This blog post is not really for dummies.  I’m new at this blogging thing, and if you’re taking the time to read my blog, I don’t want to insult you by calling you a dummy.  My goal with this post is to shine a bright light on a common-sense approach to extracting money from VC’s:  stuff that somehow didn’t wash over me until I had pitched dozens of investors the wrong way.  I felt like a dummy when I realized how badly I’d been screwing up for a couple decades.

For starters, fundraising is a lot like Sales.  You are selling shares of stock in your company to an investor.  It’s a lot like selling a widget to a widget buyer.  It’s also kinda like dating.  You and the investor are not going to hook up unless he or she likes you, finds some common interests, and believes that a closer relationship with you might be rewarding.

I had a very successful 10+ year sales career earlier in my professional life, largely because I am a prolific asker of questions, and I’m a good listener.  One of the first things I learned in sales school is that, to sell anything to anyone, you must first find out what the potential buyer wants and why he wants it.  The initial goal of any sales process is to figure out what the other person wants, assess whether you can help him get what he wants, and if so, explain how you can help him get what he wants.  If you don’t know what he wants, and why he wants it, you cannot possibly assess whether you can help him get what he wants.  Fortunately, knowing what a Venture Capitalist (I’ll call him “Tom”) wants is easy because, nuances aside, they all want the same eight things.

What VC’s want from you

• Tom wants to believe that taking a meeting with you is worth his time. Every man and his dog wants to meet with Tom, because that’s where the money is.  Bonnie and Clyde robbed banks for the same reason.  Before investing an hour with you, Tom wants to know whether you are credible, and whether you are selling stock in the kind of company that matches his “investment thesis” (a lofty term that describes what kind(s) of investments Tom wants to specialize in and why).  Tom’s investment thesis may include sectors, such as bio-tech, ad-tech, or retail; specific geographies, like China or the U.S.; company stage, such as seed investments or later stage investments, and other attributes.  You can only sell stock in your company to Tom if your venture matches his investment thesis.
• Tom wants reasons to believe that he can trust what you tell him.
• Tom wants to reasons believe that your team is competent, passionate, and fun to be around. In other words:
  • Can you do the job (of making your company successful)?
  • Does each team member want to do that job more than any other job?
  • Will Tom enjoy being around you while you are doing the job?

You, your VP of Marketing, and your VP of Sales need to prominently display all three of these traits.  If the rest of your team is competent and passionate, but a little more introverted than the others, that’s fine.  Nobody expects the VP of Engineering to be the first one to get naked at a party, though I’ve seen it happen.

As I mentioned above, the first part of this process is just like dating and mating.  It’s mostly about the people, not the business.  Let’s say that Bill and Sue meet at a party.  If they engage in a conversation, they will be looking for mutual friends, mutual experiences, and mutual interests.  If Sue loves rock climbing, skiing, kiteboarding, and adventure travel, while Tom is not athletic, doesn’t like the outdoors, and prefers to spend his spare time reading books and attending the opera, both Bill and Sue are likely to conclude that they are not a match for each other so far as dating goes.  Neither is a bad person, and they may strike up a friendship, but a first date would likely be a waste of time.  If Bill is smart, he’ll make a good enough impression on to Sue to get her to introduce him to one of her girlfriends whose interests are more like his.

Back to pitching Tom as a potential investor — Tom will only want to hear the rest of your story if his top three wants (above) are met. Otherwise, he may text his assistant to make up some excuse to pull him out of the meeting.  If Tom likes what he’s heard so far, he will be ready to hear more of the story:

