This is part of a series of transcripts of the proceedings of the Garage Ventures’ “Art of the Start” conference held in Mountain View. See the complete series of transcripts here.

Guy Kawasaki, Garage Technology Ventures: This is a panel called Creating an Ecosystem. The purpose of this panel is for you to understand how you create an ecosystem and a community and a healthy stage/foundation for a company. So we’ve asked some experts from various professional functions to come up here and discuss with us this idea. The first thing I’d like to do is ask each of them to introduce themselves, the company they work for, and basically what they do. So I’ll start over here with Jeff.

Jeff Adams, Goldman Sachs: Great. First of all, thank you very much for inviting me. My name is Jeff Adams, I’m a Managing Director of Goldman Sachs in the Technology Investment Banking Group and, in that capacity, call on and service and work with a variety of companies, large companies, small companies, public, private, across a wide range of industries and probably the service or function that’s most applicable for this group is the IPO process that we take companies through when they become public.

Guy: Thank you Jeff. And Dave?

Dave Anderson: I’m Dave Anderson, I’m a partner with the accounting firm Mohler, Nixon, Williams. And we enjoy working with startup companies where we help them get started in terms of getting accounting systems put in, and then, as they grow their ecosystem and have more financial reporting requirements, to do their audits and help them get ready for whatever their exit strategy may be: an M&A transaction or IPO.

Guy: Alright. Alan?

Alan Jepson: Yes. I’m with Comerica Bank – we’re a full-service commercial bank. We assist early stage companies. I’m in the Technology and Life Sciences Group – we’re a national practice within the bank and so we have offices around the company. I handle the Northern California division. And again, we work with emerging companies and help them with their financial services needs.

Guy: Thank you. Betty?

Betty Taylor: Betty Taylor, the co-founder and partner of Krause Taylor Associates, which is a high-tech PR firm here in the valley. We’re located in the San Jose – been around for about eight years. My business partner, Barbara Krause, we both came out of Apple Computer where we ran the PR there – world-wide PR. She was actually my boss and ran all of corporate marketing. We’ve represented both small and large companies. Our forte is on startups, and helping get them started. We work with them on their positioning, their messaging, and their PR, strategy through implementation.

Guy: When Betty and Barbara were working at Apple, one of their main functions was to shut me up.

Betty: You always tell this story.

Guy: And so it is a reflection their sincere dedication to startups and entrepreneurship that they would even come to a conference and be on a panel that I’m hosting.

Betty: On continue to represent you at Garage!

Guy: And finally, last but not least, Mark.

Mark Weeks: I’m Mark Weeks, I am co-chair of the Venture Law Group at Heller Ehrman. We have always been passionate about and committed to the startups. We represent the companies before they’ve met a venture capitalist or funding source, before maybe they’ve gone through of the cycles that Guy’s referred to. We’ve been a startup ourselves, and that’s our passion: to help counsel entrepreneurs and build successful, changing enterprises.

Guy: Alright. I’ll start with you Mark and work my way back down. If each of you would address this issue: could you give the audience your analysis of the current situation of startups, the current atmosphere and, you know, are we “back” are we still down at the bottom of the barrel? Do you see another bubble coming? What’s your analysis?

Mark: Well, I appreciated your comment earlier, because we too pray every night for just one more bubble. And we don’t quite see that yet, we don’t have any expectation of that. I think our view is that this is a fabulous time for startups. The going is tough. The funding environment is challenging, but our impression, our view is that we’re seeing some very, very exciting people. We’re seeing some very differentiated technologies. And we think that probably the next generation of startups that have been put together in the last twelve months and then the next six to twelve months/two years, going forward may be some of the most differentiated and ever-changing companies that we’ve ever seen in a long, long time. I think, to your point earlier, people are forced to, and you’ll be encouraged to and forced to be a little bit more crisp about what you want to do and why you want to do it. I think Guy’s comments and his five points are spot-on in terms of some of the exercises you need to force y
ourself to do. I think it’s harder today, I think it’ll take more passion today, I think it’ll take more expertise today to do the things you want to do. But I think if you can get through the first phase of development, of going through the MAT, as you referred to it, and going through that process I think you’ll be rewarded. So, I don’t want to pretend to say it’s better or easier than it’s ever been – it’s probably, in some respect, harder. But there is a fair amount of, sources of, capital that are interested in putting money to work, there are fewer opportunities in a lot of those sources of capitals’ view of what are good opportunities. But if you make that bar, then I think you have a terrific opportunity.

Guy: Betty, what’s your analysis of the current situation?

Betty: Well, in terms of the flow of what we’re seeing in terms of new companies coming in, I think it resembles 1998 in some ways. The number of calls and that. We’ve taken on two new companies in the last couple of months and we’ve probably turned down, you know, five or six. Believe me, compared to two years ago, that’s a significant move forward.

Guy: Are you doing it for cash or stock though these days?

Betty: Well, for our base is not based on stock. So, once a company reaches the bar, we’ll consider stock, but not in trade. Not any longer. We learned from the bubble too.

Guy: Alright. So there is a change.

Betty: Oh yeah, there definitely is a change. I think the other thing that we’re seeing is the companies that we’re looking at have a lot more seasoned management and I think they’re much more realistic and have learned their lessons well in the last few years.

Guy: How would you define “seasoned management”? Because everyone says, “Oh yeah, now it’s a much more entrepreneur”, but if you look at some of the great companies, like Google, you wouldn’t say that Larry and Sergey were “seasoned managers”.

Betty: No, I wouldn’t. But I think what Larry and Sergey had the great sense to do is to bring in seasoned management. You know, we have firms like that right now – there’s this new company that we’re bringing out right now called Aliph. The two founders are kids out of Stanford University; however, they brought in a team that has, including a CEO, that’s been around the block several times and had successes under their belt in the area where these guys have technology. So that’s what I mean by “seasoned” – been around the block.

Guy: Alan?

Alan: Well, it’s definitely not 1999 again, so I don’t think we’re in trouble having another bubble here shortly. However, a think a frustrating thing for entrepreneurs is that the problems that they knew are out there waiting to solve are still there. And it’s been very difficult over the last few years to get the capital and to get the team together to help them solve those problems. And it’s gotten to the point where the venture capital community and I think the budgets at some of the larger companies are in shape so that entrepreneurs can now form a team. It’s kind of 1997, 1998 timeframe again, which is OK. And it’s been pretty frustrating from our standpoint, all us service providers up here, is that we’ve been waiting for the market to come back. It’s been three long years. So there’s a lot of people hungry to serve the entrepreneurial community. Now, there are a number of our fellow competitors that have gone away and those that are here are very anxious to help the startup flourish again. So I think that the capital is there, and I think it’s a good environment – it’s just not 1999.
Guy: Think it’ll ever return?

Alan: Not in my lifetime, I think.

Guy: How old are you?

Alan: Fifty! No, I don’t know – depends on how long I’m going to work.

Guy: Alright Dave?

Dave: Yeah, we continue to see some fundraising activity, but it tends to be later rounds, less often the early rounds. But the one thing we are seeing is companies are expected to do more with less. They’re looking at lot harder at their service providers, and the fee structures and all that, and they tend to be going, I think you said earlier, the brand name companies and looking for alternatives, especially in the world of the accounting firms.

Guy: Could you, for this audience, you know – so you said basically people are focusing more on function than form, if you will, alright. It’s not about the big names – it’s about what are you really getting?

Dave: Right. Value for the dollar.

Guy: Right. So in your particular area, how does an entrepreneur know that they’re getting value for the dollar? Because you could make the case, you know, everybody says they can audit me, how do I tell the difference? And I’m going to ask each of you about your professions.

Dave: In our business, I mean, there are a lot of CPA firms out there -there are the big four and then there’s everybody else. We’re up there closer to five. And what you really have to look at are credentials. Our technology companies are very unique, because they have very complex products, they deliver a complex solution, which creates complex accounting issues and tax issues. And so what companies should look at is how credentialed is that firm? What are the backgrounds of people? Are they with, you know, technology companies every day. I think that’s the important thing.

Guy: Jeff, what’s you analysis?

Jeff: I actually think it’s a very good time, for a couple of different reasons. When I speak with my venture colleagues who are looking at investing in early stage companies, they certainly indicate that they’re seeing a lot more and a lot better ideas. When you think about the underlying economy, it certainly is getting better, and so the opportunity for people to spend and open their wallets is getting better. I know, within Goldman Sachs, and in our IT department for example, we certainly are starting to spend more now than we were over the last couple of years. And we’re starting to be open to looking at some earlier stage technologies and smaller companies. I think there have been quite a few good, very talented employees that have been displaced over the last several years, so there’s a good talent pool from which to draw from. And so I sort of think all of that creates the right stage to form companies and to get companies going. And then when you think about the liquidity strategy, and I know that may be a bad thing to talk about, when it comes time to hit the cash register, I mean you have to think about the two main ways that you’re going to ultimately get liquidity, either through an IPO or selling your business. The IPO market is much better than it was, it’s as healthy as it’s been, you know, basically since 2000. And in terms of selling your company, really companies over the last two or three years weren’t interested, the larger companies weren’t interested, in acquiring smaller private companies, both because they were dealing within their own organizations and, secondly, they didn’t want to take on more employees and additional burn. And I think we’re really starting to see it turn there in terms of the willingness to look at acquiring companies, new technologies, so there’s really a, I think, a much more constructed liquidity path for private companies as well.

Guy: What do you, what would you tell an audience of entrepreneurs about the sweet spot or minimum configuration for a company to consider going public?

Jeff: There are a number of different things. I’d say I think the most important things are a lot of the things that you’ve talked about, which is: having an idea, having something, a business, that is different, is something that people can really get interested in and excited about, that’s always going to be the thing that investors are going to get most excited about and that will be willing to pay for ultimately. I think that when you think about the financial aspects of the business, if you look over the last eighteen months just to pull some data points, over the last eighteen months, you know, there have been twenty to twenty-five technology IPOs. They’ve averaged about $100 million revenue run rate on an annual basis, forward-looking. So that’s gives you about the size of the business. The nineteen or twenty of the companies were profitable and had been profitable for an average of four quarters. So you’ve got to be of significant size to get public – call that $100 million dollars in revenue – profitable. And I think, you know, the management team is obviously critical because ultimately that’s who’s going to sit in front of investors, look across the table from investors, and they want to see that there’s some kind of track record. I think it’s great to have the young, hungry entrepreneurs who came up with the idea, but I think ultimately when you talk about being a public company you want to see some experienced management. SO having some element of the management team there is important. And then the last thing I would say, and I can’t emphasize this enough, the environment for accounting and financial controls has just changed radically. I know the amount of time that I and my colleagues are spending working with companies that are coming public right now – we spend an unbelievable amount of time really digging into that, because that’s the thing that investors are really focused on right now, to make sure that, you know, the house is in order from a financial controls perspective.

Mark: Just to echo one of the points you made. I would differentiate, for this group, when you talk about people and you talk about startups, differentiate between two groups: the management team, the board of directors, the experts when you’re a later stage entity going public or doing something as opposed to, what your first question was in a sence, when you’re a startup and what’s the exosystem and who should it be. Don’t necessarily assume that you need the experienced, vetted management at the start of days. What you need is exactly what Guy described before, which is someone that is or a team of people that are extremely creative, who have defined something that they want to change that they think has value or change the way people act, the way that people buys things, the way people do things. You know the Porsche example is a fabulous example – I didn’t se the one I wanted so I’m going to build it, do it – that can be someone coming straight out of college, that can be someone that’s been an engineer for three years, seven years, ten years in a fabulously company. And it doesn’t have to be someone that has done it two or three times to get it started. What those people have to do is to go through some of the steps that Guy outlined before, and build an ecosystem and build a set of people with the same passion in different areas of expertise to complement him or her in the startup. So I would really encourage you, as you think about your business, I think we see tons and tons of startups, pre-funded or just funded or by-hook-and-by-crook gone through that first phase, that if you really push, and we spend a lot of time going through MAT with them, because at the end of the day they’ve figured out or you’ve figured out, you know, how to put together, you know, a pretty good spreadsheet of the business plan, you can put together a pretty good spreadsheet of a billion dollar market because people tell you people want to see a billion dollar business. I guarantee every one of you out here has a billion dollar business because we can all figure out how to work the math and how to work the sign, but when you go through and really test and push yourself to test the milestones and the assumptions and the various tasks you’ve got to do, I would argue you’ve sort of taken that down to about the tenth degree and not all the way. And it may be that as you look at it you may not understand or know, you know, all the various assumptions and questions you want to answer, and how to ask the question, how to answer the question. That’s OK. Have that passion, but look around your community and find mentors and find colleagues and find people that share that passion, who bring, who are either smarter, you perceive to be smarter, than you or bring a different expertise than you that you don’t have and then force yourself to go very deep on the MAT. Because I think, probably the mistake a lot of people make is they realize they have a fabulous idea, and they may, but they don’t quite get to MAT.

Guy: Betty, I’d like to start with you on this question which Dave’s sort of alluded to already. It is about the selection process for an entrepreneur of someone in your profession. Specifically, how do they figure out which PR firm, which commercial bank, which accounting firm, which investment bank, and which law firm to pick? Because, you know, it’s not an easy decision!

Betty: So, I can answer that on the PR firm side. I think, yeah, your ecosystem is the great X factor. What you look for, the people you surround yourself with, in the service industry, your infrastructure, are the people who need to be able to give you access to all the things that you need to entre, in my case, into the media. So when you’re selecting a PR firm, the first thing you have to do is look at the track record of the firm, what they’ve been able to achieve, where they’ve had their success, the experience of those in the firm, and who you’re actually going actually to have working on your account. A lot of the larger firms you may see a partner of a senior vice president when you’re doing the vetting, but you may never see them again. In fact, that’s been one of our differentiators is to offer that kind of experience. And then, I think also, you know, many of our clients are repeat clients. So out of the eight or ten companies we’ve represented in any given time…

Guy: They’re what kind of companies?

Betty: Repeat.

Guy: Oh, I thought you said “weak”…

Betty: No, oh god no. No, not at all. They’re repeat clients, so that they, you know, we’ve worked with them in other capacities before, which says a lot because I think you want to know that any firm that you’re going with has the wherewithal and is “there”.

Guy: But won’t every PR firm that you go to say, “Yeah, we know Walt Mossberg, and we know Dan Gillmor, and we know, you know, Kara Swisher – I can get you to them!”

Betty: The proof is in the pudding.

Guy: But how does the, in the vetting process, how does the entrepreneur get the proof?

Betty: Well, you can call Walt Mossberg. Please, call Walt Mossberg!

Guy: Yeah, but would you want all these potential clients calling Walt Mossberg saying, “Betty says she’s well-connected with you – is that true Walt?”

Betty: Well, first of all, I wouldn’t give him as a reference unless I was really serious about the company. So, to your point, I don’t disagree at all with what you said about the different stages of a startup. I think that when you’re ready for a PR firm, you’re much farther along that curve typically. So you do have a management team in place. Because one of the things, I think there’s a lot of naiveté out there about, you know, dealing with the press. A lot of people seem to think, “Well, you just put out a press release. I’m ready to start my company, just throw our press release out there!” You know, within the, dealing with the media and conducting public relations there is also ecosystem, there’s an infrastructure that has to be developed, and you firm, the PR agency that you choose, needs to work with you to develop that infrastructure long before ever put a press release out. So, I think you have to look at, and understand that, PR is a process and understand that what people can bring to the table will be accessed and, you know, if I’m serious about you, I will tell you to call Walt Mossberg.

Guy: OK Alan, so I walk into Comerica and I say, “Alright, I’ve got my million dollar funding, I’ve got a check for a million dollars. Who do I deposit it to?” How do they, what’s their process for figuring out the right commercial bank?

