Go For The Gold

Follow these 10 steps to impressing investors, and you'll be on your way to the big time.
By Guy Kawasaki
Entrepreneur Magazine - April 2007

Last month I told you what not to do if you're trying to get venture capital. Here are the top 10 things you should do.

1. Build a real business. This seems like a "duh"ism, but few entrepreneurs do it. Most focus on quick flips to an IPO or acquisition. But nothing is more seductive than a company they can easily imagine having a big impact on the world.

2. Get an intro. Venture capitalists are lazy. We want things handed to us on a silver platter, like when someone we know and trust tells us about a good deal. The best introductions come from corporate finance attorneys, college professors and CEOs of companies in our portfolio.

3. Obey the 10/20/30 rule. Your PowerPoint presentation should have approximately 10 slides, you should be able to give this presentation in 20 minutes and the smallest font should be 30 points. And yes, this means you with the patent-pending, curve-jumping, open-source, AdWords-optimized way to sell dog food online.

4. Show traction. The easiest way to prove you have a real business is to be generating revenue. It's one thing to believe your bull-shiitake Power-Point presentation; it's another to see cash flowing into your company. Show traction, and most venture capitalists will be willing to suspend their disbelief.

5. Clean up your act. Remember, venture capitalists are lazy, so present a clean deal. Clean means no lawsuits challenging your ownership, no shifty stock deals, no disgruntled co-founders lurking in the background. The more crap a venture capitalist has to clean up, the less likely he'll be interested in your deal.

6. Disclose everything. If you have crap you can't clean up, then disclose it right away--not necessarily in the first meeting, but soon thereafter. The worst thing you can do to venture capitalists is surprise them with bad news.

7. Acknowledge, or create, an enemy. Venture capitalists like to see competition--it validates that a market exists.

8. Tell new lies. Please refer to last month's column. Every time you tell one of those lies, you decrease the likelihood of funding by 25 percent. Do the math: Tell four lies, and you won't get funding.

9. Don't fall for trick questions. Venture capitalists use two trick questions to assess your cluelessness: 1) Do you see yourself as the long-term CEO of this company? and 2) What is the path for your company? The right answer for the first one is, "My goal is to build a great company. If it means I need to step aside, I will gladly do so when the time is right." The right answer for the second one is, "Frankly, I haven't given a lot of thought to liquidity. My team and I are focusing on the product. If we build a great company, I'm confident liquidity will occur."

10. Underpromise and Overdeliver. In everything you say, ensure that your results exceed expectations. Deliver a prototype early. Deliver your list of references early. Close a partnership deal early. The only thing you shouldn't do earlier than expected is run out of money.

Guy Kawasaki's mantra is "Empower entrepreneurs." He is former chief evangelist for Apple Inc., co-founder of VC firm Garage Technology Ventures and author of eightbooks--most recently The Art of the Start. Visit his blog at http://blog.guykawasaki.com.

ThePortlander.Com From idea to a soul changing event

The story of theportlander.com is one of insight not only into how to start a business with nothing more than an idea.But also into ones soul. When the founders of theportlander first met to discuss ideas for what they thought would be the next big thing they never realized that what they were putting together would transform not only the news world in there city but also themselves. Sometime in November 2006 two men met to discuss a website idea for downloading free mp3's and generating revenue from the google adsense program. Little did they know google was about to buy YouTube and offer a way for anyone to grab some of there popularity with adsense. So needless to say after doing some research they found that there idea was already out there in the form of Reever.Com and other notable websites. What to do give up or push on with more brainstorming. Then New Years night roughly 10 minutes after the crystal ball dropped in times square one of the founders had an idea. Why not create a website where all of the news and information for Portland OR, flood into one main site and use Web 2.0 technology to run it all. how could it fail . Well it could and from that they ran with there idea.Over the next 6 months the idea of theportlander transformed from something akin to Myspace to what it is now and what it will become over the next few months. They had no money and very little programming knowledge.But they had a dream and would find any means possible to build it. Through this they gradually pieced together what is now theportlander. One founder told me that throughout the experience he gained more into who he was than he ever thought possible. here is a quote from one of the Co-Founders " Holding onto this idea and never losing site of it even when others were saying you'll never launch it pulled me down sometimes but it changed me in that I said no I will do this and I will make it successful, because of this my whole outlook on life changed and my life went from I hope I can do this to I will do this and every aspect of my life has changed because of it" . I think alot of startups don't always have a chance to go through this, as most go into it with funding or some type of guidance. From theportlanders point of view they had nothing and had to create something with nothing more than an idea and the perseverance to crawl and scratch there way to a successful launch. Because of this they now have pride and respect for the business they have created and will work harder to make it a success and to top it off they have no debt going into it. This blogger wishes all of the crew over at ThePortlander.Com all of the success that they wholeheartedly deserve. Congrats guys on a successful launch :)