• Tom wants to understand and believe in your product and your business model. Specifically, he wants to know:
  • Who is going to pay you money?
  • For what product or service?
  • At what price?
  • Why will those customers feel compelled to buy?
• Tom wants to believe that you and your team have a good grasp of the obstacles that you must overcome to succeed, and a strong game plan for overcoming them. Here are some examples of obstacles (that may or may not apply to a given company):
  • Competition – who are your current and future competitors?
  • Competitive response:  What strategies and tactics might your competitors deploy in response to your entry into the market?
  • Regulatory hurdles – current and anticipated
  • Beyond competitors, are there any other entities that will “lose” if you succeed? For example, when the car was invented, buggy whip manufacturers businesses were substantially threatened.  If a successful version of your business causes similar collateral damage, how might those potential losers respond?  Might they will launch a campaign to try to convince potential drivers that your new-fangled automobiles are unsafe?
  • Internal drama/turmoil:  Do you have any disgruntled team member(s), investor(s) and/or board member(s)?  Is some of your company stock in the hands of non-contributors, non-believers or miscreants?
  • Litigation – Are there any current or expected legal threats to your business?
• Tom wants to understand, and know that your team understands, the factors that drive the unit economics for each of your customer cohorts.  A “cohort” is a subset of your target customers that has meaningful things in common with each other, and different from other cohorts.  If you’re selling to other businesses, then large businesses and small businesses may act differently enough to consider them as separate cohorts.  In a consumer business, maybe males age 18 to 35 act differently than females age 50 to 65.
  • How will you acquire each new customer cohort?
  • What customer acquisition cost will you incur for each new customer cohort?  Are there viral or network effects that will lower your customer acquisition costs?
  • What does it cost you to provide your product/service to a customer cohort?
  • What is the projected average lifetime contribution margin per customer for each customer cohort?  (Contribution margin is the amount of gross margin, less direct costs, that each new customer is expected to contribute.)
• Tom wants to know the projected scaled economics.
  • How many potential customers are there in the world?
  • If you capture a reasonable, but not outrageous portion (let’s say 20-30%) of those potential customers within five years, what revenue and profit will you generate?
• Tom wants to believe that he will earn an adequate return on his investment. In this case, you need to ask him what “adequate” means.  All investors want “as much return as possible,” but once you get past that (“ha-ha”), Tom should be able to answer the question.  Investors in early stage deals expect a higher projected return than later stage investors because they are taking on more risk.  Here are the questions Tom may ask to determine what return he can expect from an investment in your company:
• How much investment capital will your company need, in total, to reach sufficient scale to enable an attractive exit for investors?
• If the company delivers the expected revenue and profit at that scale, what will the company be worth at that time?
• What IRR will Tom earn if things go as planned? IRR stands for Internal rate of return.  Think of this as the expected compound interest rate that Tom will earn on his investment in your company between the time he buys shares of stock in your company and the time that he can sell that stock, either to an acquirer of your company or to the public market.  There’s a little more to it than that, but let’s not get bogged down in the details.
• What’s the lowest IRR that Tom might expect if the company does poorly but doesn’t crash?
• What’s the highest IRR that Tom might expect, short of some miracle?

Having given well over 100 investor pitches in my career, that’s my take on the 8 things that all smart investors want.  For whatever reason, I have found that most investors don’t tell entrepreneurs what they want in advance of taking a meeting.  If I was Tom, I would send my investment thesis to every entrepreneur who wants to meet with me and ask the entrepreneur to confirm that his venture matches that thesis.  I think that would save everybody a lot of time.  I don’t know why most of the Tom’s of the world don’t do that.  My guess is that it’s FOMO (fear of missing out) on some hot deal that falls outside his stated investment thesis.

What you should want from a VC

At this point, you might be thinking, “OK…but what about what I need?  What about what’s best for me?”  I really hope you’re asking those questions.  Because what you need does matter, and it matters a lot more than what Tom wants, for at least three reasons.

1. You are not Tom.
2. Tom is hedging his bets by investing capital in many companies, not just one. You, on the other hand, are going “all in” on just one company.
3. You have way more skin in this game than Tom does. Tom is mainly investing other people’s money, not his own, and he is getting paid a lot to do it, even if most or all of his investments lose money.  Just in case you’re not aware of how most VC funds work, here are the basics.  Once Tom and his partners (the “General Partners”) convince investors to provide them with capital to invest, for the foreseeable future (maybe 10 years), Tom will get paid a very generous annual salary (a “management fee”), and enjoy substantial perks whether he invests that money wisely or not.  Tom will also get a nice share (20 to 30%!) of any profit that they produce for their investors, without having to take any meaningful share in any losses they generate for their investors.  I’m serious.  That’s how it works!  You, on the other hand, are investing all your time in this one venture.  You may also be investing your money, and your friend’s money and family’s money.  If Tom invests, he will insist that you be paid a salary far less than his.

Given all of that, it’s even more important for you to find the right investor, than it is for Tom to find the right investment, and you shouldn’t feel bashful or selfish about feeling that way.

The best of all worlds, of course, is to find a “match made in heaven,” a mind-meld where your excitement about your company and Tom’s feed off each other, just like falling in love.  When that happens, it’s a beautiful thing.  If that happens, it will likely be due much more to your efforts than Tom’s.  Unfortunately, most entrepreneurs, especially newbies, view VC’s with a sense of awe, and are too timid and fearful to indulge themselves in this sort of self-centered, “shoot for the moon” thinking, but you should.  Since very few entrepreneurs have enough confidence to feel worthy of this kind of idyllic outcome, they won’t be standing in your way when you strap on some courage and go for it yourself.

Again, my goal in this blog post is to help you, not Tom.  So let’s go over Tom’s wish list a second time.  But this time, let’s take your needs into account as well as Tom’s.

• You both need to believe that meeting is worth your time.

In any match-making exercise, whether it takes place on Match.com, at singles bar, or at a venture capital firm, good things happen only if both parties are looking forward to the “first date.”  I wrote a separate blog post solely about this match-making topic called (my) Biggest fund raising mistake ever.  It’s chock full of ideas on how to find the right match.  I learned how this works the hard way, by making even more mistakes in the VC mating dance than I made in my 20’s, looking for romantic love in all the wrong places.  PLEASE read it, and let me try to save you some of the pain I endured.  It talks about how to find the right investors, and how to get them to join you on that all-important first date.

• You both need to believe you can trust each other.

This is also discussed in the blog entry mentioned above.  The punchline is that you will vet the investor’s reputation and integrity first, during a research phase that produces a “prospect list” of qualified potential investors.  Only then will you ask your network for a quality introduction to Tom, from someone Tom respects, who will vouch for your honesty and integrity as well as Tom’s.

