by Kim Lavine
I had so much opportunity in front of me, I didn’t know what to do. I was almost giddy. I was still angry with the Angels, but I recognized this was an opportunity that was scuttled by the actions of one individual.
‘Why couldn’t I put everybody together?’
I thought. The Angels, besides bringing money, were also bringing talent and experience of a caliber for which I would never be able to afford to pay for.
I was thinking about this when the my SBDC counselor called
“What are you doing Tuesday?”
“What aren’t I doing?”
“You’re going to Venture Tuesday, that’s what you’re doing. The first Tuesday of every month, the university sponsors an event where three businesses looking for capital present to a panel of investors, VC and Angels. It looks like your Angels are going to be there. You gotta go.”
Indeed I did
I thought. If for no other reason than to flaunt before them all my recent successes. I was still angry at this time, and in retrospect, this was a foolish waste of my time.
Anger is a counter-productive emotion that brings no value. I can honestly say, that after everything I’ve been through, I almost never get angry anymore. Anger clouds your ability to see problems and their solutions clearly.
This Angel situation was still a problem for me, and until I got rid of the anger, I didn’t see the solution.
I dressed myself up in my lucky suit
The one that managed to be very professional while displaying the absolute limit of politically correct decolletage, and put on all my best over-the-top green daisy crystal jewelry.
I drove the hour and a half to this university’s event, and found my way to a crowded room filled with at least a hundred people, all focused on a panel before them made up of three individuals: the first can only be described as the most buttoned-down, formidable-looking Master of the Universe I had ever seen in my life—bow-tie, spectacles, and all!
Smart Money, Old Money, Corporate Money & Washington Money
If you looked up Prestigious East Coast Cash Money in the dictionary, his picture would be there. Out of all the money there, he was Smart Money. Next was Old Money herself, sitting on the panel and receiving the fawning attention of the three entrepreneurs there waiting to present. Third was a person who was the second-generation founding family member of a major pharmaceutical company, William Parfet of Upjohn, recently purchased by Pfizer, for which I once briefly worked. They had brought out the big guns. There was another group of investors sitting at a table to their right. I turned around to see that the VC team of Corporate Money and Washington Money were there too.
criteria for Presenting at Capital Raising Event
- Large Potential Market: For most of these events you have to be talking about a minimum $200 million dollar market, of which you would forecast a percentage of sales, with profitability in three years.
- High Anticipated Growth Rate: Projected annual sales growth of 25% or more.
- Experienced Management Team: Key people who have been there, done that.
- Competitive Advantage: A “distinct” advantage in performance, price, etc. compared to the competition.
- Barriers to Entry: Economic means to discourage or beat competition in the field, including proprietary technology or patent.
- Clear Strategy for Commercialization: A realistic and well thought-out plan to bring product to market.
- Scalability: A substantial likelihood that that the business can grow exponentially once the product is launched.
- Proof of Concept: Ideally, a product or service that clearly fulfills a need, has achieved some level of sales or sales commitments.
- Business Model Anchored in Reality: Management has thoroughly assessed its market, productdevelopment costs, on-going operating expenses and overall funding requirements.
The usual introductions were made
But this was a group that wasn’t about wasting time.
There weren’t going to be any compulsory lame jokes or sleepy personal narratives about the events of their drive there today. Time was money, and these people were all about money.
The panel was introduced; Smart Money, turns out, had his own capital investment firm, was involved in the late 90’s Silicon Valley IPO madness as a Senior VP for a major investment firm, and was instrumental in the founding of Napster. And he was a first-round investor in Google.
The room went dark
The overhead projector was turned on, and presenter number one hooked up his laptop and started the PowerPoint show. I could tell right away he was in Life Sciences. His short-sleeved shirt—no tie—and sandals gave him away.
He was a certified genius—he was a Nobel Prize laureate—but he had no idea of the step-by-step mechanics of how to ask for and close a sale. I listened with rapt concentration for the ten minutes he was allowed to make his pitch, laboring to understand just what he was talking about.
The second the precious ten minutes expired, the panel moderator stood up, cutting off the power supply to their laptop, ending their dazzling PowerPoint display preemptively.
He asked the audience
“Anybody here understand what they’re selling, raise your hand?”
I had to admit that I did not, along with most of the room by evidence of the scant hands raised in answer to the rhetorical question.
How could it be possible that such an accomplished and learned group of scientists could come this far in the evaluation process of capital funding without understanding the rudimentary basics of asking for a sale?
It's The Bottom Line, Stupid
They had succeeded in dazzling the audience with their unfathomable and recondite knowledge of life sciences and some baffling new technology they had discovered in their labs at Cal-Tech and MIT, but had completely failed in expressing what and when its practical application and financial benefit would be to the group of investors gathered there who were concerned with only one thing: the bottom line.
An Exercise in Vanity
This exercise in vanity was rewarded with ten minutes of passionate criticism from the group of investors—or Bad Guns—who spared no ego as they tore apart the business plan and its ineffective presentation.
The stunned entrepreneur presenter stood staring like a deer in the headlights, helpless to avoid the truck that was rolling over him, while the room of observers sat in stunned silence, witnessing the carnage with self-satisfaction thinking they would say the same things if only they had the chance or the courage. This guy was a Nobel laureate, and he was being eaten alive! ‘
Guess my Angels treated me with kid gloves, after all
Next was a company selling fuel-cell technology. I could hear the fear in the presenter’s voice as he started. He had flown in from California for this opportunity to present. He spent a few minutes explaining how airport security had stopped him, wanting to confiscate his fuel cell prototype, and how he almost didn’t get it there.
This was a very bad decision,
because he burned up two of the ten minutes of his presentation time, and he found his PowerPoint slides cut off a full two minutes early. He didn’t even get to show them the money at the end. Didn’t matter. One member of Bad Guns was so knowledgeable about the most arcane details of fuel cell technology, that he appeared to know more than the presenter. He didn’t mince any words.
“I know more about this technology than you do, and that prototype you’re holding is worthless! Your technology is already obsolete!” Yikes! I was scared, sitting in the audience. This same man would later check out my cleavage and smile at me with a big friendly “hello” at the break; more proof that breasts can tame the savage beast.
What's Your Burn Rate
The third and final presenter was another life sciences company; he had the charisma of a board, and I lost interest one minute into his presentation, remembering only one thing he said. “We have a burn rate of $40,000 a month.”
I listened long enough to hear that burn rate meant how much money you went through with all your fixed and variable expenses each month, or your negative cash flow. It presented a sort of thumbnail for potential investors to understand what your capital needs were.
This company was researching a cure for cancer, so they had laboratories, scientists, and all kinds of technical expenses. They needed money as soon as possible, he explained, if they were going to continue their work. Everybody here, including Nobel laureates, were in a state of Code Red when it came to money apparently.
- Refers to the amount of negative cash flow per month that a company goes through.
- Indicates how long capital raised will support operations until company shows profitability.
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