Bill Payne angel investor and Damian Scattergood of STAR translation at HotHouse event on Fundable Startups.
Thursday 19th April 2012 was a fantastic day here in Docklands when we had the chance to meet Bill Payne, Americas 2009 Angel Investor of the year. Bill has invested in over 50 companies including DoubleClick. His successful track record makes amazing reading.
Bill was visiting the Hothouse entrepreneurship program based in Docklands Innovation Park where STAR has its Dublin office. So it was great to be able to meet and discuss this topic with him. The title of his presentation was “Fundable Companies” which caught my eye straight away. At the end of the day the real question for any investor or managing director is : “Is the project or company actually fundable?” All too often business plans have great ideas and lots of out of the air sales figures and projections but what investors look for is what the core business actually is.
Management Team is key.
One of the key factors that Bill highlighted was the strength of the management team. You may have a great product and a million dollar market, but can you actually manage the company when it gets to that size? As companies grow you have to evaluate your management skills (across the company) and ascertain who is the right person to manage it and what skills they require. The skills to manage a 5 person startup are not the same as those required to manage a 100 person company. Sometimes a CEO has to decide and plan when they need to be replaced. If you are looking to have an exit sale of your company perhaps it is better to put in a CEO that has done it before so they can manage up and out for that trade sale.
But I’m Only A Startup.
Ok so you might not be the million dollar company looking to be bought out if you are just a startup. Again Bill offered some excellent advice on how to manage the early start investment (or whatever cash you had) and how to focus on building your company. Start-up companies should first consider:
1.Where to focus?
2.How to spend and manage cash?
3.And where to build the correct value in your organization?
Angels are people too.
Young entrepreneurs often forget that Angels are people too. They have the same concerns and worries about a business as you do. They may have the money you need to build a company but have to be careful where they put it. Bill told us that 50% of his investments go nowhere. That’s a lot of money to lose. So he looks for companies that might deliver back 20 times return. If you were looking to have an angel invest between 500k and 1 million in your company, they would be looking at getting 20 million in a trade sale in perhaps 5 years. So think before you leap.
The Top 7 Tips Bill gave us where:
1. Management team is important.
2. Scalability: Your business needs to be able to scale fast (production, people and management skills).
3. Angel investors tend to invest in local companies – so do you homework on who is in your area.
4. Potential fund-able companies should be customer ready. You should have some customers and a little traction in the market. Angel money gives you the funding you need to scale, it is not research money.
5. Competitive Advantage: You need to have some form of competitive advantage. If someone can copy you tomorrow and take the market away forget it. It doesn’t mean you need IP rights etc, this can come later, just an edge to get the first 10 million in sales!
6. Niche Markets helps. If you are in a market the big companies aren’t looking at, you can take market share quickly.
7. Sales and marketing plan: Make sure you have a proper sales plan. Not we’ll get 1% of the market by 2012. How are you actually going to sell your product?
If you are interested in learning more about Bill Paynes system for ensuring you are investment ready check out his website on http://www.billpayne.com/
Are you investable ? – follow Bill here
By STAR Translation Services