Mega Post – Blogosphere, Founder’s Stock, Option Pools, and Don’t Raise VC

Instead of posting each of these individually, I’m going to just go ahead and combine them into one super informative awesome post (at least I think it’s awesome).

First up, Technorati has released data on a survey they did about the state of the blogosphere.  Extremely interesting information on the who, what, where, why of blogging (as well as some cool stuff on revenue, etc).  Worth reading – you can find it here.

I also came across a couple of very good informative pieces on information that founder’s should know when going to raise capital.  One is about Founder’s Stock and the other is about Option Pools.

Finally, for those fortunate enough to attend the Web 2.0 conference here at Babson, this post came from one of the attendees.  Essentially, many of us here at Babson have great ideas but not necessarily VC fundable ideas.  It’s easy to get discouraged but the truth is that most ideas do not need VC money and therefore the best thing to do is just to start your business.  You can read the full post here, I highly recommend it.

As always, thanks for those that actually write these posts.  It’s great to learn from others’ experience and to have access to knowledge that before blogs was mainly unavailable.

Term Sheet Hacks

More critical advice here for first-time entrepreneurs especially, this link talks about the key elements of a term sheet: what to look out for and how not to get caught in a trap.

Term sheets are an area that the VC/PE club will definitely talk about at some point this year, but also feel free to ask questions about them here.

Read the article here

Killer VC Deck

Many students are in the process (or soon will be) of creating a rocket pitch for their business ideas.  This quick pitch is just one aspect of a good set of documents that entrepreneuers should have at their disposal.  Another is the elevator pitch – a 30 second story that grabs the interest of someone.  I found a very good blog post about how to go about developing a full VC Deck and appendix.  You can read the full story here.  There is one particularly good piece of advice that I think is a necessity for Babson students:

you should go find a few people who know a lot about your industry/business…entrepreneurs who have “done it before.” Maybe even a venture capitalist (tell them you don’t want their money…you just want them to tell you everything that is wrong with your business).  Ask them to take 30 minutes and tell you how much your idea/plan/business sucks. Set the ground rules that they can’t say anything positive.  (I’d like to see the look on the VC’s face when you say that!).  Kick the crap out of your business…or as we used to call it: “8-Mile-ing” (if you haven’t seen the movie, go see it and the scene at the end will answer your question). After you have 8-Miled your business, give a 3-6 word title to each objection you heard.  For example, “Team too inexperienced” or “CPM forecast 10x too big?”  Then prioritize them in decending order by your estimate of the probability of it happening and size of its adverse impact.

Considering the resources available to Babson students (professors, other faculty, Blank center, other students, club leaders) this is an easy task to accomplish.  Ask for candid feedback and you will get it – and the positives are far less important than perceived negatives.

Online Venture Capital Database

Keeping with my early theme of finding VC money, I wanted to share a very useful resource with all of you.  Matt Winn, an associate at Chyrsalis Ventures, created a free online database of Venture Capitalists.  There are a few really nice aspects to this:

• It is fairly complete
• You can search by a variety of options including firm, name, bio keyword, firm size, min. investment, max. investment, and geography
• It includes a handy map

The really nice part about the keyword search is that you can type in an academic institution, Babson for example, and find all the VCs who attended that school.

The database is located here

Finding Angel Investments

I read an interesting article today about how to find Angel Investments on The Texas Startup Blog, written by Alexander Muse.  Often the most difficult task a new entrepreneur has, after forming a good business idea, is raising the capital to pursue that dream.  The first step is generally from friends, family and fools but could also be from what are known as Angel Investors.  The basic premise of the post I read is that there are 5 types of angel groups (excerpt from the original source follows):

• Type 1: Novice angels with financial objectives
• Type 2: Experienced angels with financial objectives
• Type 3: Novice angels with subject matter expertise
• Type 4: Experienced angels with subject matter expertise
• Type 5: Family, friends and colleagues

Mr. Alexander Muse than proceeds to describe the benefits of each type of investor based on the value they provide to the entrepreneur and how they can be found.  At Babson, it’s also important to network.  Some of your classmates know or have been involved in Angel groups in the past.  Some Angel groups even meet here on campus to evaluate new deals.

The full article can be read here

Getting things rolling

First post on a new blog.  This is certainly exciting!  I want to start off by saying I’m looking forward to this blog being a vital piece of the education at Babson.  I believe a lot of the value that Babson offers its students is the community it fosters. 

Now, on to the exciting aspect.  Those that know me understand that my interests are primarily targeted at early-stage Venture Backed companies.  I scour the postings of entrepreneurs, venture capitalists, and industry followers closely.  I will post many of the articles I find along the way that I think are relevant for entrepreneurs as well as those interested in pursuing a career in finance.

To start, I would like to bring to the forefront a post from some time ago written by Marc Andreessen.  For those that don’t follow his blog, I highly recommend it.  In this particular post, he talks about what “no” often means to a venture capitalist, and how entrepreneurs should interpret the answer, as well as followup suggestions.  Here’s an excerpt:

It’s an old — and true — cliche that VCs rarely actually say “no” — more often they say “maybe”, or “not right now”, or “my partners aren’t sure”, or “that’s interesting, let me think about it”.

They do that because they don’t want to invest in your company given the current facts, but they want to keep the door open in case the facts change.

And that’s exactly what you want — you want to be able to go back to them with a new set of facts, and change their minds, and get to “yes”.

So be sure to take “no” gracefully — politely ask them for feedback (which they probably won’t give you, at least not completely honestly — nobody likes calling someone else’s baby ugly — believe me, I’ve done it), thank them for their time, and ask if you can call them again if things change.

To read the full article, click here.

I completey agree with a lot of what he is saying through the post.  It is very difficult to obtain a “yes” from VCs, so understanding how to handle the “no” is a very important part of being an entrepreneur.