Corrections or additions?
This article by Jeff Lippincott was prepared
for the October 11, 2000 edition of U.S. 1 Newspaper. All rights
reserved.
Courting Venture Capital
How do you know what to say to a venture capitalist
once you have determined that it’s time to take move forward with
your business plan? Learn the right way to approach venture
capitalists
at the New Jersey Entrepreneur’s Forum entitled, “What Do VCs
Want?” at McAteers restaurant in Somerset, Thursday, October 12,
6:30 p.m. Cost $45. Call 908-789-3424.
According to Ron Hahn, general manager with the Princeton-based
venture capital firm Early Stage Enterprises (ESE), venture
capitalists
are looking for investment opportunities that have the following
attributes:
1. A very clear explanation of what the new business is about.2. A large market opportunity for the product or service inquestion.3. A management team that has a lot of experience in themarketplaceand has the skills to sell a product or service to a customer”We find one of the key ingredients is a CEO who can sell,”says Hahn. “Ultimately a successful business sells products andservices and makes a profit, so the ability to sell is a keyissue.”ESE, founded in 1996 by Hahn and co-manager James J.Millar,has invested about $20 million in 16 companies to date, and has helpedthose companies raise another $70 million through other parties. Anew partner, Kef Kasdin, has recently joined the firm from 3Com.ESE (www.esevc.com) specializes in investing in companies in theMid-Atlantic region,from Connecticut to Virginia, that are in the early stages ofcorporatelife. ESE’s preferred first round investment ranges from $500,000to $1 million. “Other venture capital companies would do a dealfor $5 million where we would never do one that large,” says Hahn.”ESE provides a level of capital typically earlier than most ofthe venture capital firms nationally or in this region would tendto provide.””ESE tries to deal with the earliest stage of venturecapital,”says Hahn, “and we’re prepared to make a seed investment in acompany that is not quite ready to sell a product or service.”According to Hahn, in some cases the investment is made at the endof a sort of test-marketing phase called “beta-testing.” Betatesting is letting a customer use a product or service for free orat a discount in return for the customer’s comments on what they likedor didn’t like about the product or service and any additionalsuggestionsthe customers may have.ESE also invests in companies that have completed beta-testing andare ready to offer a product or service.Hahn feels that there is an underserved market segment in themid-Atlanticregion for a third kind of investment his firm makes: Companies thatare selling products and services but with less than $3 million inannual revenue at the time of investment.What tips does Hahn have for those contemplating wading into venturecapital waters?Put together a very professional business plan. “Thebusiness plan should be a document that the management of the companycreates and should talk about the market opportunity that the companyis going after, the innovation that its product or service makes inthe marketplace, who the management team consists of, the businesspotential, and financial objectives.””It’s surprising, sometimes we get business plans and we readthrough them and we actually can’t quite figure out what theirbusinessis,” says Hahn.Get a referral. ESE gets over 1,000 proposals per yearbut will make perhaps four to six investments per year. The bestchanceto get the attention of ESE, or any venture capitalist, is to bereferredby people they know and trust in the community.Be prepared to give a professional presentation.”You’dbe surprised how many people come into our office and ask us `Whatwould you like to know about our business plan?’ We need to see howyou are going to approach potential new customers.”Hahn got bit by the entrepreneurial bug while earning his MBAat UCLA. A professor had asked a group of students to go out a finda company that would permit the students to come in and do some freeconsulting. “I became fascinated with the entrepreneurialpersonality— somebody who takes significant risks to build a businessopportunity,”says Hahn.Hahn sees a lot of interesting technologies but feels that often themissing ingredient is capable management. To be successful in gettingthe interest of venture capitalist Hahn advises, “Put togethera management team that has the right kind of background andexperience,because that is what will impress us.””People who should approach us are those who have taken someactionto make the business a reality. They still need capital to get fromhere to there. And even though their accomplishments may be at a veryearly stage, they’ve done something that convinces us that it trulyis a real business opportunity.”— Jeff LippincottTop Of PageBe an EnvironmentorMost people are very busy, with very little time intheir schedule available for volunteering, but I suspect that somepeople would be eager to help transform a young person’s life,”says Maureen J. Quinn, director of the NJ Environmentors Projecton Lawrenceville Road.Quinn launches her a recruiting campaign with a kickoff meeting forvolunteer mentors on Thursday, October 12, at 6:30 p.m. at the RiderUniversity Science & Technology Center, Room 102. E-mail:mquinn@environmentors.orgor call 609-278-5844.This multi-cultural, one-to-one mentor program helps high schoolstudentsdecide on their educational career goals — and then helps themmeet those goals. Volunteer mentors are matched with a student towork on an eight-month project, which they choose together. Theprojectmust involve an environmental issue that can be researched and testedscientifically. The pair work on the project together for two hoursper week. The result: a classroom lesson taught by the high schoolstudent and an entry in the EnvironMentors Fair.Plus a big increase in the self esteem of the student and, claimsQuinn, lots of fun for the mentor. Mentors do not, by the way, needto be an environmental professional, and they get plenty of trainingand support.”I’ve seen the students that I mentor change their outlook aboutthe importance of protecting the environment in just a few shortmonths,”says John J. Rosania, who has been an NJEP mentor for threeyears. “The project gives students the opportunity to interactwith another adult, aside from their teachers and parents, that theyhave common interests with. These interactions help the student togrow as a person, gain self confidence, and most importantly, havesomeone to look up to. You cannot put a price on this.”Next StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
