why I brought Founders and Funders to Ottawa

I'm a bit nuts ... I don't stop much except to hang with my family or learn to play guitar. Between running FaveQuest, consulting, three kids, filming/producing/directing/editing "The Nasty Hockey Show" and starting to design Zoogeez ... things are interesting for sure.

With all of that going on, I decided to organize a major event taking place next week. Crazy!. Here is why.

There's a lot of complaining on both sides of the funding table and way to much negativity. Lots of bitching about lack of support from government. Constant chatter that Canadian VCs have had poor returns. While some of this may be true ... there's also another possibility which is this:

"there are many investors who are looking to place money and numerous high quality, fundable start-ups looking for investment. "

Funders and Founders need each other and an event that brings these two groups together may very well unlock the apparent frozen state of start-up investment in Canada. The Founders and Funders Dinner is a grass roots by invitation only event that brings these two groups together for an evening of hard-core networking. No presentations, no demos. This initiative was started by Austin Hill (who is coming to Ottawa for our event) and Patrick Lauzon in Montreal and similar events have sold out across the country with support from David Crow & Jevon MacDonald.

After attending the Toronto F&F last spring following an invitation from David Crow, I decided it was time to bring the event to Ottawa. With the tireless assistance of James Smith (LaBarge Weinstein), Tim Hember (thinkRF, The Ottawa Network) and Ian Graham (CodeFactory) and a long list of sponsors (LaBarge Weinstein, Ramius, Acorn Partners, Verdexus, Price Waterhouse Coopers, Royal Bank).

Within barely a week of registration, the Ottawa event being held on October 29th nearly sold out as of now (and will sell out). It is especially encouraging that roughly one third of the Ottawa registered attendees are investors (VCs, Angels, government funds, working capital ...). We have some founders and investors coming from Montreal and Toronto and many well known and new local investors will be in attendance.

This is a story about people taking action at the grass roots to make things happen while everyone else is worried and complaining about the economy.

Cheers,

Allan
BTW, if you are interested, shoot me an email at allan.isfan at favequest.com

getting over the fear of a start-up

Marc Andreesen (of Netscape fame) wrote an excellent blog recently listing the top reasons not to do a start up. He was really bang on ... An excellent read with many other fantastic blogs and comments http://blog.pmarca.com/2007/06/the_pmarca_guid_1.html. In the end it is either in you or not but how do you know? Most often, fear clouds the judgement and people don't do what they really want to do. Once you do away with the fear, you think more clearly.

When I think about my own situation, I can point to so many people that gave me confidence. This ranges from my own parents who always had incredible courage leaving a communist country with two kids and absolutely nothing else. My parents had incredible conviction and perseverance. I still remember being seven years old (just before we left Romania) and my dad signing me up for a bike race in the 10 year old group. I had a crappy bike but he ran beside me the whole way giving me so much strength I actually won. They didn't want to award me the cup because I was too young but there was no way my dad would give up until they did. I still have that cup.

The extensive list also includes my wife who has supported me since we started together when I was in grade eight! Don't know what she saw in that skinny guy with big hair and a pack of smokes rolled up in his cut-off tee shirt. Glad she stuck with me ... not sure where I would be without her. After I quit my job a Ciena a year ago, she agreed to start Isfan Solutions Inc with me even though her own graphics company was doing just fine without me.

It also includes strong bosses who would not put up with crap forcing me to aim higher while also checking with my wife to see how I was doing when I got Myasthenia Gravis as we were about to have our first child and I could barely stand, hold a fork or even swallow. As I decided to leave Ciena, several of the executives as well as some of the original founders of Catena encouraged me as they continue to do. A couple of them even got me consulting opportunities which helped me get through the worry of at least some income while I pursued my dream of creating a great new start-up. It made putting in the resignation letter that much easier.

Since I left, Leo Lax from Skypoint Capital gave me the opportunity to join Skypoint as an Entrepreneur In Residence. It has been a fantastic learning experience and has opened up a new world. I now have amazing partners and advisers that keep me on my toes every day. They are all much better at what they do than I would ever be and I am extremely fortunate to be leading such a fantastic team. People always recommend to surround yourself with people that are better than you and I certainly have managed to do that.

