If it takes a venture capital fund more than three months to decide
whether to invest in you, it’s a lost cause. Forget the fund and move on, as
it’s not likely that you will get an investment from it. This is one of the
messages that emerges from a seminar organized by MATI High Tech and
Infinity Venture Capital Fund.
One of the bitterest complaints against entrepreneurial funds,
particularly new ones, for which the start-up is their first, is that funds
tend to drag their feet. This is liable to push the start-up out of the
game, since nowadays, a start-up’s window of opportunity is extremely short.
Giza Fund general manager Zvi Schechter says that funds need to act
fairly, even if they are greatly pressed for time. The time problem, which
is related to a growing personnel problem at these funds, greatly handicaps
the funds in growing and developing, and presents an even more serious
obstacle to the screening of new start-ups.
”For some reason,” Schechter says, ”fund managers tell entrepreneurs just
starting out that they will get back to them the following week regarding
their business plan,” knowing full well that they have absolutely no chance
of reviewing the plan by the following week, or even the week after.
The beginner entrepreneur swings back and forth between hope and
desperation, but he should understand the following principles: funds that
specialize in a specific field can be expected to reach decisions much
faster than a fund that has only general knowledge of the field. When this
sort of fund has to start examining a technology or business model in depth,
either by itself or through consultants, it will take much longer, and the
process will be much slower.
Formula Ventures general manager Ariel Sela expands the subject, by
saying that the load funds currently face, and the multiplicity of new
initiatives cropping up on a daily basis, do not help shorten time spans,
quite the contrary. “We invest in about ten out of 700 start-ups which
approach us. As a result, the funnel becomes increasingly more narrow, which
makes it harder to reach decisions quickly.”
According to Robert Bash of Inifinity, time is the most lacking
resource, much more than money. A start-up has no time, since its window of
opportunity is extremely narrow. Funds, which have to examine these
initiatives with tiny windows of opportunity, suffer from the same
restriction, since the moment the window closes for the start-up, it also
closes for the fund.
On the other hand, Bash claims that funds should at least be polite
enough to tell an entrepreneur that they are not interested in his
merchandise, or that they will be able to review his proposal only in
several weeks. He can then make a decision in the light of this fact.
At the same time, the entrepreneur needs to know how to be short, in
order to take up as little as possible of the fund’s time, for his own
benefit. “An entrepreneur needs to know how to do an ‘elevator presentation’
, i.e. present his idea and his company to us during the time it takes the
elevator at the entrance level to reach the fund’s office, in our case – the
16th floor. We, for our part, need to know how to organize ourselves in the
right way and be efficient, in order to meet reasonable deadlines.”
Another way to catch attention, which translates into shortening time,
is by having a good story to tell, according to Clal Electronics manager
Barak Hahamov. “If you approach us and tell us that Cisco is your strategic
partner, you’ll be granted longer listening time more swiftly. This means
that the entrepreneur needs to weave his story in such a way as to sound
better than other start-ups’ stories, and will therefore be accorded higher
priority in the fund’s schedule. In other words, your story must give the
funds the immediate feeling that they are going to profit in a big way
here.”
If you truly want to earn a fund’s undivided attention in listening to
your business plan, do yourself a favor and compose a short one. Those in
the funds business explain that it is preferable to arouse them to wanting
to know more, and certainly not to send them dozing. You may ask what is
regarded as short business plan. A two-page management overview at most,
plus a business plan of only fifteen pages, and heaven forbid, your
presentation should not contain more than a dozen transparencies.
Published by Israel's Business Arena on 17 May, 2000