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Funding your Business in the US

10/31/06 | by JAdP | Categories: Business

Today at the ANZA Technology Network conference, I attended the Funding your Business in the US Forum. This year ANZA video taped all of the sessions. Viki Forrest, the CEO of ANZA introduced the moderator, Kevin Matsushita, Vice President Emerging Technology Practice, Silicon Valley Bank, and panelists:

  • Jeremy Liew, Partner, Lightspeed Venture Partners, doing early stage investing
  • Jane Lindner, Managing Partner, Jane Capital Partners
  • John Scull, Founding Managing Director, Southern Cross Fund
  • Carol Sands, Managing Member and Founder, The Angels’ Forum and The Halo Funds both doing very early stage investing
  • Saeed Amidi of Plug & Play and General Partner of Amidzad early stage VC [he gave an example of his recent activity where he helped a start-up raise 2MM$ that closed this week & will begin raisinq a 10MM$ Series A startinq next week with 90% committed by the seed investors

Here are some of the things I took away from this session.

  1. USA/Silicon Valley and Australian/New Zealand funding; looking at total funding over life of company AND how the investors can make a lot of money; smart money vs. dumb money; look at corporations & grants as sources as funding; Investors are getting smarter all the time; ROI is first & foremost; A seed round is usually done because a company is not ready to go to market or there are market questions to be answered & may range from 100K$ to just over 1.5MM$ and smart investor does the seed to get seat at table for later rounds; if the Angel/Entrepreneur makes a stupid evaluation during seed it can block later deals; smart & right are judgement calls; LONG VIEW FIRST; Raising money is an ART not science; Equity & ROI for investors, founders, later management team, etc.; VCs looking at 25+ companies at any given time & will invest in one that quarter; the scarce resource is the time of the partners [investors], always speak truth & deliver on promises
  2. Funding is an important part of overall strategy; milestone driven not comparative valuation; assume no revenue until B round; milestones are events & outcomes not time or simple events [traffic to a site not launching a site]; discussion of Silicon Valley investors funding overseas companies - technologists may be overseas but Executives & marketing/sales must be here; investors want to know that their message is being heard which requires face-to-face meetings & constant feedback
  3. How does an entrepreneur better their odds of being the ONE company funded out of the hundreds of requests received; a "warm" introduction, especially from one of their portfolio companies' officers/founders; the ability & work required to get that introduction is akin to that required to get into a potential customer or hire a great recruit; an angel that was funded by a VC is a great person to give that introduction
  4. What might entrepreneur hear that means it's not a good fit: “Keep in touch”; if a VC is interested they'll set up the next meeting; VC money is not the only source of funding; if you can't interest an Angel look for the signal in the noise - that is, what is wrong with your business model, idea, market, etc.
  5. When founders flounder? Expect transition in management team; Board responsibility is to shareholders by assuring good management, good team, all needed resources; Lightspeed is founder friendly and doesn't necessarily follow this rule, but in many instances CEO is almost always swapped out especially by later stage investors
  6. Q&A: Board of Advisors should be investors from start-up space, Carol likes Advisors in early stage not a Board of Directors, Angels often see great ideas from researchers/technologists who could never manage, whereas VCs rarely see A ideas from C teams

Many of these points I've heard many times over the years. One thing I would like to add is that as a founder of a company, one should always be reevaluating their position in the company and should ALWAYS hire a person to do a job better than they could do it themselves. That always applies, whether it is choosing partners as co-founders, hiring to fill out the management team, building out the full team AND MOST ESPECIALLY when looking at your successor for the many roles you'll fill throughout the life of your baby, er, company. You may start out as Chairman, CEO, President, lead technologist, lead sales, and chief cook and bottle washer. You may change roles as the company grows. You must always be aware that your role(s) at one stage of your company's life may be better served by someone else at later stages. The other part of this is that you must be able AND WILLING to delegate both work AND RESPONSIBILITIES. The two must be commensurate.

As an entrepreneur, you should also be looking for complimentary talents and personalities to your own and your initial team. This is as true for the investors you may get as it is for your operational team. And always have fun.

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I'm Joseph A. di Paolantonio and this blog has two main foci: my interest in food, and my interest in the future. This provides a look into my personal life, and is separate from my consulting work…though there will be overlap. I am an independent researcher, working as a strategic consultant and I'm an executive with over 20 years of commercial experience with a technical interest in the intersection of Internet of Things, with advanced data management and analysis methods. I view data science as a team activity, and I feel that the IoT must be viewed as a system. I am leveraging my past activities to understand the adoption and impact of the IoT; first, as a system engineer in aerospace, where I developed Bayesian risk assessment methods for systems within the Space Transportation System (including the Space Shuttle), Extreme Ultraviolet Explorer, Gravity Probe B, and many more, and second, as a enterprise data warehousing, business intelligence and analytics professional. Between my aerospace and IT careers, I indulged my hobby of cooking by starting a food company, Montara Magic, centered around my chocolate sauces. My education combined chemistry, mathematics and philosophy. I performed research into molten salt fuel cells in graduate school, and in photovoltaic materials for a short time in industry. The lure of bringing the human race into space was strong, and when I was offered the chance to combine my chemistry and mathematics skills to develop new risk assessment and system engineering methods for space launch and propulsion systems – I couldn't resist. I perform independent research and strategic consulting to bring value from the Internet of Things, Sensor Analytics Ecosystems and data science teams.I am a caregiver, a lover of science fiction and speculative fantasy, and my passion to learn has led me to a pilot's license, an assistant instructor in SCUBA, nordic and alpine skiing, sea kayaking, and reading everything I can, in as many topics as I can.

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