I recently had the third annual Isfan Palooza in our back yard, complete with a live band by the pool and later around the bonfire. We must have had close to 100 people or so, with quite a bunch sticking around by the bonfire late into the night.

Many of these were ex Catena people and it reminds me of the amazing times we had, especially when we hit critical milestones: the first ASIC out of the fab and working in the lab, the first time we made a phone call or streamed a video through our new product, the first tradeshow, the first customer and so on.

We are now pitching MYDYO to VCs and I certainly get the feeling it will be a long hard road which is not a surprise. We will get there but continued support is always helpful. I am a lucky man indeed. When we hit it big, I will have many people to share our success with and those that know me certainly don't doubt it will be a good time.

Cheers,

Allan Isfan

CEO, MYDYO

PS. Come find me on facebook and check out the photos of Isfan Palooza

4 VC meetings, many more to go

It has been a while since I blogged and much has happened since. Note that I will be transforming the blog into more of a short "daily musings of a start-up founder", similar to Fred Wilson's blog entitled "musings of a VC in NYC" that I have been enjoying so much (http://avc.blogs.com/).

I was recently in Williamsburg, VA for a panel discussion on regulatory issues affecting broadband deployment. This is connected to my other personality as the "engineering" component of Isfan Solutions Inc. ... a consulting firm my wife and I founded a year ago (she had been running her own company for about fourteen years). A very interesting panel discussion and got to very briefly check out this pretty cool colonial town. Will definitely go back this summer with the family on our way to Charleston, SC to celebrate my niece's 16th birthday.

Also got to see Roger Waters play a fantastic show in Ottawa while the Senators unfortunately lost to the Anaheim ducks in the Stanley Cup final. It was a truly magical show and I strongly recommend not missing it if you have a chance (though it was extremely political ... a pink pig flying around the arena with anti-war and anti-bush messages).

On the VC front, we finally kicked off requests for VC meetings and managed to pitch to a few major VCs and a strategic investor so far and overall it went very well. So what does that actually mean? What makes an entrepreneur think a pitch went well?

1) very likely to have a follow up meeting
You don't really know until the next meeting actually happens. However, indications are that we will have follow up meetings with an expanding group of partners.

2) lots of good dynamic discussion
All meetings involved lots of great discussion with many great comments and questions. The partners were clearly enganged and involved which shows some interest in the topic. They also appeared genuinly interested to continue the discussion.

3) learned something new and useful about the VC and ourselves
In one case, the VC is very interested in knowing about our technical intellectual property. Unfortunately, we didn't focus on that very much but at least we now know it is very important to them so that will be a major focus during the next meeting. Fortunately, my partner and I both have credibility in terms of IP as we both have patents and history in complex technology. We have lots of patentable concepts but need to get moving on filing them.

In another case, it was less about technology but more about go-to-market strategy and shooting for the stars. We are actually not planning for a huge A round after the seed and are able to become profitable on only one round. This can create a perception that we are not thinking big enough even though we are. The basic question was "once your trial is complete and you have validated/adjusted your assumptions, how do you aggressively bring this to market to secure your place in a significant way, i.e. land grab". Another question in a similar direction was "if you could raise more money than projecting right now, what would you do differently?".

Answer I gave was not great ... more work there to make the our case and pitch that aspect more convincingly.

4) every pitch gets better
Every time we pitch to a partner, VC or other interested party, we learn something very valuable that gets folded back in to the plan and pitch and the whole story gets better.

I continue to be convinced that we are on to something significant and have credibility in the space. If we continue to evolve as necessary, make every pitch better than the last one and get follow up meetings with partners and VCs, we'll close our funding and step on the gas. In the meantime, we have been experimenting and implementing some of our concepts and I'm really enjoying being a customer which bodes well for the future.