Alan: That’s a good question. The entrepreneurs obviously have, you have got your customers that you’re trying to go after and you’ve got your product that you’re trying to deliver. Banks are the same way. There’s going to be different products, and different customers that they’re trying to serve. So you’ve got to go in and deal with a financial institution that is interested in your kind of business: an emerging technology company. I was thinking of the example you talked about, the myth of the Pez dispenser. Banks, think of the relationship with Goldilocks – she sat in a chair that was too small and broke it. Small companies may think, “Oh, I need a small bank” – often, small companies that want to sell to the large companies, they have international needs right away, often you’re going to break the capabilities of a small bank. Large banks are often too uncomfortable for emerging companies. You need to find somebody that is just right, that knows what happens in between rounds of financing, that can make the introductions. As Betty just mentioned, what is the ecosystem that is going to help me? Comerica, for example, we bank venture firms, we bank early stage companies, and we’re part of the process of making sure that ecosystem works for our customer base. So you’ve got to deal with a bank that is focused on dealing with your type of company. So we understand what happens in between rounds, in between all the difficulties that happen along the way, and we’ve got the experience to do that.

Guy: OK. Dave, you want to add anything?

Dave: Yeah, I think the needs of a company along its lifeline for accounting services changes, obviously. In the very early stages, you know, like Mark was saying, companies will need to be focusing on different things. But there will come a time a point in time where they’re going to have to put in systems that are going to allow for growth and then start a CPA relationship that’s going to grow the company. Betty used the example where, you know, I was with a Big Four firm for a long time, you know, where I went out and did the initial sales call and then I didn’t talk to the company for, you know, nine months. You know, with our firm we really like working with startups because we do have the ability, based on our structure, where the partner group can deal one-on-one with the client. Then, going further as the ecosystem grows, and you get further close to the exit strategy, you know, as Jeff was saying, corporate governance takes on a much stronger importance. And that’s when you need to look at the Sarbanes-Oxley related kinds of things.

Guy: I’m glad you brought that subject up. For two guys or two gals or a gal and a guy sitting in a garage, does Sarbanes-Oxley mean anything for them? Or is that something for “stay out of jail” if you’re Enron?

Dave: At that point, probably not. They shouldn’t be worrying about Sarbanes-Oxley. But as the ecosystem grows, as you get funding, once you have an independent board of directors. Then the accounting relationship changes where your accounting firm now is engaged by your board, which means you have to have certain controls in place, because ultimately when you get acquired by a public company, the acquirer is going to be looking at the company in terms of how far along are you to have all the things you need to be compliant with Sarbanes-Oxley. Because if we acquire you, your financial records are going to become part of our financial records and so that becomes important. And then, I think it’s even more important if the IPO is the exit strategy.

Guy: Speaking of IPOs. OK Jeff, you know there’s Morgan-Stanley, there’s Goldman-Sachs, there’s Credit-Suisse. I’m hot, doing $100 million, four quarters of profitability. I’ve got someone telling me about this concept called a bake-off. I mean, what’s your advice to entrepreneurs? How do you tell? Every investment bank comes in and says, somebody says, “Well, you know, on the day that the cooling period stopped we had the highest return compared to the opening day” and another bank will say, “Well we had the best opening day increase for twenty-four hours”. So far, I’ve never met a bank that didn’t do the thing the best.

Jeff: There’s charts that shows they’re number one.

Guy: Right, so how do you pick an investment bank? Knock on wood, let’s all have that problem, right?

Jeff: Obviously it’s a great position to be in. And I would say, I mean, when I think about private company, and certainly early stage company, and how to think about that problem, really it’s almost something I would almost say don’t worry about it. You know, if you are executing on the plan and vision and all of the things that you put in place when you founded the company, you have the things in place, Wall Street will find you. You can’t hide. We will seek you out and find you, and we will do that through all of the partners and board contacts and so forth. The one thing that I would say that’s changed very much in this environment is really the relationship between the investment banking side of the house and the research side of the house. And it used to be that those two entities could work very closely together and talk very openly and freely about a whole bunch of different things in term of targeting companies, and how you were going to call on them and build the relationships, and now those relationship really have to be built independently. And so I would encourage, as you get to become a later stage company and really start to think about doing an IPO, while it may seem a little counterintuitive, you will need to be proactive in terms of reaching out and building relationships independently with the research and the banking teams. And hopefully at the time at the point in time when it comes to be a bake-off, you will already have built relationships with the people that are competing for your business. And if not, you should ask yourself, well, why is that? Was has firm X not been in to see me and not spend time to get to know me and understand what my value proposition is, and get to know me and my style and what I’m looking for as a company that’s seeking to use investment baking services? So, hopefully, when you get into that bake-off, you’ve met with all the various firms, you have a sense for what their capabilities, experience, track record is, and so when you’re sitting across the table and look at all this data, you’ll have the sense for who are the people behind that data and are they really going to be able to help me get through the IPO process and help me become a public company. Because, ultimately, it’s about the people you’re going to work with. Every firm will say they’re great in this, and there are quite a few very good, capable firms, but it’s ultimately about the people, the individuals that you are working with, that are going to call on you. Those are going to be your bankers that are going to help you, give you advice, and support you once you’re a public company.

Guy: Mark, besides picking a law firm that has Craig Johnson as the…are there any other algorithms you can use for finding a good law firm.

Mark: That’s really it.

Guy: That’s it? Alright, so I guess…

Mark: Yeah, I guess I would say the following: I’d say in all of these areas, I think at the end of the day you need to look for expertise. You don’t have time in what you’re doing to screw around with someone learning the business – you’re learning the business, you’re bringing in people you know what to do. And in all other areas and everything you’re hiring, you’re looking for expertise. On the legal side, you know, the first thing you need to do is subset – there are a number of terrific lawyers out there, lots of different firms – there’s a subset of those that focus on startups and technology. And then I think, reality is, wherever you go, whoever you talk to, find those people, find people who understand what you’re doing. Every lawyer, I don’t care what he or she tells you, can’t be everything to everybody, they can’t know every technology, they can’t know every, sort of nuance of patent law. They specialize, and they may be a little bit broader, or a little bit more narrow, but they’re not everything. So, even within a law firm, find those people. Even within an accounting firm, even within an investment bank, everybody subsets to one degree or another and they understand your technology. They understand the companies that would be, and the people that would be, your customers. They understand the venture capital and funding sources. They understand the deals that have been done. They’ve done it multiple times. And those are the people you want to find, because at the end of the day you’re looking for every single member of your team. And we consider ourselves part of your team – maybe that’s something to ask: are they purely a service provider or consultant or something, and are you part of their day, but not are they thinking about you? We think of ourselves as part of your team – we look and plan to spend an inordinate amount of time with you building your business, but you got to also find those of us that – you know, if you’re a software company, you’ve got an enterprise tool and you’re selling to a certain customer, there are lawyers, there are experts, there are PR people, there are accounting people, there are banks, that focus and can tell you the fifteen, twenty-five, thirty, very terrific, successful entrepreneurs and companies they’ve helped build. And those are the partners you want to be with. And, you know, the honest truth, for better, for worse out of all of this, you’ll probably spend more of your time with the lawyers in the early phases than anybody else, and so you’d better find the guy that you think that you can build with, you’re going to sweat with, you’re going to have some good days, you’re going to have some really terrible days, but find somebody who’s going to be a partner with you. Find someone who has the same passion about doing something crazy like you want to do, and I think you’ll have a great experience.

Guy: Do you think it’s a reasonable expectation for an entrepreneur to want his lawyer or her lawyer to help with fundraising, introductions, paving the way, etc. etc.? Is that a…

Mark: Yeah, I mean, I think it’s an absolute reasonable expectation. I think, the honest truth is, we’re interested in building successful enterprises. That’s what we’re about, working with fabulous people, building successful businesses. We define our success by your success. We define our success as…you know, we sit around as lawyers and we say, “Well, how do you define success?” – well you can defined success as making a lot of money. Well, that’s fine. We live in this Valley, and everybody wants to do certain things, but as Guy says, we have a core set of principles – making money’s not on our core values, okay? If we do things right and we build the expertise, and we build the successful business, just like you are, maybe some nice things will come. We define success as repeat entrepreneur. It’s the easiest way for us to test how we’ve done and whether or not our clients, our partners, you, consider us to have created success with you is you come back and do the next one. Funding is a piece of that. One of the things we do, is have a, you know – and a lot of law firms do this, love to say, “Hellerman/VLG, we are the only ones that have all the exclusive relationships with the sources of funding” – there’s a lot of people that have terrific relationships. But our goal, and that’s why I go back to “expertise” – if you’re working with someone who’s a lawyer, who’s been in the community and done this multiple times and worked with multiple companies, here she’s going to be able to direct you, to introduce you to the exact type of – and review with you the different types of – venture capitalist in your specific area, where you can make a call and very quickly that venture capitalist will know very, you know, very easily whether or not this is a business plan, a business, a group of startup entrepreneurs that they want to interview. And that’s something that we spend a lot of time doing, you know, the match, personality, expertise, the startup stage, what the venture fund does, how they invest, what their style is, what the terms are, is something that we have deep expertise in, and something – and a lot of lawyers do – but something we bring to the party. Now, I wish we could guarantee the funding. I wish we could say, “You what? We’re going to call these three entities and we know, pretty sure, that they’re going to fund you and you’re going to be off and on your way.” Can’t do that, would love to do that. When we figure out that riddle will be terrific. But what we do do is, we spend a tremendous amount of time helping the entrepreneur to build the team, and to identify the alternative sources.

Guy: You know, I think the message for the entrepreneur here is that as you are perhaps particularly seeking a corporate finance attorney, and also I think accounting to some extent is also true, that a very reasonable question in the interview process is: can you, will you, have you introduced us to sources of funding? So it’s not just about the legal work, it’s not just about the accounting work, it’s “Can you call someone at Sequoia and get us an appointment if we go with you as a lawyer?” Is it a reasonable question?

Mark: I think it’s an absolute part of your diligence -you should not only ask those questions, you should look and ask who else they’re represented in the past. You should ask, just as any of us, we all have references, we all have relationships. It’s across the board. What you’re trying to do is build, the word we keep using, this ecosystem. But as we go, can your lawyer call Goldman-Sachs, and can they get Goldman – who’s very busy and they have a high-profile and they work with fabulous companies – a little bit earlier in the process to pay attention to you or identify you? You’re right, when you get to the $100 million run rate, they’re going to find you, no question they’re going to find you – but before that, a year before that, two years before that, you may want to explore some alternatives, you may want to plan in advance what that process may look like and how you might want to do it. Boy, the hot topic today is the Dutch auctions – you may want to educate yourself a little bit earlier on what the heck that is and how it works and will that bring more value shareholder value or not, and how does that work. You may want to explore, “Gee, we’re going to go down one of two paths – we’re still going to build success either way, but we’d like to explore with Goldman-Sachs what the opportunities for acquisition are, and what we should think of? And here are our milestones for running the business, are those synergistic? Or how would Goldman look at that as our M&A bank, and what would they identify as different or additional milestones if we want to be acquired?” And maybe the value, exit scenario, dollars are different, but we’d like to explore that. Your lawyer, and your various board members and your relationships, the expertise you build around you, should be able to tap into that. And they should be able to tap into that in a way that you get the high, top tier, you know, people who’ve done this – again, expertise matters. Not the junior banker, not the junior lawyer, not the junior accountant, not the junior whatever it is, you get someone who is high-profile who can deliver value to you for many of these areas of expertise. So, I think it’s perfectly reasonable and, quite frankly, I think you should assume that what you’re trying to identify are those lawyers or accountants or any of the experts that can tap into the community.

Guy: Alan, I’d like to ask you this question about the ecosystem. What can you do to foster a very supportive and yet value-adding board of directors? Lots of people, you know, when we have these kind of panels, lots of people say, “Yeah, you ought to build out your ecosystem by having good board members” and everyone’s out there writing it down. Yeah, get a good board member, and then you go home tonight and say, “What the hell is a good board member?” – you know, duh, I was going find a bad board member, good thing I went to this conference! So, what is a good board member, how do you find these rare birds? And I’d like each of you to offer some opinion, advice on finding good board members.

Alan: Obviously early on the venture people that provide the money are going to want a board seat. They’re putting in capital, so they want that. That’s up to you to choose who you’re going to do there. Now obviously, what Mark is saying from all of us you could expect to find sources of capital, referrals to funding sources, and we’d be glad to do that. That’s the obvious thing. You’re obviously going to have people in your industry that know that. Now the advantage, I think, that Guy is alluding is the fact that since we’re banking a number of companies in the semiconductor industry, or in the telecom industry, we’re used to companies, that is we’ve banked a lot of companies, that maybe have been successful and we know retired people, for example, in the trust department or whatver and our personal banking area, and they’re looking for things to do, if you will, relative to the industry they’ve been involved in. And we can often make the introductions, but good board members are important because they can communicate certain things to the company and also to the banks and other people that need to understand where the company’s going, and that’s going to be critical in the process of moving from one step to the other. So, a good board member is one that communicates, has the domain experience, and has the connections that you’re going to need. I think the bank can provide access to certain of those people – we have to careful, from a fiduciary responsibility, we can’t, for example – when we give referrals, we have to be sure we don’t give one referral because it looks like we’re trying to put our person in there. We have to give several referrals. We’ve got to do homework, we’ve got to make sure that those are people that you’re going to find useful. And so that puts the onus on us to not only have one person we’re working with, but a whole variety of people. And it’s critical for us to make sure that we’re going to do something that makes sense for the company. We’re a very…you know, we’re a public company, we have to make sure that we want to see our name in the press for good reasons, we’re helping emerging companies not that we’re trying to plant somebody. So we’re very careful about that. And we’ve got a number of people that we’ve worked with in a lot of different industries that can help out in that regard. But I think the critical thing that we want to see, as a banker, is the communication that can happen between the board member and the company, and as a partner, the bank is a part of that triangle, if you will, between the funding source and the equity, the debt, and the board guiding the management to make that happen. We want to make sure that is all working very smoothly.

Guy: Dave, I’d like your advice about board members.

Dave: Yeah, I mean, a company that’s receiving an early round, you know, starts evolving and then the board is created typically with the venture partners that are funding the company. But as the company evolves, you know, with Sarbanes-Oxley, again, there is this requirement to have a financial expert on the board. And as a company gets closer to, you know, an exit strategy, they need to start looking at that once they have independent board members. So I think the value that we bring as an accounting firm, like Alan said, there’s this whole pool of people out there, I have a stack of people I know that are either retired partners with accounting firms or CFOs, you know, current CFOs that are looking to serve as financial experts, as directors. I think that’s an important thing that we could bring to a startup.

Guy: Board member advice?

Jeff: I would just add just that early in the company’s formation the type of board members that you will have and would want to have, I think, are going to be slightly different than what’s going to happen as you approach and ultimately become a public company. Early in the process, certainly, your venture investors are going to be extremely involved and they’re going to bring a lot of benefits to the table, in terms of advice on business model construction, company formation, helping to get the right management team in place and think about what market you’re going to go after, making introductions, and really providing sound counsel advice and guidance. That’s going to obviously continue, but as you become a public company you have to overlay on top of that a very strict corporate governance environment that all public companies are living in right now. All you have to do is pick up the Wall Street Journal and you just read about company after company that is getting just thrashed in the press about board members and lack of independence. So it’s really a big issue that you will deal with – and we’re dealing with it now with all of the companies that we’re bringing public, in terms of helping them think about how to construct their board, making sure that they have the right committees formed, nominating committee, governance committees, obviously the auditing committee, that there’s the appropriate amount of independence and diversity. And you want to make sure that you’re able to achieve all that, but at the same time not sacrifice the good counsel and wisdom and judgement. I’ve always had CEOs tell me that their best board members are a lot of times the ones that are toughest on them, that ask the hard questions, that really force them to answer the difficult issues and often do some difficult things they don’t want to do. So, you’ve got to think about that aspect of it as well.

