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Posts Tagged ‘venture capital’

Calling all Potential MBA Interns

help-wanted


North is rapidly expanding and is currently seeking smart, hard working, 1st year MBA interns as potential additions to our team of superheros. Below is a formal job description.

Early-Stage Venture Analyst – MBA Internship Position

North is seeking top MBA talent to provide support for our analyst team. Our interns will work closely with our team of analysts and will be exposed to a broad range of responsibilities in the venture analysis process. This is a highly selective role and top summer interns will potentially be brought on as full-time analysts after completion of studies.  Although the position is demanding and requires the ability to work independently, our interns are giving tremendous flexibility.

Ideally, candidates will possess a keen entrepreneurial spirit they are looking to sharpen and expand upon.  Strong written and verbal communication skills are a must, as position requires completion of written reports. Candidates will also possess superior interpersonal skills, outstanding quantitative and organizational skills, and a proven ability to work as part of a team.

Candidates should send a resume and CV to analyst@dontgosouth.com.

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The purpose of this Phenotype element is to determine what if any debt the business may have at the time of the financing, and more importantly if that debt will be serviced immediately upon closure of the round. What one isn’t looking to do is to fund a company only to have all the cash go out the door to service old debt, leaving the company with no cash to operate. Ideally there is no debt, or debt that converts to equity at the time of the financing. If there is debt after the financing, the terms should be examined to determine what impact it will have on cash flow. There should also be provisions that give the current investors some protections in the event of a wind up. In addition, keep an eye out for and examine any investment banking agreements that may impact the cash position upon closure of the round.

debt

The definition of debt here is broad and includes trade financing, outstanding credit (even personal credit card balances if known), informal borrowing from friends and family, bank lending, private loans, convertible securities or other forms of debt, formal and informal.  Will such debt need to be serviced immediately upon closing this round of financing?  Are there any existing agreements (e.g. with investment bankers) that may impact cash or equity upon closure of the round, such as warrants or convertible securities? How can existing debt hamstring a new venture?

This is just one of the key criteria forward-thinking investors use when evaluating the strength of entrepreneurs and their new ventures. How do you measure up? Go to www.venturephenomeproject.com to read all 80 criteria and swap knowledge with other entrepreneurs & investors.

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FOCUS

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The purpose of this element is to determine whether or not the company has clear focus. Often new ventures, in an effort to build up multi-billion dollar financials, expand their offering to many different products/services. Does the venture have a clear path for the business, not just offer a mixed bag of various products/services and revenue models? While the attraction to offer the target consumer more than one product/service may seem great on paper, more often this causes dilution in the efforts and stalls all areas of growth. Should investors be excited or afraid of a venture that has 12 different revenue streams?

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With a lot of today’s web companies a focused intention turns fuzzy as the management team wrestles with how they will monetize their site. Although there are many great ideas out there, only a small percentage actually build a revenue strategy into their new venture. Instead, they built a “cool” site and try to tack on a monetization strategy after they launch. Thus, a site built around a single idea begins adding features in an effort to become profitable. More features are not always a good thing, as the team will likely lose focus on their original goal. Key point: making money should not be a fuzzy afterthought, but rather should be a central focus.


This is just one of the key criteria forward-thinking investors use when evaluating the strength of entrepreneurs and their new ventures. How do you measure up? Go to www.venturephenomeproject.com to read all 80 criteria and swap knowledge with other entrepreneurs & investors.

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speedpitch

Nearly every major funding website boasts that in addition to their “connecting” services, they also host entrepreneur speed pitching events. Speed pitching? It doesn’t work for finding a soul mate, so why would it work for finding a high quality venture investment? Let’s face it, true understanding of a venture, the management team, and the target market doesn’t happen during a frenetic 20 minute pitch over a cheese danish. Investors need to make confident and educated decisions based on data, not just rely on their intuition or how the entrepreneur dresses that day. Listening to eager, money-hungry entrepreneurs dial in their elevator pitch is exhausting. Seasoned investors are looking for thoroughbreds, not an inbox clogged with also-rans.

Funding Universe has recently made a lot of noise with their Live Pitch concept, which they outline as, “Businesses are allowed four uninterrupted minutes to present their venture. They then have three minutes to answer questions and bing bam boom they are done. Four minutes is not a lot of time to explain an entire business, so the pitches have to be precise, thorough and engaging.” Are you kidding? Four minutes is how much time it takes to ask a stranger for directions, not convince them to forge a committed, long-term relationship.

