How I Raised $55 Million Of Venture Capital In Two Months

When I was recruited by John Doerr and Ram Shriram to run Elance, I spent a lot of time reviewing the business model, the market potential, its people, investors and business relationships.  What I failed to do was to take a serious look at her balance sheet.  When I did, after showing up for the first day of work, I discovered to my amazement that the business was very low on cash.  I had assumed that with the type of people and venture firms behind Elance, that cash was a forgone conclusion.  I was wrong. I have always believed that priority #1 for any CEO is to manage CASH.  If you don’t have cash, then go and get it.  If you have it, be ever mindful to not operate in other-peoples'-money (OPM) mode and manage that runway like your life depends on it.  BTW, it does. So after my first day of “shock therapy,” discovering our low cash position, I set out to build an Executive Summary, PowerPoint presentation and Financials. What I did not do was build a giant Business Plan deck with ridiculous amounts of market research and page after page of excel spreadsheets. Talk is cheap; here is what we got done.  We visited 12 venture firms and received commitments in short order from 9.  Within less than 60 days we raised over $55 million dollars and we were off to the races.  In the process, one of my favorite business leaders, Bill Campbell the Chairman of Intuit, helped me to understand a very important fact about raising money.  While I was blabbing on and on about whether we should take more, or from whom we should include in the round, Bill said, “Take the (blank) money.”  From that day, I have advised the same to every company I've since worked with. I’d like to share now a few thoughts of what worked for me, in the hope that you can get funded too. I would not waste the time building a big bad business plan, at least as described all over the web.  I’ve come to believe this has become a consultant’s dream, unfortunately, not one filled with gold at the end of the rainbow.  Why…Because venture capitalist do not read them.  Angels may be more inclined, but even then I doubt it.  When looking at the companies I have funded, I cannot think of a single time when I have read one.  Not one. So if it makes no sense to create a giant business plan, what should you do?  I would break it down into four basic steps, knowing that what is not provided or discussed in your first visit, can be provided in later visits.  Remember, goal number 1 is to get that second appointment, nothing more and nothing less. 1)   Prepare an Executive Summary.  Keep it concise and spend the majority of your time working on the opening.  The opening should contain your hook; you have the equivalent of 10 to 15 seconds of read time to grab attention.  Carry that “hook” right in to your slide deck.  (See our previous post for help on constructing your Executive Summary.)  As I’ve mentioned in an earlier post, if you see your audience reaching for their “crackberries;” your toast.  If that happens, try hard to jar them back, and for the next presentation, make it better. 2)   PowerPoint Deck.  I would prepare and practice presenting a PowerPoint deck with no more than 10 to 15 slides (we'll be posting an example deck here in a week or so).  I would work the material until I knew it by heart.  Do not expect to show up and read your slides.  Nothing could prove more boring, show that you are not prepared, and that you are not taking your business seriously.  You have one shot; make it your best.  If it turns out you get rejected, ask good questions and move on.  Take note of the rejections and the reasons for why.  Should it occur three to five times over, you need to make changes. 3)   Financials.  Provide a clear example of how you see the business flow.  Be conservative and make sure you explain and can back-up your assumptions.  I’d go out 3 years, and include an income statement, balance sheet and cash flow statement.  Show clearly where the money goes, how long it will take to get in the market and what your adoption rates are.  I’d include a brief slide or two in the PowerPoint deck, but financials seem to work better as separate documents. 4)   Elevator Pitch.  I’ve saved this for last, because after you have created the other documents, you are in a much better place to create the perfect 60-second pitch.  As mentioned earlier, the hook is where you should concentrate your time.  If you fail to grab attention in the first 15 seconds, all the other work is for naught. (see our previous post for help with the elevator pitch) That’s how we raised over $55 million in venture capital within two months.  I know you can do it too, maybe not the 55 million, but what you need to progress your company.  The Roach Post contains more than enough information to allow you to construct the pitch you need to get funded, and we have only just begun.  We are working hard on a whole series of posts designed to get you funded and then, how to maximize your business potential.  Join our team and let’s get to work. Subscribe to The Roach Post for future updates and as always, comments are welcome.

Tagged as: business plan outline, entrepreneur, executive summary, finance, john doerr, Kleiner, ram shriram, sherpalo, Startups, venture, venture capital