BAE Workshop Blog
Executive Summary Contest

Think you have a good executive summary? Think it’s better than 99 others? The average executive summary has a 1000:1 chance of getting funded: Is yours that one-in-a-thousand? Find Out!

Send your executive summary to today. The most promising summary will save $200 on BAE Workshop. The deadline to apply for the contest is Wednesday, September 15th.

If you don’t win, find out why and what you can do about it at BAE Workshop. We provide 1:1 feedback and coaching to help you create an executive summary and PowerPoint presentation that contains what investors want to see. Our eight-week Workshop has interactive sessions on every aspect of a winning summary and presentation. Rather than just telling you what goes into your documents, we work with you to create the necessary plans and documents that form the meaty content of your fundraising materials. For more information about BAE Workshop, visit For more information about the Workshop topics, click here.

We help you create the materials VCs want you to have when you walk in their door, and from what we’ve learned from our surveys, what entrepreneurs want to know before they walk in their door.

Available in Pleasanton, Palo Alto, and on-line for those who are not convenient to either physical site.

8-Week Series – Starts September 29

Everybody knows you need a go-to-market strategy; but what goes into one? What do you show? What do you leave out?
There’s a session for that.
There a dozens of seminars on the necessity of finances in your materials; how much do you show? What matters and what doesn’t?
There’s a session for that.

Lots of advisors will tell you the first paragraph is the most important; why is it? What do you say in it? What do you avoid?
There’s a session for that.

Want to hear from VCs and angels what they look for, what turns them off, what they would have done with some interesting possible investments? Want to know what successful entrepreneurs did to get funded?
There’s a session for that.

Find out what goes into a winning executive summary and presentation; learn the process of funding, the steps you’ll go through
There’s a session for that, too.

Send in Your Executive Summary  Now
To qualify for a savings of $200 for the Workshop series, send it to

What the Numbers Don’t Tell You About Start-Up Funding

A deeper look into the statistics of fund raising for entrepreneurs

In an earlier post (How Bad is It?) I showed data indicating that only one applicant gets funded for every thousand executive summaries received by a VC firm. While that is absolutely true, it doesn’t tell the whole story.

Normal statistics assume that the objects the statistics deal with are interchangeable, but this is not the case with entrepreneurs. They range from wet-behind-the-ears newbies to serial entrepreneurs on their fourth start-up. The statistics don’t apply equally across this spectrum.

For starters, roughly 50% of start-ups are not fundable. They don’t have a business model that works, or they plan to introduce an OS to compete with Windows, or for any of a thousand other reasons they simply aren’t fundable. For them the statistics are not relevant.

So how come the other 49.9% don’t get funded?  There are plenty of reasons. Here are some of the more common ones.

Too Early

  • This is the most frequent problem.
  • Start-ups may apply to a firm that states on its website that it invests in early stage companies, but then learn that “early stage” means different things to different VCs. For one, it means beta software and a few users but for another it means two quarters of revenue.
  • A little time will fix most too-early situations (if the time is spent getting more customers).

Approach wrong firms

  • You would expect that “nobody” would approach a software VC firm with a medical device idea, but a lot do.
  • More nuanced errors occur when an investor’s website says they invest in security software, but it fails to clarify if it’s network security, PC security or DRM.
  • A lot of firms advertise themselves as “Bio-tech,” or an equally broad field, yet in practice have a much narrower focus.
  • Know who you want to talk to; start by researching the VC’s website, examine their portfolio, check the background of the partners.

Insufficient growth plans

  • VCs need their investments to grow unnaturally big and fast.
  • Entrepreneurs with modest growth plans will find they don’t get much attention.
  • How much is enough? A general rule of thumb is that $100M in revenue in five years is expected.
  • Sometimes all it takes is to re-plan more aggressively.

Too late

  • Some start-ups have been in business for five years, have built little customer base, have been searching for money in a lackluster manner. They simply aren’t attractive.
  • Investors may feel if a start-up can’t build something reasonably big in four or five years there is probably something wrong with its idea or with the team.
  • There is not much you can do to fix this one, but a lot you can do to avoid the problem.

Wrong introduction and presentation materials

  • There is a right way and many wrong ways to create your executive summary.
  • There are certain things investors look for and if s/he can’t find it quickly, it’s on to the next one.
  • There is a right way and many wrong ways to create your investor pitch.
  • There are certain things investors look for and if s/he doesn’t hear them, there’s no invitation back.
  • Particularly for first-time entrepreneurs, getting some outside help can provide you with the right stuff, done the right way. Experience can be a good teacher, but can also be an unforgiving one.

Not likable (enough)

  • Investors will work with you closely, apply a lot of pressure and depend on you to execute.
  • They will want to feel that you listen and are coachable.
  • A lot of tough times are in store, and they will be much easier to manage if you like each other.
  • Investors like to invest in people they like.

Some little thing

  • The rule of cockroaches is widely applied, if only unconsciously. It states, “There is never just one cockroach.”
  • If an investor sees one problem — e.g., of logic, planning, or understanding, s/he is likely to conclude there is a serious risk that there will be other such problems that will be uncovered later. That is a real turn-off.

We will return to these themes in future posts, and go into ways to avoid problems, in future posts.

Looking Up? A Review of Recent Funding Data

A review of recent VC investment data

Every quarter chroniclers of the state of the venture capital industry release data about the quarter just past. Most of the data is retrospective, giving little guidance as to what we can expect in the future—other than a continuation of whatever trend exists from the last few quarters. A lot of ink is spent documenting how much money VCs have raised from their investors, how much they’ve actually invested, up rounds vs. down rounds, exits, etc. But there is one category that is highly predictive and is the one I find most interesting—the relative number of Series A investments.

