Learn From the 5 Core Principles of Angel Investors

Image via AngelCapitalAssociation.org

If your startup is looking for an Angel investor, does it makes sense to present your plan to flocks of Angels, and assume that at least one will swoop down and scoop you up? In reality, hitting large numbers of Angels in multiple locations with a generic pitch is one of the least productive approaches.

Here are five key things you need to know to quickly find the right Angel for your startup: Read more

M.B.A. Programs Have Adapted to the Startup Model

It’s fashionable in this fast-paced era of exponentially accelerating technology to deride the value of a traditional M.B.A. Indeed, some people believe that even an undergraduate degree is not particularly useful for a would-be entrepreneur, and the most vocal adherents of this school of thought are encouraging ambitious young people to drop out of college and immediately start their own businesses.

I could not disagree more.

The M.B.A. degree was created in the early 20th century as “scientific” approaches to business management were first being developed, and gained its foothold in the booming post-war years when rapidly expanding American industries needed a steady supply of new managers to administer their ever-increasing workforces. It saw its apotheosis with a pivot as the financial markets of the late 20th century glorified the arcane financial analysis and marketing skills required of the so-called Masters of the Universe in investment banking and consulting.

When I received my M.B.A. from Columbia University Graduate School of Business in 1983, there wasn’t a single course or activity with the word “entrepreneurship” in its title. Many — if not most — of my classmates were fast-tracked managers from utility companies, large retailers, consumer goods conglomerates and financial firms. But over the past few decades, as companies began to shrink and brand new upstarts like Apple and Microsoft became the most valuable companies in the world, Newsweek identified the country’s most endangered species as the “Bached White Male” corporate middle-manager.

There is no question that the game has changed, fundamentally and irrevocably. As I noted in my closing talk on The Evolution of Success at TEDxWallStreet we are moving at an ever-accelerating pace to a time in which entrepreneurship will be the cornerstone of the business world, large companies will continue to shrink, agile methodologies will replace traditional top-down management, and “career management” will be a personal rather than institutional responsibility.

In response to this core shift in the commercial world, M.B.A. programs have not remained stagnant, as some would seem to imply. Rather, they are themselves pivoting with the changing market, and squarely addressing the new realities.

I serve on the advisory boards of the entrepreneurship programs at both Columbia and Yale, and was mentor of the year at NYU’s Stern School of Business, so I have had a first-hand view of these fundamental transformations.

Originally pioneered by schools like Babson, where entrepreneurship is embedded into every class and activity, and picked up and expanded by top-tier schools such as Stanford, where their online Technology Entrepreneurship course has been taken by more than 25,000 students, academic business programs have adapted to the times. At NYU Stern, the annual business-plan competition organized by the Berkeley Center for Entrepreneurship & Innovation is the heart of the program, with more than 500 teams participating in recent years. This is where companies like Pinterest and Comixology found their initial teams and their seed investors.

As The Wharton School of the University of Pennsylvania notes in its online introduction to its M.B.A., a modern business school degree provides a host of benefits that have great value in the new world of fast-moving, entrepreneurial innovation. In addition to the network and brand-validation that comes along with a high end M.B.A. program, these courses of study provide a true grounding in the “hard skills” of economics, finance, marketing, operations, management and accounting, as well as the “soft skills ” of leadership, teamwork, ethics and communication that are so critical for effectively creating and managing both innovation and growth.

Whether it is internalizing crucial concepts such as the time value of money, or really understanding the core values of agile project management, a 2013 version M.B.A. from a strong program represents to me an indication (along with many other factors) of someone who can potentially make a major, positive contribution to our team.

* Original post can be found on Wall Street Journal Blogs @ http://blogs.wsj.com/accelerators/2013/04/04/david-rose-m-b-a-programs-have-adapted-to-the-startup-model/ *

What is the typical valuation/discount for branded lead angel investors (Dave Mcclure / Peter Thiel, Jeff Clavier etc.)?

I think this question (if I’m reading it as intended) may have a mistaken premise. It’s not as if there is “an official valuation” for a given startup, and that Dave McClure gets 10% discount off of that number for his investment, while Jeff Clavier gets 15% off and I get to pay a 5% premium :-) .  Rather, it comes down to whomever is willing to provide a term sheet sets whatever valuation s/he thinks is appropriate under the circumstances, which the company either accepts or doesn’t. And once there is a round in progress, other investors (assuming there is still room available in the round after the lead investor) decide whether or not they are interested in this particular opportunity at whatever the valuation for the round is. Read more

Technical Product Elegance is Not a Business Model

Image via BusinessModelGeneration.com

Many entrepreneurs work hard on the proof of concept (technical), but skip any proof of the business model (revenue flow). In other words, once they are convinced that the product works, they assume their price, sales channel, and marketing will bring in the customers. These days, the technical side may be the easy part.

Proving the business model requires a different approach than proving the technical concept. For example, one CEO I know gave away his software product to the first ten customers. Customer technical personnel loved it, and it worked, so he was totally devastated when he couldn’t sell one for a “reasonable” price in the first two months of hard work.

So how do you go about proving the business model? It starts with a customer problem or need, and includes proving the technical concept, but starts earlier and goes much further, per the following key steps: Read more

Is an info-rich investor deck preferable to a “Presentation Zen” investor deck?

As Matt Haworth noted, the two different types of presentations are for two completely different purposes. In my presentation training sessions I refer to it as “one to show, and one to go”.

When you are doing an in-person presentation (of virtually any kind, not just a pitch), you definitely want to follow Garr Reynold’s advice in Presentation Zen, and keep text to an absolute minimum (that means “virtually NO text at all”.) Your slides should be full screen photos, screen shots, tiny video clips, etc.  The whole idea is to add what I call “emotional resonance” to your personal presentation. Read more

Idea Non-Disclosure Demands Kill Investor Interest

Image via WorkPlaceInfo.com.au

Entrepreneurs often get the advice from their lawyers and friends to always get a Non-Disclosure Agreements (NDA or CDA) signed before disclosing anything about their new venture. Most investors and startup advisors I know hate them, and refuse to sign them. Who is right?

Let me try to put this question in perspective. If you are totally risk-averse, then push to always get signed NDAs. You won’t last long as an entrepreneur in this category, since a startup is all about taking risks. On the other hand, if you intend to patent an idea, you need a signed confidentiality agreement from everyone knowing details, or you will legally lose patent rights.

The format of an NDA is simple, and you can download a sample from my website. Here are some rule-of-thumb considerations that should help you decide when an NDA is really required, or actually has negative value: Read more