased advertising.

They're currently thinking about introducing their products into England.

… And, this is why “Sarah’s” get one out of a thousand Executive Summaries funded while the “Mark’s” tend to succeed.

Dick Brown is President/Founder of American World, a consulting company that helps entrepreneurs that are seeking capital. He has known dozens of these folks and has written or reviewed hundreds of Business Plans. He is author/publisher of two books - “How to Raise Money, the Truth”, a new, “how-to” for entrepreneurs and “The PC Revolution, an Anarchist’s Journal”, a first-person history that exposes the people and events that created the most brutal upheaval in the history of the computer industry. When it ended, giants such as Digital, Data General and Wang were out of business. Dick was an active participant. He knew all the players and lived with them throughout the insurrection.

Web: http://www.amerwld.com/
Email: dick@amerwld.com
Dick’s books and more information on AW are available at: http://www.amerwld.com/


For more information, please visit Dick's TNNW Bio.






Published by THE NATIONAL NETWORKER Newsletter. All rights reserved. Subscribe Free For Your TNNW Newsletter and THE BLUE MONDAY REPORT! - Click HERE.
The National Networker Companies

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VENTURE FINANCE - REALITY VERSUS RUMOR: On Being an Entrepreneur - Two Fables