Tag Archives: Willamette Angel Conference

10 Requests From Your Business Plan Reader

Angel investment, Business Plan Contest, Business Plan Marathon, Business Planning, , , , , ,

I’ve started my business plan marathon season again. Between now and the end of May, I’ll read several hundred business plans: some for my angel investment group (Willamette Angel Conference), and others for judging business plan contests at the Universities of Oregon, Texas, Rice, Princeton, and Notre Dame.

paperworkI’d like to use the famous T.S. Eliot line from The Wasteland: “April is the cruelest month.” The trouble is that I like reading business plans, so that wouldn’t fit. I posted about his last year around this time, and here I am again, reading plans.

What does seem appropriate, however, is my plea to business plan writers, wherever you are, if you’re going to produce a plan that I have to read:

  1. Convert it to PDF please. I hate those big honking bound documents. They weigh a ton. Most of my business plan judging involves planes, hotels, and airports.
  2. Give my aging eyes a break. Learn the definition of presbyopia and then reflect on the demographics of angel investors and business plan judges.
  3. Make it about the business, not the science. I want to see target markets, channels, sales, costs, exit strategies, defensibility, scalability, and things like that. Unless it’s software or Web stuff, where I’m more at ease, I’m not going to read or understand your science. I’ll look at your experience and degrees and I’ll take your early sales, testimonials, and such as validating your science.
  4. Summarize well. Make sure you hit the high points. Don’t ever let me finish a summary without knowing what you’re selling to what market, why they’ll buy it, what it does for them, how much money you think you need, how fast and to what sales level you can scale up, strengths, core competence, and a quick sense of your team.
  5. Tell me stories. Make me understand what problems you solve, for whom, and how they find you. Make that story credible. Give me some real examples, real situations, real people, and make it believable.
  6. Show me milestones: milestones you’ve achieved, and milestones you need to achieve.
  7. Don’t give me dumb profits. If you’re going to generate margins at twice the average industry levels, then you better have a convincing reason for why that’s possible. When I see huge profitability, it doesn’t make me think you’re going to be amazingly profitable; it makes me think you don’t know the business you’re in.
  8. Show me your patents if you have them but if you do, show me something about how defensible they are (if at all) and make sure your projections include legal expenses to defend them.
  9. Show me that you know something about cash flow: inventory management if you have products, receivables and collection days.
  10. Think of your reader. We don’t all have hundreds of plans to read, but whether it’s for angel investing or a business plan contest, we do all have a good number.

(Image: AVAVA/Shutterstock)

Apples, Oranges, and Making Startups Pay to Pitch.

Angel investment, Business Plan Contest, Venture Capital, Venture Contests, , , , ,

I hate it when people push issues way too far, diluting their points by overextending them. Stretch your generalization net too far and you catch a lot of innocent fish along with the sharks. Do that and you kill your own argument.

For a great example of that, Jason Calacanis’ rant against startups having to pay to pitch investors. You can click here to read it. He’s very angry at businesses charging startups fees of thousand of dollars to pitch investor groups. I agree with him. I also dislike most (but not all) of the mostly-web-based listing services that charge startups hundreds of dollars to list themselves somewhere were investors will see them.

By the way, for a rant-free and more balanced discussion of the same problem, click here for Lora Kolodny’s summary on NYTimes. com.

But my beef with Jason’s rant is his total lack of distinction between thousands of dollars as a pay-to-pitch fee, charged by for-profit middle-men companies, and the normal fees of tens or hundreds of dollars charged by angel investment groups as part of the pitching process. That’s like apples and oranges. And the oranges are getting smeared with the bad apples.

I read, cringing,  as Jason and his followers (in the comments) seethe with anger at entrepreneurs being forced to pay anything, in any context, to present to investors. And that’s way off base. You simply can’t lump these pitch predators and their big fees with the hundreds of angel investment groups and community organizations that charge tens or hundreds of dollars to cover real costs.  He’s got so much sound and fury, without making some important distinctions. It’s scary.

Let’s take a real-world case, one that I know well. I’m a proud member of a local angel investor group that charges the startups who enter our annual business plan competition $199. We’re not exploiting anybody. Not one of us ever sees a dime of the entry money. It goes to support the costs of the event, including the location, coffee and such, collateral. It’s controlled entirely by the organization itself, a collection of non-profit civic groups trying to contribute to small business development in our local area. Where’s the harm in that?

While a few of Jason’s commenters hint at this kind of distinction, the general feel is about as friendly as an angry mob with torches and pitchforks.

So there’s the problem. Generalize that pay-to-pitch is exploiting startups, and you make the world harder for well-meaning groups of investors that are giving startups a pretty good deal. So why not make the distinction, apply some gray tones instead of all black and white, and make a better point? Oh dear, all those nerdy pointy-headed distinctions are so undramatic.