• You both need to believe that the other party is competent, passionate, and fun to be around.

Again, your high-quality intro source will hopefully vouch for you and for Tom on this front, but this is just the beginning. You need to solidly believe that Tom is excited about your company, knowledgeable about your market sector, and fun to work with.  If you don’t believe that, then walk away.  Life is too short to work with the wrong investor, no matter how much money he can bring to the party.  Don’t set yourself up for ugliness with Tom when your company inevitably goes through challenging times.  Talking to other entrepreneurs that are working with Tom is a good way to assess what it’s like to work with him.

At this point, you and Tom are at a critical juncture in the match-making process.  If, and only if, you and Tom believe that there is a possible match between you, based upon (1), (2) and (3) above, should you disclose more information about your product and business model.  If either you or Tom has doubts about the fit after discussing the first three topics, it’s in your best interest avoid telling him the rest of your story.  If you find yourself in this position, I suggest you politely say “Hey Tom, it looks to me like we may not be the right fit for you.  If so, I don’t want to waste your time listening to the rest of the pitch.  Do you know any other investors who might be a better fit?”  This could bring you some value for the time you invested in the meeting (a referral/introduction or two), while still giving Tom back the rest of his hour to spend on things he cares about.

Otherwise, if the meeting proceeds, it could be that Tom is staying engaged because he wants to learn something from you that he could use to help someone else – maybe a friend whose company plans to compete with you.  This isn’t a silly paranoid idea.  I have personally encountered this more than once – as a recipient of a start-up’s deck that would not have wanted me to have it.  Seemingly high-integrity people just can’t seem to keep a secret, so I find it best not to tempt them.

However, if you are getting the right vibe from Tom, it’s show time!  You will want to let your passion for the business show as you dive into your pitch:  telling Tom about your product, your business model, the economics, and, most importantly, how much money Tom can expect to make if he invests on your company.

Your story will no doubt be based upon some facts, some assertions, and some assumptions, and it’s good to call them out along the way, along with proof statements for each one.  What’s a proof statement?  It is simply a reason why Tom should believe the facts and your assertions, and buy into your assumptions.

For the facts, you need to provide credible sources that confirm those facts.  Easy stuff, if they are really facts.

Your assertions are things that you are claiming to be true. For example, if you make the assertion that potential customers will pay $50,000 for your product, your proof statements might include the following:

• You already have orders in hand from customers who have agreed to buy it at the $50,000 price point when the product is available; and/or
• Three potential customers have told you that they will pay $50,000 for your product. Ideally, they will put this in writing for you, or agree to take a phone call from your potential investors.  If they really like the product you are building, they will likely be willing to help you get your venture funded.  Don’t be afraid to ask them for this kind of help.  It’s kind of a litmus test to see whether they really want your product vs. just being polite; and/or
• Your competitors are successfully selling a product that is clearly inferior to yours, at a $50,000 price point.

Some of your story will likely be based upon assumptions.  The proof statements in this case are reasons why Tom should believe that your assumptions will likely prove to be true.  Proof statements here may be (a) a logical argument why they ought to be true, (b) references to credible third parties who believe in the same assumptions.

Back to the list:

• Product and business model. If you’ve done your homework, this one should be easy. You are simply, and convincingly, telling Tom “who is going to pay you to do what, how much will they pay, and why will they want to do that,” along with solid proof statements to back up your facts, assertions and assumptions.

• Obstacles. You and Tom need to arrive at the same understanding of the obstacles you must overcome for your company to succeed.  Tom is not looking for a company that has no challenges ahead of it.  Such companies do not exist.  Every company, new or old, must overcome multiple challenges, many of which are, or should be, known at the very beginning, before any meaningful amount of money is spent on the venture.  I encourage founders to (a) look far and wide to identify all possible challenges, (b) prioritize them based on their potential impact to the company, (c) develop a cogent strategy for overcoming each confirmed obstacle, and (d) test-drive the hell out of your mitigation strategies by trying them out on potential customers so that you build confidence that your strategy will work.

If you are using slides for your investor presentation, include a slide called Obstacles that lists your highest priority obstacles.  During the presentation, however, verbally walk the investor through your strategy for overcoming each obstacle. Do not put your solution strategy on the slide, because you don’t want to tip your hand to your competition if your slide deck happens to find its way to them.  The Tom’s of the world are notoriously bad at maintaining confidentiality.  Proprietary information is part of an investor’s stock in trade, and I have seen startling violations of trust when it comes to maintaining confidentiality.  It’s part of the reason that investors almost always refuse to sign non-disclosure agreements.  You should assume that anything you include in a slide deck will find its way to your competitors, no matter how trustworthy Tom seems.

