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From an editorial by Steven M. Cohen, which appeared Venture’s Capital Club Monthly. The opportunity to present my entrepreneurial business idea to the New Ventures Workshop at the Harvard Business School was too great to pass up. I thought of the exposure to a roomful of investors eager to pour hundreds of thousands of dollars into my venture and the tremendous profits their dollars would initiate. I thought of the feedback I would get from the panelists - surely they would be impressed with the idea, and with me as an entrepreneur. No doubt they would be equally impressed with my wife [the company’s cofounder] and her ability to handle the public relations aspects of the firm. Certainly people would be thrusting Offers To Purchase at me before the presentation was over. I made a note to have Offers To Purchase with me. Judging by the process of getting scheduled, how bad could the experience be? Mr. Burt Alimansky, Chairman of the Workshop, was patient and thorough as he explained the ground rules of the workshop and the costs involved. I would need to submit my complete business plan to the panelists at least ten days before, and have handouts ready for the audience. To be most effective, he recommended that I accompany my talk with a slide show, highlighting certain key aspects of the business. He provided me with a suggested outline and asked for my suggestions for panelists. For $350, I would benefit from the candid business advice of four panelists, all of whom would be familiar with the industry in which I hope to operate. And one of the panelists would be a venture capitalist - so if the deal looked good, I’d make contact right there. I began working on the presentation months in advance. For a public talk, I thought I would omit a lot of the routine financial information, and instead include more industry background. Instead of pie charts and pro formas, I decided to include color slides depicting the problems the industry is having, and how the new company expects to solve them. Instead of iffy sales projections, I listed the product benefits and hinted at possible unit sales. I wrote jokes into the script here and there to provide comic relief. Wrong, wrong, wrong. The first comment from the first panelist was, "Mr. Cohen, when it comes to investments of this magnitude, you shouldn’t be joking." The first comment from the second panelist was, "Mr. Cohen, instead of providing sales projections, you’ve given us conjecture. We need solid sales projections, for every product, for ten years, in order to properly analyze your chances for success." The third panelist said, "Mr. Cohen, your slides are very nice, but you haven’t shown us a single slide of your product, nor have you provided a Sources and Uses Statement. As investors, how will we know where our money is going?" And the fourth panelist said, "Mr. Cohen, you’ve wasted your time and ours. Without detailed financials, including projected profit and loss statements and balance sheets for each of the first ten years, the industry background you’ve provided is nothing but interesting reading. You’ve got a lot of work to do." And so, $350 and many late nights working on the plan later, I learned to heed the advice I had been hearing from venture capitalists for many years: Don’t go looking for capital until the plan is complete, and answers the questions investors are bound to ask. The Plan Forums . . . aren’t places for theatrics or creativity. Just stick to the basics, and make sure all your homework is done. Don’t agree to be a presenter unless you are certain your plan is complete, including all financials and the shareholder’s agreement. Because, like the Emperor and his new clothes, if you’re naked up there, somebody will notice. |