Study: $850M Invested by VCs on Web 2.0 In 2006

Ernst & Young and Dow Jones VentureOne are reporting today that global venture capital investments in Web 2.0 companies totaled $844.4M in 2006, twice as many dollars invested in the space in 2005, and with nearly twice as many deals. According to the study, there were 167 Web 2.0 deals last year, with a median pre-money valuation of $6M worldwide. Pre-money valuation of Web 2.0 deals were smaller than the overall median pre-money valuation of venture backed companies, which is $18.5M. Ernst and Young and Dow Jones found that the most active investors in the space were Benchmark Capital, Draper Fisher Jurvetson, Sequoia Capital, and the Omidyar Network. The study classified Web 2.0 firms as companies that include user-created content, podcasting, blogging, social networking, as well as companies using AJAX and other rich Internet applications.

8 Startups That will surface Soon

The Under the Radar: Why Office 2.0 Matters conference starts later today in Mountain View, CA. It’s a chance for lesser-known companies that provide web-based business solutions to strut their stuff. The 32 companies that will be presenting at the conference are promoting their ideas on how to make business more collaborative and productive. Here’s a roundup of those presenters that offer true social benefits with their services.

SlideAware - SlideAware provides online storage and collaboration solution for slideshows that’s fully integrated with PowerPoint. This provides transparency for the team. Presentations can be sent to clients, and metrics give details about who looked at the presentation, and how long they viewed a particular slide.

Big Contacts - Big Contacts serves up an online Rolodex, wiki-style. Keep track of meetings, anniversaries and clients’ spouses. One-click access to Word templates pre-populate letterheads and greeting cards for any contact. Added notes and assignments from multiple users are wiki-style to see the history on any client.

Koral - Koral is a private workspace for your docs that can be shared with a group. An improved search makes it easier to find the right document, and their sync function alerts other team members when a new version of your document has been added. Koral keeps everybody on the same page, at all times.

Spresent - Spresent provides a web-based alternative to PowerPoint. Their Adobe flash-based service is optimized to create feature-rich presentations that can incorporate YouTube videos and Flickr photos. Presentations are shared online, and prove to be far more engaging than a PowerPoint presentation.

Stikkit - Post-it meets wiki. Stikkit, a recent SXSW finalist, lets you type notes on your Stikkits, and they’ll be kept up to date. Shared Stikkits can be edited, making it a mobile wiki. Email yourself a Stikkit for it to be automatically converted into an email format for furthered sharing purposes.

Teqlo - Teqlo is an application that lets you mashup your widgets. It aims to provide a way for non-tech savvy people to create customized solutions, such as a drag-and-drop feature to place sales leads on a map and automatically provide a list of phone numbers every morning. Removing the need for coding and developer knowledge broadens access to the furthered democratization of business and social tools alike.

Worklight - Worklight uses ajax and RSS to offer better access for employees within the corporate structure. Other ways they update businesses are desktop and web-based widgets, bookmarks, and mashups. Businesses are usually slow to adopt new trends like these. So Worklight may not change the masses, but could usher in the next era of business communication.

Xcellery - Xcellery enables online collaboration of Excel sheets. Their service may seem to be very similar to other online document management systems such as Google Docs and Zoho Sheets. Xcellery’s main point of differentiation is the fact that revised documents aren’t replaced, but are extended. This is a useful feature that many of the established players have yet to take into account.

Starting With a Dream Ending with a Nightmare

When you first sit down and start dreaming about the website or product you want to release upon the world, you soon find that your dream has alot of flaws. A great example of this is CitySearch.Com when they first came to market they had a grand vision of becoming a hot bed of business listings for anyone who needed to find anything from a great place to eat to help from an attorney. One problem there dream became a bloated nightmare over time. They have now sunk into nothing more than a bloated online phonebook. What happened ? there dream was so clear yet they turned into something that there founders would have never imagined a few years ago. Two words Buy Out . When they sold there company to AOL a few years back they turned a corner and havent looked back since. They are now headed down a road that they cannot come back from. for most people citysearch is there only viable search engine for finding local businesses. When you start a business you have a dream but what happens to that dream when you walk away . Do you start another dream and forget about your past glory or do you hold onto it and transform it from a dream into an empire. Both are difficult at best. Googles founders have turned there dream into an empire based exactly on this philosophy. If you truly believe in your dream you can turn it into an empire. But if you dont it will turn into your nightmare.