By the way, the best entrepreneurs can and should make their entire case to investors without slides, using just a white board, a marker, their words and maybe a few pictures.  This makes it look like you really know what you’re talking about, and it helps avoid leaking your proprietary information to your competitors.  If you want to impress Tom, try this.  It works like magic…

• Unit economics. Again, if you’ve done your homework, it should be easy to describe your proposition’s unit economics and scaled economics in detail.
  • What does it cost you to provide your product/service to a customer cohort?
  • How will you acquire each new customer?
  • What is your average customer acquisition cost for each new customer cohort?
  • If your product is a service rather than a widget, what is the projected average lifetime contribution margin for each customer cohort?

• Scaled economics.
  • How many potential customers are there in the world?
  • If the company captures 20-30% of those potential customers five years from now, what revenue and profit will you deliver?

• Investor IRR. What return on investment will Tom earn if he invests in your company?

Again, you need to nail down this story well ahead of time, commit it to memory, and preemptively answer the questions that are on Tom’s mind, which are:

• How much capital will your company need to reach positive cash flow, and why?
• If your company delivers the projected revenue and profit at maturity, what will your company be worth at maturity, and when will that occur? Determining the value of a going concern is part science and part art, but it is usually based upon the market value of public companies that are comparable yours.  For example, if companies like yours (i.e. similar or same target customers, products, price points, company growth rate) have a market value equal to 20 times annual EBITDA (earnings before interest, taxes, depreciation and amortization), you can estimate the value of your company by multiplying your projected annual EBITDA by 20 to project your company’s value at maturity.  Valuation methodologies vary with the situation and growth rate, but there are only a few commonly accepted approaches.  You can read about them here:
  • Business Valuation: the Three Approaches
  • How to Calculate the Market Value of a Company
  • Business Valuation- What Will Your Company Sell For?
• What expected IRR (i.e. internal rate of return) I will earn if things go as planned? This is the realistic
• What’s the lowest IRR that I might expect, short of abject failure? This is simply the pessimistic
• What’s the highest IRR that I might expect, short of a miracle? This is the optimistic

So – that’s about it. If you approach the process with common sense and confidence, it’s not complicated:

• Find your way to the right potential investors and don’t waste time with the wrong ones.
• At the beginning of the meeting, confirm your understanding of what kinds of investments Tom is seeking. If it’s not a match for your company, halt the meeting.  Tell Tom that you will keep an eye out for investment opportunities that match his interests.  Ask Tom for a referral to another investor that is a better match for your company.
• If you’ve confirmed that Tom is a potential match, impress the hell out of him by telling him the rest of your story as described above. Use your words, focusing on what’s in it for Tom, presenting the topics in the right order, because they build upon one another.

If you’re in front of the right Tom, the process is easy.  If you’re not, it’s impossible…

As a start-up CEO, I’ve raised about $80 million from US Venture Partners, Greylock, TCV, NorWest and others.  I’ve made a lot of mistakes along the way.  The best one (or I guess I should say the worst one),is a mistake that a I made over and over again.  I pride myself on “never” making the same mistake twice.  But, in this case, I didn’t even realize the mistake until a couple years ago.  It was hiding in plain view.  I now believe that this blunder was the primary reason that two of my companies were not able to raise capital.  I also believe that it kills other new ventures every day of the week.

In one notable recent fund-raising exercise, I brought in $10M from a first-class VC at a tier one venture firm.  But the process was butt-ugly.  I pitched over 50 different firms without getting a single offer.  I almost gave up.  My then-current investors, from two prominent venture capitalists in their own right, told me it was time to give up.  It probably would have been smart to throw in the towel given that 50+ seemingly smart investors turned me down, and given that my investors ultimately lost their money. Nonetheless, I believed in the strength of our product and team, so I forged ahead.

To arrange this plethora of meetings with 50+ investors, I reached out to every venture firm that had invested in my prior companies.  I secured additional introductions to VCs from our Board members and from others in my network.  Very quickly my calendar was full of pitch meetings.  So far, so good, right!  Wrong, but we’ll get to that.

At each meeting, I described our innovative new SaaS product that had already attracted multiple Fortune 100 customers.  I told them about the talented team that built the product.  I was getting so much practice pitching the company that I got better and better at it each week.  In fact, I got rave reviews for my pitch.  What I wasn’t getting was traction on the funding.  I kept my best game face on, but I was getting demoralized.

In the end, the only VC that maintained interest through this gauntlet of meetings, and ultimately invested in the company, was the very first person I pitched.  He had learned about the company from the founder, and was interested our company long before I took over as CEO.  Closing a deal with him was a pyrrhic victory.

What was I doing wrong to cause this lack of traction?  The short answer is that I was pitching the wrong investors:  VC’s who were never going to invest in my company.  Here’s the thing that I somehow missed, for over 15 years.

A VC won’t in a start-up unless it matches his “investment thesis,” which is a lofty label for that his chosen area of specialization.  Some call it their “wheelhouse,” or their “sweet spot.”  (Note that by “investor” I mean one partner at a venture firm, not the firm. When you pitch a VC firm, you’re usually presenting to just one of the partners, at least initially.)

What does an investment thesis look like?  Here’s a concise example from Brad Burnham at Union Square Ventures, who wants to invest in new ventures that have:

“Large networks of engaged users, differentiated through user experience, and defensible through network effects”

Brad is just not going to invest in a bio-tech start-up, even if it credibly claims to cure cancer, because he knows that he does not have the necessary knowledge to judge the veracity of that start-up’s claims, its potential market fit, nor to size up its competition.  

