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Capital Training
 

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BELLEVUE, WASH. -- Roxanne Benton Darling toyed with starting a business for two years. "I've started and stopped a couple of times, but for whatever reason, it wasn't happening." Now it's happening, and her fledgling business, Health Options Coach, is a health and stress management consulting business that will use the Internet to connect with clients. "I'm ready to ride the wave," says Darling, a resident of Santa Fe, N.M. And that is why she has enrolled in Bootcamp for Start-Ups, Garage.com's two-day event where entrepreneurs learn the ins and outs of raising capital for high-tech companies. Garage.com is a company that connects high-tech start-ups with investors.

This week's start-up event has drawn a crowd of more than 1,000 attendees, packing to capacity the Meydenbauer Center, located here. Like Darling, many entrepreneurs have come to immerse themselves in the world of high-tech start-ups and to find seed capital. "I'm here to be exposed to intellectual capital as well as the financial capital," Darling says. And when it comes to attracting capital, boot camp panelists have plenty of advice. Here are four of their key fund-raising insights.

Keep your business plan short.
The market is hot, and business plans for the next big Internet thing abound. Zack Herlick, a partner at the Seattle-based venture capital firm Maveron LLC, says his firm considers 3,500 business plans a year, of which it funds only 10 to 15. Peter Hartigan, a development officer at Softbank Venture Capital, says he looks at 50 business plans a week - but his company funds only about 50 a year.

How can you increase your plan's odds of standing out in a crowd? Be brief. Hartigan of Softbank recommends that your business plan be 10 pages, with a two-page executive summary. "We've got a lot to look at," says Dennis Weston, senior managing director of Fluke Capital Management LP, a venture capital firm focused on investments in the Pacific Northwest. He advises entrepreneurs to create a plan that is concise, direct, and compelling.

Although business plans have gotten shorter, the essential elements remain the same. Greg Bailes, technology partner at PricewaterhouseCoopers, stresses the importance of a well-thought-out plan. The executive summary should be no longer than three or four pages, and the plan should have information such as the market you're pursuing, the problem you're trying to solve, your proposed solution, a strategy for attacking the market, financials, and an exit strategy.

Get a referral.
"It's really a networked world," says Guy Kawasaki, CEO of Garage.com and the conference's moderator. To get a venture capitalist's attention, you need to know the right people, who can make the right introductions. "Finding a referral source that is credible is probably the most important thing to do," says Weston from Fluke Capital. Make use of your board of advisers, board of directors, professional services team, or anyone you know who has connections to the venture capital world. That's because many firms look to people they know and trust to find them investment leads.

It is possible to get a plan considered without an introduction - but it's not easy. Two boot camp panelists say they consider all plans that come across their desks, while others say they occasionally consider plans without referrals. Still, it's clear that introductions help entrepreneurs get noticed. When asked how many deals he's made without a referral, Hartigan of Softbank estimates only one out of 50. Warren Packard, a partner at Silicon Valley venture capital firm Draper Fisher Jurvetson, says one or two companies out of a portfolio of 80 weren't introduced by a referral.

Have the right CEO.
Doug Brown, partner of Paladin Partners, a firm that offers strategic consulting to early-stage companies, encourages entrepreneurs to consider the CEO question early on. "Understand the role of the CEO, and make a decision as to whether or not you're that person," he says. Your CEO will be instrumental in getting capital. The right CEO will be influential in attracting investors as well as creating the vision, mission, and company values, he says.

Develop a great "elevator pitch."
If the person standing next you in the elevator wanted to know about your business, what would you say? Bill Joos, vice president of business development at Garage.com, offers advice on creating an "elevator pitch" - a 30-second spiel designed to pique an investor's interest in your business. By limiting yourself to 30 seconds, you are forced to focus on what really matters, what Joos calls "the distilled essence of your dreams."

Passion is important to the success of an elevator pitch. According to Joos, a good pitch must change the investor's pulse rate. "If you can't talk about your business in a passionate way, you can't be an entrepreneur," he declares.

Copyright © 2000 inc.com

Last updated: Feb 29, 2000




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