Startup Success

Experts share advice for entrepreneurs

By Ilene Wolff

If you’re an entrepreneur courting a venture capital firm and it’s time to host a meeting at your office, put your efforts into what you have to say and don’t fret about your particleboard desks and hand-me-down furnishings — your humble surroundings may actually work in your favor.

“That shows us where you spend your money and what your priorities are,” says Tony Grover, managing director of RPM Ventures and chairman of the Michigan Venture Capital Association, both in Ann Arbor, Mich. “It means you’re a pretty frugal team.”

RPM is a 17-year-old seed and early stage venture firm whose investment focus is on business-to-business on-demand software; cloud and social media infrastructure; online sales sites; and automotive information technology, including the connected car, mobility and transportation. The company invests in businesses in the Great Lakes region, New York and Silicon Valley.

This information is from RPM’s website and demonstrates another point that Grover and others in the VC world stress: Learn as much as possible about a venture capital firm before approaching it. Fortunately, such firms are highly transparent on their websites, and list key information that entrepreneurs need to know: the type of companies they invest in; at what stage they invest; the size of their funds and the amounts they tend to invest; and their geographic reach.

In addition to his company’s website, Grover repeatedly mentions LinkedIn as a good source of information, but there’s at least one more, says Maureen Miller Brosnan, executive director of the Michigan Venture Capital Association (MVCA), a trade association that focuses on high-tech and the life sciences.

Easy-to-access resources
“The first big thing to do is to get your hands on our ‘Entrepreneurial & Investment Landscape Guide’,” Miller Brosnan says. “It’s meant to keep track of all the changes going on in the entrepreneurial space.”

The guide lists detailed information about angel and venture capital groups in the state, organizations that offer support to entrepreneurs and MVCA member service providers, as well as the trade organization itself. The interactive, online “Michigan Entrepreneurial & Investment Landscape Map” shows where angel and venture capital groups and their portfolio companies are located.

A second MVCA publication, an annual research report, provides additional information about investment money activities during the prior year.

The MVCA’s publications pay off not only for entrepreneurs, who may target their pitches for support more accurately as a result of the information they offer, but for its members as well.

“What we’ve found with our members is they are getting higher-quality calls from startups,” says Miller Brosnan. “The MVCA office is getting fewer general information calls from startups too.”

Covering all the bases
However, once an entrepreneur seeking funding follows the advice of Grover and Miller Brosnan, he or she still has more homework to do.

“Develop complete knowledge of the market you’re going after,” advises Skip Simms, a managing member of the Michigan Angel Fund and a vice president at Ann Arbor SPARK, a Michigan SmartZone. SmartZones, created by the Michigan Economic Development Corporation (MEDC), are designed to help stimulate the growth of tech-based businesses throughout the state. 

In fact, when Simms hears that an entrepreneur has the greatest new invention, one so good that after he builds it people with just flock to buy it, he suspects that person hasn’t done his or her due diligence. 

“They haven’t talked to customers, haven’t identified the sales cycle,” he says. “This manifests itself when the entrepreneur talks in generalities and can’t say what customer told him this or that.”

Simms says the entrepreneur has to contact at least 20 and up to 50 potential customers. This often means making cold calls to targeted businesses.

“It’s not necessarily the CEO or even the COO. Sometimes the best person is a manager or a line person,” he says. “You’re looking for initial feedback: be succinct, identify a problem and tell him how your product will solve it.

“The idea is to ask leading questions to get the person to tell me more: Even better if he says come visit me and show me. Nothing replaces face-to-face conversations.”

On the other hand, if the person says the problem you’re trying to solve is not a problem for him, you’ve got to rethink your product, Simms says.

More tips for success
Our experts share other dos and don’ts for startup success …

Simms: Assemble a team. There has to be more than one person engaged in the company, including a product person and a businessperson knowledgeable about sales and other administrative issues.

“It is rare that one person can be both,” Simms says. “One person won’t have the knowledge, contacts and experience.”

Miller Brosnan: Network. Investigate entrepreneur support organizations in Michigan that host opportunities throughout the state for entrepreneurs to get together. These organizations host days to pitch ideas, too. Some angel groups or VC group members may attend the meetings. Talk to other people who have gone before you about the lessons they learned.

“A hello, a handshake and a business card go a long way,” Miller Brosnan says.

Grover: If you’re fortunate enough to get a first meeting, RPM always asks the entrepreneur if he or she would prefer to go through a pitch deck (slides) or have a conversation. It doesn’t matter how long the pitch deck is, according to the MVCA. It’s more important to convey your business message. Be ready to validate your idea, talk about the customers with whom you’ve tested it, explain the return on investment for the customers who may buy your product and more. 

Being able to have a conversation without the crutch of a slide show demonstrates that you have a deep understanding of all the elements of a business, Grover says.

Simms: Listen, listen, listen – to potential customers, prospective employees and would-be investors.

“If you’re not listening, I guarantee you will not succeed,” Simms says. “Their commentary and questions will contain hidden gems of what you need to do.”

Grover: Be open and honest with potential investors. If you have a mistake in your past — a legal issue from a previous business or a driving under the influence conviction, for example — be the one to offer the information and don’t hope that it will remain hidden. 

“Take ownership of the mistake,” Grover says. “Be upfront and transparent about it.”

Miller Brosnan: Don’t let your day-to-day activities devoted to building your business idea keep you tethered to work.

“The only don’t I would say is, don’t stay buried in your office,” Miller Brosnan says. “We have a state that has totally embraced entrepreneurship and it would be silly not to take advantage of it.”

Who knows? Maybe once you’ve followed the advice of the experts, your company will grow to the point where you can afford to replace your hand-me-down furniture with something nice — and brand-new.