Considering the enormous breadth of start-ups seeking funding, it makes all the sense in the world for a partner in a venture capital firm to specialize, and “go to school” on his chosen specialty.  He will work hard to build a network of executives and thought leaders in his chosen domain:  people that can help him evaluate a new venture, and bring other potential investments to his attention.  He will attend all or most of the conferences and other industry gathering for that domain.  He will try to get on stage at these events as a speaker or panelist in order to get his face and name in front of the right people in his domain.  In addition to his investment thesis, he may also have a stage preference (e.g. seed stage or Series A or later stage), and geographic preferences (e.g. Silicon Valley or New York or China).

Many smart, confident VCs graciously avoid wasting entrepreneurs’ time, and their own time, by telling the world what kind(s) of investments they are seeking, in plain English, right on their web site.  Sadly, many other VC’s do not do this, likely due to FOMO (“fear of missing out”) on some hot deal that’s outside their wheelhouse.  They suck up a lot of CEO time educating them on this unfamiliar turf.

The Dating Game:  How to play it.

The process of finding a VC to invest in your company (I’ll call him “Nemo”) is just like the process of finding a mate, except that there’s no match.com or e-harmony or tinder, and polygamy by the entrepreneur is culturally accepted and encouraged.  Aside from those two things, it’s the same.  Both potential partners over-state their strengths and what they will bring to the relationship.  Many players are uncertain what they want from a partner.  If and when they do connect, there is always a one-sided pre-nuptial agreement.  Post-marital disappointment in the other partner’s performance occurs all too often, and lots of the marriages end in separation or divorce where somebody gets financially screwed.  Still want to play…?

The good news, at least for me, is that finding the right person to marry in the real world is the best thing that ever happened to me.  To make that happen, after 15 years of trial and error on the relationship front, I took some advice from a self-help book and wrote down what I thought I was seeking.  I then went to a few close friends and asked if they knew anyone who fit the description that might want to meet me.  One friend, after laughing at the detailed specificity of my “list,” introduced me to a wonderful human being that I’m still head-over-heels in love with after 30+ years.  It’s the nicest thing anyone has ever done for me.  Why it didn’t occur to me to try the same thing when I was looking for an investment partner seems really foolish in hindsight.

Finding Nemo

Given that many VCs don’t advertise what kind of investments they want, and those that do sometimes lie about it or don’t know themselves, how on earth do you find the right ones:  the VCs whose investment thesis, stage preference, and geographic preference are a match for your company?   The answer is that, just like the way that the VC’s have specialized,  you must specialize in finding, then meeting, then pitching VC’s that want to invest in companies like yours.

Taking the time to do the necessary research to identify the right investors and get the right introductions can be terrifying if you wait too long to start the fund-raising process, and it’s easy to see why.  If you run out of money you will go out of business.  I have been there and done that.  Two of my companies died a painful death because I was looking for love in all the wrong places.  In both cases, I had a great network that lead to a bunch of quality intros that lead to meetings with blue chip investors that lead to…nothing.  The process felt really good right up to the point when none of them showed me the money and I had to lay off all of my employees:  people who had become my friends.  Dating in the real world never leads to such dire consequences.  I guess that’s one other way fund-raising is different from dating.  In dating, you don’t lose your company if you don’t find the right partner soon enough.

If you start too late, you will probably fail.

If I’ve convinced you that this outcome is worth avoiding, then you must invest the time to find the right investors, then secure quality introductions, then hold initial meetings to to ask for advice, not money, and then have follow-up meetings to pitch them on investing in your company.  Important:  do not meet with any VC’s, even if they are call you, before doing this research.  It’s not just a waste of precious time, it’s dangerous.  When VCs don’t know your market, the questions and objections that they raise will likely be off point.  At best, you’ll waste time educating them and chasing down answers to questions that don’t matter.  At worst, your confidence will be shaken, and you will get thrown off course my someone whose opinions are not relevant.

The up-front time that you need to invest to avoid this fatal mistake of pitching the wrong investors usually takes an uncomfortably long three months.  This is because you are looking for a vanishingly small handful of needles in an over-sized haystack.  If you start too late, you (or your Board) will decide that there just isn’t time to do this research. You’ll feel pressured to get a lot of futile spinning-your-wheels effort underway ASAP.  But sometimes you need to go slow to go fast.  The best way to avoid the timeline pitfall is to start the “Finding Nemo” process six months in advance of your first VC meeting.

Fortunately, given the wealth of information on the web nowadays, this science project is less daunting than it was even five years ago.  My recipe for how to do it involves just three easy, time-consuming, tedious steps.

