Startup founders know it takes money – and lots of it – to launch their next big idea.
That’s why they look to connect with wealthy venture capitalists willing to invest in their businesses, in exchange for getting a return on that investment once the business skyrockets.
With this hope in mind, 30 companies pitched their ventures to more than 600 venture capitalists, angel investors and tech talent scouts last week in Charlotte at the Southeast Venture Conference, the largest assembly of entrepreneurs and top-tier investors in the region.
Here are six takeaways from the conference for startup founders:
1. Don’t be mysterious about money: Dazzling PowerPoint presentations and props aside, the best pitches included a key piece of information: how many dollars founders needed for their ventures.
Jeff Jenkins, co-founder of Atlanta-based TeamWorks, an automated fundraising service for high schools and sports teams, told a roomful of investors his firm needed $1 million in capital this year to enhance its products. After the conference, co-founder Jeff Glover said the firm is in discussions with at least six investors they met in Charlotte.
2. Keep listeners entertained: Let’s be honest, some pitches can be dry. To keep the audience engaged, presenters in Charlotte used props, stories and fire (yes, fire) to make their presentations pop.
Such was the case for Vojta Ciml, who founded SlidesLive, a digital storage service for video and audio presentations, conferences, and lectures. To illustrate his argument that world leaders’ speeches should be protected in an electronic archive, Ciml set a piece of paper on fire.
3. Know the investor’s backstory. Apparently, investors don’t like an uninformed pitcher. A private meeting with a venture capitalist isn’t the time to ask questions about the kind of investments they’ve made in the past, according to Joshua Siegel, general partner of Rubicon Venture Capital, a venture capital firm with offices in New York and San Francisco.
“Be honest about the data and understand the background of the investor,” added Lylan Masterman, a principal at New York-based White Star Capital. “Approach the right people.”
4. Have an exit plan: When considering a pitch, investors like to look years ahead to consider how much money they can make once an owner sells the business. That’s why they often ask questions about a startup’s “exit strategy” during a pitch.
If you’ve started a number of businesses but have never had a successful cash-out, that’s a red flag, Siegel said.
“If you’re a serial entrepreneur,” Siegel said, “you better have serial exits.”
5. Ask friends and family: Bob Young, founder of Raleigh-based software company Red Hat Inc. and book publishing enterprise Lulu.com, told entrepreneurs to seek “love money” – that is, investments from family and friends.
“When you take (venture capital) money, you make a commitment to sell and exit the business. The clock starts ticking,” he said. “VCs want a return on investment in a window of time.”
But family members treat you differently, he said.
“The press likes to present us as self-made men,” Young said. “Most of us get to the place where we are from friends and family.”
However, some warn that borrowing from people close to you can create rifts in the relationship if both sides don’t carefully document or communicate their expectations, said Steve Hockfield, an attorney with Erdman and Hockfield LLP in Charlotte.
Hockfield, who wasn’t involved in the conference, said entrepreneurs should decide whether a relative’s investment makes them a decision-maker in the business.
6. Realize the work-life balance doesn’t get easier: “That’s a tough one for all of us,” Young said.
“Look at the national divorce rate. It’s not just entrepreneurs struggling with the work-life balance.”
Keith Luedeman, founder and CEO of Charlotte-based Goodmortgage.com, didn’t marry until he was 39. Now he’s 50 with a 4-year-old.
Luedeman’s advice: “Put things in compartments. At work, be totally at work. Don’t think about home.”