Ideas from the Capital Matchmaker(tm)

Each month three entrepreneurs seeking capital pitch to the BNC Venture Capital Group. Typically, they want to raise between $500k and $5MM.  Amounts can be smaller or greater.  Our goal is to have the most fundable and promising early-stage companies present to our group.  We favor companies in our selection process that meet the following criteria:

• Excellent investor communications (executive summary, PowerPoint deck). Whether presenting to investors publicly or behind closed doors, it is critical for an entrepreneur to tell his company’s story in a clear, concise, and compelling manner. All companies are required to submit an executive summary and/or PowerPoint deck for our review. The executive summary should be no more than 2 pages. The PowerPoint deck should be about 10 slides, give or take a few. Backup slides can be included for the Q&A session following the public presentation which is based upon the PowerPoint deck. You may include video, in fact we don’t require that the presenter use a PowerPoint deck.
• Coached Presenters. We give preference to presenters who have been coached or mentored because we know they will be more fundable. According to Guy Kawasaki, former Apple evangelist: “As a venture capitalist, I have to listen to hundreds of entrepreneurs pitch their companies. Most of these pitches are crap…These pitches are so lousy that I’m losing my hearing…Pitching isn’t only useful for raising money-it’s an essential tool for reaching agreement on any subject…closing a sale, securing a partnership, recruiting an employee, or securing an investment.”
• Unique product or service:

1. Solves an important problem

2. Disruptive business model.

3. High barriers to entry.

• Complete management team

1. Start-up experience

2. Industry experience

3. Advisory board

• Fully tested product or service that is ready to go to market or, better yet, proven with:

1. Referenceable customers

2. Well known customers

3. Revenue

a. Multiple streams

b. Recurring

4. Large and growing potential market

• High gross profit margins
• Low monthly cash burn
• Strategic business partners with major distribution channels
• Prior funding from outside sources. It’s easier to raise capital if you’ve already done it.

We cannot overemphasize the importance of coaching.  The story must be clear and the presenter must be credible.  On multiple occasions, we have seen investors decline to invest or refuse to learn more about a company due to mediocre investment materials and/or a poor public presentation.  An effective ten minute presentation should answer 5 key questions:

1. What is the product or service?

2. Why will prospective customers buy it?

3. How does the company make money?

4. How does the investor make money?

5. Why is the management team qualified to run the business?

We select coached companies first and then fill our roster with companies that look attractive and have the potential to make investors a lot of money.

Concept Equity Group prepares entrepreneurs for investment. This includes preparation of investor communications, strategic review, filling management gaps, introducing strategic partners and customers.

If you are interested in presenting to the BNC Venture Capital Group, send your executive summary to len_bland@conceptequity.com.

When: Tuesday, June 22
3:30 p.m. Initial Presentations
6:00 p.m. Keynote Speaker | Final Presentations
Where: NIU Outreach Center-Rockford, 8500 E. State Street

Registration Deadline: June 10

What is FastPitch?
Please join us for our fourth annual FastPitch Competition. In three minutes entrepreneurs pitch their business or business concepts to a group of judges from the business and investment community.

There are very creative and interesting concepts from people in the Region and at FastPitch they can showcase those ideas and learn what it takes to advance them.

FastPitch presentation training sessions will be held on Tuesday, June 15 and Wednesday, June 16 from 6:30-8:00 p.m. at the EIGERlab. These sessions are designed to assist applicants with the development of their FastPitch presentations and provide practice with constructive feedback. This training has been beneficial to previous participants and will be facilitated by two of last year’s finalists; total cost is $15. If you are interested in participating or have questions, please E-mail S.Pritz@RockValleyCollege.edu or phone 815.921.2054.

Click here to download the 2010 Stateline FastPitch registration form

My client called today saying that his investor has asked for his Private Placement Memorandum (PPM).  We discussed what should go into his PPM in addition to the business plan.  http://wistechnology.com/articles/3935/  The client is well prepared with a good business plan including an investor risk section.

