Venture Capital in Two Trips Six Years Apart:

In late 1999 as the bubble was bursting, I called on a dozen or more Venture Capital firms pitching my idea for financialaid.com. I was was not well received, I was a young 29 years old and I was not expecting to be treated like a bad kindergarden student. I had built two small successful companies but that did not matter. Most of the VC's said no right away, stating that we did not have the experience to create the vision. We did receive a few offers but choose to pull equity from our houses and sign away our lives to raise the small amount of money needed to fund the nancent business. It worked out extremely well for us. When we sold the original founders held 96.25% of the shares. Had they invested they would have seen a 80x on their money.

In November of 2006, we decided to call on some of our friends on Sand Hill Road. This is the centerpiece of the Venture Capital community. It is truly an amazing part of the world. I can only guess how many companies have pitched their product on this street and how much money has been invested. One of the companies we called on told us they were responsible for 10% of the NASDAQ, had they held all the positions they had invested.

This trip was different. We were well received and treated with the level of respect that you would expect from business professionals. I do not know if it was the timing, my prior success or higher caliber of people but this trip was an amazing learning experience. Re-writing the business plan, putting together the PowerPoint and pitching your vision force you to quantify what you know to be true in your heart. (We are still engaged with a several firms so we will keep you posted on the outcomes.)

We have always kept our internal business plan, but it is much more difficult to write one for people who have no idea what you do. The process, which took two weeks, required the commitment and buy in from our top management staff and tech team. We walked away with a much better idea of what we need to do and how to explain it to all of our customers.

Another benefit that is not mentioned very much was that very intelligent people drilled into our business. They asked very tough questions and forced us to defend our passion for the business with compelling data and unique solutions. We walked away with a great sense of direction and confidence.

You do not have to travel to Sand Hill Road to go through this process. Write your business plan and present to intelligent people you respect who will give you honest input. They can help you through tough times and allow your to refocus you on your weaknesses. Companies can create a board of advisors to help with this.

Cheers,
Mike