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What, who, where, when, how, why

Enterprise & Venture Capital, 5th Edition is out!

To quote Stephen King, the famous author, “What separates the talented individual from the successful one is a lot of hard work.”

This book will give you some secrets to make your path to success a little easier.  Its loaded with wisdom from dozens of entrepreneurs, investors & success stories like Resmed, Looksmart & Hitwise.

Visit Allen & Unwin, our publisher to order a copy.

Book Released – Enterprise & Venture Capital, 5th Edition

Are you looking for a guide to build a great business?

Are you thinking about venture capital backing?

How about some case studies of successful start-ups that made it to the global stage?

We interviewed dozens of entrepreneurs and venture capitalists so the new edition of Enterprise & Venture Capital (Allen&Unwin) has it all.

Check http://www.allenandunwin.com/default.aspx?page=94&book=9781741756906 to order.

CAPM – completely wrong??!!

Sorry for my absence last week.  I just started a large project reviewing the valuation of a large portfolio of investments for a major bank.

This week I have been reading “The (mis)behavior of Markets by Mandelbrot. Mandelbrot is a famous mathematician well known for his development of fractal geometry. Think fractured structures.

In 2004 he applied his mathematical genius to probability and finance theory in this book.  Its an interesting read so far.  I had not previously looked at probablity as having different states – much like water can be frozen solid, liquid or vapour, depending on the temperature.  Probability, Mandelbrot says, is similar.  Sometimes it is mild, sometimes its wild and sometimes slow.  He cites some interesting examples.

Much of today’s finance theory is based on the work of Bachelier from around 1900.  He basically came up with the idea of a normal distribution or bell curve.  The problem with this in finance is that markets do not really follow a normal distribution.

So while present theory suggests that large movements in markets are supposed to be rare, they are in fact not rare at all.

Its worth thinking about because if we are taking calculated risks and playing the odds in our investment and business decisions, it helps to know if we have estimated the odds of wins and losses reasonably well.

I’d love to hear from others who have read the book.  Hopefully time will permit me to complete the read of the book this week.

Cheers for now

Tom The Money Man!

Can I raise VC at the Idea Stage of my Business?

The idea stage is quite early for most VC firms. Angels may be your best bet but talking to VC’s early will build a relationship that may be handy sooner or later.

I recommend you go on the various VC’s websites, find out who they are invested in and contact the founder or someone else in the company. See how they have found the experience, what their VC wanted and see if they can put in you direct contact with their backer. Just make sure the company is not a competitor to your idea!

Next best bet are to find who the lawyers and accountants and other advisors are for the VC backed company (or the VC firm if you can find this out. Make contact with them and ask similar questions and favours.

You should read Enterprise and Venture Capital by Chris Golis (4th Edition). It will help you with guidance on all aspects of building a growth company. The 4th Edition is Australia focused but the general principles apply world wide. I am currently co-authoring the 5th Edition, which will be a little more international.

Make sure you spend time with people who have done it before, even if you have to spend a little money, to learn how they did it.

Make sure you have plenty of your own capital in the business because without personal financial commitment, its unlikely any one else will trust you with their money.
Cheers
Tom

Should You Get an NDA from Prospective Investors?

You should certainly try but many investors (particularly VC’s) won’t give them. It partly limits their ability to do business and there is a major administration burden – some VC’s see thousands of business plans per year. That is a lot of NDA’s to keep track of and takes thousands of hours of time to read them, sign them, file them, track them, etc.

To access investors with millions of dollars, you will have to take some risks and that NDA or no-NDA decision will probably be an early judgement call for you.

With big name investors, your ideas are generally safe. Its in the VC’s best interests not to abuse the info they get – if a firm got a reputation for stealing ideas, they probably wouldn’t have many entrepreneurs knocking on their door.

With private individuals and lesser known investors, I’d try hard to get the NDA.

One interesting point is that while many investors won’t sign, once they are invested in the company, they will want you to have a policy of obtaining an NDA from other outside parties!!

So you could try to turn that around on them – “if you invested in our business, surely you’d want confidence that our info has not been provided to large numbers of others without any protection? So its a double standard not to sign ours now.”

Hopefully this is some useful guidance for you and gives you some material to have an intelligent discussion with investors about NDA’s when you are trying to persuade them to sign!