Disqus - Latest Comments for DavidSRoseNYA

Re: Should Angels only invest locally?

DavidSRoseNYA — Fri, 15 Aug 2008 10:24:44 -0000

As a matter of fact, Frank and TCA were not the only out-of-state angels to find this deal! I, too, saw the listing for GiftVenture in Angelsoft, got in touch with Vegas Valley Angels, and asked to be added to the deal, which I've already funded. So now Steve Mock in Vegas has got investments from both coasts through Angelsoft!

Re: The genius behind never logging into the software I was selling

larosam — Thu, 07 Aug 2008 21:06:18 -0000

In order for this theory to work exactly this way, you need to have sales engineers in place - someone that can truly understand the inner workings of the software and can work that through with the customer. What we wound up doing at Air2Web was the salespeople worked the value with the decision maker - and the details of HOW it got done was done with the SE (Sales Engineer). If the SE identified something that was sold that really couldn't be done, we would circle back and try to solve it. But, if I did my job correctly, the customer understood WHY they were doing business with us, and bought into the ultimate value that A2W was delivering - and therefore some small workarounds were usually OK.

Currently, my sales guys don't have that luxury and have to both serve as sales person and sales engineer. Therefore, they have to log in and understand all the inner workings of how to do everything in the software.

That said, what I do try to teach them is that they need to really focus on selling value over function. Software can always change (and does), so what you need to make sure is that you don't put an imagined obstacle in front of yourself regarding HOW the software does something.

For example, in our software a customer may think that he needs a notification to work a certain way that it doesn't. Well, we all know that we can always change and add that feature. But if they buy into the fact that Angelsoft is going to change their world like it has for so many investment groups - then living with a small change in their process is worth it.

In an ideal world, I think I would have my sales guys use engineers and focus only on working with customers at the high level and sell value. One of the first things I did at Angelsoft was to replace the salespitch from a "walk thru the software" to a "feature overview / value of ecosystem" pitch. Given that we don't have sales engineers, I think that my team now does a great job of selling value and showing function next.

Re: The genius behind never logging into the software I was selling

DavidSRoseNYA — Thu, 07 Aug 2008 20:28:15 -0000

Whoa! That's a heavy post! i think I understand the theory behind it, but would you (do you) go so far as that with your own sales guys??

Re: Un-Fundable: Lifestyle Busienss

DavidSRoseNYA — Thu, 31 Jul 2008 10:13:20 -0000

OK, I'll jump in here too (Rhody, it's not that everyone is jumping ON you, but that you've raised some important points that deserve to be addressed.)

"Lifestyle business" is NOT a pejorative term. Rather, it is a well-known and generally accepted expression (see <http://en.wikipedia.org/wiki/Lifestyle_business> and <http://www.powerhomebiz.com/vol100/lifestyle.htm>.

It describes the perfectly valid goal of creating a business that is fulfilling economically and spiritually for the entrepreneur and his/her family. I know dozens, if not hundreds of lifestyle entrepreneurs who would not change their jobs if you offered them ten million bucks: the homebuilder who loves being out on the job and creating a hand-crafted, perfect house; the picture framer who works six hours a day at a relaxed pace and knows every one of his customers by name; the personal shopping consultant who delights in finding just the right outfit for the perfect occasion...even the top VC who quit his job at Accel partners to move to Maine and start a mail order business specializing in a cappella music.

All of these businesses comfortably support the entrepreneur, each of the entrepreneurs receives great personal satisfaction from his or her business, and each is contributing to society...but not a single one of those enterprises is "venture (or angel) fundable". The point that Jason and the others are making is NOT that there is anything 'wrong' or 'tacky' or 'less desirable' about a lifestyle business, simply that the economics of it mean that it needs to be financed in some way other than risk equity. That can mean bootstrapping (usually the best option), personal savings, friends & family loans, or personal debt.

The fact is, because early stage, high-growth businesses are so incredibly risky (to expand on Evan's point, only 1 out of 100 businesses looking for venture/angel funding actually gets it, and five out of ten of those go bankrupt), seed and early stage investors need to maximize the potential return. I recently led a seminary discussing the somewhat complicated math involved (see <http://www.centernetworks.com/angel-investing-s...> for a look at the key slide), but what it boils down to is that EVERY deal into which a smart angel invests money needs to have the POTENTIAL to deliver a 20:1 or 30:1 return on the invested capital.

To run through a bit more of the math (and to make clear just how unbelievably tough that is), take an entrepreneur who comes to New York Angels seeing a $1 million investment and valuing his or her company at $4 million (this is a pretty typical profile for the kinds of businesses we see.) In order for the angel investor who contributes, say, $25,000 to the round to end up with an annual return of about 25% (which is about twice what you would hope to get from a hedge fund, and is commensurate with the risk being taken; remember the odds are 1000:1 that this will be "the one"!) that little startup company needs to be sold within six years for [I hope you're sitting down] ONE HUNDRED FIFTY MILLION DOLLARS.

And since there simply is no way from now to the end of the universe that this is going to happen to a sole proprietor home builder, or a local picture framer, or a personal shopper or even a mail-order a cappella music label, THAT is why those perfectly valid, great businesses, run by wonderful, smart, entrepreneurs (all of whom happen to be friends of mine, by the way) are "lifestyle" businesses and not appropriate for angel or VC financing.

So that is why it is really, really important to figure out at the beginning exactly what one;s personal goals are in starting a business, and what kind of financing (from bootstrapping to venture capital) is appropriate to support that goal.

Re: Is The Business Plan Dead?

DavidSRoseNYA — Fri, 11 Jul 2008 19:27:42 -0000

Umm...the business plan was NEVER an investor document! As a matter of fact, that's precisely why it has fallen into ill repute, and been the butt of nasty comments for so many years! The business plan is The Plan for running your business. How on earth are you going to know you've arrived if you don't know where you are going? Why would YOU invest YOUR time (certainly more valuable than a VC's dollars, right?) without a crystal clear understanding of whys, wherefores, how-tos and how-muches??

Writing a business plan BEFORE you start your company should be de rigeur for every entrepreneur, and if they were to do so, we would see a lot fewer hopeless companies looking for funding. And that's why investors ask for business plans: (a) what a great way to understand in half an hour exactly what you're trying to do, how you're planning to do it, and why you're the one to make this work, and (b) because who would want to invest in someone who hasn't had the discipline to ask HIMSELF (or herself) the hard questions before the investor does?

That said, even though I'm one of those investors who [ahem] doesn't always read the plan when it comes in, I certainly do read it before I write a check. The bottom line is that clear thinking and effective communication is the hallmark of a good entrepreneur. If you want to be the 1 in 100 who gets funded, you'll be doing yourself a big favor by having a great business plan AND a great executive summary AND a great one-pager AND a great PowerPoint presentation (speaker support version) AND a great PowerPoint presentation (printed, leave-behind version) AND a great Angelsoft video AND a great one-minute verbal elevator pitch. And if that sounds like overkill, let me assure you the gal right behind you has all of the above...and she's the one getting the vc/angel dollars.