Tech Coast Angels Screening Event

This past Wednesday, myself and two other members of the VCIC team were generously invited to watch a Tech Coast Angels (TCA) screening event. At the event, 4 young companies present before some of the members making the case about why they should receive angel investment funding.

The event is a great opportunity to see how experienced investors grill entrepreneurs. For obvious reasons, I won't go into any detail about the presenting companies, but the four were from very diverse backgrounds. It was interesting to see the presentations from the investors perspective; learning what works and what doesn't.

After watching the event I have a few preliminary tips for entrepreneurs seeking investment. First, answer each question as directly as possible. There seems to be two reasons entrepreneurs do not answer the question they are asked: 1) they want to dance around the issue; and 2) they misunderstand the question. In the first case, the entrepreneur is not fooling anyone. These investors have "been there -done that" and, even if he should fool them, there will be due diligence later on that will catch up with him. IMO, the second case may be worse because if the investor asks a question and the entrepreneur answer addresses something else, that is bad. If the investor cuts him off and brings him back to the initial question and the entrepreneur still answers something else, it can be an indicator that the entrepreneur can't focus on the issue at hand. How can an investor be confident that when a issue arises in the company that the entrepreneur will cut to the heart of the matter and address it if he can't answer a direct question?

Second, have a plan and understand your weaknesses. The worse thing an entrepreneur can do is to fluff up the weak areas. The investors will see them and if he continues to assert it will not be a problem, you will lose all credibility. There is no shame to say that you need help in an area and make that part of your plan for use of the investment funding.

Finally, really think if you need angel funding. While we all want to believe our business is design for hyper growth and greatness, some businesses are not meant for the angel/VC route. Once you go this route, an angel or VC will demand a hockey stick-like growth curve and an exit in a very short time frame. An entrepreneur must understand if the market of his business can accommodate that growth or that exit time-frame. Some markets are designed for slower growth. There is nothing wrong with that. In fact, it will lend itself to growing itself through revenues and thus avoiding the need to dilute equity to the outside investors. The main point is that if the market will not deliver the growth rate or exit time-frame, the entrepreneur will soon find himself with some upset partners and he could find himself removed from the company.