Entrepreneur's Boot Camp - Avoid the Pitfalls to Funding: Interview with the Creator
For the past few weeks, we've been presenting interviews with CEO's that have completed the Entrepreneur'$ Boot Camp. I thought as we complete 2017 and look ahead to 2018, that this was a perfect time to share more about the creator of the Boot Camp, George Kenney.
George is the founder and managing director of Sheperd Ventures, a technology, software and life sciences fund that has completed more than 50 fundings for emerging companies. I'm now working closely with George as we share the common goal of ensuring a higher percentage of success in funding for innovative new companies. George was recently interviewed by the San Diego law firm Mintz Levin and I've provided a copy of that interview below that I encourage you to listen to!
Here are a few key highlights from the interview:
Only about 1% of new companies are able to raise the venture capital they need to succeed. (3% if you include angel capital, not much more.)
So, what's wrong with the other 99%? Actually, there's nothing wrong with them, except . . . they haven't mastered messaging, that is, how to effectively communicate themselves and their offer to sources of capital. For example, Shepard Ventures has invested in 18 companies, but listened to 2,000 pitches! VC's are busy and, as George puts it, they don't have time "to separate the incompetent from the unfortunate." The message here is that you have GOT to be able to effectively communicate your value proposition quickly in order to stand out from the crowd and have a chance for funding.
There are two major messaging issues that could be keeping your company from getting funded:
- First, you've got 30 seconds to get your investor excited, without boring or confusing them, if you want to be funded. What you need to know is that they're not worried about missing your deal, because another cool deal with show up soon enough. So, in 30 seconds, can you stand out from the crowd effectively?
- Second, most CEO's think they should be selling their product or offer, but that's a mistake. Instead, you've got to sell yourself -- and not just anything about yourself, but one big thing: why the investor should trust you.
Those of you that have read this blog over time know that I've written extensively on how to develop trust with investors because as George points out, most VC's carefully choose about 1 out of 100 investment opportunities and still lose money on 80% of those! So, they're fearful about losing their money and you can only overcome that if they develop trust for you. If you're new to this blog, or of you've been reading it for some time, PLEASE go back and review the many posts from earlier this year about how to develop the precious commodity of trust.
So, how do you excite an investor, avoid boring or confusing them in 30 seconds, while at the same time, gain their trust? It seems like these goals are almost contradictory. Are they?
George's short answer is to practice your pitch. Entrepreneurs that do the Boot Camp are challenged to deliver their pitch to at least 50 people and see how many of them can repeat the core, exciting value proposition back to them. Until you get to a point where everyone that hears your 30-second pitch can repeat it back to you, you're simply not memorable. Sorry, there isn't a short-cut to this. Also, you have to "know your why?" Why are you in business? It's not about making money; everybody is in business to make money. Your "why" is about what inspires you about what you are doing. So, what you're doing is less important than why you're doing it.
Of course, the reality is that unless you already know an investor well, you'll probably have to send an email with an executive summary or PowerPoint to them in order to get a meeting. So, how do you make that first paragraph or slide or two compelling enough to get the meeting?
First, do whatever you can do to get an introduction to that investor from someone they already know and trust.
Second, less is more. Don't make the mistake of sending a volume of materials. Investors simply don't have the time and patience to wade through 50 pages of material. George trains entrepreneurs to make their pitch document no more than 15 slides. When George is helping a Boot Camp graduate connect to a funding source, he sends a one paragraph email and six or seven impactful slides. The purpose of the email is simply to convince a busy investor to open the PowerPoint because most times they won't.
Remember, they simply don't need your deal, no matter how good you think it is. And what's the key thing to include in that one paragraph? Your "why."
If you get the meeting, there are only two things that you need to do: to excite and to get permission to tell your story. A big mistake many entrepreneurs make is to launch into their pitch without asking permission. That may seem strange to you; after all, you've got the meeting, isn't it assumed that they want to hear your pitch? Remember, you probably got the meeting because someone they trust referred you. So, the investor will be polite, but if they're not REALLY excited they probably won't be listening much to your pitch. Permission means that you've excited them enough AND evoked enough trust that they are truly eager to hear the whole pitch.
At the end of the day, the reason most companies fail is that they run out of money before they're profitable. And, they run out of money because CEO's fail to "wow" investors enough to gain sufficient funding.
Before you "wow" investors, you've got to gain their trust. A CEO needs to give investors a reason that they are trustworthy. The best way to do that is through a story from your life that demonstrates you are the kind of person who can be trusted to carry on and see things through.
Another major element of being trustworthy has to do with coachability. Are you willing to trust mentors and investors to advise you? Or, are you more committed to maintaining tight control over your company and your plans? Are you willing to step aside as CEO if that is in the best interests of the company at some point? Or, are you going to run the ship, even if you run it into an iceberg? The right attitude breeds the kind of trust that leads to investment. The wrong attitude doesn't.
At least 50% of Entrepreneur's Boot Camp end up getting funded. That's a lot higher than the 1% overall that I mentioned earlier! The secret to Boot Camp success is a tough screening process and an immersive, demanding six-week mentoring experience that teaches graduates how to stand out from the crowd, get connected to great funding sources and gain the attention of and trust of those investors.
Take a few minutes to listen to the interview below; it's not often that you get to hear truly candid comments from a major investor that has seen thousands of pitches and knows what investors want.
Key Takeaway: Investors are busy people who don't need your deal in order to be successful. To gain their attention, you've got to wow them in 30 seconds. To even get a meeting, you'll generally need a trusted referral. When you do get a meeting, don't pitch without gaining permission. You gain permission with your "why" and answering why you can be trusted before you pitch your deal. To master these things you need to practice, practice, practice and get feedback -- can people repeat your core value proposition back to you exactly as you pitched it? If not, you'll bore or confuse investors and won't be funded. Some of this seems contradictory: on the one hand you have to excite and "wow" investors; on the other hand, you have to inspire trust. How do you do both of these at the same time? Funding is a tough, competitive game. You simply HAVE to stand out from the crowd in all these areas. If you're not sure you can accomplish that today, consider applying for the Entrepreneur'$ Boot Camp and dramatically improve your funding chances.
Interview with George Kenney: