Thursday, June 12, 2008

POTW: How to Pickup a VC

It has been a dozen or so weeks since our last post of the week. Thanks to The Great Kawasaki, we're back ... here is his chortle-filled take on how to pickup a fat head:

Many entrepreneurs ask me what is the best way to open a pitch to potential investors. I'll answer that question at the end of this posting, but first let me tell you the ten worst opening lines that you can use:

  1. You say: "I'm bright and ambitious." Investor thinks: "That's a relief because I usually invest in stupid and lazy people."

  2. You say: "I'm a blue sky thinker." Investor thinks: "You have no business model, and you don't know how to ship."

  3. You say: "I don't know much about your firm, but I thought I'd contact you anyway." Investor thinks: "You're a lazy idiot--why are you wasting my time?"

  4. You say: "I love to think of new ways to solve problems." Investor thinks: "Is this a high-school science fair?"

  5. You say: "I have lots of great ideas, but I have trouble figuring out which one to try. Let me tell you about a couple." Investor thinks: "I want to know which idea you're going to kill yourself trying to make successful, not which ideas have crossed your idle mind."

  6. You say: "I've always wanted to be an entrepreneur." Investor thinks: "I've always wanted to be a professional golfer. So what if you always wanted to be an entrepreneur?"

  7. You say: "I'm sure you are aware of the growing need for security. Web 2.0, Open Source, whatever." Investor thinks: "If you're sure I'm aware, why are you telling me you're sure I'm aware."

  8. You say: "If you sign an NDA, I'll tell you my idea." Investor thinks: "You are clueless. How can you not know that venture capitalists don't sign NDAs?"

  9. You say: "The last time I contacted you, I..." Investor thinks: "I'm going to fire my secretary for putting this clown on my calendar again."

  10. You say: "My goal is to build a world-class company." Investor thinks: "How about you ship and sell the first copy before we talk about world-class anything?"

Now you know what not to say. Here's what you should say:

    "This is what my company does..."

It's that simple. What you're trying to do is get potential investors to fantasize about how your product or service will make a boatload of money. They can't fantasize if they don't know what you do. And they don't want to be your friend, mother, or psychiatrist until they understand what you do, so cut the crap and explain what you do.

Step on the gas

In idle times this week, I have volleyed between surfing for a hybrid (to replace my hyper-consumption Landcruiser) and reading Natural Capitalism. It's a cerebral paradox; the latter read, in the form of environmental guilt, gas-at-$4.50-plus-a-gallon remorse, and plain common sense, feeds the former four-wheel reality.

Natural Capitalism engages readers to imagine an entrepreneurial conversation that took place at the end of the nineteenth century ... A group of powerful and farseeing businessmen announce that they want to create a giant new industry in the United States, one that will employ millions of people, sell a copy of its product every two seconds, and provide undreamed-of levels of personal mobility for those who use its products. However, this innovation will also have other consequences so that at the end of one hundred years, it will have done or be doing the following:

  • paved an area equal to all the arable land in the states of Ohio, Indiana, and Pennsylvania, requiring maintenance costing more than $200 million per day;
  • reshaped American communities and lives so as to restrict the mobility of most citizens who do not choose or are not able to own and operate the new product;
  • maimed or injured 250 million people, and killed more Americans than have died in all wars in the country's history;
  • be combusting 8 million barrels of oil every day (450 gallons per person annually);
  • made the United States increasingly dependent on foreign oil at a cost of $60 billion a year;
  • relied for an increasing percentage of that oil on an unstable and largely hostile region armed partly by American oil payments, requiring the United States to make large military expenditures there and maintain continual war-readiness;
  • be killing a million wild animals per week, from deer and elk to birds, frogs, and opossums, plus tens of thousands of domestic pets;
  • be creating a din of noise and a cloud of pollution in all metropolitan areas, affecting sleep, concentration, and intelligence, making the air in some cities so unbreathable that children and the elderly cannot venture outside on certain days;
  • caused spectacular increases in asthma, emphysema, heart disease, and bronchial infections;
  • be emitting one-fourth of U.S. greenhouse gases so as to threaten global climatic stability and agriculture; and,
  • be creating 7 billion pounds of unrecycled scrap and waste every year.
Now imagine they succeeded.

Karl Benz, Gottlieb Daimler, Ransom Olds, Henry Ford and a gaggle of comrades were the catalytic culprits. I presume their intentions were entrepreneurial (create a company to make money by building and selling great products that fill unmet needs), not harmful. They were prophets in a business sense, not an ecological nor societal damaging manner. The thrills and ills of their success -- in a sobering and enterprising way -- open a window to innovate the world's largest industry.