Recent Data On The VC Industry

Series A investments are the acorns from which oaks will grow. A Series A investment is the launch of a new company. Almost all start-ups will see follow-on rounds in future quarters. What this means is, if Series A investments are up in Q1, then we can expect growing activity in Series B and C in the next few quarters.

The latter series dominate the data for the industry and are what most of the media focus on. If latter rounds are up, the industry is up. If they’re down, the industry is down. That’s because the latter rounds are typically 10 to 100 times larger than the relatively small amounts that get invested in Series A.

So what does the recent data tell us?

Fenwick & West summarized data from Venture Source and the Money Tree early last week. The data are based on the approximate 104 Silicon Valley companies that received funding in Q1 10.

The proportion of Series A fundings in Q1, 24% of all fundings, was up slightly from that of Q4 of 09,  23%. But Q1’s results showed a dramatic increase from year-ago numbers of 13%  in Q1 of 09, and even more dramatic improvement from Q2 of 09, where only 8% of the deals were Series A. Each quarter since Q2 has shown an increasing level of Series A activity. What that means is that more and more companies are getting started and this is a good and improving time to start a company.

An indicator of an improving environment is that for later stage investments, up rounds exceeded down rounds 49% to 32%, with 19% flat. Q1 10 is the third quarter in a row in which up rounds have exceeded down rounds. What this means is that companies are growing, expanding, meeting their benchmarks, and increasing their valuations. Generally this trend indicates the economy is improving and also that the companies are performing well. But not all segments show positive results.

The hot industry sector is Internet/Digital Media with up rounds in 83% of deals. Software had the most deals, 44% of the total.

Some of the luster may be off the Cleantech sector, which had the fewest deals (8%) and the smallest fraction of up rounds (17%) and the largest fraction of down rounds (67%). Cleantech has probably been running on hype for several quarters, and is in the process of falling back to more normal, non-hyped, status. It may not have reached bottom yet.

But if you look for a unifying theme in this quarter’s data, it is certainly the continuation of the improving climate for venture capital and the economy. It’s a good time to start a company and to get funded.

The original report can be found on Fenwick & West’s website, here.

13 Mistakes: Real-Life Mistakes Made by Entrepreneurs — #1

First of several posts about entrepreneurial mistakes and their consequences

From time to time I will be posting about mistakes entrepreneurs make in their search for funding. These anecdotes are drawn from my own consulting practice. Every one describes an actual circumstance, hard as that may be to believe.  Each one represents a company with an investable idea that because of mistakes made by the CEO became un-investable. For obvious reasons the names of companies and their managers will not be used.

Mistake # 1: Pile up a Mountain of Debt

Long-Life Phosphor Powders

A potential client had a license from a world-famous research lab on the East Coast. He had full rights to manufacture, sell and distribute a class of long-life phosphors – they could retain their glow for up to twelve hours. Applications ranged from highway cones that could be seen all night, to ski and water sport clothing and equipment, to emergency exit signs and many more. Several large companies had expressed interest in purchasing his  phosphors when he was in a position to deliver them in volume. The market potential was enormous.

By the time he came to me, he had spent five years  looking for funding to build a manufacturing facility.  Advisers had taken him to Chicago and Boston, introducing him to shady “angels,” a private equity investor who did business from his car and other questionable characters.  Never had he spoken to a legitimate venture capitalist.

He had talked friends and family into financing his purchase of samples from the research lab, fancy wooden sample kits,  travel and  expensive market studies. All in all, he owed his friends and family $20M, including interest.

He came to me to find a VC who would give him enough money to pay back the $20M and set him up in manufacturing, which he estimated would cost another $10M or so. He had never worked in a manufacturing facility, let alone run a factory.

I explained that VCs live in a competitive world and compete with other firms based on the returns they provide their investors. A firm can’t take $30M, give 2/3 of it away and expect to make a competitive return on the remaining $10M.

Sometimes even really good ideas just can’t get funding, often because of misguided notions and serious mistakes made by the entrepreneur.

How Bad Is It?

A summary of the odds entrepreneurs seeking funding face

The hard truth is that most entrepreneurs aren’t going to get funded, and most of them won’t know why. Here are some examples of how hard it is to get funding in the San Francisco Bay Area. Data may be different in other parts of the country.

  • A small VC firm in San Francisco reports that it gets 6,000 executive summaries a year yet only funds six companies a year
  • The partners in a mid-sized VC firm on Sand Hill Road say they sit through 450 PowerPoint presentations a month but only fund 15 companies a year

From mega-firms to boutiques the ratio of executive summaries to fundings is consistently reported to be in the range of 1000:1.

Funding Statistics:

  • 90 % of executive summaries do not result in an invitation to present
  • 95% of first presentations do not get an invitation to a second meeting
  • 99.9% of executive summaries do not get funded
  • Only 1% of first presentations get funded

As a consequence most entrepreneurs spend months in a fruitless search for funding.

So starting a company is  likely to be the hardest thing you have ever undertaken, especially if you are a first-timer. It will make grad school look like a piece of cake. That is because getting a company off the ground is a full-time job, as is fund raising. You will never have worked so hard. Consequently it will be the most fun that you ever had. In your work you will be surrounded by optimists who believe you can succeed, who have been infected with your optimism. It’s all about high risk, high tech, high finance — what’s not to like?

In future postings I will be discussing why the statistics are so bad and what entrepreneurs can do to improve them.


Point Lobos near Monterey, CA