The chance that a good investment will surface and ultimately be made in one of these speed pitch events is very low. For a Web 2.0 company to go pitch alongside a clothing company and a biotech company to a roomful of investors with varying interests is inefficient for everyone. As an investor, why would you want to hear four minute, spin-filled, “sunny sky” pitches from entrepreneurs focusing on a space in which you have no interest or knowledge?

Many tech conferences today (like well-known DEMO) allow startups to pitch and demo their products to their attendees, almost always for a hefty fee (up to $18,000!). demologo
“While conferences like DEMO are extremely lucrative for the organizers, I’m not sure the startups or attendees attending get much out of it other than a great networking event. There are too many start-ups for press to give even passing coverage to many of them, and attendees are lost in a sea of pitches that all begin to blur together.” – Michael Arrington. TechCrunch.

In addition, when a large fee is involved, attendees don’t know if they’re really seeing the best start-ups or just the best start-ups that were willing to pony up the presentation fee.  While there is a need for young companies to showcase their innovative ventures to experienced investors, and there is a natural fee based filter that weeds out the dreamers, this tactic has been met with mixed results. With our economy in dire straights, the time to accelerate innovation is NOW, It’s time for investors to be able to discover and fund fresh opportunities based upon the actual strength of the venture, rather than the bells and whistles of a rushed or expensive presentation.

Excerpt taken from Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital. If you’d like to read & download all 33 pages of this constructive prose, it’s waiting for you on our website: www.dontgosouth.com.

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To an entrepreneur, fundraising is scary stuff, and rightfully so. Make no mistake about it; FUNDRAISING IS HARD, and even harder during leaner times. However, those working on the next big idea shouldn’t lose their faith. They should keep plugging away, stay inspired, and conduct careful research on the options available to them.

Besides the current recession, most of the fear around raising money comes simply from a lack of understanding. The world of start-up capital is a foreign one to most entrepreneurs, partly because investors are so unlike them (deal makers vs. creators), and partly because they don’t have an intimate understanding of how the world of capital operates. Well, let’s try to straighten out some of the confusion.

There are two main types of investors: Angels and Venture Capitalists. Angels invest their own money and VCs invest other people’s. The other main options for funding are to solicit your friends and family, or to just do it yourself. Given our current economic climate, and the fact that innovation by entrepreneurs is essential to right this economic ship and restore the confidence in our global economy, all options are on the table. So read up, welcome to business financing 101.

The VC Route

Venture capital is the most highly regarded form of funding, but it’s also the most misunderstood. Venture Capital (VC) is funding that comes from professionally managed funds that have roughly $25 million to $1 billon to invest in promising new businesses. Because there are so few of them, and they have control the money, VCs are extremely choosy on who they decide to fund.

VC funding is certainly not for every company, and timing is critical, but if you’re a high-growth company capable of generating significant revenue in the short term (or already have a nice revenue growth curve), funding from an institutional venture fund provides a fantastic opportunity for accelerated growth. Such acceleration, however, does not come cheap.

Most VC firms offer a few other undesirable “benefits” in addition to their money. In many cases they will require the addition of a few senior management roles (of their choosing) to your team. Remember, VCs are usually bankers at heart, so don’t expect them to be able to help with or understand your technology or target consumer’s emotional needs. Go to them when money is all you need. A big name VC will look to own AT LEAST 25% of the company to cover their time and energy for a particular investment. Venture capital is by far the most expensive money you will ever raise both in terms of equity and sanity.

The existing VC model centers around a short-terms focus on a big payout. VC firms do not typically invest in businesses that have a promising long-term future but rather in ones that will likely see a liquidity event in 3-5 years. Because these investors aren’t putting up their own cash, they feel substantial pressure (it’s their job after all) to see significant returns on their investment over a set period of time. The fastest and biggest way to do this is for their portfolio companies to either get bought out or go public, so you can expect them to push for unnatural things to happen. $5M to break the space-time continuum usually looks better on paper than it turns out in practice.

In addition, VCs almost never look at a business plan or listen to a pitch if a trusted individual didn’t refer you. While this practice certainly limits the amount of junk plans (i.e. cubic zirconia) on their desks, it also leaves out the possibility of discovering a true gem. Yes, the old boys networks is a great thing if you are part of the in-crowd, but both parties could benefit from a more open and efficient approach to finding and filtering investment opportunities.