Guy: Okay. Mark?

Mark: I would add to that last thought, I mean I think, particularly in the early days: expertise, expertise, expertise, and objectivity. You want to bring onto your board, look for people who have, again, maybe done it before or have a particular area of expertise, whether it’s the science and the R&D side, or the marketing side, or the financial side, whichever areas it is you might want some additional guidance and counsel on, make that list of people. Make a wishlist – it’s ok. Make a wishlist of some really terrific, high-profile people. You won’t get them all of them, you might not get any of them, you might get one to pay a little bit of attention to you as you grow, but make that list and figure out with your group of advisors who you know and who you might be able to call and ask to help you. I think it’s variety of things, if you’ve got people on your board that you respect and that are willing, you believe, to tell you and give you the tough feedback, it’s much more of a productive board relationship.

Guy: Let’s say that you have found this perfect board member: known in the industry, been around the block, credibility, just perfect. How much of the company would you offer that person to join the board, maximum?

Mark: The answer…that’s a great question.

Guy: That’s a great stall.

Mark: That’s a great stall. See – the lawyer in the group would say ‘it depends’.

Guy: I know it depends.

Mark: It depends. I guess I would say it this way Guy: I think that, you know, there are certain situations where, you know, you may get…if I went on the date and I said, “Geez, do those kind of board members bring, you know, one percent, three percent, ten percent of the company?” The answer might be yes, but it’s kind of an incomplete answer because, you know, of what? Of what? If you’re a pre-funded company and that person you’ve described has agreed to really spend a lot of time with you, I mean really a lot of time: they’re going to help you do MAT, they’re going to help you make connections, they’re going to help you get funded, okay? Whether that’s a venture capital or corporate or angel, or whatever, it’s going to be much higher in those percentage numbers than the one percent, two percent, half a percent kind of a number. If it’s a person who says, “You know what? I’ll spend two days a month with you, I’ll occasionally come to your advisory meeting, maybe I’ll be on your board, maybe I’ll be on your advisory board.” It’s probably going to be smaller range – half a percent to a percent – smaller, bigger depending on where you are. When we do these things and we go through this, I encourage the folks to sit down in a very honest way with the board or advisor and ask and talk about what the commitment of time will be. Because for a lot of commitment of time of a person you’ve described – this perfect, terrific expert – it’s worth a lot to you, if they’re really going to spend that time and give it to you. It’s worth a lot, but maybe less, if they’re going to lend their name and their credibility and be at your quarterly or monthly board meeting and do some things, but it may not be the same value scenario that it might have been if they were going to be, in a sense, part of the founding team. To me it really depends on what value they’re going to deliver, where you are as a company, if you’re already funded and then they can spend less time on that. It’s still a ‘maybe’ and I didn’t give you a straight answer.

Guy: You have sufficiently clouded the issue.

Mark: It’s clouded enough.

Guy: Somewhere between zero and…

Mark: I guess the one thing I would say, let me say the one thing I would say on this, which is that when you’re going in with venture or you’re going in with advisors: I wouldn’t get too caught up in the percentages. Okay? People often in a startup phase get very obsessed about dilution and ownership. You’re going to build something very, very successful, and if you force yourself to run the numbers, when you get to that $100 million run rate, and you’re going public with Goldman, and you’re building a terrifically successful business, you’re going to look back at whether you gave that person a half a percent or one and a half percent, okay – get the person. Don’t get caught up in that half a percent, get the value.

Guy: Alright.

Betty: I would just add to that, you know, from a press perspective the first thing that the media is going to ask when you go out there is, “Who’s behind your company?” So it certainly doesn’t hurt to have some high-profile, well-known people that have track records, but I agree that it can’t be in name only, they have to know that there’s a real vested interest in the company. Along those lines, there are other components to the ecosystem that we haven’t even touched on. There’s the very mixed question the media is going to ask you, “Who are your customers?” So, a big, you know, contributor in the ecosystem is your customer base, along with resellers (if you’re in that type of environment), VARs, etc.

Guy: Let’s take some questions from the audience. Anybody? There are mikes so that you can…

Audience member: Good morning, my name is Charles Palmer, I came in from Florida for the conference.

Guy: Not Tampa Bay though…

Audience member: No, but very close. And, one of the primary reasons I came here today is to find out: is it foolhardy to think that a tech startup can make an attempt from a place that is as remote from this region as southwest Florida? To any of the panel members, is it difficult or impossible to work with you if face-to-face is not possible?

Alan: Let me just say that, from Comerica’s perspective, we’ve got offices in about the largest ten places, geographically, in the United States where venture is putting in money. So, we cover everything nationally, we’ve got an office that covers the mid-Atlantic states, if you will, in that area. And so, we will, from a banking perspective, assist you wherever you are in the US, but we only have direct, inline offices where you’ve got probably the largest venture investment in that area. But, sure, you can do that.

Guy: All he wants is your ATM though. Any other thoughts on this? Can you work with someone in Florida?

Betty: Actually, we’ve worked with companies in Idaho and in Austin, and, you know, so the west coast is obviously easier for face-to-face, but we also have an employee in New York. So we’re set up to, you know, service companies that are geographically remote. Is it optimal? No.

Guy: But at an extreme, there are people that work with companies from Israel – I mean, that is a pain in the ass to get to. So it can work, but the bottom line is that if you’re good and interesting enough company it doesn’t matter. But if you’re a mediocre company, then Milpitas is too far to work with you. Next question?

Audience member: Could get a list of the most common mistakes entrepreneurs make when they come to your firm for services? Can we go over on the panel?

Guy: How about the single biggest mistake or most common mistake, you know, for lawyer, PR, bank, accounting firm, investment bank? Is it hard to narrow down?

Alan: One of the things, from a banking standpoint: sometimes entrepreneurs confuse the role of debt and the role of equity. But again, we’d be glad to chat with you about how those work out, and what the capital structure should be. But, you know, I’ve found that entrepreneurs before they get venture money understand that better than after they get venture money. But we can help.

Guy: Alright. Accounting?

Dave: One of the biggest mistakes is waiting too long before to bring in some sort of accounting in house, accounting person, whether it’s a controller or accounting manager.

Guy: Okay.

Jeff: The only thing that I would say is that the biggest mistake is just getting people involved either too early, I mean from an investment banking perspective, is getting people involved too early or before you really know what you want and how the firm can be helpful to you. Because what ends up happening is if you set the wrong expectation right out of the gate, where the management team doesn’t have a defined plan or defined strategy, then that can put you in that particular banker’s mind in the wrong bucket in terms of being a priority to invest and develop the relationship longer term.

Guy: Betty?

Betty: It’s definitely not leaving enough time in the process. You know, we get brought in and the company will say, “I want to do a press release in two weeks, I want to introduce the company in two weeks.” You just can’t do the work that needs to be done in that timeframe. It’s unrealistic.

Guy: Okay. Mark?

Mark: I would go back again, Guy, to a couple of your points because I think it’s what we see most often. One is a failure to really spend time and to articulate core values. I couldn’t agree with Guy more that a mission statement is a very creative experience for team-building – it doesn’t make a company. And he had a different word for it, I call it ‘core values’, but if you in a half a page can articulate your core values it really helps you define whether or not you want to do what it is you set out to do. The other thing, the other biggest mistake again I would say is most people haven’t spent enough time on MAT, on what you defined as MAT. And if you could take more time to do anything before you go see any startup service provider, lawyer or potential investment source, is to really go through the milestones and the assumptions.

Guy: Thank you. Over here?

Audience member: My name is Doug Milke, I’m with a very fresh startup called Wyhona, content enabler. There’s been a lot of discussion about how venture capital will define the shape and the picture of your actual board. And, in fact, I’ve had discussions with my partners where the question is raised, “Who’s the CEO?” and my answer to that is, “I don’t know, I haven’t met him yet.” And what I mean by that is: you’re building teams, teams are very, very important – pick the right people to manage your company. Why would I go ahead and build a board when it’s going to be redefined when I finally find my venture money?

Guy: Well, I mean, one answer is: it’s sort of a Catch-22, right? If you have a good board, you’ll attract venture money. Yeah – any more thoughts on that?

Alan: Part of it is, you know, a good board member is somebody that’s from the industry, gives credibility, and answers the Catch-22 question. And maybe being there only for a temporary period and they know that. You know there are early stage board members that know they’re going to drop off, but they help you get started.

Guy: Yes?

Audience member: This is a question based on your remarks in the opening there – where are the women investors and what are they investing in right now?

Guy: We not going to…maybe that’s why there’s so few women investors – they know that there’s not that much to invest in. We’re not ending on that question – over here?

Audience member: Hi, I’m Jim Franklin with GoIPO.com, and I just have a question for Mark. You know, a lot of the early stage companies that have got their business plan done, they’ve got their management team together, and they’re out, they’re looking for venture funds. One thing we noticed: a lot of the venture funds are depleted from the assets, the cash assets, to invest in companies. I wonder if you could address, you know, the Dutch auction has been mentioned, it’s been very much part of the news, some of the regulations of the state offerings of regulation A, interstate offerings, what other avenues do some of these companies have in approaching raising this capital?

Mark: Well, I’m going to distinguish, and maybe I’ve missed the question here but, distinguish two separate situations. There’s raising capital in the public markets and then there’s raising private money from institutional investors or from an angel network. When we talk about Dutch auctions and IPO processes, there’s a number of different alternatives, or there’s now two or three different ways to raise money in the public markets and it’s evolving, Google being another example and we’ll see what happens there. Red Envelope was another example of a Dutch auction – we’ll see more and more of those I think as we move on. It’s got its own set of issues and challenges, but that is different from what I would say to you is, for most of you, the traditional method of, from a select, limited number of investors, whether it’s institutional venture capital, corporate investment groups, or individual networks, you’re still raising private money under private offering exemptions in a variety of state and federal laws. It’s not worth getting into that sort of a level of detail here. I’d say it hasn’t changed much in terms of how you’re doing it. I would caution everybody in terms of trying to keep, when you’re going and trying to raise money, the number of people you solicit to a minimum and to get some guidance on that.

Guy: This is the “Mark Benioff” theory?

Mark: Definitely.

Guy: Please join me in thanking the panelists.

This is part of a series of transcripts of the proceedings of the Garage Ventures’ “Art of the Start” conference held in Mountain View. See the complete series of transcripts here.

Good morning, my name is Guy Kawasaki and I would also like to welcome you to our conference, called The Art of the Start. In particular, I found out that there are some people here who have come from foreign countries, so I’d like to thank you for coming so far for this conference. There’s a pretty large contingent of Canadians – I have to tell you that when the Calgary Flames lost to the Tampa Bay Lightning, I wanted to cry. Frankly, I believe the Stanley Cup does not belong in a city where you get snow in a cup. It just doesn’t fit. I’m a Calgary Flames fan – so, welcome to my friends from Canada.

I am going to give you an overview, a “big picture” view of starting a company. This entire conference is roughly based on the book that I just wrote, called The Art of the Start – it looks like this [slide reference].

This cover is actually an interesting story – it is using a photo from a company from Calgary called iStockPhoto. Any of you could have bought that photo for about a buck and a half and created this cover. iStockPhoto (Patrick Lor is the CEO) represents a new kind of market for stock photography: usually stock photography is about $300 a shot – this is a buck and a half a shot. And that’s Canadian.

So that’s the cover of the book that will be coming out in September, but this is not a promotion for my book. This session is about the big topics of starting a company.

For those of you who have seen me speak before, you know that I like to use a Top Ten format. There’s a historical reason for that – the historical reason is that I’ve seen so many hi-tech CEOs speak in my work that suck as speakers. I figured out early in my Apple career that if you’re going to suck and you use a Top Ten format, at least the audience knows how much longer you’re going to suck. I hope you don’t think that I, or Bill, or Bill suck, but in case you do at any given point, usually in our presentations you just have to subtract from ten.

I struggled (this is the introduction chapter of the book) to come up with a Top Ten the things you really need to do to start your company off correctly. And there are not ten things – the most that I could come up with (that are crucially important) is five. So this is a top five for you – I’d like to go through these top five things and discuss them in rather great detail from The Art of the Start.

Lesson 1: Make Meaning

The first thing I learned that, you know as Bill alluded to, is that we have seen literally thousands of companies over the past six or seven years, and we have met tens of thousands of entrepreneurs and entrepreneur teams. And with hindsight, although we were honestly swept up in it as much as they were, I think the thing that we learned the top level thing you must have. If you’re going to create company and that company’s going to be successful, it is because the founders of the company want to make meaning. Not money. Not prestige. Not power. Not status. It is about making meaning.

I would encourage you entrepreneurs as you’re contemplating your companies or forming your companies to think about what is the meaning going to be? Not the money. Money is the outcome of successful meaning-making, if you will.

Let’s analyze the types of meaning – I think there are principally four types:

• One is to make the world a better place by a product or a service.
• The second is to increase the quality of life of people.
• The third is to right something that is wrong, to fix something.
• The fourth is to prevent the end of something good.

Those are the four types of meaning that any company, any organization can make. My plea to you is to focus your efforts on making meaning, not making money.

Now, there may be an element of hypocrisy here because I will tell you that there were times in my life that I wasn’t focused on making meaning. I will pull a mea culpa, if you will. I look back, and I say, well in 1983 I was starting in the Macintosh division at Apple and I wasn’t exactly focused on making meaning. Basically in 1983, I, and the rest of the Macintosh division, wanted to send IBM back to the typewriter business holding its electric balls. So that’s not as lofty as making meaning. In 1987 at Apple, we were obsessed with beating Windows, beating Microsoft – we wanted to send Bill Gates back to making/serving Frappachinos at Starbucks. It was about Apple versus Microsoft.

But in 2003/2004, I’ve really come to this conclusion that a great company is about making meaning. That’s lesson number one – making meaning.

Lesson 2: Make a Mantra

Lesson number two is a passionate request from me for you to focus on making an organization mantra. Now a mantra is very different from a mission statement. A mantra is typically shorter – arguable the shortest mantra ever is “om” (the Hindu mantra) – it is a sacred verbal formula. It is thing where if you could ask any employee “what do you do?”, they would understand it immediately and be able to consistently communicate the purpose and meaning of the company.

Now I have to contrast mantras (because it is not a typical recommendation for an entrepreneur) with mission statements. Many of us make mission statements – how many of you have mission statements? Now let me guess how that mission statement was done. You took a group of people, maybe you even went offsite, you had each functional group represented, and for a day you hammered out this mission statement. And at the end of the day, every group had a little say in it: HR got to say “well, we have to do good for the employees”; the Finance person said “we have to return money to the shareholders”; the marketing person said “we have to change perceptions”; the engineering people said “we have to design something new and radical”. So at the end of the day, you had a mission statement that was about 25 words long that no one can remember. It’s just total Chop Suey. No one could care less about the mission statement. I have seen very few mission statement done well.

I looked up in a book, called The Mission Statement Book by a man named Jeffrey Abrahams – and he analyzed 301 mission statements. This is a very interesting statistic: of the 301 mission statements that he looked at, ninety-four use the word “best”, 211 used the word “customers”, 77 used the word “excellence”, and 169 used the word “quality”. The message here is that everybody uses the same kind of words in a mission statement. For this reason, I recommend to you that you forget about creating a mission statement. Make a mission statement when you’re a middle stage company, when you can hire consultants and go to Monterey for an expensive offsite. If you want to waste a day, go make a mission statement. But while you’re a young company, focus on a mantra.

A mantra is short and sweet. Let me give you some examples.

Nike‘s mantra is “authentic athletic experience”. If you were to ask a Nike employee “what do you do?”, it is about “authentic athletic experience’. Disney is about “fun family entertainment”. The Green Bay Packers football – “winning is everything”. Those are mantras, they are not mission statements.

