Allan Isfan is a co-founder of FaveQuest, a young start-up. This blog covers start-up topics.

Sunday, January 21, 2007

Google

Big brothers willing to help

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I recently registered my company with the Ottawa Center for Research and Innovation (OCRI) and attended the first of many presentations last Thursday. Basic registration for a start-up is $300 which provides access to what seems to be a significant set of resources, events and networking opportunities.

The session I attended last Thursday consisted of presentations on the topic of early stage financing from a diverse group including a VC (Jim Laird) CFA/VP investments, Covington Capital Corp, a member of the Ottawa Angel Alliance (Irving Ebert), a lawyer (Michael Dunleavy, LaBarge Weinstein ... the firm that represents me), investment consultants (Raj Narula and Mike Manson, Taraspan Group ... assisting OneChip) and a successful serial entrepreneur (Jim Hjartarson now CEO of OneChip Photonics, formerly founder and CEO of Catena networks). If you are from Ottawa, you've probably heard of this last character. Note that Andy Weirich is also at OneChip (coincidence?).

I mostly went to heckle Jim and to do a bit of networking. I must say though, all the presentations were absolutely fantastic ... the best $85 dollar breakfast I ever had. There was lots of great and honest advice. I truly felt these guys took lots of time to prepare and were truly genuine in their quest to help young entrepreneurs. If there is anything to take away from this post is that Ottawa is a close and tight community full of successful people willing to help others. I have already been fortunate to have asked for assistance from many such people and they have certainly not disappointed. If you are an entrepreneur, get out into the community through organizations such as www.OCRI.ca , tie.org and/or contact entrepreneurs and other capable people in the community to ask for help ... don't be shy.

I will attempt to summarize the key take aways from the sessions through some short bullets. I'll try to come back to the key items in future blogs.

-rate of return for VCs has been pretty bad over the last few years which makes it difficult for them to raise large funds from which to invest - just fantastic!
-VC early stage investment sweet spot is ~3-5M in Canada and closer to about $9M in us
-if you're looking for something in $3M range, stick to VCs in Canada
-VC funds have a timeline for each fund in 8-10yr range, basically they need to invest and recover funds within that rough time-line
-before you go to a VC, make sure you know what stage their fund is at. If they are late in the fund, they'll be looking for an acquisition or IPO (fat chance) quickly which changes their investment decisions
-liquidity event is typically expected in 4-5 yrs
-ask for twice the amount of money you think you'll need
-kinda obvious but most companies fail when they run out of money :)
-go to VCs before you need the money ... build relationships, get to know them and how they make their decisions, the stage of their fund, the types of companies they invest in and at what stage ...
-this is actually how I ended up as an Entrepreneur In Residence at Skypoint
-give them a sense for what you are thinking about and where the market is going ... then come back in 6 months and show them you were right ... good for credibility
-qualified angel investors invest a significant amount of money and have helped a very large number of companies get off the ground ... definitely worth a serious look
-angel alliances, such as the Ottawa Angel Alliance www.ottawaangels.ca/, are generally much more successful than individual angels (their rate of return seem better than most VCs too)
-angel investors are hands on and local (within ~1hr) ... as Irving put it, angels with faster cars invest in a larger geographic radius
-important to pick the right investors ... don't take shotgun approach
-very wise to do lots of research on each VC before attempting to pitch
-look for short list of 10-12 VCs
-wise to consider getting help from consultants such as www.taraspan.com (they are working with Jim Hjartarson's new company, OneChip Photonics).
-have fun, have fun, have fun
-investors are diversifying out of telecom (no big surprise here .... darn gotta scrap my next DSLAM idea!)
-don't look for investment until you are completely ready ... bootstrap like crazy to get going


I have more stuff but for the sake of brevity, I'll save the rest for the next post.

Cheers,

Allan Isfan
Founder

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