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Business Plans and Angel Investors

I attended two extremely helpful -- and mutually reinforcing -- entrepreneurial events last Thursday: a free (!) Business Plan Writing workshop offered through the Northwest Entrepreneur Network (NWEN) and a seminar on "An Entrepreneur's Perspective on Angel Investing: Plan, Present and Negotiate" offered through the MIT Enterprise Forum of the Northwest.  The former provided some guidelines for how and why to write a business plan; the latter provided some first-hand experiences by successful entrepreneurs who have effectively used business plans (and other tools) to attract investment.

The Business Plan Writing workshop pn Thursday afternoon was led by Bill Keough, Director of Business Development for Hubspan, Inc., and Bryan Brewer, Founder & CEO of Business Plans Northwest.  They posited the goal of a business plan as "a tool to convince someone else that your venture is worth pursuing"; I like that, as it is broad enough to encompass all [prospective] stakeholders.  They also emphasized the value of empathy: being able to adopt the perspective of convincees (my term for potential investors and employees ... and existing spouses).  Throughout the workshop (and the MITEF seminar), empathy and other traits associated with emotional intelligence (e.g., self-awareness and optimism) were either implicitly or explicitly referenced repeatedly.

The slides from Bill & Bryan's presentation will be have been posted on the NWEN web site soon.  Among the pearls of wisdom I gleaned from the workshop:

  • The idea behind a venture is not nearly as important as the management team and their ability to execute (my notes read "99% execution").
  • The first paragraph of the business plan should include some financial projection that provides quantifiable evidence that you are aiming high.
  • Your board of advisors can help create an unfair advantage, by giving you access to some world-class expertise that your competition does not have access to.
  • Wherever there is a business opportunity, there will be competition ... and if it is an [as yet] largely undiscovered opportunity, there is always the competition from inertia.
  • It's not enough to simply identify the pain that your product or service will help overcome, you have to assemble evidence that enough people will be willing to pay enough money to use your product or service [aye, and there's the current rub for me].

The evening MITEF seminar on angel investing was presented by two entrepreneurs who have recently succeeded in securing angel investment for their companies: Lon McGowan, CEO of iClick, and Henry Lin, Co-Founder of Chelsey-Henry (MITEF does not post slides to their web site; so I posted a copy here if you are interested in a copy, contact them here). Lon and Henry echoed several of the themes presented at the business plan workshop, with some interesting augmentations and variations.

Among my gleanings from this seminar:

  • "Investors invest in you, your team and your products or services, in that order"; it is important to clearly convey your passion and knowledge.
  • Use graphics rather than text in your presentation wherever possible; analogies are very powerful (e.g., describing Chelsey-Henry as "Tumi for women").
  • Angels typically like to invest in companies with a market opportunity of approximately $2-3M; individual angel investors typically invest between $25-100K in a venture.
  • Venture capital groups often advertise; angels often prefer to maintain a low profile.
  • Seeking investment can be viewed simply as a variation on the traditional sales cycle: you are selling equity (many of the excellent suggestions for effect selling I heard at a recent sales seminar presented by John Browne of Workpump and Lori Richardson of Score More Sales, are clearly applicable in this context, e.g., identifying ideal customers, qualifying prospects, and following through).
  • There were lots of specifics about the legal aspects that I was unaware of, e.g., Preferred Placement Memoranda (PPMs), "blue sky" filings, and various rights. preferences and clauses that have to be worked out ... with legal fees in the range of $15-20K (!); Lon and Henry both emphasized the importance of having a good lawyer (I'm glad I'm all set on at least that count).

I am reminded of the Zen proverb, "When the student is ready, the teacher appears".  This student is as ready as he'll ever be, and is very grateful for all the insights and experiences shared by these  generous teachers.  Time to do my homework!

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