Just to make sure, I asked a local entrepreneur, Nathan Lillegard, president of Floragenex, who describes himself as “as someone who has paid way too many fees to talk to people about my company.” He said:

“A truly dedicated entrepreneur finds just as much value in the experience of pitching as in the investment payoff. If an event, like the WAC can help startups improve their pitch, enhance their skills, and make at least one useful connection, then it’s worth a small fee to participate. If, on the other hand, all that the entrepreneur gets is a quiet crowd and no feedback nor chance to network, then I wouldn’t pay $1 for the privilege of talking to a room full of people with money.  Caveat Emptor! It’s up to the entrepreneur to know that there is a cost to raising money and these types of events can be a very efficient way to meet lots of potential investors, just one of which can change their world as they know it.”

And if you’re a startup anywhere in Oregon, especially in the southern Willamette Valley, and you have an interesting business with a good chance to grow, and a real exit strategy, then pay no attention to that angry man behind the curtain, and please apply to pitch to the Willamette Angel Conference. And yes, it will cost you $199.

(Image credit: istockphoto.com)

True Story: My First Experience in Angel Investing

Angel investment, Business Planning, True Stories,

Today’s a good day to post on my angel investment experience, because this afternoon I’ll be speaking to a group on this subject in Corvallis, Oregon. What I want to do is just describe how it went for me, one set of eyes, one viewpoint, without making any generalizations about the rest of the world of angel investing.

Last February I joined Willamette Angel Conference (WAC), an angel investment group in the southern Willamette Valley, including Eugene and Corvallis. Here’s what happened. 

  • It started for me with the discovery, in early February, that the buy-in price was $5,000 plus $250 in fees. I always thought of angel investment as a matter of putting $50K or $100K or more into a startup. But I could manage $5K.
  • The group entity was an LLC of which every member had shares depending on how many $5K shares he or she signed up for.
  • I had to certify that I’m an “accredited” investor. Nobody audited my books or anything, but I did have to sign a paper guaranteeing that I met the Securities and Exchange Commission (SEC) guidelines. Details of that here. The point is that this is a very risky investment, and you have to be able to just plain lose that money.
  • I got access to Angelsoft.net for the WAC group. There were 43 potential investments submitted to the group by late March.
  • We – about 25 members, each of whom had at least one $5K share in the group — met in the evening every Monday in April. In our first meeting we narrowed the 43 plans to 13 (we had aimed for 15, but there was a natural break at 13). In the next two meetings, we studied the 13 remaining plans. We listened to pitch presentations by the entrepreneurs, and asked questions. We divided into smaller teams to visit their offices, if possible, and talk to them. In the last April meeting, we chose five finalists, and divided into groups, again, to look at them in more detail.
  • In a last evening meeting in early May, we shared additional information on the five finalist companies.
  • At an all-day event in middle May, we heard presentations again along with an audience of several hundred people, and voted a winner.
  • My wife an I now have a small equity share in CenterSpace Software, of Corvallis, the winner we (the investor group) chose.

From my point of view, as someone who’s raised VC money for my own company and been on the board of a company that raised VC money and went public quickly, has taught entrepreneurship and consulted to VCs, and has mentored a lot of startups, and judged business plan competitions, it was an extremely satisfying role reversal to sit on the investor side of the table. I enjoyed the meetings thoroughly. I read the business plans, paid attention to the pitch presentations, asked questions, and enjoyed meeting and working with the other investors. This was all good.

I liked this experience so much that this autumn I agreed to be investor chair for next year’s version.

If this sounds interesting to you, look for local angel investment groups in your area. Ask your Chamber of Commerce. Browse the Web. Go look at Angelsoft.net.

(Photo credits: Willamette Angel Conference)

Do Business Plan Contest Winners Make It in the Real World?

Angel investment, Business Plan Marathon, Venture Contests, , , , , , , , , , ,

Craig from trackster.com asked me last week in a comment he added to my Willamette Angel Conference post:

I was wondering with all these business plan competitions that you judge, how many winners or even non winners have you seen turn into successful companies? Are there any examples that you could give?

Yes, a lot of these companies make it. It’s more like half than the one in 10 portion you’d think from the classic assumptions.

I’ve seen lots of these companies launch and become successful, in a much higher proportion than the classic assumption of one or two of every 10.

For example, take a look at this page from the Rice Business Alliance, which has run one of the best of these contests since 2002. The graph here shows the success rate for all of the 166 ventures entered in the Rice contest from the beginning. The trend is very clear. The Rice Alliance says that since 2001 (quoting their website):

  • 66 of our past Rice Business Plan Competition teams are successful business start-ups
  • 192 business teams from national and international schools have participated
  • More than $90 million in capital raised by Rice Business Plan Competition participant companies

Although they make the raw data quite as accessible as the Rice Alliance does, the University of Texas’ Moot Corp, the oldest and most respected of these contests, has to have a similar success rate. I say that because I’m involved with both and the plans and the people are excellent in both. And Moot Corp does post a very long page full of specific successes, with a lot of details. I saw all of the companies they have there from the 2007 and 2008 contests, and I’m not at all surprised that they’ve made it.

