Later stage companies grow in a fairly predictable manner and their future focus areas and activities are also predictable. For instance, the management team at John Deere can probably look out at least a year and make very accurate projections about their likely growth, product mix, key management challenges and deliverables, etc. In contrast, a year in the life of a start-up will be filled with unexpected changes in people, plans, focus areas, etc. Given that start-ups usually have limited cash, it is extremely important to understand what matters in the big picture and, therefore, how to make decisions as time unfolds so that the company is constantly tracking towards a good outcome. When we begin working with a start-up company, we always deploy two tools early on: a DashBoard and a ScoreCard. Continue Reading »

Founder / entrepreneurs are among the most intriguing people you will ever meet. In order to overcome the almost impossible odds of starting a business they have to possess certain traits: extreme confidence in their vision, creativity, endurance, enthusiasm, etc. Given the entrepreneur will hear “it will never work” so many times at the beginning they have to be stubborn and unyielding in the face of criticism. All of these traits are typically found in founders who successfully push their companies from an idea to a working product or to a first set of customers. Unfortunately, these same traits are often what causes a founder to fail as a leader in the next chapters of a company’s growth. This note is about what entrepreneurs should be focused on as they consider taking their companies to the next level (more staff, outside investment, etc). Continue Reading »

“I don’t know what my business will look like three months from now let alone three years!”

Every entrepreneur hates the dreaded financial model. Just the thought creating one can cause heartburn, fatigue and endless discussion about the unnecessary burden put on entrepreneurs in order to raise money. Less-experienced entrepreneurs often will try to dodge financial modeling with claims that “our market is so big, you don’t need a model to convince yourself we have a great business” or “I’m too busy running a business to spend any time building spreadsheets”. But the reality is that if you’re going to raise money, you’ll need to build a detailed three to five year financial model. The surprising news is that the exercise of building a model will help you better understand your business and make you a better entrepreneur. Continue Reading »

Our firm spends a lot of time working with entrepreneurs to define “accretion points”. Essentially, these are moments in time where an accomplishment or a set of accomplishments make it obvious to everyone that the company is worth much more than it was prior to achieving these things. Our fundraising strategy for early stage companies is often defined by accretion points. Continue Reading »

I remember a particular discussion in a business school class when the professor asked if success is driven more by what you know versus who you know.  I recall coming down strongly on the side of what you know.  Given the significant investments I had made in engineering studies, graduate school and analyst training programs, I suspect my point of view at that time was predominantly driven the magnitude of these investments combined with a predominantly theoretical view of the business world.  Now I’d like to fast forward 15 years later and re-evaluate my assessment. Continue Reading »

For this note, I want to focus on whether or not your company can establish its credibility or “expertise” in the eyes of the investor (putting aside the issue of whether or not you have a good business idea). In later notes, we’ll deal with how investors think about “good” and “bad” businesses. Continue Reading »

In my notes on this blog, I will return again and again to the most important aspect of raising capital for your business: credibility. If Steve Jobs were to leave Apple and launch a new firm, he could probably raise funds by simply expressing his ideas in a single meeting. He can do this because he has proven that he knows how to not only create new products but to create new products that capture the imagination of the public and which can generate large profits. Continue Reading »