By contrast, let me give you a mission statement. Starbuck‘s mantra is “rewarding everyday moments”. Starbuck’s mission statement is: “established Starbucks as the premier provider in the world of the finest coffee in the world while maintaining our uncompromising principles while we grow”. Which one do you think is easier to remember?

Let me give you more examples:

• Southwest Airlines: The mission of Southwest Airlines is “dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride and Company Spirit”. The mantra that I would make for Southwest Airlines is “better than driving”. Also “cheaper than driving”.
• Coca-Cola: “The Coca-Cola exists to benefit everyone that is touches”. My mantra? “Refresh the world”.
• Wendy’s: “The mission of Wendy’s is to deliver superior quality products and services for our customers and communities through leadership, innovation, and partnership”. That’s for a hamburger. I think the mantra for Wendy’s should be “healthy fast food”.
• United States Air Force: “To defend the United States and protect its interests through aerospace power”. I think the Air Force’s mantra is “kick ass in air and space”.
• The March Of Dimes: “The March of Dimes researchers, volunteers, educators, outreach workers and advocates” – someone from HR got all the groups in there – “work together to give all babies a fighting chance against the threats to the their health: prematurity, birth defects, and low birth weight”. I think the mantra for the March of Dimes should be simple “save babies”.

The point here is to focus on mantras. Short, to the point, memorable. That’s point number two: make a mantra.

Lesson 3: Get Going

Point number three is to get going. One of the thing that Bill and I and the other people at Garage have noticed is that many people, when they decide to create a company, they think that the first thing is “buy Microsoft Office”. Because if I don’t buy Microsoft Office – because you need Powerpoint, you need to start creating presentations, then you need Word to write a business plan, and then you need Excel to create that spreadsheet and have a financial model. I am not nearly as anti-Microsoft as I used to be, but I am telling you the key to getting going is not spreadsheets, it’s not Powerpoint, it’s not wordprocessing. The key to getting going is to get your hammers, and your tools, and your compilers and your Autocad, and whatever it is that you’re use to create your product or service and create. Get going. Start making that product or service.

Getting Going

Let me give you some principles of getting going.

First of all, I encourage you to think big. Think big. Don’t just do things 10% or 15% or 20% better. Think 10 times better. Think more dramatic improvement. Think different curve, not same curve. Think getting to the next curve. Think creating the next curve. You know when Jeff Bezos created Amazon.com, he didn’t go to a Barnes & Noble Superstore and say “Wow, Barnes and Noble has 250,000 titles in this brick and mortar store, I’m going to create leapfrog them. I’m going to carry 275,000 titles in bigger brick and mortar store”. He went from 250 to 3 million in a digital book store. Think big to get going.

The second thing is you need to find soul mates. You know, in America, and particularly Silicon Valley, there is the myth of the sole entrepreneur. This it the Steve Jobs, the Henry Ford, the Anita Roddick, the Richard Branson, the Thomas Edison working alone, genius doing it by all by himself. And in fact, I think if you analyze even these companies history is wrong. All of those people had groups and were members of a team. History is wrong. It is not about one person, the sole entrepreneur, it about the group of entrepreneurs. Hence my second recommendation is you need to find some soul mates, the people who are drinking the same Kool-Aid that you are. Find some soul mates.

The third thing is when you design your product or service you should be not even not afraid, you should want to polarize people. You should want people to look at your product or service and say “I love it” or “I hate it”. The worst thing is indifference. So when you look at some cars – because cars is an easy example for people – look at the cars that you see that you “wow, I love that design” or “I hate that design”. When you look at a Mini Cooper, you love that design or you hate that design. When you look at an Infiniti FX45, you love that design or you hate that design. When you look at a Toyota Scion XB – that thing that looks like a little bread truck, you either love that design or you hate that design. But that’s what your product or service should do.

When we introduced the Macintosh it was definitely a bifurcation of the world. People either loved it or hated it. But the people who loved it are what mattered. The people who hate it don’t matter. The worst case is people don’t care. Don’t be afraid to polarize people.

Design Differently

The next recommendation about getting going is you need to design differently. You need to get out of the usual patterns of design. Let me suggest a few. One method is called “I want one” – which is you’re the customer, in this rare case there is no disconnection between what marketing says the customer wants and what engineering says we can do. It’s in the same body. You are the engineer, you are the designer, I want this, and I’ll make it. This is what happened with Steve Wozniak and the Apple. Another example, also from the car world is Porsche: Ferdinand Porsche once said, “In the beginning, I looked around and, not finding the automobile of my dreams, decided to build it myself.” I love this theory, the “I want this” theory.

The other theory is the “my employer couldn’t or wouldn’t do it” – this is where you’re working for a company and you see a market, you see a technology, you see a service that you want to do, but your employer doesn’t see it, your employer doesn’t want to do it. So you leave that company – hopefully you get your IP done correctly – and you go start a company.

Another theory, this theory is my favourite, which is “what the hell, it’s possible, let’s build it”. This is the spirit of Silicon Valley. What the hell, let’s build it! That’s how Motorola built the first cellular phones – what the hell, let’s build it, let’s go prove the market for cellular phones. You know, it was a completely foreign concept to think of carrying a phone with you – phones were at places, when you wanted to use a phone, you went to the phone. Retraining humans to think that you could carry a phone was majorly powerful in many ways. For Motorola, that phone was mainly engineering driven. What the hell, we can build a portable phone, let’s do it.

The last theory of designing different is called “There Must Be a Better Way”. This is when you’re sitting around one day and you’re saying “There is something just wrong with the system”. This was the genesis of eBay. Pierre Omidyar, when he started eBay, wanted a very market system. A better market system so that people could sell their stuff, their junk, online. The story of his girlfriend wanting to sell Pez dispensers online is more mythical than true. He really wanted to create a perfect market. A perfect market because he knew their must be a better way.

So those are the keys to getting going – that’s step number three.

Lesson 4: Define a Business Model

Step number four is to define a business model. This, for many people, may appear to be a “duhism”, as is “Duh! Of course you have to create a business model”. But we have found that many people do not pay any attention at all to the process of creating a business model. This is, I would say, a vestige of the dot-com era. Now, don’t get me wrong: no one wishes more for one more bubble than me. I just need one more bubble. Because this time, I know what to do. Having said that, that is my appeal, every night I pray to God for one more bubble.

But let’s suppose that actual bubble doesn’t appear – then it’s all about defining a business model. Now, I often lack subtlety (that may not be often), but I think the definition of a business model is: who has your money in their pocket, and how are you going to get it? That’s a business model. So let me give you some notes on a good business model.

Be Specific

First of all, be specific. Who is the customer, why are they paying you, when are they paying you, how much are they paying you? Be very specific. None of this, “Well, we’ll attract million of eyeballs and somehow we’ll figure out how to monetize it by building a community, we’ll sell advertising, or we’ll be the paid-for search engine for something, but don’t worry we’ll gather the eyeballs and figure it out later”. Not specific enough.

Keep It Simple

Also, keep it simple. You know if you need a partnership to another partnership and another partnership who will bring in this partnership to form a community to get revenue, it never works. You have to keep it very simple. Think of eBay’s business model – people post stuff, they sell it, eBay takes a piece of the action. See, that’s a business model – you don’t need a PhD from Stanford to figure it out. Keep the business model simple.

Another recommendation on business models is to copy somebody else’s business model. By the year 2004, pretty much all business models have been figured out. Why create a new model – copy someone else’s business model.

Ask a Woman

And I have one more recommendation about business models. It is one of the more controversial things in the book. This theory is that when you are developing your business model, what you should do is ask women what they think of the business model. Specifically women. Don’t ask men. The reason is that I believe men, deep in their DNA, have this code, this desire, to kill things. Men want to kill plants, they want to kill animals, they want to kill other people, they want to kill a lot of things. By and large, society has repressed this genetic need to kill things. By contrast, women do not have this DNA, do not have this need to kill things. So one of the problems with asking men about a business model is that men will always say, “That’s a great business model” because men are trained or genetically inclined to want to kill things – no matter how stupid your business model is, they will always say, “This is a good way to kill the competition, that’s a good business model”. Women, by contrast, don’t have this flaw. So ask women about your business model.

This is a very terrible indictment of men and their judgement – to reinforce this theory I suggest you pick a book called The Darwin Awards. The Darwin Awards is a collection of extremely stupid things that people have done that have gotten them killed. I read the Darwin Awards and I noticed a very interesting thing – there are approximately 12 chapters about people killing themselves in The Darwin Awards, 11 of them are about men. That should give you a rough indication. My favourite example is when, in 1998, two construction workers fell to their deaths – two male construction workers fell to their deaths – while they were cutting a circular hole on the floor. They literally cut a hole around themselves, then fell to their deaths. Would you want to ask that gender about a business model? I rest my case, I rest my case.

Lesson 5: Weave a MAT

The fifth and final step of The Art of the Start is for you to weave what I call the MAT. MAT is a very interesting thing – in the dictionary, a mat is defined as a heavy woven net of rope or wire cable placed over a blasting site to keep debris from scattering. And starting a company is very much like a blasting site that has debris scattering. So a mat is a very important thing. So what are the three things that MAT, M-A-T, stands for?

The first is M, milestones. When many people start companies, we’ve noticed – and I was guilty of this myself – when you start a company, it looks like there’s a whole bunch of things to do. You know you need to incorporate, you need to register with the government, you need to buy chairs, you need to find a building, you need to do all those kind of things. But fundamentally, there are only about seven milestones that matter to a company, and I would recommend that you focus on these seven milestones. These are milestones, these are life-changing, company-changing, company-setting events. These are the seven:

• First is proof of concept – that the science really says you can make electrons do what you say you’re going to do.
• The second is that you complete the design specifications.
• The third thing is that you finish a prototype.
• The fourth thing is that you raise capital.
• The fifth thing is you ship a testable version to customers.
• The sixth thing is you ship a final version to customers.
• The seventh thing is you achieve break-even.

Those are the milestones of a company. Every one of you should address those milestones.

These milestones, I believe, are a product of every kind of business. Whether it’s a new school that has to prove their concept of teaching, or a semiconductor company that has to prove that their chip will work. All of these things are products.

The second letter in MAT is A, A stands for assumptions, One of the things that I think is difficult for many companies is that they build financial models and business models with certain assumption and they never test those assumptions. Or if they do test them, it’s done looking backwards when it’s too late and you’re running out of money. I think it’s very important that you list and test these assumptions in real time. These are the kinds of assumptions: the performance metrics of the product – are you going to test the performance that you say you’re going to achieve. Another is to really test the market size assumption. Another is to test your gross margin assumption.

Other assumptions: how many sales calls can a salesperson make? What is the length of the sales cycle? What is the return on investment for the customer? How many technical support calls will you get per unit shipped? What’s the payment cycle for receivables? What’s the payment cycle for payables? What’s the compensation requirements for the kind of people you require? What are the prices of parts and supplies? These are the kind of assumptions that should be tested. Indeed, many of them should be tested as you achieve milestones.

So now we’ve done the M and the A. The T stands for tasks. Tasks – here I ask you to create a comprehensive list of the major tasks that are necessary to achieve your milestones. This is a subset of the totality of the tasks, these tasks are only done to achieve milestones. They are things like renting office space – it is necessary to rent office space to finish your prototype, for example. Another task is finding key vendors. A third task is to set up accounting and payroll systems. A fourth task is to file and fill out the legal documents. And the last kind of task is to purchase insurance policies.

The whole thing is woven together: What are the major milestones? What are the assumptions in those milestones? What are the tasks we have to do to get to those milestones.

These five things, these five absolutely crucial things, I believe, are The Art of the Start. It is the art of getting the company going. These five things are the most important things that you need to do to get your company off and going well.

With that, I would now like to go to the panel, where we’ve going to bring up some people from our community service providers and other experts who are going to discuss the art of starting. I’ll ask you for a sixty seconds while we set up the stage. Thank you very much.

This is part of a series of transcripts of the proceedings of the Garage Ventures’ “Art of the Start” conference held in Mountain View. See the complete series of transcripts here.

Welcome, welcome, and good morning. I’m glad to see you here at our new conference, The Art of the Start. My name is Bill Riechert, I’m Managing Director here at Garage Technology Ventures, and we’ve pulled together this conference, The Art of The Start, to help entrepreneurs and startup executives navigate the new landscape of the venture world.

As some of you have noticed, the world has changed pretty dramatically over the last few years – and we’ve noticed that too. Since we started at Garage (in 1998) working with entrepreneurs, we’ve looked at literally tens of thousands of business plans, we’ve met with thousands of entrepreneurs, we’ve put on scores of conferences, and we’ve helped fund over a hundred early stage technology companies. We decided to pull together this new conference to encapsulate the lessons we’ve learned and bring together some of the expertise from the community to share some of the mistakes and some of the techniques for success that will enable entrepreneurs to navigate more successfully in this venture landscape.

Today what we’re going to do is go through a series of sessions starting with Guy Kawasaki, who’s going to give an overview of Art of the Start. The Art of the Start, by the way, happens to be the name for Guy Kawasaki’s next book, which will be coming to a bookstore near you in just a couple of months – so you see a little cross-marketing going on there. That will give you an overview of the main themes of The Art of the Start and then we’ll do a panel to bring together some experts to talk about how you can leverage for success using the ecosystem of the venture community.

We’ll break briefly for a short break sponsored by our friends from Comerica, then come back and Bill Joos will talk about The Art of Positioning and Presenting your value proposition. I’ll be back to talk about The Art of Raising Capital and then we’ll have the President of the Computer History Museum give you a brief introduction to the Computer History Museum and an opportunity to learn about it during the lunch break which follows shortly thereafter, sponsored by our friends from the Heller Ehrman/Venture Law Group.

We’ll come back to a panel discussion with a few great venture capitalists, who are going to talk about funding your dream, followed by myself coming back on stage to talk about the other side of that equation, The Art of Bootstrapping. Another break sponsored by our friends from Mohler, Nixon & Williams, then a group of entrepreneurs who are going to talk about their successes, some of their mistakes, and give their perspectives on the whole process, ending with The Art of Rainmaking – Bill Joos will come up on stage and talk more about how to sell when you’re an early stage company, and then we’ll wrap up the conference.

We’ve got a lot of stuff. I want you to take a deep breath and get ready for this. But first I want to say a word about our sponsors. These conferences are always sponsored by a number of companies in the community, but Comerica, Heller Ehrman/Venture Law Group, Mohler, Nixon & Williams, and the other sponsors you’ve seen on the screen this morning – they represent a unique commitment, that we’ve seen, to early stage companies. What you’ve probably noticed is that other the last few years some of the brand names have abandoned early stage start-up companies. I want to particularly thank our sponsors today for showing a continued commitment to early stage start-up companies. Thank you very much.

Now, you know Garage is all about start-ups. We started, as I said, in 1998, but we have changed – I’ve talked a lot about change already this morning – we’ve changed in the environment. I just want to give you a very brief, thirty-second update on Garage for those of you who are interested. You know, when we started out we focused on helping find great entrepreneurs and helping them find great investors for their company. It was a great model during those times – we raised over a third of a billion dollars for entrepreneurs during that period. As you know, a couple of years ago the early stage/seed stage money dried up, so we had to change our model along with the world.

We changed our model. We were very, very lucky.

We raised a small venture fund with CALPERS, the California Public Employees’ Retirement System (CALPERS), funded our start-up so that we could go out and be a true venture capital firm focusing on seed stage and early stage technology companies. That’s what we’ve been focused on for about the last year or so, and we are very proud and delighted to have invested in ten great start-up companies during that last period, and we’re continuing to look for those seed stage and early stage technology companies – two guys in a garage, two gals in a garage, guy and a gal in a garage, straight or gay, whatever – we’re looking for the next great entrepreneurs who are interested in building the next great technology firm. That’s the new Garage Technology Ventures.