Let me leave you with a question/comment that I hope will generate some thoughts and feedback. Our strategy has always been to think about the consumer first. We want to build a very simple, intuitive and personal service that amazes people by what it can do for them. You always hope that it takes off like wildfire and virally ramps to millions of people. We get picked up by a major player for some crazy valuation and everyone is happy even if we never made a dime. Think YouTube, Skype, MySpace ... you get the picture. However, as I always say, hope is not a strategy. We have therefore been spending a significant amount of time and effort creating a strong go-to-market strategy and business model that actually creates revenue instead of just thinking about how to get as many consumers to sign on, regardless of potential revenue. I believe in solid business concepts and creating a viable entity that can grow and make money without having to cross our fingers and pray that someone picks us up before we run out of cash. Are we crazy?

windmills and the impossible dream

We are finally emerging from a nasty winter up here. The igloo is finally melting and we have to move back into ... what do people call it? ... the house. With some help from family, we put away all the boards for the hockey rink and cleaned up after a nasty winter. Len, the pool guy, came by today to get the pool ready to roll for the season ... kids can't wait to jump in. The nice weather, the bright sun, getting the bbq fired up again, the ridiculously large beer fridge full of beer and all that nice summer stuff definitely cheers everyone up. Before I forget, Funding Bad Habits has confirmed their availability to play at the annual Isfan Palooza fest June 16th and with any luck (and a bit of pressure), they'll allow me to join them in a few songs. This party has been a huge success in the past with over 100 people showing up, pitching tents, trailers, multiple blenders going at once and drinks being served and on and on. Please keep June 16th starting at 3pm booked in your calendar. If you want details, drop me an note. If you are on my evite list then you'll see something come out soon.

For a start-up seeking money though, summer is not exactly welcome. The summer is a very bad time to do business. People's minds are on other things and key people are on vacation which makes it difficult to get everyone together long enough to make major decisions. It is a tricky time for members of a start-up as well since summer is not typically a time for long hours on a computer. I'm desperately trying to get things nailed down and launch this puppy before summer otherwise we'll have to ride out the heat wave and get things done in the fall. It is not the end of the world but it will be critical to keep up the great momentum we have managed build up so the goal remains to get this funded ASAP.

As I indicated in my last post, we did our first pitch to a VC recently. To be fair, the pitch was to the partners of VC where I am an Entrepreneur In Residence (EIR). It is certainly a more friendly environment than a typical off the street pitch to a bunch of people looking for a reason to say no. My partner and advisors were invited to follow up with a more informal discussion early this week to answer some questions and provide more detailed descriptions of our architecture and business plan. This also went very well too and we'll be moving on to the critical final stages which includes combing through the financials and providing validation for our numbers and assumptions from credible people in the industry.

Emails are leaving my outbox imminently to set up round of talks with other VCs, angels and some potentially very interesting partners which could also be strategic investors. You never feel quite ready but I think we are ready enough to rock and roll with the punches.

With that in mind, I thought I would share the lyrics to a very tough song my singing teacher is trying to teach me. It is a song that I believe may have been written for the movie "The Man of La Mancha" which is a film adaptation of the Don Quixote story. Quixano (aka Don Quixote) eventually loses his mind from little sleep and food because of so much reading (sounds familiar) and slips in to a world of fantasy in which he is a night and begins attacking windmills which he believes are giants. Surprisingly a propos.

You can find a recording of the actual song at the link below and the lyrics just below that.

http://www.reelclassics.com/Audio_Video/Music7q/manoflamancha_otoole_impossibledream.mp3

To dream ... the impossible dream ...
To fight ... the unbeatable foe ...
To bear ... with unbearable sorrow ...
To run ... where the brave dare not go ...
To right ... the unrightable wrong ...
To love ... pure and chaste from afar ...
To try ... when your arms are too weary ...
To reach ... the unreachable star ...

This is my quest, to follow that star ...
No matter how hopeless, no matter how far ...
To fight for the right, without question or pause ...
To be willing to march into Hell, for a Heavenly cause ...

And I know if I'll only be true, to this glorious quest,
That my heart will lie will lie peaceful and calm,
when I'm laid to my rest ...
And the world will be better for this:
That one man, scorned and covered with scars,
Still strove, with his last ounce of courage,
To reach ... the unreachable star ...

Back to you guys soon with more news.

Cheers,

Allan "never give up" Isfan

Asbestos Underwear and the VC Ring of Fire

Going into the VC ring of fire. Read this blog with the Johnny Cash Song "Ring of Fire" playing in your head and imagine the object of the love is a start up.