As Natural Capitalism opined nearly a decade ago, the contemporary automobile is embarrassingly inefficient:
Of the energy in the fuel it consumes, at least 80 percent is lost, mainly in the engine's heat and exhaust, so that at most only 20 percent is actually used to turn the wheels. Of the resulting force, 95 percent moves the car, while only 5 percent moves the driver, in proportion to their respective weights. Five percent of 20 percent is one percent -- not a gratifying result from American cars that burn their own weight in gasoline every year.
Ouch. My teeth grind and my frown protrudes as I gaze at my parked '88 Landcruiser, backed up to my wife's Volvo SUV. They're inefficient petro-pigs, a paradox of living in Davis (let alone on this planet).

Completely redesigning cars by reconfiguring three key design elements could save at least 70 to 80 percent of the fuel it currently uses, while making it safer, sportier, and more comfortable, Natural Capitalism's authors opine. These three changes (pyramids for entrepreneurs to ascend with their innovations) are:
  1. making the vehicle ultralight, with a weight two to three times less than that of steel cars;
  2. making it ultra-low-drag, so it can slip through the air and roll along the road several times more easily; and,
  3. after steps 1 and 2 have cut by one-half to two-thirds the power needed to move the vehicle, making its propulsion system "hybrid-electric."
It's the last day of third grade for my eight-year-old son; he awoke at 5:45 (5:06, he claims) as I scribed the above. With no knowledge of what I'm babbling about herein (no joke), he said: Mommy, why do you guys like big cars? They're bad because they get low gas mileage and they're going to break down.

Tuesday, June 10, 2008

BeenUp2

Invariably a conversation begins with, So, whatcha been up to? It's a good, extemporaneous test to gauge what's important to you, or what is top of mind. MySpace and FaceBook exist for this reason ... communities of people instantaneously keep track of what they and their friends are up to. Though I'm a member of neither, I think I get it: You can engaged in real-time communication with multiple people, an open window into your life and the lives of your friends.

I've been up to investing a mass of energy into The New California 100, a first of its kind event. We are convening and honoring the top-100 established companies in the Great Central Valley, showcasing 40 cool growth companies to a gaggle of private equity investors, and honoring the inaugural class of New California Hall of Fame members, seven Valley business legends. As events go, it's quite entrepreneurial ... coalescing the audiences, naming the top-100, creating and honoring the Hall of Fame. Should be fun, and it all goes down Tuesday, June 17.

What you've been up to also speaks to what you care about. I wrote a few months ago about the necessity -- when you're building a company or chartering a cause -- of getting people to care (about what you've been up to!), of creating relevance and stoking resonance about what you're doing. An excerpt:

What is relevance? To me, it’s getting people to care by generating value and interest and demand and intrigue and inspiration. It’s about creating and stoking a bonfire, one with ever-growing visibility and a desirability to participate. It's encapsulated in one of The Cluetrain Manifesto's theses: Companies that do not belong to a community of discourse will die. It’s hands down the paramount challenge CEOs face.

Relevance matters only in the minds of your constituents; it’s their perception, period, that counts. And, all stakeholders count: Customers, prospects, partners, shareholders, employees, analysts, competitors … your entire ecosystem. It’s doing something – a lot of things – to edge people to the front of their chair, to raise an eyebrow, to engage a phone call, to elicit an, “I’ve gotta do something -- invest, buy, partner, work, lead, support – with this company," action.

Fostering relevance is an (check that: the) ante to success. The rest – the blocking and tackling of business – is easy and boring. If you’re not relevant – if you can’t get key constituencies to care – move on. Treading water in an empty pool is painful for all involved.
My thinking was shallow; I missed a key point. It's not enough to get people (and yourself) to care. You also need to connect such interest to a stake (or outcome). As your level of care/commitment (emotional, physical, and professional involvement) increases, so too must your potential reward. If the latter does not follow suit, you're primed to either be disappointed or abort your efforts entirely. This is not worth it.

Back to my inspiration for this post: BeenUp2. Check it out, poke around, have some fun. I was introduced to the company a few weeks ago -- my first social network! -- and I think I'm hooked. Snap a photo with your phone and email it to BeenUp2 with a description; yesterday it was my kids lounging before school, today a shot of the remodeled hole in our house at sunrise. Instantly, it's shared with the community. People can see, absorb and comment on what you're up to.

BeenUp2's founders are cool and they have built a fun, simple and effective tool (check that: community!). The community (members are mushrooming) cares and procures instant gratification, and the company's business model is tantalizingly, Web 2.0y tasty.