Angel Investing, Entrepreneurship & Learning

So I had a meeting last week with a well-known banker here in Utah. He has an extensive background in the VC/angel investing space and is very well-connected. During our conversation, something he said caught my attention:

(paraphrased) “One of the problems with the majority of entrepreneurs is that they are in too much of a rush to raise money. As a result, they end up serving up a ‘half-baked’ deal!”

What does it mean when a deal is half-baked? A half-baked deal is one that is not angel/VC ready. We entrepreneurs are inherently confident people. In most cases, we have been successful at what we do and so we believe that we can raise money on our own. We do the best that we can to draft and executive summary/business plan and then we start distributing it to every investor that we know!

What’s the problem with that? The problem is that investors are VERY hard to please. You usually only get one chance to make a good impression. Not only that, but investors also roam in packs. When they’ve seen an exceptionally good or, on the contrary, a bad deal — they will talk about it with their investor friends. In other words, if you are not sufficiently prepared when you start seeking capital, your chances of getting funded will be decreased dramatically!

How do I avoid the dreadful half-baked? 1) First, you must begin the fund-raising process early. Don’t force yourself to be in a rush to get money — it will only result in bad karma (and most likely bad deal terms). 2) Second, if needed, get help (in the end, it will probably save you a lot of time & money). There are many people that can help you with your business plan/funding opportunity — at FundingUniverse.com, we have very affordable and helpful packages/consulting services that will get you well on your way (if you’re interested, email me: bblake “AT” fundinguniverse.com). 3) Third, get advocates. If you can get someone “in the investor know” to be on your side, it will really help your cause and open a lot of doors.

Bottom line… be prepared. It will save your time, money, and reputation!

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Phew…

After soliciting the help of Trent Miskin, our CTO, my blog is back to normal.  I guess that there was a problem with my theme when we upgraded to the new Wordpress 2.0.  Anyway, it’s all fixed now and I have a new theme — if you are using a blog aggregator, come see what you think!

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I’m confessing… I haven’t received a comment on my blog since April 21st! I guess that I just write really stupid entries. No one cares about what I have to say. My entries are not stimulating in any way. I’m wallowing in blog self-depression.

But wait…an email from the infamous Jordy Gunderson!

SUBJECT: Your blog hates me!

Brock, when I posted a comment on your blog it took me to a blank page. I’m not sure whether the comment was posted on or not, but you should look into it.

–
Jordan Gunderson
Blog ~ http://jordy.gundy.org

So…it might be true that nobody tried to comment on my website for a few months, but I’m going to take the liberty to believe that there must have been hundreds, maybe even thousands, of people that have been trying to comment on my blog but couldn’t! It makes me feel much better about my late night blogging habits.

Now, the question arises…how do I fix this dang thing? Anyone who is tech/wordpress savvy, please advise!

Also, for the thousands of you have been trying to comment, feel free to shoot me an email (bblake “AT” fundinguniverse.com) so that I can post your comments when it gets fixed.

July 19th 2006 Posted to Personal, Technology

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Last week, I had a terrific meeting with a good friend and mentor Devin Thorpe of Thorpe Capital. Not only is Devin a very savvy businessman, I like to say that he is on the “good side” of investment banking.

Devin and I usually meet once a month before the Utah Valley Entrepreneurial Forum luncheon. One of the topics that we discussed this month was the importance of having a clear cut exit strategy. It seems that the exit strategy is included in every book or article on writing a business plan, but I’m going to go out on a limb to say that having an exit strategy really isn’t that necessary!

Of course, if you are trying to seek money from an angel investor or VC, your idea must have the potential to exit at some point in the future — that is where most of their ROI will come. However, do you really need to know the possible companies that could purchase your company? I don’t think so. The problem that I foresee is that if you are focused on building your company in such a way that it will be appealing to company XYZ, what happens when XYZ decides not to make the purchase? Did you have to forego possible growth in order to appeal to XYZ? I foresee all sorts of problems when building a company with that specific end in mind.

On the contrast, what if you were just focused on building a successful company? My thought would be that if you are generating substantial revenue, your company will then be appealing to many different companies — which means that they will be competing/bidding to acquire you.

Successful company + competing acquirers + Devin Thorpe = Happy Day my friend.

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One of the phrases that I think is not used enough in business is the phrase “I don’t know.” I know that I often catch myself trying to come up with the correct solution or response to a question when, in reality, the best response would probably be “I don’t know!”

We’ve all been there. You know that the person really doesn’t know, and yet, they do all that they can to wing an intelligible response. What would happen if we were to just say, “I don’t know, but I will find out or find someone who knows”? I honestly believe that it will be more beneficial in the end because it will be known that you are a wo/man of your word.