I particularly liked cQue, which recently landed a contract with the San Francisco Giants to revolutionize ticketing technology; and Evapt, an automated billing system for software as a service; and several dozen others. They are up and running, they are raising money, they are making it.

To be fair, these two competitions tend to be the best of the best. The entrants are carefully selected. Most of them have won local or regional contests. They are grad students and people in the real world. I’m also involved in some less ambitious business plan contests, like ones for undergrads, that don’t produce a lot of real companies.

And this year I’ve added angel investment, which is a different thing entirely. Like the major academic contests, it is about business plans, ventures, presentations, questions and answers, investors’ points of view, exit strategies, and so on. Unlike the academic contests, there are no MBA requirements, and no faculty advisors.

And specifically, the angel group I’m in, the one I posted on last Thursday morning: there were five finalists that presented to the group. All five of them are very real companies already, even thought they want and in some cases need angel investment of $125K. All five will be there a year from now. The one with the lowest need and least ambitious forecast, a software company called CenterSpace, won the investment. But the four others that didn’t win, led by my personal favorite, Zapproved, have good future prospects. That was also Zaps Technologies, Wicked Quick, and Floragenex. All of these are going to survive and grow.

Angel Investor Conference

Angel investment

Today I’ll be listening to pitches at the Willamette Valley Angel Conference, voting on which of them ends up with the $125K investment.

I’m one of 25 members. We started with 43 plans and narrowed them down to five finalists. We’ve broken into groups and done additional work on each of the finalists. Today we hear them pitch again, for the second time, and award a winner.

One additional finalist will be chosen from a group of wild card entries.

It’s a good group: interesting companies. It will be hard to decide.

True Story: 75 Business Plans in a Month

Business Planning, Venture Contests, , , , ,

Sometime in middle May you might find me emerging, blinking, uncomfortable from the sunlight, after reading and evaluating 75 or so business plans in a single month. And watching and judging and asking questions about almost as many presentations. I can see the headline:

Man reads 75 business plans in a month … and lives to tell about it.

Does that sound like a complaint? I hope not. Actually; there’s a touch of bragging to it. I couldn’t have spent the last 30 years focused on business planning if I didn’t like reading them (although, perhaps, maybe it would be better without so many all at once).

This is business plan season for me. I just finished reading half a dozen plans for Notre Dame’s annual business plan competition (we, Palo Alto Software, give a prize to the best one), and another half dozen plans for the Rice Alliance business plan competition (I’m a judge, and we have a best business plan prize for that one too). I still have to read five plans for the University of Oregon’s New Venture Competition next weekend (I’m a judge), and I’m supposed to produce a first-cut on 43 plans for the Willamette Angel Conference (I’m one of the angel investors) by the end of the workday today.

Oh, and this is the season I teach my Starting a Business class at the University of Oregon, so I’ll have another 20 or so plans to read as part of the class.

Despite all this, I’m very disappointed that I have to miss the University of Texas’ Moot Corp Competition this year, because of a scheduling conflict. That would have been another half dozen or so plans, also this month.

So don’t tell me, please, that nobody reads business plans. I do. So do the other judges. So does a whole team at Palo Alto Software. And so do all the other members of the angel investor group I’m in.

So you’d like tips, hints, suggestions? If you wrote one of those plans then it’s too late for you to change it now; but maybe I can influence your presentation. And also, maybe if I comment on some of the business plans I’m reading while I’m reading them, it might help somebody else with a plan later on.

All for the greater good, I’m sure.

Maybe I’ll make it a category, like “the business plan marathon,” or something like that. So you can click for related entries. Tim’s folly, perhaps.

And just to kick this off, some points worth noting:

  • Profitability too high: I’m not impressed with a plan promising 40%, 50% or more net profit on sales. That doesn’t mean the business is very profitable; it means they’ve underestimated expenses.
  • Dense text: Particularly dense scientific text. I’m a business reader, I’m not going to evaluate your science anyhow. I’ll just look at your degrees and past work to see whether that makes your claims credible. Maybe the patents, too, but patents don’t mean much unless they’re good strong patents with a lot of legal work supporting them.
  • Missing tables and charts: For example, I want a bar chart to show me the highlights — projected sales, gross margin, and net income, for the first three years, or five years if you insist. I want to see the projected income table in detail, so I can track things like marketing expenses and payroll. I want to see cash flow table. I want to see startup costs, and what the proposed investment is going to buy the venture. 
  • Treasure hunts: Don’t make me hunt around to find exit strategy, valuation, defensibility, market focus, or any other key point. Make it all easy to find, please.