How to Win a Venture Capitalist

From: "Saved by Internet Explorer 11" Subject: How to Win a Venture Capitalist Date: Sun, 22 Dec 2013 19:11:20 -0800 MIME-Version: 1.0 Content-Type: text/html; charset="Windows-1252" Content-Transfer-Encoding: quoted-printable Content-Location: file://C:\Users\DM Fraser\Documents\Misc\How to win a venture capitalist.htm X-MimeOLE: Produced By Microsoft MimeOLE V6.1.7601.17609 How to Win a Venture Capitalist =20

How to Win a Venture Capitalist

by = Jim=20 Swartz

Published in Computer Systems News, July 30, 1990

Business opportunities are = everywhere=20 for venture capitalists. Hundreds of business plans cross = their=20 desks every month, offering myriad opportunities. However, = the=20 successful venture capitalist invests in people first and = business plans second.

When considering an investment opportunity, most venture=20 capitalists look at the obvious trends and market niches. =20 Transcending the business elements, however, the most = important=20 factor in a decision to invest in a company is the quality = of the=20 people. In real estate, the three biggest criteria are = "location, location and location." The venture capital axiom is = people,=20 people and people.

Investors focus first on the management team's = background. It is=20 essential to understand its ability to deliver on its plan. = In 20=20 years as a venture capitalist, I've picked enough winners = and=20 suffered through enough losers to develop my own = measures.

There are five major characteristics that investors look = for in entrepreneurs. In most cases, one or two are dominant and = all five=20 are present in some degree. The traits, in order of = importance, are=20 leadership, vision, integrity, openness and dedication.

Leadership. It's often assumed that entrepreneurs = are=20 born leaders, but that's not necessarily true. Sometimes it = takes=20 years to acquire the quality. And sometimes it never = surfaces.

Areyh Finegold, founder of Daisy Systems Corporation, = tells a=20 story about his role as an Israeli paratroop commander. = Despite=20 instructions from his superiors, he would never let his = troops sleep=20 more than a single night in one place.

He used the same strategic thinking to build a sense of=20 leadership in his employees at Daisy, as he encouraged them = to think=20 independently.

Finegold was proud that he made everyone he hired take a = salary=20 cut. All Daisy employees chose to earn less just for an = opportunity=20 to work at the company. It became a badge of distinction to = join=20 Daisy.

Finegold is a natural leader. Not all entrepreneurs are, = but a=20 little leadership mixed with other essential qualities can = work just=20 as well from an investor's viewpoint.

Vision. One of the greatest visionaries and = leaders in=20 the local-area network business is Ralph Ungermann. For = five years=20 running, his company, Ungermann-Bass Inc., met its original = business=20 plan exactly. He is regarded as one of the industry's = leading=20 strategists, and his vision has been critical to his = company's=20 success.

Vision doesn't come magically; it comes from hard work. = Thomas=20 Edison said, Opportunity is missed by most people because it = is=20 dressed in overalls and looks like work."

Integrity. Unlike leadership and vision, this = quality is=20 nearly impossible to assess on first impression. But after = six=20 months of working closely with an entrepreneur, integrity, = or the=20 lack of it, becomes apparent.

Judging an entrepreneur's integrity is crucial. The = entrepreneur=20 must tread a fine line between being honest and creating so = many=20 problems that everyone's enthusiasm is dampened. The = venture=20 capitalist must have a keen sense of where this fine line is = drawn=20 to anticipate problems and not overreact to the = entrepreneur's=20 concerns. The goal is to build a constructive team with a relationship built on mutual trust.

Openness. Most great entrepreneurs are = continuously=20 taking input from everyone around them. Entrepreneurs who = are open=20 are constantly re-evaluating their own positions, = questioning their=20 own assumptions and becoming their own management = consultants.

It's essential not to confuse openness with flexibility. = Sometimes, flexibility is insecurity in disguise. Just as = relying=20 on a plan that depends solely on a venture capitalist's = vision is a=20 major error, so too is investing in a management team that = depends=20 too much on the advice of its own board or its venture = capitalists. =20

Openness is watched very closely during the = decision-making=20 process. It is the surest path to building a true = partnership.

Dedication. Much has been written about the = classic=20 traits of entrepreneurs: stubbornness, dedication, pursuit = of a=20 goal despite adversity. The importance of perseverance and = patience=20 in all those entrepreneurial efforts cannot be = underestimated.

Those are the traits most venture capitalists seek in=20 entrepreneurs. Are they always there? No. Are venture = capitalists=20 always right? Clearly not. The key is to combine those = traits=20 within the management team, and if they are not there upon = the=20 initial investment, add them as the business moves forward.=20