Mike Volker from Simon Fraser University spoke to a packed house at the Simon Fraser Segal Graduate School of Business (and president of WUTIF, the Western Universities Technology Innovation Fund) with his talk on “What Angels Really Want” at the New Ventures BC event held at the school on April 30th. With a background in technology start-ups, Volker was able to tie together advice between innovative entrepreneurs and the investors looking to take them to the next level.
Volker said that good companies will always get funded, but should try to avoid the “e-myth,” which is the assumption that technical-minded people have that they will also be skilled at business. Entrepreneurship and leadership matter, Volker said, and getting the two camps together is most important.
Current conditions, from low interest rates and R&D costs, to great infrastructure and easier financing and special incentives make it a perfect time to start a new business, he said.
New Ventures BC is a business competition, created to find new and innovative BC companies. The instructions to the New Ventures jury were to pick companies that are “the most likely to be commercially viable, with the greatest value.” Volker said the same principles apply when looking for investors.
But he added that it’s important for companies to decide if they’re creating a lifestyle business, built to be self sufficient and not require VC funds, or if it’s an attempt to create a next-level “high-growth, high-tech” company with a large eventual payoff.
Shareholder agreements are important to create at an early stage, he said, and it’s equally important to not rely on boilerplate and instead craft an agreement that suits their needs.
After deciding WHAT their business is, entrepreneurs have to figure out WHO they’re selling it to. They have to sell it to themselves, their staff and customers, as well as investors.
Angels want interesting opportunities, an attractive return (10X to 100X being typical), as well as a willing protege. They also want the 3 I’s (Intensity, Integrity and Immediacy) and the 3 G’s (Goodness, Greatness and Greed….for the company).
In order to achieve their goals, entrepreneurs have to surround themselves with the best possible people for their business, as well as being able to take their idea and translate it into revenue.
Fundamentally, Volker said, it’s all about profit and loss. What are you buying, who will buy it, and how much will you make? He added that a clear passion and understanding for an idea or product make s a huge difference, and will get investors on side.
Volker was an early investor at RIM, but he pointed this fact out to illustrate that the founders of that company were no different than anyone else in attendance at the New Ventures event. By crafting a business plan, RIM was able to reach their current dominant place in wireless, and they did so when they were a tiny start-up. Volker said the secret to that growth was confidence not only in themselves but in their business plan, which carried over to creating confidence in their investors.
In terms of product, the object itself or the service it provides is far more important than the technology inside the device. When addressing investors, explain what the product is, what it does, and how it can generate revenue, not the internal workings or esoteric code that makes it work.
Entrepreneurs should also be careful to protect their intellectual property, whether its through copyrights, or patents. They should also identify what stage they are at, from prototype to production model. And Volker stressed the importance of letting investors know what kind of time frame they’ll be dealing with.
Always be conscious of the status of your business plan, Volker said. Additionally, entrepreneurs should stay on top of both costs and potential competitors, because if they don’t, investors will and may find a better solution.
Distribution channels, strategic partners, and supply chains are all integral to moving the product, and shouldn’t be neglected.
Teams are also a vital component, especially when moving from angel investors to venture capital. Know your shortcomings, and bring in team members (including board members and advisors) who can compliment your skills. Finances, including a cash-flow projection to profitability, are also key to starting a new business.
Most importantly…who will buy the product? Why would they buy it? Can money be made, and if so, how much money? All simple questions, but absolutely necessary to ask, he said.
