Entrepreneur Resources

How to Get a ‘Yes’ From a Venture Capitalist

  |   Entrepreneur Resources, The Latest

 

 

 

 

Fortune | By Robert R. Ackerman, Jr. | October 26, 2016 | 5:00pm P.T.

 

 

Nine tips for improving your odds.

 

This article is part of Tools of the Trade, a weekly series in which a variety of experts share actionable tips for achieving fast and effective results on everything from productivity to fundraising.

This week, Bob Ackerman explains how entrepreneurs can impress venture capitalists. Ackerman is the founder and managing director of Allegis, an early-stage venture firm that focuses on cybertechnology companies.

Pulling off a successful pitch and actually getting an investment from a venture capital firm is a huge feat. While the pace of venture capital investing remains strong — the second quarter of 2016 marked the 10th consecutive quarter in which VCs invested more than $10 billion — as an entrepreneur, the odds are stacked against you. VCs typically finance only one or two percent of the business plans they see.

Before you begin perfecting your pitch and approaching VC firms, take a moment to determine whether venture capital is the right funding option. VCs typically deploy millions of dollars in a startup and are looking to make several times their investment: 6X to 10X is a good rule of thumb. If your startup doesn’t truly target a huge market with a strong and credible management team, you should consider other sources of funding.

With that in mind, here are nine steps to get you started and improve your odds for getting a VC to bite.

1. Ask yourself the serious questions. Does the market you’re addressing really warrant attention from a VC? Startups always face lots of barriers to entry; is your product or service differentiated enough to overcome these obstacles? If you do raise venture funds, you will likely have to surrender control of your company to your new boss – i.e., your Board, which will now include VCs. Are you comfortable with that? If not, venture capital funding may not be the best route.

2. Make the intangible, tangible. Do as much as you can before showing up to a pitch: incorporate your company, set up your website and domain name, create business cards and, if possible, create a product prototype. This puts you in a better position to raise capital at a higher valuation, particularly if you have a prototype, than if you simply come with an idea.

3. Read their minds. There are certain pieces of information VCs will always want to know. Be ready to address the three types of risk all startups face: market, product and execution. They’ll also want to see customer references.Finally, make sure you can address the technical credibility of your product or service.

4. Research which venture firms you should approach. Most have certain types of companies they like to invest in; make sure your company fits within those parameters. After that, research each firm’s reputation among entrepreneurs. If you can, contact entrepreneurs the VCs have previously funded, and ask if they’d work with the firm again. If not, find out why not (a sour ending to a relationship can say a lot). Also ask how the firm responded when things got tough. All of this will help you determine whether the VC firm can truly “add value,” as well as inject money.

Once you’ve answered all these questions, refine your target list to the best “potential fits”. Broadcasting your plans to venture firms who are not a fit is waste or your time and theirs.

5. Know what makes you unique. It’s important that you present yourself as the expert in the room. Make sure your brief “elevator pitch” is top-notch. Time your presentation:30 minutes for the presentation itself, 10 minutes for a demonstration of your product or service, and 20 minutes to accommodate questions and feedback. Anticipate tough questions. Why does your business need to exist? Why you? Why now? What makes you unique?

6. Get a “warm’ introduction. VCs expect founders to use their social networks to get an introduction at the firm. It demonstrates you know how venture capital works and that you know how to hustle. It also shows us someone we know is willing to go to bat for you. Cold calls go to the bottom of the pile and are never really evaluated.

7. Meet with as many suitable VC firms as possible and target the right partner. Successful fundraising is largely about persistence. In fact, it’s a lot like dating in quest of a soul mate. Don’t just target a firm, target the “right” partner within the firm that will most likely respond to your pitch. Every partner has different investment interests (which you can usually find in their online bios). Target the one most likely to be interested in your company.

8. Be yourself in the meeting. Resist the urge to don a mask of no-nonsense professionalism. Instead, act natural and be yourself. VCs invest not only in ideas, but in people, too.Investors are adept at spotting superficiality. It’s important to be yourself.

9. Remember the dos and don’ts. Do demonstrate how you can counter the competition. Do know your numbers cold.Do overflow with passion and conviction. Do balance boldness with believability. Do listen and engage. Do be honest about your competition and likely challenges (and know how you will overcome both). Don’t be vague. Don’t exaggerate. Don’t name-drop. Don’t talk too much.

In the end, your goal is simple: Land a second meeting. Good luck.

Find this article here: Fortune.com

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Xconomy | Allegis Capital Leader Co-Founds DataTribe To Tap Government Research

  |   Entrepreneur Resources, Portfolio News, The Latest
By: Bernadette Tansey   –  July 28th, 2016
 @Tansey_Xconomy     @xconomy     @AllegisCapital     @Data_Tribe

In 2015, Silicon Valley venture firm founder Robert Ackerman was helping the founders of Maryland startup Onyara to prepare for a fundraising round that would allow them to mine the commercial potential of advanced data processing technology developed at the National Security Agency.

“I just found my next billion-dollar idea,” Ackerman says he was thinking at the time.

But then, Santa Clara, CA-based data management software company Hortonworks  (NASDAQ: HDP) swept in and offered to buy Onyara for “north of $40 million,” Ackerman recalls. And his venture firm, Allegis Capital, missed the chance to lead the Series A fundraising round for a company that might have yielded a much bigger payoff for both founders and investors, Ackerman says.

He realized that founders like Onyara’s—new entrepreneurs coming out of East Coast government intelligence labs—needed more support than a venture firm usually provides. Rather than tackle all the steps ahead for Onyara as a startup, its founders accepted the instant Hortonworks payout, he says.

