Archive for the ‘pitching a VC’ Category

1 page, 1 slide

January 17, 2012

can you describe your company in 1 slide?

that is really hard.

usually takes quite a bit of time to understand your customers well enough to articulate your value in 1 slide and for the customers to agree.

but these days people have less patience and want to make decisions quickly.

would it be a pie chart of what you save them on costs?

would it be how you increase their revenues? or profits ?

perhaps how we improve their conversion ratios?

I always liked the signs posted on poles next to stoplights saying

“loose 10 kg in 10 weeks”

these guys can explain their business very quickly.  they have to – no angels, no VCs.

today i spent 2 hours with some guys, and i still do not understand their business. but they seem very close to something very interesting. hence the 2 hours.

back to the guys who want me to loose weight (and i should).

what is their cost per lead?

i bet the conversion ratio is not that high; and their best conversion ratios and channels are word of mouth. for all of us working on digital marketing machines, let not forget that. our customers can create the best leads for us. does your product/service make it easy for them to recommend you?

more often than not, the answer is “not”….

or

“paint your house for 1399NIS (3 rooms)”

the beauty with that one is that up-sell is coming. i bet’ya his ASP is > 1399NIS.

the photo here is one for a plumber. ( called ‘installer’ in hebrew – no downloads, no SEO)

“the fast plumber”

a bit too much text?

this plumber does not drive an old truck.

he drives a motorcycle. and this sign is on the box on the back of the motorcycle where he keeps most of his tools.

we all know it is no fun to seat at home and wait for the plumber. the fact that he is on a motorcycle, makes me believe his customers wait less. made me want to call him.

finally, lets see, on your website, most users or leads end up reading/using one page and then make a decision.

what is your most important page?

 

 

 

 

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behind the shadows

January 27, 2010

this post is written in response to guy grimland’s article in the marker on VC responses to emails with an investment proposition

i would like to share with you my perspective:

  • what i thought
  • what i did
  • and why

first the facts:

here is the email i got:

From: shadowscale shadowscale [mailto:shadowscale.startup@gmail.com]
Sent: Tuesday, January 19, 2010 4:43 PM
To: Adi Pundak-Mintz
Subject: Meeting with Gemni

Dear Adi

My name is Yinon Tzuk. I’m the co-founding CEO of Shadowscale, a startup focused on automatic optimization and scaling for enterprise and consumer web applications.
Our founding team is an organic team that left Checkpoint 2 years ago, after spending 3 years together building scaling, cloud based security products.

Since then we’ve spent the last 2 years developing a unique solution for enterprise/consumer web applications experiencing rapid growth.
These applications often suffer from accelerating infrastructure and operational costs, coupled with significant learning curves resulting in downtime, poor user experience, and revenue loss.

With our service customers can continue developing their applications on a SINGLE virtual web server and a SINGLE database, with simple real time data manipulation.
Instead of worrying about load balancing, caching, security, CDNs, code acceleration, backup and deployments – Shadowscale does the heavy lifting in the background.

The customer controls the application’s SLA, availability, security and speed/cost ratios via a dashboard and can implement any state of the art scaling module on demand.
With the ability to see performance data, bottlenecks and solutions customers can make meaningful choices about their infrastructure cost decisions and optimization without any actual learning curves, development and operational costs.

During October 2009 we deployed the first version of Shadowscale supporting automatic scaling for databases with a top tier US based enterprise beta partner, with excellent results – more deployments are planned to follow during Q1 2010.

I’d love to set up a meeting to tell you more about Shadowscale in person.

Regards,
Yinon Tzuk

here is my response

yinon

thanks for your nice note

someone from the team will be in touch by phone to get more details and see if there is room for a meeting

sounds like you are at an exciting phase, and congrats on the great work up till now

do you have a presentation

take a look at the link below to my VC related blog posts

looking forward

adi

blog https://adisababa.wordpress.com/category/vc

here is gemini’s response once guy called to ask for comments after disclosing ‘the hoax’ (more of which are to come)? and complaining that only one partner responded

Dear guy

Thanks for taking the time to talk to me while you are with your son

Here is gemini’s team response:

We try to reply to every opportunity within 48 hours

We try to research and discuss the opportunity as a group and call the entrepreneur or set a meeting within a week most of the time, and some times 2 weeks

It is our belief that in order to have a clear and synchronized process it is best that only the partner and associate from the relevant sector will lead the interaction with the entrepreneur. Therefore multiple responses are not productive. We believe this is a professional method for dealing with opportunities that come thru email our desire for professional conduct is borne from respect to the entrepreneur and a view of ‘treat others as you would be willing to be treated’

The success of israeli high tech, is lead by entrepreneurs, not VCs, and we try to remember this every day

i will try to add some thoughts:

this letter looked unusual, (there is no Yinon Tzuk on linked in), Gemini is misspelled, the email address, some essential material was missing, and this is not the right way to approach a VC. i still believe that people deserve a response. i am not even good enough on this topic most of the time. this includes my wife, my friends, CEOs of my companies. so i have a long way to go to improve

guy from my experience is

  • intelligent
  • motivated
  • thinks out side of the box

i think this article is sad.

if you take one thing away from this episode it should be this

do not approach VCs via email

take the time to talk with people, find people who know the VCs and believe in you and in your idea and will introduce you and guide you through the first meeting and hopefully start a process. you can read more about my thoughts how to approach a VC, here.

you will get far more from the interaction (which, at times, is not enough)

i think this article is sad. why?

becuase we as a high tech industry and the VCs financing early stage entrepreneurship have far greater problems which should be addressed in depth and not through a yellow prism

for israeli VC s these may include:

  • lack of belief in the vc model
  • lack of belief in their ability to help
  • lack of desire to work really hard. and boy, to be a good VC you need to either be really lucky or work really hard

most of these issues could be cleaned up by a more equitable and reasonable compensation structures.

for isreali entrepreneurs the issues to discuss may include:

  • build a reasonable plan and execute against it
  • optimize long term, not short term. (can VCs help here? are they part of the problem?)
  • build a team and keep it together

but, don’t forget to wear sunscreen

#9 don’t call us, will call you

December 29, 2009

The main purpose of the presentation was to get into a process.

so success is actually determined by the next steps.

when questions arise during a presentation, write them down. summarize them towards the end. and promise to get back.

now, there is a tendency to do it quickly; within 24hours is standard etiquette.

sometimes, promptness is less. i mean, the hectic pace we are used to, our busy calendars and access to communication is and information can drive lower productivity. answering a need too quickly is a manifestation of this inefficiency as well.

so, promptness is less.

think things over, send an email within 24 hours stating what you understand the issues to be, and get back with some insight that blows us away.

in general, you should be constantly trying to discover what are the issues the VC has that if answered, will motivate them to start the process.

your answers could be the start of the process.

there is a great problem with this advise:

sometimes VCs do not know what will make them want to do the deal.

sometimes the issues stated are not the ‘real issues’.

hey… most times.

but once in a while, the way you listen, address key issues and analyze them as you evolve, can make a difference.


about masks לא כל יום פורים

November 20, 2009

from wikipedia

A mask is an article normally worn on the face, typically for protection, concealment, performance, or amusement.

This stone mask from the pre-ceramic neolithic period dates to 7000 BCE and is probably the oldest mask in the world (Musée de la bible et Terre Sainte )

i have written previously what not to do in a VC presentation

i would like now to flip the coin and tell you what to do.

to perform. to succeed, to get good money. so your idea can spring into life.

here is my first rule, or piece of advice

before your start your performance, your presentation with a VC, decide

are you putting on a mask, or taking off a mask?

 

 

#8 answer questions

November 4, 2009

answers

What is the real goal of a meeting with VCs?

to get another.

not just so that VCs can waste your time.

your time is valuable.

but get another meeting that will start a process.

hopefully ending in a term sheet.

here are a few great ways to get there:

  • create a dialogue. connect
  • do not act as a presenter. be yourself. discuss issues. focus on ‘the customer’, not the presentation
  • get questions answered. first quickly, then slowly

i wish to be clear here. i mean two different things by saying ‘answer questions’:

