Why Many Entrepreneurs "Miss The VC Boat" and What To Do About It - Supernova 2008

Slide 1: A Few Quick Observations on Why Many Entrepreneurs Keep “Missing the VC Boat” & What To Do About It Steve Barsh www.stevebarsh.com  blog.stevebarsh.com steve@barsh.com  +1.215.888.2101  twitter: sbarsh  Copyright © 2008 by Steve Barsh. All Rights Reserved.

Slide 2: Raising Capital Too Early “Premature Pitching”  Too early?  Too many assumptions  Chasing money rather than “de-risking”  Wasting time, energy & focus  Business is based on 3 – 7 key assumptions = risks (see CBE blog post)  Spend more time  Refining extremely compelling value proposition (see “Stop Coding, Start Marketing” blog post)  “De-risking” the business model, e.g.,  Market demand  Differentiators  Pricing 2 stevebarsh.com Copyright © 2008 by Steve Barsh. All Rights Reserved.

Slide 3: Out-of-Box Ideas for “De-Risking” Using Very Little Cash!  Testing via cost-per-click advertising  Market demand is there (may have to use A/B Testing)  The right price (test multiple price points)  Positioning works / key messages (try variations)  Differentiation resonates with target market (is there “lift?”)  SWAT team / “Rent-A-Coder” product development approach  Build a “good enough” version -- get it in the hands of real users  Get “in market” to get feedback, results, adoption  Start collecting relevant metrics as soon as possible  Your OOB ideas / experiments? NITMOI. 3 stevebarsh.com Copyright © 2008 by Steve Barsh. All Rights Reserved.

Slide 4: Most Entrepreneurs Don’t Seem To Know The Implications Of The VC “Magic Ratios”  VC wants 7 – 10x in 3 – 5 years purchasing 30 - 40% @ early stage  Example  Entrepreneur wants to raise $2 million for their Series A  VC buys 40% and may assume they only own 20% at exit Implication for entrepreneurs?  Just pegged exit @ $100+ million ($2 million @ 10x = $20 million, which is 20% of $100 million)  So entrepreneur needs to show a path to…  Traffic / customers / users (and what’s the value of each?)  Revenue (companies in that space acquired for what multiple?)  Profits (companies in that space acquired for what multiple?) 4 stevebarsh.com Copyright © 2008 by Steve Barsh. All Rights Reserved.

Slide 5: A Few Quick Observations on Why Many Entrepreneurs Keep “Missing the VC Boat” & What To Do About It Steve Barsh www.stevebarsh.com  blog.stevebarsh.com steve@barsh.com  +1.215.888.2101  twitter: sbarsh  Copyright © 2008 by Steve Barsh. All Rights Reserved.