Ring Of Fire Lyrics

Love is a burning thing
and it makes a firery ring
bound by wild desire
I fell in to a ring of fire...

I fell in to a burning ring of fire
I went down,down,down
and the flames went higher.
And it burns,burns,burns
the ring of fire
the ring of fire.

The taste of love is sweet
when hearts like our's meet
I fell for you like a child
oh, but the fire went wild..

I fell in to a burning ring of fire.....[etc]

Well .... that time is now. Dates are being nailed down for a VC roadshow. I expect to have at least 3 or 4 major pitches between now and the end of April. That's nothing as far VC road trips go but it is still scary since this is the first time. No more kid gloves ... I'm expecting to come out somewhat burnt but hopefully not too bitter and ultimately successful.

There is so much to think about ... burn rate, advertising vs subscription, founders, founders, founders, advisers, patents, validation, a detailed spreadsheet that tracks everything including coffee stir sticks and toilet paper, tax credits, what makes you truly different and can you defend that, patents, partners, go to market strategy, value chain, marketing plan, sales plan, development costs and on and on and on. Add some of the consulting work to all that and the relaxation we had in Disney last week seems like months ago.

When I started this, I knew it would get crazy and have some ups and downs. I can't say that it has been easier or harder than expected though I'm entering the hardest phase imminently. We are actually aiming for a seed investment under $1M which should theoretically be easier to achieve since there is less risk. However, I falsely believed that the expectations would be lower. My expectation was that I would have to pull together a great team around a good concept and growing market. A detailed description of the concept coupled with some validation in the form of "sounds very interesting ... it could be something we would deploy because of reason X, Y and Z" from some key industry people and we're off to the races. Silly and naive. The way I perceive it, you have to plan on being just as prepared as you would for a $5M A round. The only difference is that the VC is not taking as much of a chance ... you are lowering their risk. I'm probably exaggerating a bit but not much ... but I'm not taking any chances.

It is enough to drive you to drink. The 2 AM trips to the hot tub with a glass of Drambuie are becoming a nearly daily event to clear the head and it actually works quite well ... I should be able to claim it as a tax deduction. To add to the joy, a very recent change in the founding team has led to some pieces of the puzzle falling back in my lap to scramble. Fortunately I was able to pull some favors and draft some excellent help but I hit a real low for about a day this week. This was followed by clinching some fantastic partners I've been hoping to get to sign on to the advisory board and another major exec that could really help fill out the team ... a fantastic guy ... back up to a high. Basically this week has been a roller coaster.

I was the QB of the football team in High School and I must admit I wasn't a fantastic one though I did have some great moments. If my center, good ol Fraser, got stomped on, I would ultimately feel much pain, especially on a very wet late October with mud in nearly every orifice. Things seem to hurt a lot more when you are cold and wet for some reason. I don't like pain and fortunately Fraser covered me most of the time, a big boy who ended up in RCMP I think. You have to be able to count on your team and I'm working very hard to ensure I have very good pigs and not chickens. Sometimes one is disguised as the other ... why did that pig just lay an egg??? hmmm ....

Having said all that, even though I'm exhausted and whipped, I'm more pumped than ever. I have managed to polarize some people who don't think what I'm doing will work or that people won't sign on in the quantities required. Of course, I have many on the positive side but the negatives is what I need right now to polish things. I have asked a number of knowledgeable people to sit through my pitch over the next couple of weeks and hammer me as hard as they can. Be difficult, a devil's advocate, ask nasty questions ... whatever ... tell me I'm crazy and dreaming. I best get some calluses before go time on April 10th. This is one of the reasons I have invited many of you to a big bash (other than an excuse to party with lots of fun people) on April 14th. I really need the input of the general consumers, and especially women who don't get easily swayed by cool wiz bang stuff. Plus its a good excuse to party ... not that I need one mind you but this way at least it is a tax deduction.

Well ... heading to bed before tomorrow for once ... must find my asbestos underwear.