One of the items we discussed was the term sheet disclosing what the company is offering to investors in exchange for their investment.  Here is an excellent site with term sheet examples and a term sheet generator: http://learnvc.com/2009/04/updated-example-term-sheets-and-term-sheet-generator/

After putting together the PPM including the term sheet, we will take the package to his attorney.  The attorney will review this legal document and make sure everything is handled properly.

The premier event of the MIT Enterprise Forum Chicago season, the Whiteboard Challenge is an exciting contest of ideas. This is the essence of MIT: world-renowned for the number of businesses that the university’s organizations incubate.

The finalists have been selected from 89 submissions this year. Join us to watch their presentations as they get a set of markers and five minutes to “whiteboard” their idea before a panel of judges.

For recognition.
For respect.
And for $5,000 in cash prizes.

Sponsored by the law firm of Ungaretti & Harris.

EVENT DETAILS
Date and Time
Wednesday, May 26th beginning at 4:30 p.m.

Location
Northwestern University School of Medicine
Lurie Building, Hughes Auditorium
303 E. Superior,Chicago

Cost
Individual Member            No Fee
Pre-Registered Guests        $30.00
Day-of-Event Registrations   $40.00

REGISTER at
http://bit.ly/9fjtKY

The finance bill includes changes to the definition of accredited investor and requires that any private placement be filed for review with the SEC for 120 days.  I encourage you to contact your legislators to make sure that the changes to the finance bill with regard to Angel investing be modified as recommended in this article: http://digg.com/d31PURs?t

Specifically, leave the $1MM accredited investor limit the same expect exclude housing, and eliminate the provision to file with the SEC.  Requiring filing with the SEC for every Reg D filing would only hurt startup businesses and make money for lawyers.

Another aspect that hurts small businesses raising less than $5MM is the current SEC regulation that limits the help entrepreneurs can receive for raising capital to registered broker dealers (and soon investment banks). Other regulations require broker dealers to be responsible for disclosing all the risks of an offering they help with.  This means that they have to spend time and money evaluating an offering, even for a startup raising only $250K.  As a result, nearly all firms don’t allow their members to raise capital for these types of offerings.  This leaves startups that are not experienced in raising capital with no one to turn to.  The American Bar Association has recommended a change to the SEC regulations: “In undertaking this effort, the SEC staff should focus specifically on whether to create an exemption from broker-dealer and/or investment adviser registration requirements for certain finders or instead issue a new regulation enabling these finders to register under a simplified regime aimed at regulating finders engaging in a defined category of activities.” http://www.sec.gov/info/smallbus/gbfor22.pdf

Making these changes would help small business.

You may have heard that investors don’t want to read the entire business plan.  They also don’t want to read an 8 page executive summary.  If you make it interesting and easy to read, they might read your one or two page summary.  Use bullet points, graphics, and simple communications to get an investor interested enough to talk with you.  Here is an outline.

One of the biggest challenges for the investor pitch is showing the investors how they will make money.  Most entrepreneurs fail to show this in an easily understandable fashion when pitching to http://conceptequity.com/BNCVCGroup.htm.

On 1/5/10, I put together a financial summary (https://conceptequity.sharefile.com/d-s0feaaf368864535b) to help entrepreneurs include this in their pitch and take out some of the mystery.  There are certainly special circumstances that will change for each business, so this model should be used as an example, not as the final result.

Implicit in the model is an estimate for valuation.  This will vary by company.  Some experts recommend that the entrepreneur tell investors that the valuation is negotiable because of the uncertainty the value of an early stage company.  If you share this view, do not complete the multiple or show the ownership percentage.

The option to retain the company should be shared with the investor. This will make it less attractive to some investors. In the case of a hold, will you be

1.  Paying dividends to the investor or

2.  Offering preferred shares with an attached interest rate, or

3.  Buying back the investors stock?

Something like this is needed in order for them to secure their return.