1. Build your prospect list.  Start by creating a list companies that are comparable to but not competitive with your company.  Then find out who funded those companies – because those investors the ones that are most likely to have an investment thesis that matches your company. Find the specific partner at each firm that led each investment, along with the amount and the stage.  Here are some sources for doing this research.
   • VC web sites – will often tell you which companies they have invested in, which partner led each investment, and sometimes each partner’s investment thesis
   • Crunchbase.com – can often tell you who participated in each round, how much and when
   • Your network — Ask anyone and everyone you know (and also their friends!) whether they know any investors that make investments in companies like yours.
   • Web sites of comparable companies – will often list the company’s Board of Directors, which usually includes the partners who led some/all of the VC investments.
   • Conference/event web sites of conference organizers who hold events serving your industry. VC’s who focus on your market segment that attend as speakers or panelists are often listed on the agendas for these events – even the events that have already taken place.
2. Find the best match-maker you can muster. The two best tools to do this “who knows who” research are:
   1. LinkedIn – Look for people you know who are linked (one level away only) to your prospects that might be able to introduce you, and then put that list in priority order, taking into account your relationship and the credibility of the potential referrer.
   2. Your network. Ask everyone you know if they know how to get an intro to the prospects on your list, reaching out first to your current investors, your Board of Directors, and your Advisors.
3. Execute a professional outreach.  Once you have identified the best referrer for each prospect, it’s time to ask for the introduction.  (Do not use LinkedIn’s introduction facility to accomplish this – the success rate is far too low).  Since you’ve done your homework, you can now make a very specific email request to each referrer, like this:

“Hey John, I am raising capital for my new company Acme Analytics.  Our software helps consumer packaged goods companies measure the ROI on their TV and print advertising spend.  Our first two customers are Procter & Gamble and Kraft!  Bruce Wayne at Gotham Venture Partners makes investments in companies like ours, and your LinkedIn profile says that you know Bruce.  Could do you me a huge favor and provide an intro?  To make it easy, I have included  a quick company summary below.”

This “quick company summary” has to be just that:  no longer than one, unambiguous paragraph, in plain English, containing no more than 4 sentences.  (If you can’t write that paragraph, you’re not yet ready to pitch investors.  Go get help.)

When you construct your request like this, all John needs to do to is to “ReplyAll,” adding Bruce’s email address and a one or two line intro. Bruce can then read the whole thing in less than one minute.  Never ask John or Bruce to do more than this!  Otherwise, one or both of them will set it aside because they are busy.  They will plan to get back to it later, but often later never comes. 

Now it’s time for background checks.  Huh??

While you’re waiting for these outreach efforts to turn into meetings, it’s time to put each prospect under a microscope.  Find out as much as you possibly can about what each potential investor cares about.  Stalk their LinkedIn profile and everything connected to it. Creep on their Facebook page if you can. Listen to/read every presentation they have given at conferences and other industry events  (search for them on SlideShare.net).  Read their web sites, blogs and press coverage.

Now ask yourself some questions.  Does the prospect’s views about the future of the industry match yours, or do they have a contrary opinion that you may have to deal with in some way?  For each prospect, try to find out what kind of person he is.  Call other CEO’s whose companies he invested in, and ask what he is like to work with.  Are you likely to enjoy being around him, or might he drive you crazy?  Is he known for firing start-up CEOs?  If possible, try to get a read on his ethics, and cross him off the list if the ethics appear questionable.

Beyond narrowing your list, there are three more objectives:

1. Gather conversation fodder that you can use to get to know the VC a bit before you dive into your pitch.
2. Casually show the VC that you’ve “done your homework” for this important meeting.  Tell him why you sought him out as the right match.
3. Know his hot buttons in advance, so you can address them.

By now you’re almost certainly asking, “How can I afford to be so damn picky at a time when I need to raise money.  Money is green no matter who it comes from.”  Here’s the magic:  when you reach out to the right investors, i.e. to Nemo, even if you don’t have the best intro path, you’ll find Nemo more likely to take the meeting.  Nemo will “get” what you’re talking about, and you’ll have a much higher probability of reeling him in as an investor who really can bring more to the party than money. It’s magical because Nemo is actively looking for companies like yours.  That’s his mission.

The conventional (I call it “amateur”) route is to focus on the VC’s with whom you have the best connections.  This path will likely feel really good for weeks, or even months.  These VC’s don’t ask you the toughest questions because they are not even considering investing in your company.  Gracious and polite, they probably took the meeting as a favor to someone who will now owe them a favor.  This path is seductive but deadly.

What I describe here decidedly the road less travelled.  It requires a lot more work up front, so it looks like you’re going slow at a time when your Board and your own inner demons demand speed.  But you’ll get to the finish line faster, more confidently and more assuredly, when you develop the confidence and resolve to be respectfully selective. Always remember:

If you have an investment-worthy start-up,
the right investors are just as interested in finding you as you are in finding them!  

The wrong investors don’t care about your company at all, no matter what they say.

I never imagined that I would be writing two posts in a row about Apple’s mistakes.  I was planning on writing mainly about my own many mistakes. It also feels really strange to be calling out Apple just a week after they announced their best quarterly results in history. But – I just saw something that I wish was unbelievable. Unfortunately, it’s not.

Apple’s new big idea:  make the MacBook Air thinner by removing everything that matters.