Cheers,

Allan Isfan
CEO, MYDYO (as in My Radio + My Video = MYDYO in case you are wondering)

batten down the hatches

Before I forget, I'd like to let you know that I'm being interviewed by a local Ottawa tv channel today. The interview is being done by Janet Eastman and will be aired today (Friday Feb 2) at 6:30pm on Rogers channel 22. It is short interview and is the first of a series of monthly interviews that will follow a new entrepreneur (i.e. me) through the trials and tribulations of kicking off a start-up. Because we are right in the thick of it right now and don't know how it will turn out, it should give people a more real sense of the experience. Ultimately, the last interview should be of our team diving in to a pool of champagne. I'll be getting a copy of the show to podcast from my blog.

I got some comments from a number of you off-line regarding the last blog. I guess I sounded really negative and upset. That is partly true I suppose but more at myself than anything. I haven't been turned down for investment yet and everything is moving along fine so there's no real reason to be upset. Having said that, it hit me quite hard last week that if I didn't start working on a number of parallel paths for funding, it was unlikely to happen. VCs rarely invest alone, especially in this very tentative climate, therefore getting multiple VCs lined up is critical. There was also a realization that it is possible that we would not get VC investment at all for quite some time for one reason or another and I needed to consider alternate plans more seriously.

I therefore began looking at the product that we are building in more detail to figure out what it would cost to launch our first basic product. I realized that if we scaled back the feature set a bit and got some outside help in exchange for equity, we could get quite far with very little money. If the team was willing to consult a bit on the side to help the cash flow, that could really help as well. This was a very positive realization that we are not urgently dependent on huge outside investments and we are prepared to move forward one way or the other.

Some people saw this as giving up and that is absolutely not the case. Quite to the contrary. We are putting on a full court press on the funding side and widening the scope of potential investors while we prepare to batten down the hatches and ensure we are not urgently dependent on significant funding. I think the ultimate result of this new direction is that we will get the funding we need but will be in a much more powerful position which will make it easier on the knees.

Cheers,

Allan Isfan
Co-founder, CEO
MYDYO

Big brothers willing to help

Before I get going, please note that I've syndicated my blog through FeedBurner. Look for the RSS chicklet (orange logo) and associated link to the right of the blog. This allows you to include my feed in your news reader and get updates. Note that you can also register your email and get the blog automatically the day after it is published.

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

are angels really angels?

My 10 year old daughter still believes in the tooth fairy. I give her about $5/tooth and a note written with my left hand so that she doesn't recognize my hand writing. She has whispered to me a few times that she knows the tooth fairy is not real and I don't try to convince her otherwise. We both know it's a game and since it benefits both sides, we continue to play it. She gets money and I get to have fun writing the note and giving her an incentive to keep her teeth clean since the cleaner they are, the more money she gets. You have to know how to play the game such that both sides get something out of it ... a basic win-win.

The same goes for the start-up & VC game. I saw lots of games played over the last few days. I just returned from a few days in Silicon Valley where I attended the "DowJones VentureWire Consumer Technology Ventures" conference. This is a great conference and a fantastic learning opportunity I strongly recommend for anyone considering a start-up, although the turnout this year was weak due to a Web 2.0 conference in San Francisco happening at the same time. The conference is small, but very well run. Each day starts with a keynote followed by panels and interviews with key people. The rest of the day is broken up into eight separate rooms and companies have 50 minutes to do their pitch. There were quite a few VCs attending, sharing their thoughts and advice. I'm definitely going to shoot for presenting here in the next year or two. If you're interested in knowing more, I would be happy to share more details.

The overall pitches and presentations were weaker than I would have expected for the valley, although there certainly were some that were excellent. There are some well documented things you need to cover and many missed major components which was shocking to me. There was too much focus on the idea itself and little on the management team and how the company was actually going to make money. Many of these companies need very experienced leaders, consultants or advisors with deep VC knowledge to help them raise money. A good idea simply isn't enough.

As a consumer, I saw lots of things I would probably use but with my VC hat on, I left many of the presentations being unconvinced they were real VC opportunities. Many were too small to be real standalone companies that VCs would invest in and would be better off sticking with angels, bootstrap like crazy and get profitable in a hurry to survive before flipping their companies to a bigger player. Some of these thoughts were echoed my many VCs. Having said that, there certainly were some that have significant merit and will hopefully get funded. I'll provide a summary of the highlights for my next post on Monday. Be sure to check it out because I'm convinced you'll find some services you'll want to use.