I think that this concept is especially important when it comes to pitching to angel investors. It is well-known that investors invest in the entrepreneur. When it comes to judging the entrepreneur, they are most likely looking for an entrepreneur with passion and integrity. We all know how to show passion during a pitch (we can show that we have “skin in the game”, we can portray our knowledge of the product/industry, and we can be very persuasive, etc.), but how do you show integrity through a pitch?

I really believe that responding with an honest “I don’t know” can do it!

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While this post is a few weeks late, I want to give a big shout out to Nicole Davis, the director of the Ernst & Young Entrepreneur of the Year competition/event. I’ll tell you what, if you missed out on this year’s Gala, I’m very sorry! Everyone and their dog attended the black-tie event; I think that there were close to 1000 people there.

There are a few of the winner’s that I know personally and I would like to congratulate them:

• Greg Warnock: Greg won the special “Supporter of Entrepreneurship” Award. Greg is a personal mentor of mine through the Junto Partners program. He is amazingly well-connected and has a sincere desire to promote entrepreneurship in the state.
• Mark Burton: Mark is a personal friend that I have known since my youth. He is a member of my faith and was an inspiration to me growing up. He has built a very successful company and is an active angel investor.
• Josh James & John Pestana: Josh & John are the Founders of Omniture — the most recent Utah company to go public. I have come to know Josh & Johnny P through my brother Dave (Director of Strategic Accounts at Omniture). They are both young entrepreneurs and are way cool.
• Will West: I don’t know Will quite as well as I know the others, but he is a mentor to the Junto Partners. I have met with him in his office and he has provided valuable feedback to FundingUniverse.com. He has agreed to participate in a FundingUniverse.com podcast interview to provide valuable tips and suggestions on how to raise capital for your business. He has raised more capital than anyone in the state of Utah.

Nicole Davis: you deserve an “atta girl!” Nice work, my friend, on an amazing event.

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I have heard the a lot of good and bad stories when it comes to outsourcing development offshore. We will soon be in the hiring mode for programmers and I am interested in hearing from those people who have had good or bad experiences.

Obviously, you can’t beat the price… and there is a language barrier; but, is there a way to get around/over those hurdles? I really have had no experience with outsourcing, but would really like to find out more. Please advise…

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A good friend of mine and previous Junto Partner, Tamio Stehrenberger, once created the “Don’t Hate” t-shirt brand. I always thought that the brand was cool because it’s in align with my “Be cool” theory.

Anyway…the reason that I bring this up is because a blogger in Texas posted an entry about FundingUniverse.com and me that was definitely “not cool.” Of course, everyone has their opinion… so it’s not that big of deal.

Although, if you are going to state your opinion, don’t you think that you should be educated on the subject? This guy doesn’t know me from Adam. He has no idea what we have accomplished or what we are building. He also doesn’t know how accurate the article in VentureWire was — it’s not my fault that the VW article posted that we raised “less than $1MM.”

Either way, I’m really glad that he made the entry because “any PR is good PR.” I wish him the best of luck and only give him one piece of advice: “Don’t Hate!”

UPDATE:  I read Mark Cuban’s blog this morning on criticism and I really like what he has to say.  If you don’t do anything, you’ll never be criticized.  If you are being criticized, it probably means that you are on the right track.  Take the criticism, learn from it, and keep going!

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During one of my meetings with Bill McMillen of the Gold Coast Venture Capital Association, he said something that I thought was very interesting (and I’ll paraphrase):

“One of the things that entrepreneurs need to be taught is that angels are not friends & family.  We are not investing in the entrepreneur because she has a great personality.  We are investing in the entrepreneur because she can execute on a market opportunity.”

Comments like these and other actions that many angels are taking really support the thought that angels are becoming more like VCs.  With the increase in angel investor education, their investments are becoming much more sophisticated.  What does this mean for us entrepreneurs?

Even though the investment market is very entrepreneur-friendly right now, it means that only the best entrepreneurs with the best opportunities will be funded.  There are a few things that we are doing at FundingUniverse.com to make sure that the best opportunities are the ones that our investors will see:

First, we are implementing a rating system.  The system will both objectively and subjectively rate every deal that is submitted in order to sift the “wheat from the tares.”  Second, if the deal has not received the highest rating, there are products and services that we are developing to help the entrepreneur improve.  Financial helps, pitching tips, business plan evaluations, coaching, idea help, angel investor “funding evaluations” and more will all be offered to help the entrepreneur be “angel ready.”

Our goal is to introduce good deals to active angel investors.  We want every deal to become worthy of angel capital.  Once this system is implemented, only the deals with the highest rating will be allowed to present at our Speedpitching Luncheons (which is basically what is happening right now because all applications go through a screening committee).

The last idea that we are thinking about is to offer a full refund on any purchase that has been made with Funding Universe if your deal gets funded by one of our angels.  We believe in our entrepreneurs and believe that our services will help them to be more prepared for today’s sophisticated angel investor!

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