Archive of UserLand's first discussion group, started October 5, 1998.

Pitching a business plan to investors?

Author:Dave Winer
Posted:5/2/1999; 8:55:49 AM
Topic:Pitching a business plan to investors?
Msg #:5528
Prev/Next:5527 / 5529

This is a cc of an email I sent to a friend who's preparing a business plan to pitch to potential investors. Since coming back from vacation I've spent a lot of time, relatively, meeting with Silicon Valley venture capitalists. My goal is to understand what they need, how I can help them, so I can participate in the financial boom. I've decided this is something I want to do.

So after reading several drafts of my friend's business plan (I've xxx'd out his name) here's what I had to say to him this morning. At the same time I am talking with people in the Frontier community about exactly this idea, how to design businesses that attract funding.

Every situation is different, but some of the lessons apply equally in all cases. I'm sure I'll eventually write DaveNets about this, but the ideas are still raw, but I wanted to get them out there to see what questions people have, and if there are any other members of the community that are working in this direction at this time. You'll see why as you read the email.

The letter to my friend

I met with a top VC yesterday for two hours. Instead of pitching my plan to him, I asked him about his business, how it works, where he's going, what he needs. Instead of telling him what I needed (neediness is not a good way to get help, I've learned) I listened to what he needed and asked questions. They don't need business plans, they get far more than they can evaluate. They don't need money, the money chases them. What they need is CEOs and management teams.

So, to extrapolate, if you can assemble a management team, in competition with all the huge money the VCs have to throw at them, you will get the cash you need to grow your business. However, it doesn't matter if you have a business plan, they will give you one to execute if you don't have one, in fact, I believe it's better to show up with a management team *without* a business plan. Instead of taking a chance that your plan is one they've already invested in (or something like it) or that your plan is one that doesn't interest them, I think the chance of getting your startup money is better if you show up with no plan, and have a team of people, covering all or most of the bases, that looks good to them.

Since we agree that you are not a CEO, therefore, and since you want to be part of an Internet startup, I think you'd do best if you flip the equation around. Leverage your recent experience with XXX as a creative guy to land a job as a creative guy on a startup that's in the same space as XXX. Get the stock you're entitled to in being part of such a team. Stick it out for two years and work feverishly to make it successful, and when you get your $5 million bonus on the IPO, use that money to start your personal vision of entrepreneurship.

A friend of mine, XXX, is now worth a few million dollars after the XXX IPO. There's a great lesson here. Before he joined XXX he was in a similar position to you. Frustrated that he couldn't get anyone else to buy into his vision. I believe this frustration was self-inflicted. No one is going to invest in your vision other than you. It's a myth that the VCs invest in visions. They don't. All the cover stories about Marc Andreessen and Mitch Kapor and Bill Joy and Steve Jobs don't help to get the truth out there. I couldn't get the VCs to invest in my vision either, even though I had a track record of making millions of dollars for investors with my past visions. Fortunately or unfortunately, I had the money myself to invest in my own vision. So I was able to go forward. However, if I hadn't had the money, or if I had reserved it (even better) a few years ago I would have been able to be a key person in an Internet startup, and now I'd have an order of magnitude more money to play with.

You can help a team because you have access, on a personal level, to opinion leaders. Even if the only three people you could pitch were XXX,, XXX and XXX, you'd be a big asset to a team. But you know a lot more people and they know and love you. This is what you offer. It's worth a lot.

This idea of serving the XXX is lame-o. It isn't going to fly. This is not a charitable environment. People are greedy greedy greedy. There were a couple of charity-based businesses that got funding a couple of years ago. Now they're in the cesspool. "Been there done that," the investors will say. Can't pitch that idea, so give it up.

In fact, give up the idea of pitching an idea. Start going to the social events of the investment community. Carry yourself as you were when you were at XXX. You're a big guy in the creative sphere and you have the credentials to prove it. Don't make the mistake XXX made, and let that asset wither and fall off. The longer you wait, the less value it will have.

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