If you'll need VC money, start early

Many companies were of the right size and scope for a VC but started off with angel money, typically a few hundred thousands but sometimes more. They stretched the money extremely well and I was amazed by what they managed to develop with so little money. However, they now need VC money to take it to the next level and the lack of early engagement and experience with VCs showed. Because they haven't been talking to VCs up to now, it is a little late to start learning when you need money in a few months. Things just don't move that quickly. The way I figure it, if you're going to need VC money eventually, get involved with VCs as soon as possible and ideally even at the seed stage.

I know it sounds like I'm biased because I'm an EIR with a VC firm. This is really not the case. I've been considering looking at angel investing as well but as some of you know, I don't do things on a small scale. I think big and I know I'll need significant investment that will have to come from VCs. It is super critical to never ever lose sight of that, even if you do get a bit of money from angels to get things going. Getting money from VCs is RADICALLY different from working with angels in nearly every respect, including timeline, so the sooner you start talking with VCs the better.

Most VCs I know work much slower than you would think. If things go well, you'd be lucky to close anything within 6 months of first contact. The reality is that you'll start pitching to VCs and it will take many months before you'll get even a small nibble from a couple of them. Start-up teams often believe so much in their concept that they think it will sell itself and VC will immediately sign on but it is so much more complicated than that. I'll share a few tidbits to think about although it is definitely not a complete list.

Thing to think about when going down the VC route:

-do you have a fundable team, and especially a credible CEO
-the idea is great but probably wrong ... need a team that will adjust as necessary and have strategy to penetrate the market
-I have heard the following comment many times "good idea but they don't have a CEO"
-what is the exit strategy? M&A, IPO?
-it's fine to make piles of money but if the VC can't pull it out, it doesn't help much
-I would contend that you need to think big and be able conceive of an IPO in 5 years or so. If that is clearly never an option, that's a really bad thing
-is there is a history of IPO and M&A in the space you are entering and if so what were the valuations?
-VCs often start with the end in mind. Basically ... the VC needs to have a sense for the value of the company in 3-5yrs (i.e. what you could sell it for or raise in an IPO) and work backwards from there. Examples of similar companies that were acquired or did an IPO are very useful. YouTube is probably not a good example!
-timing timing timing
-you need to hit the market with your product just before the hockey stick inflection. The timing of the investment will depend on many factors. If it is S/W, you can fund closer to the inflection, perhaps 1-2 years. If it is hardware & software, you need to invest at least 2-3yrs. If it is silicon ... god help you. You need to invest at least 3yrs ahead in my opinion and need huge $$$
-VC partners often decide by consensus
-it is extremely important to find a champion and you therefore should do some research to find the right partner to pitch to initially but keep in mind that the others will need to be convinced as well.
-are there other companies in their portfolio that are in a similar space? That can work for you and against you.
-people like to place bets in a variety of different markets and types of opportunities
-does the VC have experience in the space you are pitching?
-if the answer is no, they will have a hard time with the due diligence required to make a big decision. Furthermore, they won't help open the doors you need. You may also get steered from one play to another. For example, they'll steer you from a consumer play to an enterprise play simply because it is closer to their experience, even if the market is not nearly as good.
-who are the other VCs investing?
-chances are, you'll need multiple VCs and working with VCs that have a history of working together is important (not absolute requirement though)

There is much more I could say here but I hope you get the point. Getting money from VCs is possible and new companies are successful in getting funded all the time but it is extremely complicated and takes a huge amount of time. You really need to know what you are doing and getting people with direct experience and contacts to help is absolutely crucial. I'm not such a person yet but am learning the game with the help of many people and personal perseverance. It has already highlighted major holes in my own initiatives that I know I need to sort out before I have a chance in hell to get funded.

If you have opinions to share on this topic, I'd be extremely interested to hear your thoughts. If you are willing to post these in the comments so that other readers can see them, even better.

Next Monday's post will include a summary and links for many of the cool technologies and services I discovered over the last few days. Don't miss it!

Cheers,

Allan Isfan
Entrepreneur with an Iron Ring