Now I’d like to introduce a person who needs no introduction. Guy Kawasaki is the founder, the chairman, and a Managing Director of Garage Technology Ventures. He, in addition to that, is just an overall great guy. He’s going to give you an overview of his new book, The Art of the Start.

This is part of a series of transcripts of the proceedings of the Garage Ventures’ “Art of the Start” conference held in Mountain View. See the complete series of transcripts here.

What we’re talking about now is The Art of Raising Capital. We’re going to assume you’ve gone through all of this hard work that Bill has put you through and now we’re starting to think to ourselves, “Alright – are we ready to go out and pitch to those VCs? Are we ready to go out and raise that venture capital?”

A little about me and in terms of my background in this particular domain: I’ve spent most of my career as a serial entrepreneur. So I’ve done this a lot. I’ve been through this drill a lot. And before Garage I was involved with four different venture-backed startups and raised tens of millions of dollars for those different companies. I had a lot of interesting experiences in that process. Then at Garage, in the early part of our Garage story, we were involved, as I think I said before, at helping companies raise over a third of a billion dollars of venture capital. So, you know, tens of thousands of business plans heard, thousands of pitches went through the process. Now, in our current incarnation as a pure venture capital firm, we’re going through the experience all the time of entrepreneurs who are pitching us for seed stage capital, early stage capital. So, we’ve learned an awful lot – I personally have a lot of scars under these long sleeves from battling with venture capitalists over the years. And so
what I want to share with you right now are a few tips and techniques that you can use to perhaps take a little bit of the F-U out of “funding”.

So now, if you want to go out and raise venture capital, stop first and think. The first question is: is your business venture-fundable? Does it really make sense for you to go out and pound you head against the brick wall of the venture capital industry to try and raise venture capital. Because, the harsh reality is not every brilliant idea is, in fact, venture-fundable. There are a lot of really good ideas – there are even a lot of really good companies – that really should not be going after venture capital, because venture capital is a very special form of capital. It’s not like all other capital. Venture capital firms require that you meet three very distinct criteria in order for you to be justified in receiving their money. The three criteria for raising venture capital are: First of all, you’ve got to have a business that has the potential for rapid sustainable growth. That’s why we’re all here – because we want to start businesses that are going to go, you know, straight to the moon, doubling, tripling every year. That’s great.

There are a number of businesses that can grow rapidly – that’s criteria number one – but you’ve got to be able to get to a significant size and scale in the course of that growth. And you hear this all the time – VCs get on stage and say, “We’re looking for the billion dollar company” – well, of course, they’ve said it so much that all of you believe that every single company that you’re going to start is going to be a billion dollar company. But you got to be honest with yourself – is this really going to get that big over time, and is it going to get to scale? Now, you know, it’s a somewhat more nuanced word, but VCs, venture capital, really needs companies that will scale with growth – in other words, it gets easier as you grow, it doesn’t get harder.

If it gets easier as you grow, then you have the opportunity to meet criteria number three: your business has got to have ongoing disproportionate sustainable profitability. I mean, there are a lot of businesses that can grow rapidly and get to a large size, but they’re not all businesses that have disproportionate profitability. And the only way you can have disproportionate profitability is if you have some very unique sustainable competitive advantage – usually it’s wrapped around some sort of unique technology or know-how you have. And that’s why VCs are so focused on innovative technology, because that tends to be what gives companies the advantages to meet these criteria.

So, first of all, you know, is it venture-fundable? Do you meet these criteria? Let’s assume that you’ve thought about this long and hard, you’ve been honest with yourself, and, you know, you think through the model a little, change your business plan a little bit, and you realize, “OK, this is venture fundable” – now what? Now the question is what is the best way to go out there and raise venture capital? And I want to go through five key components to going out there and being successful raising venture capital.

The first one is: you’ve got to make sure when you start the company, you start smart. There are a lot of very significant details that you’ve got to make sure you get right at the beginning to avoid getting into trouble later on. So you’re going to start smart. And then you’ve got to learn how to tell a good story – you have to understand the fundamentals of your business, you can’t just get pretty slides put together – you really have to understand them, internalize them, and be able to articulate them – that’s a lot of what Bill was just talking about. But on top of that, it’s amazing to me how many entrepreneurs don’t spend the time making sure the numbers add up. There are a lot of economics involved in building a business – and a lot of entrepreneurs just haven’t bothered to get their heads around the economics of their business. I’m going to talk about some of details of that. Once you get all that right, then there’s a very specific process for being successful finding the right investors for you company, and I’ll share with you four techniques are the most appropriate techniques for going after investors. And lastly, throughout the whole process, the key to success in raising venture capital is constantly building your pool of credibility with the people you’re talking to, with the investors certainly, but also with the people who are involved with you in that process – the customers you’re talking with, the gurus you’re talking with, all the people you’re building into your ecosystem – you’ve got to be continuously building your credibility. And we see, all the time, entrepreneurs stumbling in this area and destroying their credibility with very just small, simple mistakes that they don’t have to make.

So, let’s go through each of these one by one.

Starting smart – what do I mean by “starting smart”? Well, when you start your company it’s important that you put together a simple clean company. Back to Guy’s original presentation – all the tasks of starting up – there are a lot of things you have to do when you start up a company. As Guy said, you’ve got to rent office space, you’ve got to buy office furniture, there are a lot of things – but there are some things that are really important that you get right because if you don’t, you’ll be in trouble later on. The first thing is, from the very beginning when you set up the company, incorporating the company, creating the founder stock, distributing the founder stock. Now some of this is technical stuff, and this involves making sure you have the right law firm as your partner in the process. But when you set up a company, you got to make sure you get this right and you don’t waste a lot of cycles fiddling with this because you’ve done it the wrong way. It used to be, here in Silicon Valley in the good old days way back in the nineties, when companies would start up the lawyers would incorporate the company in California because, you know, we had a lot of time and if, in the unlikely small percentage chance that you were going to go public, they’d flip it over to a Delaware corporation at that point and then you’d go public. And that was fine. What was interesting was that during the bubble, the investors and the law firms realized, “Well, we’ve only got nine months between incorporation and going public so we might as well start in Delaware!” So, increasingly what you’ll see is the venture law firms are starting companies out in Delaware – but you don’t want to start out as an S corporation or an LLC and start approaching venture capitalists saying, “Don’t worry – when the time comes, we’ll create the right corporate structure.” Just do it right the first time, set up the right corporation – probably it’s Delaware, maybe it’s California, I don’t know where you’re from – if you’re not from California, probably it’s California, probably it’s not Florida with all due respect to our friend from Florida.

Then you have the process of distributing founder stock. It’s amazing how many people get into trouble here – so you need someone who’s done this before and who understands technically what this all means. And I’m not going to go into all of the technical details here, I’ll just make one comment about one key mistake we see people making. You see a lot of entrepreneurs very early on in the process making promises to their co-founders about how much of the company they’re going to get. And you have this discussion about, “Okay – we’ll each take thirty-three percent of the company!” Well, you know, thirty-three percent of the company when, and on what basis? It’s a very ambiguous kind of phrase – don’t ever get into that discussion with your founders. The next thing you know is you bring on another guy and they get another ten percent, then you bring on advisors and they get two percent, and then there’s this great board member and they got another four percent. Whatever the numbers are – you get into trouble if you start promising percentages of the company. At the very beginning, put together a plan for capitalizing the company over the long term, and make sure you understand how each of the founders are going to fit in to that. Distribute the founder stock very carefully and precisely with real documentation. And then the other piece of it is you’ve got to sign buyback agreements as founders. And every entrepreneur when they here this for the first time, usually they walk into a VC, they’re in multiple layers of discussions – the VC says, “Now, you guys have all signed buyback agreements, right?” and the entrepreneurs look at each other and say, “Well no – we’ve been working on this for five years. We’ve worked long and hard on this in our garage, and we own that stock!” And the VC says, “Well, you know, you don’t really.” And then you have this discussion, and it’s usually bloody and it’s messy. Get into your head that it’s the right thing to do, to have a buyback agreement among the partners who start the company. I can’t tell you how many times we’ve seen companies that have blown up after six months or nine months – one of the partners leaves, one of the founders leaves, you know the founder’s wife ends up having half the stock, whatever it is. Put together buyback agreements so you don’t get all messed up as things evolve over time with the company.

And then – as you start bringing employees into the company, and you bring in consultants, and you bring in advisors – do it clean, do it right, do it with documentation. Get your law firm to give you standard employee agreements, standard consulting agreements, standard advisor agreements, don’t promise percentages of companies. If you’re going to distribute stock, do it very carefully and precisely. Be sure that everybody that is working for you is developing intellectual property that the company owns.

And that gets to the next point: make sure you manage your intellectual property. People, when you talk about “intellectual property”, they think patents, and they think, “OK, it’s off in this domain of going and filing patents.” But it’s not just about patents. It’s about making sure everybody who works in the company has signed appropriate agreements. It’s about making sure that all the know-how is appropriately protected or licensed, about making sure you’re not stealing something from your prior company, it’s about making sure that the company owns the intellectual property and it’s appropriately protected. And then when it comes time to take some money from some seed investors, make sure you do it, again, the right way – from smart investors who now what they’re getting into. Don’t take money from Aunt Martha if Aunt Martha’s going to give you a lot of trouble – now I used to say “unless your Aunt Martha is Martha Stewart”, now I say especially don’t take money from Aunt Martha.

But there’s a process of taking seed capital using convertible notes, using the right instruments, bringing the right qualified investors into the process – you want to pay good attention to that. And you’ll do that, as I said, in a convertible note or loan rather than trying to sell Series A preferred stock to your Uncle Fred.

And last, earlier today someone said, “Well, you know, startup companies shouldn’t really have to worry about Sarbanes-Oxley and that sort of thing.” But I will tell you, in this environment right now, a lot more attention needs to be spent on proper governance from Day One. And that means things like all the things I’ve talked about before – it means things like thinking through compensation structures, thinking through option policies, thinking through/making sure that you don’t have any funny deals within the founders, and the investors, and the board members, or the customers, or anything like that. At the very beginning, don’t assume that what you’re doing is private – assume the things that you are doing, relationships you’re building, will become public at some level, and you want to make you they can survive the light of day. So pay attention to governance from day one. Be professional about the way you set up your company and you start your company from Day One.

So you put this all together, and what this means, really, is you’ve got to get the right attorney, the right law firm. And, now, I just want to, I should do the disclaimer, I should have done the disclaimer before – I am not an attorney, I just play one on stage. But if you’re going to start your company, you want to make sure you get someone like the Hellerman/Venture Law Group. And there are a number of other attorneys who will, for deferred fees (I’m just now negotiating prices for our friends here), they will defer their fees, they will work with you to make sure you set this up right. It’s doesn’t have to cost a lot of money to set the company up right.

Point two: tell a good story. I’ll tell you, if only every entrepreneur has spent a little bit of time listening to Bill Joos the world would be a much better place. For those of us who are at the other end, you know, receiving it, you know, the sky would be bluer, the birds would sing sweeter, if only entrepreneurs had taken to heart how do you articulate the fundamentals of your business. As Bill was saying, as you approach the venture capital community, you have to understand what’s going on in their heads – inside the heads of an investor there’s generally a scorecard that they’ve developed over the years. They’re scoring you – every communication you’ve got – if it’s an email, if it’s a phone call, if it’s an in-person presentation – they’re scoring you against these different factors and evaluating your business and how well do you understand the fundamentals of your business. Those scorecards vary, you know, from investor to investor – different investors have different biases as to what’s the most important, but it’s usually some combination of these six elements: the team and how good is the team, the problem that you’re going after and how big is the opportunity, the technology and solution you’re putting together, the sustainable advantage that you’ve got, what sort of business model you’ve put together, is it proven, and how do you leverage this business with partnerships. I don’t want to spend a lot of time on these, because I think Bill has already covered a lot of this in great detail, and we’ll talk about some of these elements later on.

The main point here is: it’s not just about getting someone to put together a great pitch for you, it’s about having the whole team understand the fundamentals of the business and being able to articulate any one of these in any given communication you’ve got.

So, you know, too often we see CEOs who will not answer a question and say, “Well, you’re going to have to talk to my CTO about it”. If the CTO is in the room, that’s O. If the CTO is not in the room and you’re the CEO and you can not give an adequate articulation of the value proposition around your technology and what makes it unique, then, you know, you’re not quite fully there. You don’t necessarily have to be able to recapitulate the code that it’s written in, but you’d better be able to articulate each of these elements and the fundamentals of your business in any given context. It’s also important to understand even though we give you kind of a template for how to articulate this, different investors are going to focus on different elements. You’ve got to listen to what they’re worried about and make sure you can address the concerns that they’re most focused on and be articulate about that issue.

Articulate the fundamentals but then, as I said before, make sure the numbers add up. Make sure that you can demonstrate a fundamental understanding of the economics of your business. Now, some entrepreneurs are more analytic financial than others. There are a lot of CEOs that, you know, they position themselves as, “You know, I’m the big picture guy – talk to my CFO when it comes to numbers.” That’s not good enough. If I’m entrusting you with millions of dollars, then I want to know that you understand at a very fundamental level what business is all about. Business is about economics, and that means that it is about numbers, it is about the way you make money. You’ve got to understand the numbers of making money if you’re going to run a successful business.

So, let’s talk about some of the numbers that you’ve got to focus on. First of all, there are the long-term financial projections. Now, as you might guess from what I’m saying, I tend to be more on the analytic financial side of things when I evaluate a business. And to me, the long-term financials are really important. I get a lot of entrepreneurs that push back on me and they say, “You know, Bill, why should I do financial projections for this business? I have no idea what the world’s going to look like in five years! And if I pull it together, everybody’s going to know I’m just making it up!” And my response to you is why should I invest in a company where you’re just making it up? Don’t you have some sort of vision of how the future is going to look? Don’t you have a way of understand how the economics of you business might play out? I don’t believe any long-term financials that I read as being accurate, but every set of long-term financials should tell a story. It should tell a story that maps to a vision of the way the future’s going to unwind. So your long-term financials are not a spreadsheet exercise that you give to some consultant who knows how to use Excel. Your long-term financials are a way you tell the story of you business using numbers. And they’re driven by the underlying metrics that drive your business. They’re not driven by cell formulas – they’re driven by how are you going to go get customers? What are you going to spend to go get those customers? What are those customers going to pay you? Some of the points that Guy was making earlier about you business model and Bill was referring to as well, tell the story using numbers, present a vision of the future that makes sense in your long-term financials. And test them with comparables – go find other successful companies that you want to model and say, “Has any company in the history of the world ever performed the way I’m projecting my company will perform?” Almost always, every set of long-term financials we see outperforms the most successful companies in the history of the economy. Get a little reality in there. Go back, look at great companies and say, “Hey, you know, this is what I will look like if I’m a great company” – test you assumptions there.

