Monday, October 30, 2006

Get Out of Your Comfort Zone When Talking To Investors

I was a panelist recently on the finance panel at the Florida Medical Manufacturers' Consortium annual summit along with Tom Dickerson of Tullis-Dickerson & Co., Inc., a $350 million VC fund focused on the med tech space. Tom made a great point in his presentation that, when business owners pitch VCs--which would apply to pitching any investor, whether the investors are VCs, Angel Groups, individual investors, strategic partners or lenders--one fatal mistake they make is by communicating their presentation from their own comfort zone. So for a business owner of a medical device company, they'll spend 90% of their presentation talking about the science; software entrepreneurs talk about their innovative source code; fashion companies talk about the merit of their designs. This is their OWN point of strength, but is not what will motivate investors to take action.

Thing is, people are generally only motivated by their own self-interest. Think of it this way: say you are interviewing contractors to build an addition on your home. A contractor comes into your home with a huge toolbox and starts laying out all his tools on your living room floor. He picks up a drill and begins to tell you about how this is the greatest drill money can buy, and it drills the holes straighter than any other drill. Then he pulls out a power saw and tells you how that saw cuts through any kind of wood, and the blade doesn't need to be replaced for years. Then he pulls out a hammer, and tells you that this hammer is so ergonomically balanced that he can swing that hammer all day without getting tired. And the carpenter goes on for 30 minutes on his diatribe about the features of all the tools in his toolbox. If this happened to you, you would likely throw the guy out on his ear. All you want to know about is will they show up when they say they will, will the project be completed on time, will it be finished within budget, will the addition not fall down and will the carpenter not complicate your life forever.

Well, it's the same when talking to investors. When you spend all your time talking from your comfort zone, you are that contractor laying his tools all over the investor's living room floor.

Whenever you try to convince someone else to do something--whether it's to invest in your company, buy your product or service, work for your company, they want to know "what's in it for them."

For VCs and Angel Groups, they want to know about two things: can an investment in your business generate a HUGE return, and that you know how you are going to do that for them. For individual investors, they also want to know about return on their investment but they also are concerned about how long they will likely have to wait to liquidate. Additionally, individual investors may also invest to satisfy some emotional need. For example, if you are developing a cure for lung cancer, people who have recently experienced an incident of lung cancer in their family may be more motivated to invest from an emotional basis.

If you can communicate what you are trying to do in a way that focuses on OTHER person's comfort zone, you will be in a better position to get what you want.

Friday, October 13, 2006

Taking the Big Leap

The one thing that all of my clients have in common, and something I also have in common with them, is at one time or another, for better or worse, they made that fateful decision to take the leap of faith from the security of a nine-to-five to the world of self employment. I did it in 2002 when I was laid off from the second job in 6 months. I refused to put my fate, financial well-being, or career in someone else's hands any longer.

I have been very honest with the business community about my experiences and struggles that are common to many a budding entrepreneur. This is the bond that I have with my clients, and what makes my practice different from that of my competition.

Recently, I introduced my good friend, Michael (a fictitious name to protect the innocent), to a potential business opportunity. He's a corporate lawyer who works for a good-enough firm, has a nice tidy life, a fabulous family—but something is just not right to him, professionally speaking.

He expressed to me that he was frustrated by his job, and the fact that he works for people that he didn't completely trust with his family's livelihood.

I had an opportunity to introduced Michael to one of my clients who was actively looking for partners to expand his business into new locations. For Michael, the timing was perfect and business concept ideal. We all met one afternoon in my client’s flagship location in New Jersey. Both guys liked each other very much, and you can see a deal wasn't very far off in the making.

On the long ride back home to New York City, Michael had a moment that really resonated with me. He realized that he was at a crossroads in life. I could see by the expression on his face the same emotions that I had felt four years earlier when my boss of six months told me that I didn't have a job any longer. It’s a very explosive combination of sheer excitement about taking on a new challenge and chapter in life, combined with apprehension of what this major decision means to him and his young family, and the inevitable fear of what will happen if things do not work out like he planned.

In the coming months, and likely the next few years, Michael will learn a lot about himself, his character, his ability to adapt to good and bad professional situations, and his commitment to his future and that of his family. As I listened to Michael describe to his wife by phone how he thought the meeting went, listening to his nervous energy, I was happy that I could be the person to initiate him into this “club” of sorts.

Michael is about embark on an exciting journey, and I'm excited for him.

When you start a business, you put your cash, ego and pride on the line and do what it takes to make it a success. My job as a business lawyer is to make sure that you don't make mistakes within your control that will make it impossible to achieve your dreams.

This Blog, “Taking the Big Leap” is designed to help people who have made this same decision--or are thinking of doing so in the near future—be more successful in business. It will be a collection of lessons I have learned in my own journey running this business. Topics will range from raising investment capital, avoiding costly legal mistakes that could derail a business, and entrepreneurialism in general.

Michael is close to closing a deal with my client, but for him, the hard part is over. He has already committed to Taking the Big Leap!