  1. before the presentation, (especially if you sent material in advance, and you have had a discussion with the associate), try to find out what are the top 3 issues that if you are able to answer, the process will start or continue. if you do not know these in advance, you probably have not used the important services of an associate at the VC fund (or have not done your homework) . if you still do not know, ask them in the beginning of the meeting
  2. during the meeting, when asked a question, do not evade, do not push back, do not delay. every question has a short answer. if it is interesting enough, there will be time for a longer answer or a discussion; either immediately, in the next few slides, or in future meetings.

in fact, you do not have to answer the question completely. the best answers are ones in which the entrepreneur says ‘i do not know’ or ‘i would like to do some more thinking on that and get back to you’. in fact, if you do not answer a question completely and you take time to reflect, this process can be used to your advantage. it can be a reason to continue the dialogue.

often, i find presenting entrepreneurs not answering questions, and afraid of starting a discussion. perhaps because of time pressures. perhaps because i focus on the wrong issue.

i also present. to investors, to my partners, to different classes in universities and in conferences

i have learned that

  • it is hard to answer a question with a short answer
  • saying ‘i do not know’ has a lot of power

#7 Write=Listen

October 17, 2009

i was at an off-site with one of my companies last week

about 10 people in a room, 3 hour session.

except for 2 people, no-one was taking notes.

how much work do you think was accomplished?

_________________

many times after a 60 or 80 minutes session with a company ends, i have learned a lot;  got to understand the opportunity better. have a better idea if i want to move ahead with the deal. is the match between us good or poor.

what does not happen often, is that the presenting company takes notes.

why?

  • the entrepreneurs were very focused on presenting
  • there were no pens in the room
  • i said nothing of value

all of the above are possible and perhaps even probable

yet, if you want to make a good impression, in addition to ‘connecting’, try to focus on

  • which of your ideas went well, and which ones did not. your presentation always could adapt
  • which of your assumptions about the market or business were validated, and which were challenged?
  • was the meeting tasks accomplished? questions answered?

if you or another member of the team takes notes, you will get more out of the meeting.

notes

_____________________

i was once with one of my companies, presenting to a top tier US VC partnership the opportunity, per request of the partner handling the deal.

since i am just a VC, i tried to be a fly on the wall.

there is a lot to be learned by how a different VC conducts a meeting

during a 90 minute meeting i said once sentence, a question, and took notes.

a couple of days later i called the deal partner for feedback, to see if they will be moving ahead with the deal and what are the key issues.

after debriefing and before ending the conversation he told me, ‘by the way, you made an excellent impression on my partners’

_____________________

if i could listen better and talk less, a lot more people will like me


#6 size matters

October 6, 2009

FalafelMarket size

it is not easy to assess market opportunities.

we all look for very large opportunities.

what is a large opportunity?

Do not look for analysts to answer that question.

they typically say that in 5 years it will be a $2 billion market with 0.6 probability. thanks.

i will be alive 5 years from now with 0.6 probability. does not really help.

actually, what size matters, depends per VC.

each VC has a different answer to two questions

  1. how much do they typically invest?
  2. what moves their needle? = what size of returns make a difference to their fund.

try to understand these parameters in advance.

regardless of their answer. try to answer to your self, what type exit matters to you. it will help you make a lot of decisions along the way. including if you want VC money or not.

in israel many VCs would like to invest up to $10M out of $40M total investments into a company. they would like to see at least $50M back. if an israeli VC owns 20% of a company, this means a $250M exit. how many of them occured in in israel since year 2000?

__________________

if you do a good job categorizing your company (usually 3 words or less) the answer of market size typically starts to answer itself.

people do an awful job at assessing market size.

the typical problem is to confuse the market with the available market.

many times this is called TAM or total available/addressable market.

if i start a corner falafel store, i am not addressing the $20B/year food market.

why?

because i am limited. by what?

by my location, my channels, user alternatives, tastes, fashion, pricing(and costs), frequency of use, marketing effectiveness, cost per lead, margins, competition, timeliness of entering the market, timeliness of interacting the customer, brand…

try using your market size assesment methodology on a flafel store or an aroma branch. what did you get to? what are factors of growing your TAM?

it is a complex problem.

i will try to simplify it.

if you show me that your company and biz model can:

  • sell $50M per year
  • with good visibility into future revenues
  • at 40% margin or higher
  • with year over year 30%+ growth

then you pass.