On 11/23/09, Facebook will start using your photos in ads that will appear on the profile page of your contacts. If you want to prevent this from happening, do the following: Settings > Privacy Settings > News Feed and Wall > Facebook Ads tab > Choose “No one” and Save changes.

The E.Factor Presents - Securing Funding in an Economic Downturn

http://www.efactor.com/p/events/id=97

In today’s business world there are many routes to capital.  But finding the finance you need for your enterprise can be like learning to play chess for the first time – you have to know the moves before you understand how to win.  As with chess, the funding game can be learned.

• How do you find the fastest route to funding your business?
• How do you choose the right financing approach for your business?
• How do you make sure potential investors take note of your business plan?
• How do you retain a majority stake?

Date: Wednesday, October 21th
Time: 6:00PM - 9:00PM
Venue; Eivissa, 1531N Wells St.
Chicago, IL 60610 Fee: Free For Premium Members; $10 for Basic Members

Keynote speaker; Len Bland

Len Bland is a Capital Matchmaker™ who has founded five companies including Concept Equity Group. He specializes in preparing entrepreneurs for investment and introducing qualified entrepreneurs to Investors. He coaches these companies in refining their strategic position, building their financial model, and communicating their value on executive summaries, business plans, and investor presentations.

Len leads the Business Network Chicago Venture Capital Group. Prior to founding Concept Equity Group, Len was VP of Sales for Tesseract, a human capital management software vendor, and Napersoft, an international document management software vendor. In these roles he implemented successful sales strategies targeting the C-level executives of Global 2000 companies. Previously, Len automated operations while managing information systems at Kraft Foods and Unisys, and analyzed company financials as an auditor for Grant Thornton.

Len is a CPA, and earned his MBA at Northwestern University’s Kellogg Graduate School of Management, and his Bachelors in Accounting from the University of Illinois.

Panelist; Steve Craig

Steve has been employed at North Bank since June, 2000 as an Assistant Vice President. His primary duties include originating and closing of commercial and consumer loans, and loan portofolio servicing of existing accounts. Mr. Craig also serves as the bank’s Compliance and CRA Officer in charge of ensuring the bank’s compliance with state and federal laws. He has been in banking since 1993 and has worked at two other banks before coming to North Bank. Mr. Craig is a member of the Illinois Bar and graduated from Southern Illinois University School of Law in 1991. He is a graduate of the University of Illinois-Urbana-Champaign in 1987.

Moderator Thomas Gorman;

Thomas Gorman is Founder and President of Entrepreneurial Design, Inc., a software company with stage appropriate business financial planning tools for start-ups through to companies that have $10M to $20M in annual revenue. Previously, he was an independent consultant, where he developed the tools that Entrepreneurial Design is commercializing.

Prior to that, he was COO of Leverage Point Media (LPM), a subsidiary of Menasha, which launched Labeldollars, an in-store coupon program distributed through deli weigh-scales, in 1,600 Safeways (Dominick’s in Chicago) in a 6-week rollout.  Before that he was co-founder of Labeldollars, and moved to Chicago with the sale to LPM.  During his career, he co-founded a reverse vending recycling equipment company, Canpactor that was sold to investors.  He co-founded and was VP of Marketing of a medical equipment company, Roman Labs, that produced portable oxygen concentrators and nebulizers, which was sold to Lifecare.  He co-founded and was President of a television production company, Your First Choice, that produced a self-syndicated TV shows about Medicare patient choice that was aired in 32 markets in the South and Southwest, and was sold to investors.

He was VP of Business Development for PAC Enterprises, an international turnkey aluminum can manufacturing plant engineering firm, that built plants in China, Brazil, Taiwan, Egypt, Saudi Arabia, and New Zealand, that was Colorado Exporter of the year in 1996.  And after that, he was CFO of an incubator, Arete Industries, where he managed the commercial development of developmentally disabled learning software and robotic projects. Mr. Gorman is on the board of Cathedral Shelter of Chicago, one of the oldest homeless shelters in America.  He holds a BA degree in Economics from DePauw University and an MBA from the University of Colorado.