Now the other side of this spectrum is the near-term operating plan, and most entrepreneurs see that as the first twelve months of the long-term plan. It’s embedded in the same spreadsheet. Probably that’s not a good way of doing it, because one way or another, either you’re going to get too high level and not have a good near-term operating plan because it’s driven off the long-term financials, or you’re going to spend too much time figuring out how many paperclips you’ve got to buy in year five if you use your operating plan as the same tool. So, just tactically speaking, when you are developing a near-term operating plan, understand that it has a different role than the long-term plan. The long-term plan tells the story, the near-term plan says, “OK, what are my levers and what are my variables in the very near-term as I’m raising capital. Can I adjust quickly to rapid changes in the outlook? If things slip, do I hit a brick wall or do I have a way of escaping if things don’t play out quite the way that I’m hoping they will?” That’s the way a VC looks at the near-term operating plan – they want to see that you have the ability to adjust quickly and react to changes in the environment. And they want to know that you’re going to use their capital efficiently during that initial period of time and that you’ve got the runway to get to the next large milestones in your business. That then enables them to understand your capital requirements, not just for this next round of financing, because you’d better understand your requirements over multiple rounds of financing and be able to model out what’s the capital structure of my company going to look like from here all the way out to whether it’s an acquisition or an IPO or whatever liquidity event. Now, again, a lot of entrepreneurs take the attitude, “Well I don’t really know, I’ll probably go raise some more money at some point in the future.” But if you don’t do the work of thinking that through, then it’s going to fall back on the investor to think through what sort of capital you’re going to require, because investors need to understand how is this company going to look over multiple rounds of investing. So I encourage you to do the work of building the model for the way your company’s going to change with different levels of capitalization.

Now, in your Series A, now, you’re going to sell thirty-five, forty, fifty, sometimes even more percentage points of you company. And then you’ve got a Series B, and maybe you have a Series C – god help you, you don’t have to have a Series D, But over time, the way the Series A investors look on your cap table changes pretty dramatically, depending on how things work out. That’s really important to a Series A investor, like Garage. So, do the work of understanding how much capital you need and how your capital structure’s going to change over time.

And then finally, as I said before, make sure you can articulate clearly what are the sensitivity points in your financial model – what are they key metrics and variables that you’re going to be watching like a hawk – that demonstrate whether or not you model is valid, or whether your model needs adjusting. You should have a dashboard of key metrics – that aren’t necessarily financial metrics. You know, it’s things like: how many days does it take to close a sale, what’s the cost of a typical customer acquisition, what’s the value of a customer once you acquire them, how long does it take to get from point A to point B in any given customer relationship, when will they buy up and up, how many customers are converting from the initial product to the advanced product, how many customers are re-upping in a subscription model. You’ve all these metrics that are the most significant variables in your financial model. You better be able to articulate those very clearly, you better be able to show how they drive your long term financial success, and you better be able to show how you are monitoring them over time. So, those are making sure you get the numbers right. Put all this together and maybe now it’s time to go out and find the right investors.

And I want to talk a little bit about some of the key factors for the process of going out and raising capital from investors. First of all, the reality in the venture market right now is probably the single most important thing you have to do before you go after venture capital is you have to generate some form of momentum in your business. It is no longer the case, if it ever really was the case, that you could sit down with an investor and a napkin, and talk about a brilliant idea and raise capital. Now, maybe that will happen again in the future at some point, but don’t count on it – it ain’t a plan for raising capital. What you have to do first is show you’ve got some sort of momentum. Now you say to me, “But I have no money! How can have momentum without any money?” Well, a lot of other people have figured out how to do it. There a lot of ways you can make progress in the development of your technology, in the development of possible customers, in the building of your team, in getting some sort of alpha or beta or something out there to validate your marketplace before you even have money. You’ve got to figure out how to do that so that when you approach investors you can say, “Here’s what we’ve done with nothing – imagine what we can do with your capital. I’ll help you imagine – here’s the forecast for this business.”

So, step one in the process, step one in the process is generate some form of momentum. Then, then, go target the right investors. You’ve got to make sure when you’re going after the venture community that you’re spending your time wisely targeting the investors that make sense for your business, for two reasons. One: if you go to the wrong partner at the right firm, you may have shot your chance at that particular firm. So, it’s not just about figuring out what’s the right venture capital firm to go after, you’ve got to do the eaxtra level of due diligence and figure out who’s the right partner at that firm. Now, most entrepreneurs, the process looks something, variation on two themes. One is: they go around to their friends and they go around to their ecosystem buddies and they say, “Who do you know in the venture community?” and they compile a list of all the people the people know and they assume that list of “who do you know” is the right community to target. But that’s not right. You’ve got to drill into the next level and find out, each of the people, are they the right people or not or is it one of their partners, or is their firm even relevant. Is it a life science firm and you’re an IT kind of company – I can’t believe how many times that happens, right, or vice-versa, IT firm with a life science deal. The other approach a lot of entrepreneurs take is they find the directories, you find a directory of venture capitalists, and, you know, you get as many email addresses as you can possibly get and then you blast the model out. Now, the great thing about the venture community that has changed over the last five years is nobody uses FedEx anymore – so that’s a good thing, it saves entrepreneurs a ton of money. But it’s also a really bad thing, because it seems like it costs less to send an additional business plan to an additional person. But there is a cost, again, if you send the wrong person your plan you’re going to develop a negative reputation, perhaps, in that firm.

I have to tell you a sad story: just a few weeks ago, I got an email that was, it was an email that at the top of the email you saw this CC list and there were about forty VCs in this CC list. And then below the CC list it starts out “To whom it may concern”. So, you can guess my first reaction was, “This doesn’t concern me!” That’s just the most egregious variation on what happens all the time in the community. Do your homework, figure out who the right investors are, and then, once you’ve figured out, “OK, this person at this firm is the person I want to get to” then you go back to your ecosystem and you say, “Who knows this person? Who has a credible introduction to this person? Who can help me get a credible entre to this individual?” And you try to build as many links into that person before you go out to them. And then you personalize your communications with them, none of this “to whom it may concern” or “dear sir”, which is just great if you’re targeting a woman. You personalize communications, you say, “Hey, I noticed that you’ve invested in this space, you invested in this company, we think our company is complimentary, we think that our company is the next generation” – show that you’ve done your homework, show that you understand the space that investor invests in, spend the time to do the homework, and then target at a more limited number of venture capitalists, rather than hoping that it’s a percentage game: “Gee, if I send the plan to two hundred investors, all I need is two percent of them and I can get my company funded!” It just doesn’t work that way.

Then, assuming you get some venture capitalists interested, you’ve got to nurture a syndicate of investors. A syndicate of investors is always headed with a lead investor, so the first thing you have to do is find lead investors: guys who will write the term sheet, or women who will write the term sheet to invest in your round. And then help build the syndicate around that lead investor. The syndicate is a group of other investors who, for whatever reason, would prefer not to lead – they’re a smaller fund, or, in this particular case, they don’t have the time to take the board position and they want to co-invest in the space – you have to build a syndicate. Now there are a lot of fairly straightforward, commonsense rules about this. You want to be careful when you’re building this syndicate that you don’t go out and say, “Hey! I’ve got XYZ, top-tier, Sand Hill Road VC that’s going to be giving me a term sheet any week now! Wouldn’t you be interested in joining them in this deal?” Well, if you don’t have that term sheet, then you’re going to get in a lot of trouble when this person calls this person and discovers, “Well, yeah, I had a meeting with them. But that doesn’t mean I’m writing them a term sheet!” You’ve destroyed your credibility; you’ve lost two investors in that process. So be very careful about how you cultivate this syndicate and you bring them together. What you want to do is get the lead investor to step up to the table, to commit the funding, and to help you build the syndicate.

If you can have two syndicates competing, that’s even better. That’s a hard thing to get to. Ideally though, you want to get one or two investors who are working with you to build the syndicate. Do not abdicate the responsibility for the syndicate to the investor; you’ve got to be part of that work process, to build the syndicate.

And then, last, throughout the whole thing understand the process of raising capital is a selling process. It’s stunning to me that even sales and marketing oriented CEOs, for whatever reason, they get into the venture process and they sort of lose their way. They lose sight of the fact that this is just another complex selling process, and it requires all of the steps that any selling process requires: you’ve got to qualify your leads; you’ve got to make sure that the person you’re talking to is the right person to talk to; you’ve got continuously do trial closing; you’ve got to figure out techniques to progress the process – “OK, so great! When’s our next meeting? Can we do next Wednesday at noon?” You know, “If I get you this information, will you be ready to give me a term sheet?” All of the standard techniques of selling: “Who else do I have to talk to? When do I get to talk to the rest of your partners? What’s it going to take for you to write a term sheet? How much of the round are you interested in?”
Just standard selling techniques. It also includes being persistent. Amazingly, you get these incredibly scrappy, aggressive entrepreneurs – but when it comes to talking to VCs they kind of feel, “Well, I’ll let them drive the process.” You know, “Have you talked to this firm recently?” – “Well, no. He said he was going to get back to me…” “But why don’t you call them back?” There is a very fine line between persistence and stalking. But, you know, you’ve got to push that line. You’ve got to push that line and, worst case, they say ‘no’ – that’s fine! You can focus your energies elsewhere. It’s better to get to a fast ‘no’ than a long, drawn out ‘maybe’ that eventually ends in a ‘no’. So, manage this like a selling process.

Then, the fifth point, which is kind of a nuance but it’s so fundamentally important and it’s amazing how many times entrepreneurs blow it on this point: you’ve got to build your credibility. There are a lot of factors that enhance and detract from your credibility during this process. Let me run through a few.

Customers – if you have customers who are reference-able, that’s wonderful. So go – perhaps the best way to go get venture money is to get customers first, customers who say they’ve bought what you have, and they want more of it, and they love you. Not everybody can do it, but it’s a great credibility builder. Short of that, there are strategic partners – now that doesn’t mean you have the Software Development Kit from Microsoft and they’re a strategic partner – it means you’ve got a reference-able relationship with a company that really wants to help you succeed. Some earlier seed investors – have you been able to attract some seed investors who are credible world-class investors. Or at least advisors or board members, and we talked a little about that earlier. Are there industry experts out there who you’ve met with, analysts who you’ve talked to, who will vouch for the fact that this is an important new breakthrough, smart industry gurus who can sign up to say, “Look, what these guys are doing is the next generation”. Back to Guy’s MAT: Are you hitting your milestones? One of the things that happens all the time is entrepreneurs, in their first meeting, they say, “But next week I’m going to sign this deal with XYZ person” and a month later they have their second meeting with the VC and they say, “How’s that deal going?” “Well, you know, in essence we haven’t signed it up yet”. And last, don’t lie. Seems kind of obvious, but how many times do we see entrepreneurs who are basically lying during the process. Now, there are lies and there are lies, and, you know, obviously we’ve seen in the news lots of stories of really bad lies. But there are also some subtle lies that you hear all the time, and so, there’s so many of them in fact, we’ve had to compile a list. So, this is my opportunity to do my top ten list and then I’ll close on that point.

There are a lot of things that entrepreneurs say during the process of raising capital that just demolish their credibility. So, the Top Ten List of Lies That Entrepreneurs The Most Frequently. Lie #10: Our projections are conservative. Now, most people don’t think that’s a lie, but it is. It is – your projections aren’t conservative, you know they’re not conservative, you know you’re going to miss those projections, just stop using the phrase “our projections are conservative”. Lie #9: Our target market is $56 billion. You know, you may be able to add up all the economic activity in every sector in which you’re possibly going to do business, but that has nothing to do with your target market. This destroys your credibility when you say this. Lie #8: We have a world-class team. Now, I know you’re proud of your team, I’m sure you have a great group of talent on your team, but it probably isn’t world-class unless, I don’t know – is Jim Clarke here in the audience? You may have a great team, but don’t tell us it’s a world-class team because it probably isn’t. They may be smarter than anyone else in the world on a specific topic – tell us that, and let us know why that is. Lie #7: Our average sales cycle is 90 days. Well, you know, your first customer who ever bought your product only took ninety days from the time you started to the time you ended. But understand that is not an average. That is not an average – that is at the far end of the bell curve. The average is what happens over the long end – you have not yet sold all the guys you haven’t sold yet. The average is going to be much longer. Lots of entrepreneurs get trapped because they build into their model this ninety day sales cycle, when in fact it’s nine months. Or twelve months. Or longer. Be realistic about your sales cycle. Lie #6 – and Bill touched on this one: We have no direct competition. Almost certainly, you have competition and, as Bill said before, if you think you have no direct competition it’s because you haven’t done the work to find them, or it’s because you’re lying to us. Either way, we’re not that excited about the work you haven’t done. Lie #5: No one else can do what we do. Well, you may be the first team to produce this particular prototype of this particular technology, but everybody knows that with enough resource and talent other people can do it. This is not a compelling competitive advantage. What we want to know is why your competitive advantage is sustainable. Why it is that because you have these three people on your team that your team will be able to sustain your technological advantage over multiple product cycles – that’s a competitive advantage, not the fact that you’ve tinkered together a technology that no one else has bothered to build yet. Lie #4: All we need is 2% of the market. I want to target the company that wants to go after the 98% that you’re going to skip. That’s the company I want. Lie #3: We’ll be cash-flow positive in twelve months. You know, God bless. From your lips to God’s ears – but it ain’t going to happen. Lie #2: Our contract with Nokia is going to be signed next week. Well, don’t start talking about when that contract is going to be signed until after it is signed. You can talk about conversations you’re having with Nokia (if that’s OK with Nokia), you might even be able to get a reference-able relationship discussion. But don’t promise contract signature dates until after they’re done. Underpromise, overdeliver. Surprise investors with momentum. Don’t miss milestones and destroy your credibility. And Lie #1 is: I’ll be happy turn over the reins to a new CEO. You know, as another venture capitalist likes to say, there’s a big difference between the CEO, the entrepreneur you’re talking to, who you know they understand the process, that they’re good at the early stage and they want to bring someone else in the later stage. But then there are those entrepreneurs whose fingers you have to pry off the steering wheels with a crowbar. It’s OK, some entrepreneurs can make that transition, others can’t and shouldn’t, and know that they shouldn’t. And there’s a big difference between the two.

So, in summary: What’s the best way to raise venture capital. Again, answer the first question – make sure you understand that your business is, in fact, venture fundable. Make sure you set your business up the right way. Articulate the fundamentals, both in prose and then understand the economics – make sure your financials tell the story of your company. Understand that raising venture capital is a selling process and use your best selling techniques through the process and then throughout the process build your credibility. So, that’s the best way to raise venture capital. The fact of the matter is: not every company will be able to succeed at the end – we’re going to talk about that later this afternoon. I’m going to be back on stage to talk about The Art of Bootstrapping.

This is part of a series of transcripts of the proceedings of the Garage Ventures’ “Art of the Start” conference held in Mountain View. See the complete series of transcripts here.

I get the privilege of introducing myself, that way we’ll do it correctly – everyone else has run off to some meetings they had. I’m Bill Joos, I’m one of the co-founders with Guy and Bill Reichert, here. And I’d like to start, before you see my name on the screen, by again acknowledging our great friends at Comerica, which brought this morning’s break to us.

We’re going to be talking about The Art of Positioning and you will need for this session this handout that is in your pack. So you will need this handout that is in your pack.

While you’re digging that out, let me go through a couple of housekeeping chores, answering a couple of questions that have already come up. You are all going to be getting an email next week that will tell you how to get each and every one of the hundred and ninety-seven Powerpoint slides that we will be using today. So, you will get all, in the email that will be sent to you, you’ll find out how to get all those Powerpoint slides. Additionally, about seven days from now there will be MP3s of all the sessions available to purchase at an extremely modest price, using one of our partners, you’ll be able to use our partner to purchase those. So you’ll have an opportunity to do that as well.

Additionally, we did give some raffle tickets early this morning – let me explain what those are all about. Our good friends at [spa] Spa have given us two spa packages, and to help us get started immediately after lunch we’ll be giving one of them away exactly at 1:15. But you have to be in the room. That hopefully will provide an incentive for you to get back. We’ll be giving the second one away following the afternoon break at 3:30.

We are in a non-profit organization called the Computer History Museum. And so I made a deal them – and the deal is that the next time a cell phone rings, that person will make a $100 donation, a total tax-write-off, to the museum. So you can choose to either do something with your cell phones now to assist them in their fundraising efforts or you can turn them off. Thank you very much.