Just after writing my post about Apple making the iPhone 6 so thin that there’s no room for a decent battery, I came across this story in 9to5Mac about the new “MacBook Stealth” that makes me believe that Apple is now going to squeeze the (battery) life out of the next MacBook Air. If this product-leak is accurate, Apple is eliminating over 30% of the thickness of this already vanishingly thin laptop.  I fear that, with this new ultra-thin MacBook Air design, Apple might get the battery life down to 2 or 3 hours.  They already made that mistake with the iPhone 6, making is so thin that there’s no room for an all-day.  It’s sad to see them making the same mistake again so quickly.  But this time, since we have an advance warning, maybe there’s time to fix this if MacBook Air fans apply some well-needed pressure on the company.

Here’s an artist’s rendition of the before and after:

I’m writing this post on my 2012, 11” MacBook Air, that I kinda liked (that is, until I upgraded the OS to Yosemite, which has been a total nightmare, but that’s another story).  It has lots of problems, but thickness isn’t one of them.  Here’s what I hate.  The battery lasts only 4-5 hours, often much less.  To try to get somewhere near Apple’s claimed 8-9 hours, I recently wasted $150 to replace the internal battery with a new Apple battery, but it didn’t help at all.  Next, I spent $225 on a ChargeTech two-pound external battery with an AC outlet, since I could not find a charger with a thunderbolt connector.  (Apple owns the rights to that connector spec, and they are apparently unwilling to license it to third parties.)

The second thing I hate is that I have to carry not only this heavy battery, but also a ziplock bag full of proprietary dongles so that I can indulge in such extravagances as connecting my MacBook to the wired internet, or to conference room monitors.  All-in, I spent over $500 on 3+ pounds of extra crap, just to get my $2,000 MacBook hardware on par with a $900 Windows laptop.  My MacBook Air now has a whopping effective weight of over 5 pounds.

The Stealth article also reports that Apple is taking away all of the standard connectors except the headset jack in this rabid pursuit of thinness. No standard USB ports, no Thunderbolt port, not even a power connector.  All of that is being replaced by a single “USB 3.0 Type C connector”.  So it looks like the MacBook Air 2015 will require road warriors like me to add a “USB 3.0 Type C hub” to their collection of “travel accessories.”  That is, if this crap-pack of goodies is available at any price. I have scoured Amazon.com and it looks like this hub has not yet been invented.  How to add a much-needed external battery to this anemic laptop may remain a mystery for some time.

Earth to Apple:

Really…? You’re better than this. You don’t need a Steve Jobs to be smarter than this. A $200 ChromeBook now comes standard with an all-day battery and USB ports to connect it to the real world. That’s $200 for the whole thing, not just the accoutrements that would-be MacBook Stealth buyers have to add to this stripped bare MacBook Air to try to make it useful.  A more appropriate code-name for this Mac might be the “MacBook RyanAir.”  (For those who don’t know, RyanAir is known for offering low air fares in Europe by charging separately for everything imaginable — a diet Coke, water, boarding pass printing, carry-on bags, window seats, aisle seats — pretty much everything costs extra.)  At least RyanAir offers value to the consumer in the form of a lower price, in exchange for yanking out every useful feature/service.  Apple gives us “thinness” instead of value.

A simple solution to Apple’s over-arching problem:  Beta testing instead of secrecy

When I started writing this blog series I promised that I wouldn’t complain about something without offering a solution to the problem. So here’s what I recommend to Apple:  start beta testing your products with real MacBook users, so that they can tell you when you’re veering off the rails.  Leak some of the specs on purpose, so that smart people can give you free feedback.

Unlike the rest of the technology world, you have eschewed beta testing in favor of pre-launch secrecy for a very long time.  With Steve leading the charge, you could get away with this.  Steve didn’t really need outside input to deliver amazing new products.  His intuition wasn’t perfect (antenna-gate, the maps fiasco, screen size myopia …), but he very often got it right.  More importantly, Steve could prevent you from shipping crappy products — by berating the would-be perpetrators and/or using his omnipotent veto power.  Sadly, Steve is gone now and it’s clear that you don’t have anyone with the right combination of product savvy, common sense, clout, and balls to play this part of his role, the part that he played so well.

Sadly, Steve is gone now, but so is the need for secrecy, at least for your current product lines (Mac, iPhone, TV, Watch).  You may still want to keep a brand new product under wraps (such as a Sonos-like product or an Amazon Echo competitor or an Apple car).  But, for the rest of your products, all you need is hardware parity with the Windows guys, since your software is so much better than theirs.  Any value that your getting for maintaining secrecy on your mainstream product lines is vastly dwarfed by the harm that your inbred product teams is causing to your customers.

PLEASE — let some of the more skeptical/vocal among the Apple faithful review and test each new product before deciding to build it.  Swear us to secrecy if you must, but do let us help you.  We can and will tell you about the product foibles and pain points that turn up during daily use of products that don’t deserve to bear the Apple brand.  The only people upon whom you can rely upon do this well are smart people who happen to use your products for many hours each day, or at least as long as your battery life permits.

Here’s what would you would likely hear from beta testers about your new MacBook.

