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Lessons from the VC Battlefield
This article by Diane Young Uniman was published in U.S. 1 Newspaper on
February 17, 1999. All rights reserved.
We bump our way through the battlefield of life,
with experience acting as much a mentor as anyone or anything else.
Entrepreneurs may face some of the biggest bumps of all. The chance
to hook up with a guru to accelerate the learning curve and potentially
eliminate some of life’s battle scars is as seductive as crackers
to a cup of chowder. And the idea of having that guru in an area of
our lives that we really, really care about is, well, forget the crackers.
It’s toast points to a trough of caviar.
Dan Conley may not be wearing long robes and a turban, but to hungry,
hopeful, eager entrepreneurs with big ideas but empty pockets, Conley’s
mantra might as well be money. Why? Because as far as he’s concerned
he doesn’t need to kick down the proverbial door to get what his clients
want. According to him, “there is no door.”
As head of the Somerset-based Silicon Garden Angels + Investors (732-873-1955),
Conley calls himself a “venture catalyst.” He works with entrepreneurial
business owners to help acquire the most appropriate form of capital,
debt, or equity at a cost and structure fitting their overall goals
and philosophy. Part of his success as a catalyst is screening-in
deals and screening-out those that still need weeding and tending
in the garden.
To get a “byte” of Conley’s perspective, hear him speak on
“12 Show Me Keys to Attracting Seed-Stage Capital” and “Avoiding
the 10 Deadly Sins of Raising Capital.” He is on a panel entitled
“Raising Venture Capital: Lessons from the Battlefield” sponsored
by the the Licensing Executives Society (LES) on Wednesday, February
24, at 6 p.m. at the Basking Ridge Country Club, 185 Madison Road.
Cost $30. Call 908-953-8092.
Also speaking on the panel are John Park, general partner and
CFO, Cardinal Health Partners of 221 Nassau Street. Park will outline
the process by which Cardinal evaluates and funds investments, especially
companies in the health care and life science services. Another panelist
is Ira Pastor, director of business development at Photosynthetic
Harvest Inc. of Willingboro. He will present an effective business
plan for early-stage capital raising efforts.
Conley grew up in Belmont, Massachusetts, the second oldest of
six. He would have graduated in 1980 at the University of Massachusetts,
but instead graduated 10 years hence after he joined the Marine Corps,
where he was a specialist in the area of avionics, diagnosing “black
boxes.” His cronies called him “Radar O’Reilley.” While
in the Marines, he qualified for the 1980 Olympic trials in springboard
diving and went on to become a “burr in the saddle” of the
UMass administration as editor of the campus newspaper and got a bill
passed that recognized student governments as actual legal representatives
with power.
Conley started out in the leasing business and was recruited by GE
Credit to help build a $100 million portfolio. Then he joined a Boston
firm (his new wife was at MIT) to package syndicated transactions.
He went out on his own in 1991, figuring that he “can deliver
better service than any corporation.”
A major factor in Conley’s success rate as a venture
catalyst, whose task it is to create a healthy, winning liaison between
the seeker of money and the source, is his fastidious screening of
the entrepreneurial companies. You can’t win in the pros with bush
league players. That’s where the matrix of the 12 “show me keys”
to attracting seed stage capital (courtesy of Fred Beste, Mid-Atlantic
Venture Funds) and the 10 deadly sins of raising capital come into
play. Seed stage capital is financing for early stage enterprises,
which usually have the highest operational risk, and are therefore
unable to get debt financing. Usually these companies receive their
first round of financing from professional venture capital firms or
from private individuals called “angels.”
When evaluating an entrepreneur and company, the 22 factors will determine
whether Conley will take an entrepreneur under his wing and get into
the trenches. If any one of these factors is awry, the catalyst, like
an examining doctor, cannot give the company its necessary clean bill
of health. According to Conley, “if a company does not possess
all 12 keys, (or if they have any one of the 10 sins) then they better
have fantastic management who can learn. You can’t survive to full
harvest until you possess all 12.”
What are some of these keys and sins? Well, for example, you need
somebody who can sell, preferably the CEO. “The CEO is promoting
the company so funding and talent are drawn to it. He or she is the
most important spokesperson for the company so you need a leader to
bring the company to the next level. They are the magnet.” How
does Conley know if a person has these qualities? “I put them
through the checklist.”
Another show-me key is in the old adage, put your money where your
mouth is. This is otherwise known as, “having some team skin in
the game.” Conley cites an example where one of the CEOs put in
a good deal of his own money which made the company more attractive
to the investors.
And, according to Conley, “a lot of success in this business is
intuition.” Conley actually utilizes what can only be likened
to an intuitive sniff test that must be passed by an entrepreneur
and his company before Conley will take the person as a client. Often
one can actually smell success in a company, and these veritable corporate
pheromones are an unstated factor that attracts the capital one needs
to grow. As Conley says, you have to be “fundable as well as compelling.”
And part of Conley’s radar intuition applies to matchmaking. “Not
only does the catalyst need to select a fund, but personalities have
to be compatible. There is a lot of right brain evaluation going on.”
Does Conley ever get fooled? Conley says he could be fooled by the
science, so to avoid mistakes in that arena he doesn’t try to know
everything. He just connects with people who do.
What happens when a company does not make the grade? It’s not totally
curtains at that point. Part of Conley’s business acumen is to keep
balls in the air. As Shakespeare would say, “Ripeness is all.”
It may very well be that the company just isn’t ripe, but that it
can rehabilitate and get a second bite of the apple and meet the 22
challenge.
How? Conley often recommends that a company go back to the drawing
board. This would include attending “The University” of the
New Jersey Entrepreneurs Forum. The “Entrepreneurs University”
helps teams grow, refine their business plan, recruit talent and advisors,
cross-train and develop their financing strategy.
Does Conley have some bottom line advice for the entrepreneurs out
there? He sure does: “if you have a better mousetrap, and you
know it, get to a venture catalyst as quickly as possible.” Why?
That is the only way to assure yourself the best possible chance that
your mousetrap is on the right track, and you don’t lose precious
time. What can happen if you don’t visit your local VC? Before you
know it, your mousetrap could be yesterday’s news, introduced by someone
else fully funded, snapping up mice in every rat trap in America.
— Diane Young Uniman
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