Subject: How to Win a Venture Capitalist
From: "Saved by Internet Explorer 11"
Date: Sun, 22 Dec 2013 19:11:20 -0800

How to Win a Venture Capitalist

by Jim
Swartz

Published in Computer Systems News, July 30, 1990

Business opportunities are everywhere
for venture capitalists. Hundreds of business plans cross their
desks every month, offering myriad opportunities. However, the
successful venture capitalist invests in people first and business
plans second.

When considering an investment opportunity, most venture
capitalists look at the obvious trends and market niches.
Transcending the business elements, however, the most important
factor in a decision to invest in a company is the quality of the
people. In real estate, the three biggest criteria are "location,
location and location." The venture capital axiom is people,
people and people.

Investors focus first on the management team's background. It is
essential to understand its ability to deliver on its plan. In 20
years as a venture capitalist, I've picked enough winners and
suffered through enough losers to develop my own measures.

There are five major characteristics that investors look for in
entrepreneurs. In most cases, one or two are dominant and all five
are present in some degree. The traits, in order of importance, are
leadership, vision, integrity, openness and dedication.

Leadership. It's often assumed that entrepreneurs are
born leaders, but that's not necessarily true. Sometimes it takes
years to acquire the quality. And sometimes it never surfaces.

Areyh Finegold, founder of Daisy Systems Corporation, tells a
story about his role as an Israeli paratroop commander. Despite
instructions from his superiors, he would never let his troops sleep
more than a single night in one place.

He used the same strategic thinking to build a sense of
leadership in his employees at Daisy, as he encouraged them to think
independently.

Finegold was proud that he made everyone he hired take a salary
cut. All Daisy employees chose to earn less just for an opportunity
to work at the company. It became a badge of distinction to join
Daisy.

Finegold is a natural leader. Not all entrepreneurs are, but a
little leadership mixed with other essential qualities can work just
as well from an investor's viewpoint.

Vision. One of the greatest visionaries and leaders in
the local-area network business is Ralph Ungermann. For five years
running, his company, Ungermann-Bass Inc., met its original business
plan exactly. He is regarded as one of the industry's leading
strategists, and his vision has been critical to his company's
success.

Vision doesn't come magically; it comes from hard work. Thomas
Edison said, Opportunity is missed by most people because it is
dressed in overalls and looks like work."

Integrity. Unlike leadership and vision, this quality is
nearly impossible to assess on first impression. But after six
months of working closely with an entrepreneur, integrity, or the
lack of it, becomes apparent.

Judging an entrepreneur's integrity is crucial. The entrepreneur
must tread a fine line between being honest and creating so many
problems that everyone's enthusiasm is dampened. The venture
capitalist must have a keen sense of where this fine line is drawn
to anticipate problems and not overreact to the entrepreneur's
concerns. The goal is to build a constructive team with a
relationship built on mutual trust.

Openness. Most great entrepreneurs are continuously
taking input from everyone around them. Entrepreneurs who are open
are constantly re-evaluating their own positions, questioning their
own assumptions and becoming their own management consultants.

It's essential not to confuse openness with flexibility.
Sometimes, flexibility is insecurity in disguise. Just as relying
on a plan that depends solely on a venture capitalist's vision is a
major error, so too is investing in a management team that depends
too much on the advice of its own board or its venture capitalists.

Openness is watched very closely during the decision-making
process. It is the surest path to building a true partnership.

Dedication. Much has been written about the classic
traits of entrepreneurs: stubbornness, dedication, pursuit of a
goal despite adversity. The importance of perseverance and patience
in all those entrepreneurial efforts cannot be underestimated.

Those are the traits most venture capitalists seek in
entrepreneurs. Are they always there? No. Are venture capitalists
always right? Clearly not. The key is to combine those traits
within the management team, and if they are not there upon the
initial investment, add them as the business moves forward.

Copyright ©1990 by Accel
Partners