Finding money to transform a prototype hatched in a garage or a process developed in a university laboratory into an ongoing business is never easy, and with the economic downturn the bar is even higher.
But even if scraping together the funding to support entrepreneurship is more challenging, Dan Conley, a principal of Silicon Garden Capital in Somerset, believes that entrepreneurship might just be the economy’s salvation. “Little engines that can are out there, and there are always high-risk capitalists willing to take a fortune of substantial net worth and deploy part of it in high-risk, high-worth opportunities,” he says. “That will be one of the pathways out of the huge loss everyone is experiencing.”
But certainly the competitive landscape for startups has intensified. “Angels are no longer trolling for kitchen-table entrepreneurs or two guys in garage,” Conley explains. “They can find plenty of full teams in labs and incubators.”
As important as the product and team are, what investors are really looking for are businesses that have “unfair competitive advantage that they can maintain by being extremely cost efficient.” Conley defines this advantage as possessing intellectual property that can’t easily be replicated by a competitor or poached by larger company — it might be a proprietary process, patents, or the licensing of someone else’s patent. And, of course, the depth of patent rights is critical. Investors must consider what the patent would be worth if everyone left and only the patent remained.
Conley will be part of a “Fast Pitch 5 + 5 Forum on Life Sciences, Healthcare, and Alternative Energy,” where entrepreneurs will make five-minute presentations and receive five-minute responses from an expert panel. The workshop takes place on Thursday, December 11, at 4 p.m. at the New Jersey Economic Development Authority’s Commercialization Center for Innovative Technologies, 675 Route 1 South in North Brunswick. Cost: $35. To register, go to www.njef.org, E-mail DanConleynjangelsnet@aol.com, or call 732-873-1955.
Conley expects the recovery from the current downturn to mirror in length the 30 months it took the economy to rebound from September 11. As a result, says Conley, people are hording cash, making it that much harder to find someone else’s money to work with.
But those companies that are either finding incremental ways to save money or are exploiting market timing have a competitive advantage in this down economy. One example he cites is a company that helps businesses contain wireless expenses that can grow quickly when every top employee and has blackberries and cell phones.
But even these companies can’t just sit on their laurels. They need to be out proving themselves to investors.
Gather your bullets, beans, and bandages. Any campaign must have all its supplies ready before proceeding. Hence, entrepreneurs looking for money over the next year, suggests Conley, should have their business plans for 2009 ready before New Year’s Eve.
Rather than thoughtful strategizing for the future, he says, fundraising tends to be reactive, with businesses waking up suddenly and saying to themselves, “Oh, my gosh, I have run out of money. What shall I do?” Instead companies should be planning now for next year. “It’s almost like a campaign for president,” says Conley. “You have to be doing it for an entire year and a day.”
The bedrock tool for fundraising is a 10-page “sell-book” that includes a series of documents: a one-page introduction, an executive summary, a five-minute slideshow (that’s three or four pages, six slides to a page), bios of key players, and a good comparative analysis of the company’s market niche.
The goal is to put together elements of proof — like a pilot study with customer testimonials — that build a compelling and fundable story, says Conley.
Raise money in the neighborhood before talking to strangers. Angel investors and venture capitalists are not going to plunk down money unless entrepreneurs have already invested their own money and also convinced their families and friends to join them.
Plan carefully when and where to make presentations. The cycle of spring venture fairs is approaching, and each company must decide which are the most favorable to exploit. It’s a bit like looking for a needle in a haystack, says Conley. “You have to go to a lot of haystacks to showcase your unique thing.”
Prepare an updated forecast. Especially in the face of a volatile economy, projections must be realistic. “It will be an automatic no if your forecast still looks too optimistic,” says Conley.
Specify key benchmarks and milestones. Potential investors want to hear about what you plan to do with their money, and Conley suggests keeping the conversation simple. For example: “With our next $100,000, we’re going to go about the following three things in the next three days; then in the next three weeks, these three; then in the following three months, this, this, and this.”
Conley grew up in the Boston area. His mother was a professional nurse and, he adds, a “supermom” who had six children in eight years. His father was in sales. “I modeled myself after him,” Conley says.
After graduating high school, Conley joined the Marines, where he soldered sophisticated radio and radar components inside avionics boxes. While in the Marines he also earned an associate’s in technology from Saddleback Community College in California. Back home, Conley completed a bachelor’s in business administration, at University of Massachusetts in 1986.
Conley reported for a university-wide newspaper and as a correspondent for a medical journal, “The Lancet.” Working for the journal, which provided doctors with the latest research knowledge, gave Conley a headstart in evaluating biomedical companies.
He also further developed his organizing capabilities through his activism with the Massachusetts legislature, lobbying for a bill that brought together the 27 student governments on the University of Massachusetts’ 27 campuses to push for their shared interests.
Conley went to work as a sales contractor for a Philadelphia company that sold lines of credit for capital equipment expenditure and financing of assets. He was recruited by GE Capital, where he learned to dissect deals and buying deals, then went to the Chancellor Group in Massachusetts.
Conley moved to New Jersey in the early 1990s and got involved with the Venture Association of New York, the Venture Association of New Jersey, the New Jersey Entrepreneurial Forum, and the New Jersey Angels.
Conley urges entrepreneurs who want to pitch at one of the Entrepreuners University’s fastpitch forums to register at www.njef.org to make an eight-minute presentation. If a company does decide to make a pitch, bring all the stakeholders, including the board.