• First, and happily, you’ll hear that we LOVE the idea of getting a 12” screen in the same form factor as the current 11” MacBook Air. That would be awesome!  Some of us frequently travel by air, and the 11″ MacBook Air is the only MacBook that can be used in coach with a decent viewing angle and  reduced fear that the person in front of you will suddenly fling his seat back and crack your screen.
• We will tell you that the current MacBook Air is not too thick. Really – it’s just fine the way it is.
• You’ll hear that we will hate it if you steal all of our USB ports.  We need those ports to connect/recharge our other portable devices, to connect to the wired internet, to connect to external projectors and monitors, and for other purposes that we don’t think are frivolous.
• You’ll hear that we would kiss you on the lips if you gave us a 10-hour battery in the MacBook Air!  If you’re able to free up room by miniaturizing the internals using your magic, please use that room to add a bigger battery!  We bought this thing because we wanted portability, meaning that we’re using it in places where we can’t easily plug it in.  We want to use it all day!  That’s a good thing, not a bad thing, for Apple.  We want to more of our day using your products, and we don’t understand why you seem so committed to prohibiting this.

Oh…one more thing.

You’ll also hear that would be insanely great if you enable real users test the next MacOS version by upgrading MacOS on their “legacy hardware” before you ship it.  This way you won’t take us through another painful exercise like the Yosemite debacle (that is still on-going as of this writing in February, 2015).  As you know, there is little near-term risk of losing your loyal MacBook Air users to the Microsoft Surface because it runs Windows, which is still worse than Yosemite, though not by much at this point. But you do run the risk of us moving to the ChromeBook if you keep ignoring our needs.  Most people don’t yet know that the ChromeBook is a better fit than a Mac for a majority of laptop users because of the price point and the simplicity.  It just works.  I don’t think you should count on that staying a secret much longer.

Apple is still the pride of the American high-tech industry.  Let’s keep it that way!

Team Apple:  You simply must find a way to stop shipping crappy products with foolish specs that don’t meet your customers’ needs.  Steve’s legacy, your own legacies, and your continued success depend upon this.  Imagine what’s going to happen when all of those new iPhone customers you recently added find out that the “6” in iPhone 6 refers to the 6-hour battery life.  It’s not going to be pretty.  So, please stop resting on Steve’s laurels and get back to shipping insanely great products rather than products that are more insane than great.  We still very much want you to continue to win.  Do you part by enlisting our help, and will try hard to prevent the kind of screw-ups that you’ve recently been making at such an alarming rate of speed!  Seriously, call me and I’ll drive down there to help.  No charge.  In the meantime, I’ll be using my new Chromebook when I travel.

‘Nuff said.  It’s almost lunchtime, and my MacBook Air just told me that it’s done for the day:

Like most iPhone announcements in recent years, much of Apple’s bravado at the iPhone 6 launch was centered around thinness. (Yes, thinness is actually a word. I  looked it up.) They proudly proclaimed the iPhone 6 to be the thinnest smart phone in the world!  Unfortunately, they made it so thin that they only had room enough for a 6-hour battery. Your mileage may vary, but my iPhone 6 dies daily at about 3 pm, and lots of my friends have the same problem.

The dumbth didn’t stop with making the iPhone 6 too thin. Team iPhone also made the surface of the phone so slippery that you simply must put it in a case or a condom to have any hope of not dropping it every other time you use it. Think about it: have you ever seen a naked (i.e. case-less) iPhone 6 in the wild without a cracked screen? I have not.

What consumer need or desire was Apple hoping to satisfy by making the iPhone 6 so thin and slippery?  Was the iPhone 5 too thick to fit in your pocket?  Was its surface so rough that people had trouble sliding it in and out of their pocket?  No, and no.  Did they want it to bend, like a leather wallet, to adopt the contour of your butt when it’s in your back pocket?  Probably not.

So then, why on earth is it so thin and so slick?  Here’s how I’m guessing this went down.  Apple probably used an all-male design team for the iPhone 6: a bunch of guys with a “size matters” mentality, who pursued thinness at all costs.  I’ll bet that if they had even one female member on the team she could have shed some light on how ridiculous Apple’s continuing form-over-function pursuit of thinness has become.  She could have pointed out how much better the new iPhone would be if they made room for a battery that can run the new energy-gulping iOS 8 all day long.  Even if she couldn’t make a dent in this deep-rooted thinness disease, maybe she would have convinced team iPhone to avoid the slipperiness problem by helping them realize that the uber-slick surface would make it mandatory for iPhone 6 users to add a cover, robbing the device of its coveted thinness.

These two huge gaffes could have been avoided had Apple asked 100 people (Apple insiders and outsiders) to use the iPhone 6 as their primary smart phone for a week or two prior to locking down the feature set. These two problems would have surfaced very quickly.  Maybe Apple’s penchant for secrecy ahead of a product launch prevented them from getting valuable/necessary feedback that would have enabled them to avoid such foolish mistakes.

Here’s a quick message to Tim or anyone at Apple who is willing listen to some constructive feedback from an Apple fan who is losing confidence in the post-Steve Apple.