Startups

Proven investors Mike Maples and Ron Conway offer tips on what it takes to enter the field of capital investment: A Rolodex of ripe talent and business resources, a market segment with potential where the investor can add value, and mutually beneficial network building skills.

How should an aspiring entrepreneur choose an angel investor? And, more importantly, how will an angel investor select you? Entrepreneurs need to gain access to the right angel - one that will add value to their growing enterprise. The top angels in the business, says investor Mike Maples, are seeking ideas that have been tested for market viability - an essential criteria before they'll consider cutting a check.

Selecting a financial partner for your growing enterprise should be as careful a process as selecting a member of your senior staff, says serial entrepreneur Mitch Kapor. Here he discusses why real start-ups offering real opportunity can afford to be choosy.

A solid business model can't survive long-term if it just draws traffic. Serial entrepreneur Mitch Kapor points out that a concrete business plan must truly offer a solution to a well-worn market conundrum. While a flash-in-the-pan Facebook app may draw millions of users in minutes, without staying power it's not viable long term.

While entrepreneur and former Lotus 1-2-3 founder Mitch Kapor understands how selling finance can boost a burgeoning enterprise, his experience has also acquainted him with some of the disadvantages - mainly accountability and a forced schedule of progress. Here, Kapor outlines some of the many alternatives to the traditional VC paradigm, including self-financing and angel funding.

Former Lotus 1-2-3 founder Mitch Kapor speaks candidly about the most valuable legacy of his wildly successful 1980's technology company: the management of free-thinking creatives. He stands by the quality of his products, but it was his huge investment in human resources, Libertarian management style, and incentives toward great job satisfaction and accountability that he's most proud of. He claims that the thousands of Lotus alumni have helped set the standard for how tech companies are managed on the East Coast and beyond.

Former Lotus 1-2-3 founder Mitch Kapor has launched a number of new ventures, and he knows firsthand the difficulty of competing with the Valley's best-known brands for top engineering and executive talent. He shares his solutions to luring the best in human resources to his door, including distributed development and opening doors elsewhere in the Golden Gate.

Mitch Kapor has been an entrepreneur since the 1980's, and here he pinpoints useful websites, educational programs, and learning opportunities that help level the playing field between seasoned venture capitalist and the first-time business operator.

Dan Springer, CEO of Responsys, acknowledges that the most frequent and important negotiations often occur with customers. Furthermore, Springer advises that the keys to a successful negotiation with customers include: 1) Preparation to discover what the customer wants and 2) Identifying the few things on which you will stand firm.

Dan Springer, CEO of Responsys, offers advice on how to raise venture money. Springer suggests that raising money depends on three factors: 1) What you have to offer, 2) The state of the venture market, and 3) An entrepreneurs long term goals. Springer argues that it is challenging for an entrepreneur with little experience or just an idea, as opposed to a business, to raise money and advises that entrepreneurs might be well served to raise money when they have a stronger value proposition. In addition, Springer also recognizes that the state of the venture market also affects the ability of an entrepreneur to raise capital. Finally, Springer proposes that entrepreneurs consider the value of the long term relationship with venture investors when bargaining on venture deals and highlights the benefits of leaving enough room in a venture deal to ensure investors get a good return.

Dan Springer, CEO of Responsys, talks about the potential conflicts of interest between entrepreneurs and investors. Springer advises entrepreneurs to discuss these situations with venture investors in advance of making a deal so that all parties understand the potential outcomes upfront.

Dominic Orr, CEO of Aruba Networks, describes his experience applying the HP way to a startup environment. Orr speaks about his focus on giving people freedom and trust which in turn sparks the passion and confidence that drives innovation.

Dominic Orr, CEO of Aruba Networks, describes the tradeoffs for an entrepreneurial company between being private or public. Orr argues that being public offers a significant benefit for an entrepreneurial company because it confers credibility and legitimacy which can aid the startup in selling to larger organizations. Of course, these benefits must be weighed against the costs and limitations imposed by being a public company.

Dominic Orr, CEO of Aruba Networks, argues that to sell a technical product to an executive team, an entrepreneurial firm must focus on understanding and eliminating that executive team's problems. Eliminating CEO, CIO, CTO or CFOs problems means understanding and addressing their pain point sufficiently to overcome their fear of something new.

Dominic Orr, CEO of Aruba Networks, observes a significant difference between going public in the post dot-com boom era in comparison to the actual boom. Orr argues that in the post-bubble era investors are much more thoughtful and analytical.

Donna Novitsky talks about developing a marketing strategy for a start-up. She addresses key issues about segmenting customer priorities and their pain-points; and building a competitive strategy. Novitsky notes that customers are the biggest marketers for an organization. She also illustrates from her personal experience about partnering with other players to generate mutual benefits.

Tarun Khanna, Professor at Harvard Business School, highlights the ability of entrepreneurs to provide solutions to social problems by telling the story of a cardiac hospital in India. Khanna points out that the founder, a cardiac surgeon and entrepreneur, has been able to achieve incredible results unmatched by private or public institutions around the world by rethinking the scale on which healthcare is delivered. Khanna emphasizes that this kind of entrepreneurship can solve social problems in ways that often governments cannot.

Tarun Khanna, Professor at Harvard Business School, speaks about the incredible change in aspirations among young people in India. Whereas in the past young people aspired to become government officials, today they aspire to become entrepreneurs and lift themselves out of poverty by their own actions. Khanna reflects that this change in attitudes is inspiring and very good for the country.

Jason Green, Founding Partner at Emergence Capital, suggests that outside Silicon Valley entrepreneurs may need to approach the fundraising process differently simply because there are fewer VCs and less capital available sometimes. Green argues that outside Silicon Valley and perhaps even in the Valley, the best course of action is to have to option to say no?that is to not raise money because the business is self sustaining.

Michael Cline, Founding Partner at Accretive Technology Partners, reminds entrepreneurs that when raising money they should not let the form of the presentation?the showmanship?overwhelm their substance, which is in essence how they create real value for a customer.

David Frankel, Founding Partner at Altirah Capital, discusses term sheets and how to structure a venture capital deal. Frankel suggests that when raising money an entrepreneur should 1) Favor VCs with simple term sheets, 2) Retain an experienced startup lawyer and 3) Explore any unfamiliar terms.

David Frankel, Founding Partner at Altirah Capital, suggests that in established venture environments, VC investors and entrepreneurs share common assumptions about what makes a fair investment deal. In emerging economies these rules of thumb have not been established and so raising money can take more time or be more challenging.

Jason Green, Founding Partner at Emergence Capital, suggests that agents are generally not used to help raise funds in an early stage company although they may be helpful in a late-stage private equity deal. Instead, as Tom Friel, Chairman of Heidrick and Struggles, emphasizes early stage entrepreneurs are connected to VCs through informal networks of advisors who make an introduction for the entrepreneur.

William Sahlman, professor at Harvard Business School, states that people, customers, and sales are the critical ingredients of venture success. Specifically, Sahlman states that, 1) having the right people, 2) focusing on customers rather than technology, and 3) concentrating on sales instead of marketing, are critical elements of corporate health and longevity.