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“VCs do initiate on their own when they see a bright startup. But it’s so rare that you seldom hear such stories. And when it does happen, it becomes legend.” – Vikas Rana, entrepreneur

As funding becomes tighter and tighter (until the economy begins to bounce back) the rate of innovation will likely speed up; out of necessity to find new ways to make portfolio companies profitable quickly. And, just as people always say it will be hard to get VC funding, the large VCs will have money to invest. For those fortunate enough to stand out and make a favorable impression, funding will still be available, as it was after the dot com bubble; but it will just take a little more work to get that cash in hand.

It is important to have your priorities straight and your feet planted in reality. If you’re new to the game and have a very early stage venture that hasn’t yet figured out how to make the cash register ring, you are probably better off working out the kinks and creating value than you are putting on a silicon valley road show. Don’t fret, there are other options.

Excerpt taken from Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital. In the coming weeks, we’ll be posting even more insightful nuggets from this paper. However, if you’d like to read & download all 33 pages of constructive prose right this moment, it’s sitting on our website: www.dontgosouth.com.

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Let’s not forget that entrepreneurs, and the investors that support them, need all the help they can get to turn their ideas into world-changing realities, and contrary to popular belief, more money is not the only answer.

The central issue is not with the quantity of ideas or number of willing investors, but rather in properly pairing the two. There are plenty of investors willing to provide the capital needed by the entrepreneurs working to change the world, but there is often a communication breakdown between the two parties. On one side there are the mysterious “deal makers” who might seem easy to reach with the click of a mouse, but in reality are incredibly difficult to engage with meaningful dialogue. On the flip side, there are the passionate entrepreneurs who are eager to find out what an experienced investor thinks of their “big idea,” but usually hear back nothing at all after submitting their materials for consideration.

So what’s the rub?

Well, there are a number of problems that are holding us back. For one thing, the process for raising venture capital is shrouded in secrecy. Isn’t it strange that in an industry hell-bent on building new companies and “inspiring innovation”, most investors aren’t even willing to take the time to give entrepreneurs some valuable feedback; specifically telling what they’re looking for, and guiding entrepreneurs to focus on certain areas of a business if they want a legitimate shot at raising investment capital? Don’t you think if entrepreneurs built their businesses around the actual criteria they were being evaluated on, they’d have a much better shot at connecting with investors? Of course both parties have to be judicious with time and energy, but the complete lack of communication is beneficial to no one.

What is so frustrating is that both parties really need each other; the future of the world (seriously people) can be very positively affected if this communication gap is bridged. Bottom line, while investment capital injected into a handful of new ventures is great, most early stage companies need much more than money. The benefits of transparency, guidance, and mentoring that an experienced investor can provide can ultimately prove to be the difference between success and failure. If an investor has wisdom to share, they should be generous with it, not hold it so close to their vest. As Ronald Reagan might say, “Tear down this black box and start to educate entrepreneurs and other investors about what works and what doesn’t.” After all, neither investors nor entrepreneurs (or our economic recovery) are well served by spending weeks or months to move a venture forward if it’s fundamentally flawed in its infancy.

With the number of new small businesses expected to rise in 2009 (with job losses high and traditional employment options limited), many will take the opportunity to test their entrepreneurial chops. Start-ups are now cheaper to launch than ever before, as $500K has become the new $5 million. Primarily because basic software that was once absurdly expensive is now free (open source), and astonishingly good hardware (or virtual processing power) is now very affordable. But before an entrepreneur will be able to transform an innovative idea into a real operating company, they’ll most likely need to seek a credible outside source of capital (and counseling). While the choices are abundant, the routes for depositing a round of funding in your bank account still remain challenging to navigate. The benefits of secrecy are far too one sided. To change our future we need to re-think the past. Moving forward into an era of collaboration and transparency isn’t just a nice idea; right now it’s an imperative.

Excerpt taken from Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital. In the coming weeks, we’ll be posting even more insightful nuggets from this paper. However, if you’d like to read & download all 33 pages of constructive prose right this moment, it’s sitting on our website: www.dontgosouth.com.

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As you know, the North team is on a mission to accelerate the rate at which innovation gets created in this country; and that effort begins with being more transparent with and helpful to entrepreneurs. Our new paper called Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital has over 30+ pages of insight, inspiration, and rarefied honesty on what’s wrong with the early stage venture capital market and of course some suggestions on how we (that’d be you and North) can fix it.

The feedback has been fantastic. In just over two weeks, we’ve had thousands of entrepreneurs and investors download the guidebook. Get your own FREE copy on our website www.dontgosouth.com.

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