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Oct. 15th, 2002
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Oct. 15th, 2002 10:26 pmA lesson in getting investment capital into your money-burning tech company:
1) Write a business plan. This should contain a psychotic mix of patting oneself on the back, crossed with worst-case scenarios. Put in financial numbers that show you barely limping above starving to death. Include a resume showing that you're the savior of the industry. Point out all competition that will, most likely, bury you in the marketplace. Outline a marketing plan that would sell a moon full of cheese to lactose intolerant mice. The business plan should be forty pages, and not a single soul on planet Earth will read past the three-page Executive Summary in the front, and the one-page Cash Flow spreadsheet in the back.
2) Find an investment guru. This could be an independent, licensed money guy, or a venture capital firm. The guru will write an amazingly complex document that amplifies the psychosis: "An investor would be an idiot to invest in this company, with all the competition out there. Said investor will surely lose their shirt and have nothing to show for it. However, if after all that, you still are interested (insane though you must be)...we are forecasting a 250% return on investment in 3-5 years."
3) Just as the document reaches completion, the guru's wife will have a baby, so the guru will be out of action for five days.
4) Once things are on track again, several investors will be targeted. None of them will be local, which means travel to LA, New York, Miami, Chicago, and Dallas, to give a dog-and-pony show proving that, though the investment is risky to the point of throwing your money into Mauna Loa, we secretly plan to make millions.
5) An investor will express definite, enthusiastic interest and will never be heard from again. Perhaps he's in jail.
6) Another investor will definitely say he's not interested. The guru will go after him. Said investor will protest that he wouldn't invest in another tech company if the guru held a gun to his head. The guru persists. The investor shakes his head and says that all money is tied up in CDs and other untouchable funds until two Tuesdays after Ragnorak. The guru persists.
7) Investor relents. He believes he will indeed invest. But, he's taking his kids fishing in the Cayman Islands and will be out of touch for the weekend. Two weeks pass.
8) Investor returns to the country. He definitely will invest...in fact, is now so enthusiastic that the company's officers get whiplash from nodding so much. The investor verbally agrees to the terms...then goes for a weekend vacation to Paris with his wife. Two weeks pass.
9) Investor returns. The paperwork has craftily been drawn up by the guru and is ready to be signed. Investor must, of course, run the paperwork by his lawyer. Unfortunately, the lawyer is taking his kids fishing in the Caymans. Two weeks pass.
10) The lawyer finds twenty-seven objections in the investment paperwork. None of them mean anything -- indeed, the suggested improvements actually weaken the position of the investor. Company agrees to all changes in approximately thirty-six seconds of perusal.
11) Investor promises that the funds will be wired into the company's bank account tomorrow. Two weeks pass.
12) Investor returns from solo sailing trip from Miami to Barbados. Expresses surprise that the transaction hasn't happened yet. Promises to call banker first thing in the morning. Two days pass.
13) Investor promises to get to the bottom of the problem. Wire transfer occurs...for 43% of the funds promised. Investor claims his accountant wants to give seed capital until an earnings threshold has been reached. Guru and company protest that the signed paperwork does not reflect this change in strategy. Investor relents. One week passes.
14) Investor is suddenly unreachable. Wife, accountant, mistress, lawyer, other mistress, and kids say that investor is involved in a bi-annual pilgrimage to Tibet and is unreachable for three months. It is discovered, however, that the wife has always had power-of-attorney, and remainder of investment money is wired within fifteen minutes.
1) Write a business plan. This should contain a psychotic mix of patting oneself on the back, crossed with worst-case scenarios. Put in financial numbers that show you barely limping above starving to death. Include a resume showing that you're the savior of the industry. Point out all competition that will, most likely, bury you in the marketplace. Outline a marketing plan that would sell a moon full of cheese to lactose intolerant mice. The business plan should be forty pages, and not a single soul on planet Earth will read past the three-page Executive Summary in the front, and the one-page Cash Flow spreadsheet in the back.
2) Find an investment guru. This could be an independent, licensed money guy, or a venture capital firm. The guru will write an amazingly complex document that amplifies the psychosis: "An investor would be an idiot to invest in this company, with all the competition out there. Said investor will surely lose their shirt and have nothing to show for it. However, if after all that, you still are interested (insane though you must be)...we are forecasting a 250% return on investment in 3-5 years."
3) Just as the document reaches completion, the guru's wife will have a baby, so the guru will be out of action for five days.
4) Once things are on track again, several investors will be targeted. None of them will be local, which means travel to LA, New York, Miami, Chicago, and Dallas, to give a dog-and-pony show proving that, though the investment is risky to the point of throwing your money into Mauna Loa, we secretly plan to make millions.
5) An investor will express definite, enthusiastic interest and will never be heard from again. Perhaps he's in jail.
6) Another investor will definitely say he's not interested. The guru will go after him. Said investor will protest that he wouldn't invest in another tech company if the guru held a gun to his head. The guru persists. The investor shakes his head and says that all money is tied up in CDs and other untouchable funds until two Tuesdays after Ragnorak. The guru persists.
7) Investor relents. He believes he will indeed invest. But, he's taking his kids fishing in the Cayman Islands and will be out of touch for the weekend. Two weeks pass.
8) Investor returns to the country. He definitely will invest...in fact, is now so enthusiastic that the company's officers get whiplash from nodding so much. The investor verbally agrees to the terms...then goes for a weekend vacation to Paris with his wife. Two weeks pass.
9) Investor returns. The paperwork has craftily been drawn up by the guru and is ready to be signed. Investor must, of course, run the paperwork by his lawyer. Unfortunately, the lawyer is taking his kids fishing in the Caymans. Two weeks pass.
10) The lawyer finds twenty-seven objections in the investment paperwork. None of them mean anything -- indeed, the suggested improvements actually weaken the position of the investor. Company agrees to all changes in approximately thirty-six seconds of perusal.
11) Investor promises that the funds will be wired into the company's bank account tomorrow. Two weeks pass.
12) Investor returns from solo sailing trip from Miami to Barbados. Expresses surprise that the transaction hasn't happened yet. Promises to call banker first thing in the morning. Two days pass.
13) Investor promises to get to the bottom of the problem. Wire transfer occurs...for 43% of the funds promised. Investor claims his accountant wants to give seed capital until an earnings threshold has been reached. Guru and company protest that the signed paperwork does not reflect this change in strategy. Investor relents. One week passes.
14) Investor is suddenly unreachable. Wife, accountant, mistress, lawyer, other mistress, and kids say that investor is involved in a bi-annual pilgrimage to Tibet and is unreachable for three months. It is discovered, however, that the wife has always had power-of-attorney, and remainder of investment money is wired within fifteen minutes.