We’re going to be spending a jam-packed hour together, and what I’d like to do is give you a little of my DNA – I think it’s always helpful to know who’s on the stage in front of you. If you prick my finger and send it away to the OJ Simpson DNA lab, what comes back is “sales guy with heavy marketing overtones”. So, think of me in that light, and it’ll be helpful as I go through my comments.

Each of us has a slightly different view of what we’re looking for, and I’m going to breaking my presentation into two parts, roughly thirty minutes each. The first is going to be done almost in the way of a workshop talking about perfecting the art of your positioning. Additionally, after that, we’re going to be talking about pitching. I am going to be available this afternoon during the break, I will not be able to take Q and As during my hour session, because we actually have about an hour and fifteen minutes of stuff to go through. So, I’ll be happy to take some questions when you can catch me in the hall during the break.

We’re going to start with the Art of Positioning. And again, you should have that worksheet in front of you. It would be extremely helpful if you all stay on the same page, because I talk at about two hundred words a minute, with gusts up to three hundred and if you’re on the wrong page, you’ll probably miss some of the things that we’re going to chat about.

Everyone has a slightly different view of problems that entrepreneurs face, but the one that I see through my eyes the most often, as being somewhat of a professional coach working with our clients, the number one problem is the inability to explain what they do correctly. Now, you may laugh and this certainly probably, therefore, applies to the people on all sides of you, if it doesn’t apply to you, but it is extraordinarily difficult to talk about what you do quickly and precisely. So we’re going to talk about the two foundation underpinnings for that: Market Definition and Value Proposition.

I’m going to offend some of the marketing people in the audience and I’m even going to offend the conference, because positioning and marketing is, in fact, an art. However, I’m going to approach it with a little bit of scientific spin today, and give you a formulaic approach that will make a PR firm cringe, but will nevertheless help you get started down that path. So there is a way to do this and to attack this problem systematically.

When we do this with our clients, we will get their entire management team together and we will spend about six to eight hours spread over several days going through the exercise that we’re going to be going through here in about twenty minutes. So the realities are it’s going to take you and your team many hours to do this, and I say “team” because without buy-in from your cohorts, without this being a team exercise, clearly the value of this exercise is extremely diminished. Additionally, today I just want you to grasp the concepts and the fundamentals. I want you to take adequate notes so if you choose to this exercise by yourself, you know how to do that.

Additionally, I want you to think of your positioning as a living document; however, there will be a time when you want to freeze that document. You do not want your positioning to change based on whoever wrote the last marketing piece for you, whoever changed the last website. You don’t want it to creep. If you’re going to change it, you want to do that consciously and have your management team do it. And, with all exercises, there’s no bad ideas. So it’s extremely important to hold your judgement as you do this exercise. Now, again, we’re not going to be able to do the entire exercise, so let’s recap again what I’d like you to do: understand the process, take adequate notes so you can do it when you go back.

Now, I think it’s extremely helpful to have a model or an example to look at. And so I’m going to take a look at a model, but let’s talk about what we’re doing first. The underpinning is: who do you do things for? It is the market definition statement. Now, some of you are going to be troubled by the fact that the market definition statement is going to be a long, complex, compound sentence that isn’t going to fall off your lips correctly. Don’t worry about that, we’ll talk about how to address that in a moment.

The second thing, once we know who we are doing something for, we want to talk about what we’re doing, and this is going to be the value proposition statement. Again, don’t be troubled by the length, by the fact that it’s long and complex and compound. Because what we’re going to then do is use these two as a yardstick. And on that yardstick, we’re going to have a number of communication vehicles that are built. These could be mantras, although I don’t happen to have that, but clearly that could be one. It could be any of the other targeted marketing communication vehicles that you or your company needs to develop. And these are the ones that need to roll off your tongue, and these are the ones that need to be more precise.

But what we’re going to find is once we have a valid market definition and value proposition, all of these, something’s going to happen. We’re going to get amazing consistency, and what we say is that our targeted communications need to be faithful to the underpinnings. Once you have your underpinnings developed and temporarily frozen, you can then use them as a yardstick to measure your other communication vehicles against.

I’ll give you an example: at Garage, we’ve had over fifteen hundred face-to-face meetings with entrepreneurs. And the first thing we sort of do is go back and look their web site. You would be amazed at the inconsistencies between which they just told us in our boardroom trying to get money from our billfolds, we look at their website and see various differences. So the answer is you want a consistent look, and one of the things we want to be able to do is that.

So we’re going to take a look today at a case study, and we’re going to look at a company that happens to be one of our portfolio companies – in fact, it’s going to be the way in which you can buy the MP3s, because I’d like you to get familiar with them. And it’s a company called BitPass.

Now to help you understand – and I don’t need you to understand their business model as much as the thinking – to help you understand their thinking, let me just share with you how their looking at their case study. The CEO is from Salon and is very familiar with subscription-based models – and what they have done is they felt that the world has gone through things: in the early days, everything was free; in the medium days, everything was a paid subscription; and now, thanks to people like Apple and iTunes and others, people are willing to pay by the sip rather than by the subscription. And so they see that individual purchasers of unique items are the new way of the future. And it is on this premise that we went through this exercise with them. Now I wanted you to just understand that to have the case study be more helpful.

So the first thing that’s going to happen – and I’m on panel A now of this exercise (you’ll notice the big letter in the lower right corner) – the first thing that we’re going to ask you to do in this exercise – should we be doing it as a real workshop, rather than as a lecture – the first thing that we’re going to have you do is, top of mind, write down as quickly as you can: who do you think your primary and secondary constituents are? And again, I don’t want you to do it for your company now – I just want you to understand the process.

Once you have done this, then we’re going to go into the engagement of a discussion of how to refine that. And what we’re going to find is a couple of things. Example: one of the things that was a factor in their decision was: what size companies are we going after? And obviously the different tiered companies, have different – it affects things differently. In a similar vein, the entire discussion built around this took into account a whole bunch of other things: are we doing video? What are the rights management? Is it one-use? Is it multi-use? All of those issues came into effect, and a discussion ensued, and it may not surprise you to learn that frequently it takes forty-five minutes or an hour for a group from a single company to agree on their primary constituents.

If in doubt, chase the cash. So, if you’re in doubt about who your primary constituent is, think of your company’s cash flow at the time you break even. And I stress that because early on, you may choose to do some unnatural things to make cash. You may choose to do some things to get reference customers and others that aren’t your steady-state business. So your primary constituent should be the largest slice of your pie chart at the time you break even.

In a similar vein, there’s going to be a discussion about who your secondary constituents are, and in some of your cases you may find that you may or may or may not have them, it may not be quite as clear. But here we have the same thing – if we’re going after a pool of buyers, we want to understand: is that a pool that we have to make, or is that a pool that we can adopt? I’ll give you an example: if you were a famous cartoonist, you would maybe put up your own website and built a culture around selling your cartoons online – but you would have to build it. If, on the other hand, a company was lucky enough to land CNN, they already have fifteen million users, therefore there’s a pool. So, in a similar vein, there is an entire discussion built around the secondary constituents.

And what comes out of this process is a clear-cut market definition. And in their case, here’s what they found: tier one large resellers of premier digital content. That is their primary source of revenue at the time they break even. That isn’t saying that selling my cartoons online is unimportant – but in the scheme of their pie chart at the time they break even, this will be their primary constituent.

In a similar vein, their secondary constituents are different than they initially thought – and that is, it is all Internet buyers of digital content and anyone other than tier one. So the walk-away from panel A is pretty simple, that is that you should be defining a very broad focus and then a come narrow to a reachable market. Nothing makes a VC crazier than having you come in saying you’re going to conquer the world – we don’t believe you. Find a reachable market – start broad and go narrow.

Moving over to panel B, we then have to figure out what the burning problem is that our primary constituent has. Now in the old days (eighteen months ago), steroids and vitamins could get sold online. I don’t mean that literally, but I mean things that made your website “stickier” or marginally better or beefier. That’s the old days – the only thing that’s getting funded nowadays is painkillers. You can’t sell a painkiller until you’ve identified the pain. And you can’t identify a pain, until we establish a burning problem. So thinking in terms of our primary constituent, their first cut problem is that they have lowered than desired usage levels. And that is, there’s only so many people in the world who will go for subscriptions, but they’re a whole bunch of other people that would sure like to sign on maybe an read, oh, about Ronald Reagan. There’s something very timely that doesn’t justify a full subscription – maybe they want to read about Ray Charles, but they don’t want to join an entire subscription. So people will buy by the sip.

Once you’ve done this “first glance” burning problem, then engage in a discussion of the symptoms: how do I know if I have that problem? And this will generally fill up a whiteboard. And in this case, I’ve put some more illustrative examples: churn, low subscription renewal, competitive losses, flat growth, abandonment, user reluctance to subscribe to one pressing need (you know, the all or nothing).

And once you’ve done this, symptoms and secondary problems, I want you to scrape them all off the whiteboard, put them in a kettle, put them on the stove, turn the heat up to ‘simmer’ and see what comes off. And we noticed, and they noticed, some commonalities – and that is the commonalities were all tied around the premise they had that the subscription model isn’t the only way to go forward, even though for many people it had been in the past.

Armed with those commonalities that came off stove in the simmer, I then can go back and I can refine the burning problem to be: limited product offering because of subscription-only modeling.

Now problems are not actionable. Pain is actionable. When Maslow did his breaking study on what motivates humans, he found that people run from pain faster than they run toward pleasure. So a burning problem means nothing – I also have to have, and identify, what the big pain is of my primary constituent that has the problem we just discussed. And in this case, we’ve identified the big pain. And the big pain in this case is: lack of revenue growth. Lack of revenue growth.

Pain’s an interesting thing – people buy or sell for a combination of reasons. Like, I wasn’t going to buy my car which I happened to like until I learned it had eight airbags. That appealed to part of my brain, totally irrational, but nevertheless it helped me and allowed me to make that buying decision. So from pain, we have to involve emotion into the selling or buying solution.

So the answer is: if my primary constituent is tier-one content resellers, and the primary problem is limited growth for lack of revenues, what of emotions would that evoke? Well before we go there, let me give you the acid test. If your primary constituent can instantly identify with the burning problem and big pain, you’ve got it right. You start telling them and the guy finishes the sentence for you and slaps his forehead and says, “That’s me!” – you’ve got it right. If you’ve got to explain it – you’ve got it wrong and you will not succeed. So the acid test: will your primary constituents, a subsample of your primary constituent, will they instantly identify with the big pain and the burning problem? You’ll be amazed how many…don’t.

So, once I have it, I have to evoke emotion. What kind of emotion does my primary constituent have with my big problem and big pain? And this is a whiteboard exercise: what does somebody feel like? Maybe I’m at an individual level – and the gamut, runs the whole gamut of things. And once again you’re going to pick one of those, you’re going to pick one of those to build your argument around. In this case, the example we’re going to be using is centered around fear. It’s a tremendous motivator. Tremendous motivator.

So, we’re going to start concatenating and bringing some of the work we’ve done together. Don’t be troubled by the fact these are long, complex compound sentences because, remember the foundations? You’re not here to use them in that manner. These are only going to be the common yardstick. And I’m going to start with the tag line that establishes your space in the present. And in BitPass’ case it is: they want to be the leading payment platform for digital content. And when we get to value proposition, I’ll explain why they chose “platform” rather than “solution”, or some of the other things it could be.

So if I go over panel, if I go, this should hook them. This should get you to the point that you sort of say “tell me a little bit more”. If I now go over to Panel E, you’re going to find that I’m going to pull together some work that I’d previously already done. So, I’m going to start with this: “BitPass is becoming the leading payment platform for digital content.” And my linking words are going to be “for” and “who”. And we’ve already done the heavy lifting on the panels that we’ve identified. This one’s going to come from Panel A, this one’s going to come from Panels B and C. And so let’s take a look at how this would read.

“BitPass is becoming the leading payment platform for digital content for [primary constituent] who fear stagnant revenue growth due to subscription-only pricing.” And when I pull those together on F (I told you we’d move quick), we have the example of the market definition for the case study. And since it’s helpful to always have an example, when you go back and do this yourself, you’ll see there’s a spot to put your own in there. Make sense?

What really transpired? We have two pieces to this puzzle, and the first one is market definition, and it has these three elements (this slide you do not have): who, pain, and emotion. This gets someplace so it’s actionable by your solution. So let’s move onto the second piece: who, pain, emotion. The three elements that are in our long version market definition. Remember, I’m never going to use it in this manner. I’m going to build my silo communication vehicles on top of this, targeted for individual audiences. So let’s move onto the second piece.

The second piece has to do with your Value Proposition. And what we want you to do in an exercise manner, and on Panel G, is I want you to engage in a role-play exercise with your team on every single thing that you really do. And in BitPass’ case, there’s a whole bunch of stuff that they do – and it’s not my job today to make you understand all of these, but suffice it to say there’s a wealth of things that they have to do to make good on their dream of selling content by the sip. And, just as we’ve done before, we’re going to take all of these words and, for the second time today, we’re going to put them in a kettle on the stove and turn the heat up and see what comes off.

And when they did this exercise, we found that a couple things came off. What they really do is they provide an elegant digital content payment platform. When you really understand what they do, “elegant”‘s a key word because they’ve taken something that’s unbelievable complex and made it extremely easy for me as the seller of my hand-drawn cartoons, or any of those Internet buyer to go ahead and engage in that transaction. So I’ve come up with, I’ve come up with the composite essence of what you do as a firm or an organization.

Now I know for a fact, from looking at the registration, I have some non-profits in the room, I have some people that don’t have products in the traditional sense of the word, but the answer is “what is it that you really do?” Even though all of our examples today are based around venture-capital fundraising. A lot of this trends, goes across all segments of all industries. If you’re a member of a large corporation, and I know I have some of you in the room, you have to justify your projects to management – you have some of the same issues, and in fact you may have even some harder issues.

So once I’ve figured out the composite essence of what you do, I can then go on, and I’m going to link some things together. And again, I’ve already done some of this work on prior panels. So, the first thing you’re going to do is talk about “what we do”. In this case: BitPass offers an elegant digital content payment platform” – and then I have two linking words, “that” and “which” – “provides an efficient technical and economic solution” – remember those were identified as a problem of the primary constituent – “which allows our customers to grow revenues by adding new products” – “new products” here being digital content by per-use, per-sip, per-file, per-photo, per-whatever.

So, when I start putting this together I then end up with a Value Proposition that has some elements. And we’ve already talked what those elements are. We know that this first slide is “who, pain, and emotion”, the other slide is easy. It’s “painkillers” and “benefits”. If you’re not selling a painkiller, good luck today. You only do that when you haven’t identified pain on the part of your primary constituents. We’re going to talk a little about benefits, matter of fact I have a couple of slides devoted to it in my closing session today which is The Art of Rainmaking, so hang on and we’ll come back to some of those issues on the “benefits” side later today.

Painkiller. Benefits.

So when I put this all together, you’ll see that there’s market definition – who do I do things for, predominant emotion and pain – and I have the value proposition – which is the painkiller and appropriate benefits. And because we really would like you to do this later, this Panel J is where you can carry your work forward.

Generally, the things take this form. They take the form of a problem being in the negative and the solution being in a positive. But you can do that other ways, but this is generally the form this will take. Now, remember what I said: our market definition is going to be long, complex, compound sentences that are going to fall into the market definition and the value proposition, and we’re going to custom-tailor the silo messages to the audience. And what I’d like to do is I’d like to spend a few minutes to talk about competitive response. So if you jump with me over to Panel K.

Here, you want to make a page for each and every competitor. And you’ll notice a very careful wording. This is where outsiders feel are your competition, because inside, you’re too close to it. You may say to yourself “Oh, those guys are not my competitor”, but knowledgeable outsiders may think they are. And we have case after case after case where our potential clients, when they did their competitive slides for us, didn’t put some names on there that our analysts found when they went to do due diligence – and that tells me something. They either don’t get it or are clueless, or they’re lying and none of those are conducive to funding.

