Growth5 Blog

Friday, March 5, 2010

Guy Kawasaki: The Art of Raising Venture Capital

Greg sent me the embedded video clips below from Guy Kawasaki's blog on The Art of Raising Venture Capital. If you are an entrepreneur in the position of raising early stage capital, or you will be trying to raise capital at some point in the future, I strongly recommend you check out these clips. All three total just over 21 mins. [A 'heads up' - and I apologize ahead of time, there is a tiny bit of NSFW language sprinkled throughout the talk.]

Guy speaks about the Five (plus one) most important factors for raising capital from VCs – including how your pitch should be organized. Check out the clips below or at the link to Guy's blog above. If you don't have 21 mins, here is an overview of Guy's talk:

1. Do something worth funding. Can your business be sold for $100mm or more down the road? If not, you are not likely to get funded.

2. You can explain your business in 15 seconds or less. How good is the idea? Guy explains the 15 second concept as being like the site "Hot or Not" vs. a site like eHarmony. He wants to know right away how "hot" the idea is, he's not looking to date you or become your friend so he doesn't have time to sort through all of the various algorithms you've developed as to why he should invest (eHarmony).

3. It's a clean deal. No lawsuits, no relatives in your company (your uncle isn't the one putting the corporate docs together. No IP issues, etc... In the 2nd meeting, admit where you aren't clean - it will come out in due diligence anyway, better to be seen as up front and honest.

4. Like it or not, PPT is the standard for the pitch. Utilize the "10-20-30 rule" – 10 slides in 20 minutes and smallest font size you use is 30 points. When you have too much text in your deck, you are proving you haven't rehearsed your talk enough. When you are reading the text word-for-word from your slides, you are proving yourself to be "a bozo."

Here are the ten slides you should use:
Slide 1 Title slide: company name, contact info (email address, phone number, address).

Slide 2 Problem slide: what pain are you solving?

Slide 3 Solution slide: how are you solving that pain?

Slide 4 Business model: how you make money solving that pain.

Slide 5 Underlying magic: to the extent possible, list your underlying magic – doesn't have to be technology, could be the unique experience your team brings to the company, an exceptional skill set your team has, etc..

Slide 6 Marketing & Sales: how will you go to market (don't just say you're going to be viral, or that word-of-mouth is going to carry you as Guy points out that both of those factors are largely based on luck).

Slide 7 Competition slide: don't just do a matrix with your column having all the check marks vs. the comp companies having a couple. Guy thinks you should do a slide that shows what you can do that the comp companies can't AND vice-versa – what you can't do that that the comp companies can. This will show that you're honest, you understand the space and thus if you really have something, the VCs will believe you.

Slide 8 Team slide: most interesting companies have unproven teams, as a result, Guy feels this slide is not as important as most VCs will tell you.

Slide 9 Projections: one slide only. The most important part is not the # of the dollar amounts, it's the metrics used to get there. Guy adds one year to the next item on the timeline and divides all numbers by 100.

Slide 10 Status and time line: where is your firm now and where are you going?
5: Drill a lot of holes, it's a numbers game. It would be great to get money from Sequoia or Kleiner Perkins, but at the end of the day, you either got the money or you didn't and all money is green. Knock on a lot of doors.

6. Bonus factor, bring VCs a business where "the dogs are already eating the food." If you show up at a vc firm and you say, "using our credit cards and family money, about $100k total, we used MySQL, PHP, WordPress, and Ruby on Rails, we created this site, we opened it up. The first month we had 10k subscribers, the second month 20k, the third month 80k.

We need money for servers and to scale. We need an adforce because we have more impressions possible than we can have ads, we have excess inventory, we need money to grow.

Bring VCs a company that is scaling too fast, without question, you will get funded.

Part 1

Part 2

Part 3

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At March 6, 2011 at 5:23 PM , Blogger mouheb said...

I've heard of a entrepreneur from the robotics sector in WA, he's been working in tech sector and my client wants to put US$1m on the table to try him, any thing I should be aware of with him? 

At March 31, 2011 at 11:49 AM , Blogger Australian said...

About the Robotics entrepreneur did you mean Paul Deuchar? He's very famous over here and especially in the industrial sector, if you plan business with him don't hesitate you found the right man


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