we will try to tackle the market size problem together in future meetings

and post investment. hopefully, we will solve this issue together before round B

#5 No Demos

October 3, 2009

As you may tell buy now, i see over 100 ideas per year, and in many years 300.

by now i have been in over 1000 first meetings, and perhaps closer to 2000.

man, believe it or not, i can still improve.

i say to my self, think of it as a consultation meeting, not as a VC meeting. but i am still too aggressive, and too frank.

i will make a daring claim:

i have been in less than 10 meetings where the demo blew me away

Instant_Demo_96

and most have not been in a first meeting

my point is this. if your demo is a killer, i will most probably see it later. but why in a first meeting?

if you are in a good market, and your business case is good enough, there will be time for a demo later.

what usually happens is:

  • the demo does not work
  • performance is lousy because of our IT (management and administration of technology in our office)
  • it takes too much time
  • it is too focused on some feature, not on the opportunity

also, and this requires some research, most demos that blow me away, end up being poor business opportunities

why?

i am not sure i have the answer. part of it may be about innovation vs execution

another may be that if you are too focused on the demo, you may be less worried about the packaging, the distribution, the marketing.

in general, in Israel, we have great technolgies and poor packaging and marketing, and few people consider the distribution strategy enough.

how the heck do you get the product into the hands of customers?

and how much does it cost?

few entrepreneurs start with that question.

i often stop an entrepreneur before a demo and ask them, what do you want me to think after the demo?

boy, it is not an easy moment. usually, a long silence ensues.

entrepreneurs mind set usually starts with how to make a unique technology. good. but not good enough.

why do customers care about your uniqueness?

is it sustainable?

do you have an unfair advantage?

forget the demo. i am a VC, not a customer.

there will be time for demos later.

#4 Teamwork?

September 30, 2009

How many people should attend a VC meeting?

typically for a first meeting, the VC will have one or 2 people.

there are a lot of complaints about VC partners not taking part in ALL first meetings.

my teammate, einat, discusses this issue, here

my main points about why i do not make it to all first meetings for companies in my space:

  • load – there are hundreds a year, and in some years 300+.
  • timeliness – i am not as available as i would like to be. portfolio has too many issues. our associates are impressive and can help me prioritize opportunities and you get a better service.

still, i need to do a better job on time management and timeliness/availability.

matisse

the next issue of this post is how many people from the entrepreneur side need to attend.

we are talking first meeting.

my claim: not less than 2 and not more than 3.

why?

if you come alone, you will have a harder time

  • listening and observing
  • understanding when questions were not answered clearly
  • taking notes

if too many people attend

  • the interaction with the VCs is less efficient
  • too much time is used on introductions
  • flow of presentation is more cumbersome, especially if everyone has a part to present
  • the interaction amongst the presenting team becomes difficult, often hurting the fair representation of the actual teamwork

the purpose of the first meeting is to have more.

there will be time to meet more team members in future meetings


#3 send material in advance?

September 24, 2009

Let’s start with why not to send material in advance:

  • you lose the chance to create a thunder
  • the presentation does not explain itself
  • ‘i have not done it with my customers, why do it with VCs?’

these are all good reasons. and i am sure you can come up with more.

My recommendation is to send material in advance.

why?

because you want the VC to be prepared.

learn if you want VC money (and it is a big if worth a separate entry) you are helping me, or another VC, through a process. i think you and i will get more out of a meeting if i am prepared.

now, i am not an expert in every market in which i see dealflow. in fact, by definition i do now know the space as well as you do. especially if you are a domain expert (which i think is an important quality for building a successful company, yet one which can be acquired).  think about this, for better or worse i have investments in Software for financial services, health care IT and water. Can i be an expert in all of these and many other spaces?

so you can help me prepare.( i try to prepare anyhow, often, not to a degree of which i am proud).

it does not have to be a PowerPoint presentation.

it does not have to be the PowerPoint presentation you will use.

but it could

  • help me prepare for an interesting discussion about how you are differentiated from competition (some of which i may not be familiar with)
  • have initial thoughts about why a big company in this space will emerge,
  • have something interesting about you and the team.

this can save time so that during our meeting we will trade thoughts, not just read a presentation together.