So, this is who would knowledgeable outsiders think are your competition. This is as important as who you think is your competition. So, obviously in the case of BitPass, one that always comes up is PayPal. So then the answer is “how do you differ?” And there’s a whole discussion that goes around how this differs. There’s a whole discussion that goes around. But now I have to find a way to communicate this. And remember what I said to you: be complete and comprehensive on who these are.

And the last point, let me explain. What if you really are, what the cynic would call, the tenth solution? Well, you gotta tell me the other nine, but you’re going to scare me if you don’t do it right. So the answer may be to put them in groups. You may say, and this is not a BitPass example, you may say that historically there have been multiple approaches to solving the solution.

“The original solution was founded by this company and three or four people followed in that model. Then there was a new approach and these other companies followed in that model. But we’re a fresh, different approach, and here’s what we do.”

You see what I’ve done? I’m now the third-generation solution, not the tenth competitor – follow me on that? Remember on the K panel, we had you do one page per competitor. Now we’re going to pull them together and we’re going to use, just as we’ve done before, some linking words.

On my K Panel: the first thing we do is we acknowledge them: “who or which primarily handles money transfer for the sale of physical items” – and the example that comes to mind is eBay, and this in fact is their primary business, some of you may be aware of some others, but their primary business is the sale of physical items – “BitPass handles the unique needs of digital content: access control, authentication, and payment.” Now this is why they call themselves a “platform”, because they have those three elements; access control, authentication, and payment.

So the key here is, when you’re talking about competitors, never again should the name of a competitor just come out of your mouth – what should come out of your mouth is the phrase dealing with that competitor that has these attributes: you acknowledge them, you categorize them, and then you differentiate yourself from that categorization. And on your top three or four competitive issues, you and everyone in your company that touches, outreaching/outward facing in your organization, should clearly understand how to do a competitive statement for each of those three.

The key again is: never just mention them, but differentiate yourself every single time you have the chance. So again, we have the foundation, we have a number of other things. Let’s talk a little about one other before I move into how to pitch. And the one that I’d like to talk about is the mission statement. Now it’s interesting. One of the very largest Sand Hills venture capitalists, whose name I will not mention, invited me to their CEO summit last year where they had ninety of their executives in the room, and they wanted me to talk to them about positioning. Many of these companies you would know because you envy them. And you would envy getting money from the VC. And they had prepared in advance, for the use of the other people in the room, a brochure that showed the logo of the company and their mission statements. There were ninety of them on this page. Hold that thought.

Part of what we do as a VC is pattern matching. We look for things that we think are going to be most conducive to betting correctly. And I’ve come to an observation that we have a lot of dialogue with people on the phone, and then when you get together, you’re sort of guess what that meeting is going to look like. And when I say people who is “us” oriented mission statements – “we’re going to be come the market leader by…” – sure enough, more often than not, that face-to-face meeting is mostly about them. If, on the other hand, I’m having a dialogue and reading executive summaries and things that we see in advance of having a face-to-face meeting, I see that it has a customer-orientation – “we give corporations an unfair competitive advantage by…” – guess what? The presentation very frequently is more customer-centric. And more often than not, when I find things that are in this category, the focus is exactly one-hundred-and-eighty degrees opposite where it should be. Back to my CEO executive summit.

Ninety people in the room, seventy-two of them started that way. When I made this slide, they all pulled it out and some giggled and some didn’t. So, before we move to the second half of my presentation and the final twenty minutes, let’s take about a couple of things.

We didn’t do it all here, we just got started. And any quality PR firm or professional is going to say we left a whole bunch of stuff out. It’s not my intent to do it all. Bring professionals in when you need them – but you’ve got to be able to articulate who you do things for and what do you do. You’d be amazed how difficult that is for many people to do. Take the time to do it right. This isn’t something you go back just do. Matter of fact, you may need to bring someone in to facilitate this.

It’s a great exercise and the real hidden value is once you’ve done it, you’re going to repurpose your market definition/value proposition endlessly as you change your silo messaging. Now, remember what I said when I started: your company, of course, has to be fast, fluid and flexible. Of course there’s going to be factors in the marketplace that require you to change your market definition and value proposition. I’m not saying be rigid – but I’m saying that if you’re going to change them, change them consciously. Don’t have creeping positioning.

Part two.

You’ll notice that the next page in your handout’s going to talk about the ten things I’m going to talk about. Give you a quick place to put a few notes.

Everyone knows you got to talk about what, and everyone knows that you should talk about how, but the fact of the matter is most people presenting spend a disproportionate, if not exclusive, amount about the what and they don’t worry about the how. The fact of the matter is, this really should really be more analogous to 50-50. So let’s go through and here’s where Guy’s ten points come in – I am going to do ten, so you can track my progress.

The first five. Now let me peel open the mind of an investor to show you what really goes on. If you think about an investor, or your boss (if you’re in a corporation), or your grantors (if you’re a non-profit), they’re going to be looking at you doing this sort of SWOT analysis. They’re going to look at you in terms of: strengths, weaknesses, opportunities, and threats. Now, some of our executives, when we work with our clients, they actually come to our management meetings on Monday with a SWOT, they actually do this for the people we’re looking at. But whether the person says they’re doing it or not, they really are, and if you understand what’s in their mind, you’re going to know how to position yourself better. In The Art of Rainmaking later today, we’re going to talk about setting up and qualifying your audiences correctly and playing into this. So this is going to dovetail into something that I’m going to be dealing with later in the day.

Point one: allow for pitch decay, begin at the end. Now I’m a student of presentations- my undergraduate degree was psychology, I love learning how to persuade. And one thing that study and study after study says is there is this thing called “pitch decay”. And let me tell you how brutal it is. Pitch decay says that when you hear someone say something to you, like I’m doing now, you’re going to start forgetting it almost immediately. In fact, you’re going to lose half of it one hour after we close. Half – one hour after we close. You are going to lose eighty percent of it by this time tomorrow. This time tomorrow, eighty-percent of what you’ve learned at this conference will be gone past you. Which is why many of you are listening with a pencil – that’s good idea. A week later, there’s only ten percent left.

Now, imagine you went to a VC partner or associate on Tuesday – that associate is going to get back together with his partners at their Monday morning meeting, six days away, and they’re going to say “What did you see when you looked at XYZ on Tuesday?” They’re only going to know ten percent of it. So the answer is, if pitch decay is a factor, figure out what the ten percent is that matters and drive it home relentlessly in your marketing, in your communications to them: “if you just remember three things today – A, B, and C…” And wouldn’t you be disappointed in me if this wasn’t my last slide when I’m done today?

That’s why, when you put together your presentation the first slide your put together is the last. Your summary isn’t an accident of putting a presentation together, it’s the reason for the presentation. The rest of the presentation is to prove those points. This is the ten percent.

We’re going to talk about the Dirty Dozen slides. We think any good company should be able to tell their story crisply and briefly in what we call the Dirty Dozen – I’ll call it twelve today. You’ve already done the hardest one, and this is the reason for the presentation. And as you put your presentation together, this slide may take you the longest. What do you want them to remember a week from now? What’s the ten percent that matters?

Point two: Be brief.

How ironic: I’m going to use eighty-seven slides in an hour to tell you, but I happen to like Mark Twain, whose famous quote was: “I didn’t have time to write you a short letter, so I wrote you a long one.”

Brief is hard. Brief is very hard. And I could replace the word “letter” with things like “overview presentation”, “elevator pitch” – it’s hard to be brief. It’s hard to be brief. I carry around in my billfold the best executive summary I’ve ever seen: it’s on a fan-fold business card. And I asked the team that did that how long did it take them, and it took them forever because just like the elevator pitch should be limited by time, you should limit your executive summary by space. A secret: all of us VCs have attention deficit disorder.

Somebody came in, they did this: “Our technology integrates all yadda yadda yadda” – you know what happens to my brain? It does that, and then I say to myself, “Boy is this guy boring me to death!”

“We capture the future of knowledge” – oh, that’s interesting. Keep it simple, stupid.

We had a company, came in from Monteray, they had this phenomenal product. And the product was used with landlines, and it would allow me to plug a device into my handset that encrypted my phone call to somebody else on a landline – and if you don’t think that’s important, read the book someday on how Boeing lost an order to Airbus because of a wiretap. It was a two billion dollar sale that was lost – it’s well-documented it was tapped offshore. And so they came in, and they had this terrific device and here’s, honest to God, what they said:

“Utilizing the 2048-bit Diffie-Hellman key exchange, and 160-bit TripleDES, we provide intrusion detection for digital voice, fax, and wireless connections”

Doesn’t that grab you? We changed it to: “We safeguard your communications”

Be brief.

Three: Bait the hook.

You know in the old days, let’s talk about US Mail – I’m old enough to remember that. In the old days of direct marketing, there were two schools of thought on direct mail campaigns: bait the hook or feed the fish. Do you want to entice them to do something (lick the sticker, put it on, mail it back), or do you want to sell them something on that direct mail piece? Well we sort of have the same continuum available to use when we talk to anybody we’re talking to. On one hand, we have the “bait the hook” side, which is really talking about getting them interested. On the other hand, we have the “feed the fish” side, which is really on “close’em” and most people make the mistake of having the elevator pitch way, way too far to the right. The elevator pitch is a “bait the hook” activity – you want me to get of the floor with you, when you stop the elevator, to ask you more. That’s what you want. That’s what you want.

Because like all communication vehicles and especially with my example, which is VCs, you have to peel the onion – and you’re going to peel this onion at various stages when it’s ready to be peeled for whatever audience you are with. So the trick is: know what the task of each communication vehicle is, and don’t make it something it’s not. It should be proud to be an elevator pitch – it shouldn’t lust after being a mission statement.

Simple elevator pitch, you all know them. Heck, I’ve got people in this audience who should be up here doing this presentation. It’s pretty simple really. Now you can make it as complicated as you want, but the fact of the matter is that it has to grab them. It has to grab them.

Four: Give high, stay high. No, it’s not what you think.

You need to be flying at fifty-thousand feet, you need to be up in the zone where you’re talking about the “what” and the “so what”. We’re going to talk a lot about “so what” as I close the session today, the conference, because “so what”‘s are the benefits and are they are the keys to what you’re going to be doing. The trap is, you do not want to get down into the “how”. Stay high. Stay high. There’s a time to get down into the “how” and they will tell you what that time is, if you just ask and listen. Again, benefits are so important, I’m going to hammer on them a couple times today. Think about them in different categories. Think about them in different categories. I can have technical benefits. I can have business benefits. We’re going to match benefits to the audience when we talk about this later today.

Five: Obey the 12-15 rule.

About a dozen slides in fifteen minutes. Now that doesn’t mean the meeting’s going to take fifteen minutes. I mean, nothing makes me crazier than the potential client, I say, “Off to see another VC on a syndication?”, and he says, “Yeah, it’s an hour meeting and I’ve got forty-five slides.” Did that hit close to home? Uninterrupted, your slides should take fifteen minutes – that’s an hour meeting because you’re going to ask a lot of questions and you’re going to do a lot of listening in that meeting.

Now at this point, some of you in the room have done this – you’ve mentally crossed your arms and said, “But Bill, you obviously don’t understand my business – I can’t possibly tell my story in fifteen slides.” And the answer is “Yeah, you can” – and on my hard drive I have a hundred and fifty client presentations to prove it. Now some of you are going to get real anxiety about what’s on each of these slides – don’t. There’s nine pieces of information I need to disseminate – you’re going to get these slides when you download them for free, so don’t go wild on me here.

But I’ve already done number twelve – it’s the reason for the presentation. I’m going to tell people who I am, what I’m after, how much money I’m looking for, I’m going to give them an overview and a mission statement. I’m going to talk a little about problem buy-in – if they don’t agree there’s a problem, I might as well stop talking. I’m going to spend a couple of slides talking about my solution and the benefits. I’m going to spend at least one slide talking about some technology. I certainly am going to talk about who else is involved. I’m going to talk about who are my leverage points on my success – and we’ll talk about that today, leading up to five o’clock. We’re going to talk about some success metrics – this doesn’t say revenues per se. What drives revenues? You know, Guy mentioned in his opening comments, and you see it time and again – “I don’t care what your spreadsheet says as much as I care about the assumptions that went into your spreadsheet. I’m going to look at assumptions more than I’m going to look at the mathematical role of those assumptions.” I’m going to spend a little time talking about who’s doing it, and I’m going to spend a little bit of time talking about where you are, you progress and these milestones that Guy talked about earlier today.

I’m going to spend about fifteen minutes and about a Dirty Dozen slides to tell a competent brief story at a high level. It’s like any politician: what do they want – they want their next term. What do we want? We want the next meeting, driving the ball down the court.

We talked about the “what”, and we’re now going to spend a little bit talking about “how”. And the first one is going to be: you’ve got to change people’s pulse. I will joke with clients – I will put my finger like this, I will listen to their pitch and I will say, “Didn’t do it for me.” Didn’t do it for me.

So what I really want to be able to do is understand who my audience is, I want to understand how to bond with them, and then how to communicate with them on their level. And we will spend some time chatting about that.

It’s OK to ask questions. Here’s a couple of my favorites: “What are the three most important things I could tell you about my company today?” – I love stack-ranked questions, it gives me insights inside that person. Now, I can better off do this on the phone – “Yep, we’re coming over to see you next Thursday. Yes, it’ll be my CTO and myself – great. To make this the most productive meeting possible, what are the three most important things that you and your partners would like to learn about my company?” Gee, “I want to have a productive meeting” – that’s pretty nice. “Help me understand” – boy, I’ll tell you there’s no wrong answer to that question. The other one is, “I’m really glad you decided to see us – what attracted you to my business plan?” – most don’t have the guts to ask this, but boy is this a good one. You’re going to find out whether it’s revenues or technology, or whether they’re thinking of a keiritsu with one of their other portfolio companies, we’re going to find out a lot of things. It’s OK to ask them questions. I love this one: “How will you accelerate our success?”

Now, I have a lot of tools – I’m a big talker, I talk loud. If I want to draw you into a meeting, I’m going to talk softer. So I have a lot of tools in my ability to help communicate and to change people’s pulse. Use them. And the thing that I want, is I want to see passion, I want to see energy, and I want to see a compelling reason on why you’re going to change the world and I should come along and help you do that.

Eight: […] transition

You ever seen a presenter get up and they click the slide and it’s like the next slide is like a total surprise to them? And it’s their slide? You know, make these things work together. Make these things work together. You may say, as an example, a rhetorical question, “This is the big problem, how are we going to solve it? Let me show you our underlying technology…” You may want to build upon the last topic – “We just talked about the background of our team. Let me tell you what expertise they’ve brought from their prior employers to make our company successful.” I may want to build on the last statement, or worst-case scenario, say, “Next.” Next.

When we have people going out to syndicate around, it is not unusual for us to videotape them several times and have them look at themselves. Most people have never done that. And whether you practice or not, it shows either way. It shows either way. You know, figure out whether you really can do your pitch in the time allowed. Figure out what you really do look like on camera. I’d guess ninety percent of you in the room have a hand camera, video camera of some sort. Use it!

Now, we’re already talked about the meeting. At the start of the meeting, I want to tell them what I’m going to them. In the middle of the meeting, I want to tell them. And on the summary slide, I’m going to tell them what I told them. Now, it isn’t going to be this transparent, but why am I gong to do this? It’s simple: I need to allow for pitch decay, and I need to make sure that ten percent sticks.

My last point: pitching is an attitude, don’t give up.

Pitching is an attitude, don’t give up.

What’s the ten percent that matters from my pitch? I like these: begin at the end, be brief, and change people’s pulse. Understand your position, understand your market, understand how to change people’s pulse, and do those things. And you’ll notice that I finished on time.