“If we could have filled that void, we could have taken that company much further,” Ackerman says.

It was one of the pivotal experiences that led Ackerman to co-found a new “startup studio” called DataTribe, whose formation was announced publicly this week.

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DataTribe aims to find promising technologies developed from government research; form companies to license the technologies; and enlist former government engineers as executives or tech experts.

Such engineers are plentiful in the Washington, DC, Beltway area, where they work on cutting-edge government-funded projects in cybersecurity, big data, and data analytics for defense agencies. But they often lack the entrepreneurial experience to get a startup launched and funded, Ackerman says. And they’re far from Silicon Valley’s ecosystem of incubators, venture firms, experienced product rollout managers, and universities that foster entrepreneurship.

Ackerman co-founded DataTribe with former CIA information technology officer Steve Witt, who was Onyara’s CEO, and Mike Janke, a former Navy SEAL who was CEO of Silent Circle, a secure communications service he founded. DataTribe has attracted financial backing from consulting and audit firm Deloitte; Yahoo Japan, a site that combines search, news and e-commerce features; and other unnamed financial investors. Deloitte and Yahoo Japan are the kinds of strategic partners that could become customers or distribution channels for the products created by DataTribe’s startups, Ackerman says. (Verizon, which announced this week it will buy the core business of Sunnyvale, CA-based Yahoo, will not acquire Yahoo’s stake in Yahoo Japan. That stake will be held by an investment company created from Yahoo’s remaining assets.)

DataTribe isn’t alone as it sets up as a feeder system to funnel ideas and experts from government intelligence agencies into the private market.

At Tel Aviv, Israel-based Team8, three co-founders who are former security experts with the Israeli Defense Forces’ Technology & Intelligence Unit 8200 (described as Israel’s NSA) are tapping their networks to form cybersecurity startups. Team8 invested $5 million in Tel Aviv-based startup Illusive Networks, which closed a $25 million Series B fundraising round in May, backed by investors including Eric Schmidt’s Innovation Endeavors, New Enterprise Associates (NEA), Bessemer Venture Partners, and Cisco Investments.

A new cybersecurity startup incubator, Build Sec Foundry, sprung up last month in San Antonio, Texas, to help ex-military members become new cybersecurity entrepreneurs. San Antonio is home to the Texas branch of the NSA; the FBI’s Cyber Division; and dozens of defense contractors and security companies.

Ackerman says DataTribe won’t confine its reach to U.S. government technology and domestic founding teams, but will look at opportunities in the United Kingdom and other nations.

Ackerman declined to say how much money DataTribe has raised, but says it will have an “appreciable operating budget.”

In February, DataTribe quietly moved into its headquarters in Fulton, MD, near the National Security Agency’s headquarters at Fort Meade, MD, and the I-95 corridor that leads south toward Washington. Its co-headquarters is at Palo Alto, CA-based Allegis Capital, which is a strategic partner of DataTribe’s and a likely investor in the startups it creates. The idea is to connect the technology being generated by government agencies with Silicon Valley expertise and access to capital, Ackerman says.

DataTribe is already working toward the close of its first startup investment: the Maryland company, Dragos, was founded by former NSA intelligence officers to provide cybersecurity for industrial control systems.

Rather than a fund, DataTribe is an “operating company” that will build startups, recruit their executives, and support them with as much as $1.5 million in seed funding, Ackerman says. The plan is to create two to three startups a year, keep them in-house for nine months to a year, and get them ready for a Series A fundraising round. DataTribe would retain significant equity stakes in the companies—a percent that would vary with each startup.

Witt leads an operating team that will consist of about seven or eight full-time members working in either Maryland or California, Ackerman says. DataTribe will also tap into a “brain trust” of executives, drawn from Allegis’s network, who will screen and mentor the startups and serve as directors, he says. Some may be financial investors in the startups.

With DataTribe, Ackerman is trying to capture the same potential financial payoff he once envisioned for Onyara, which was translating technology created for government purposes such as national defense into commercial products suitable for businesses.

Onyara was founded to commercialize data-flow technology called “Niagara Files” or NiFi, which was created at the NSA and released as an open source resource by the agency. What Hortonworks saw in Onyara’s technology was a way to enhance its service to clients, who use its Apache Hadoop software framework to process large amounts of data reliably. Hortonworks said its acquisition of Onyara would help it smooth out the collection of data from clickstreams, server logs, social media feeds, connected devices such as sensors, and other sources, as well as verify and secure these inputs headed for data analysis.

Ackerman sees government agencies such as the NSA as wellsprings of commercially valuable ideas, because they must invent solutions when the needs of government agencies go beyond the capacity of products available from private industry. This is particularly true for defense agencies engaged in collecting and analyzing massive amounts of information to protect the country against cyberattacks and other threats.

“Because of the scale at which they work, they’re seeing limitations before anybody else,’’ Ackerman says. Allegis has invested heavily in cybersecurity since 2000, and NSA veterans are involved in several of its portfolio companies.

“They’re operating five years ahead of everybody else,” Ackerman says. “Ideally, you want somebody who’s seen the future.”

By contrast, private companies don’t tend to invest in research to solve problems five years ahead in the future, he says.

With the input of co-founder Janke, the former Navy SEAL, DataTribe is modeling its competitive strategy on the methods of the elite Navy unit, Ackerman says. Like the SEALs, disruptive young companies can also find ways to succeed even though they deploy “small teams versus larger, better-resourced adversaries,” he says.

“That sounds a lot like a startup,” Ackerman says. “The odds are tipped against you.”

Find more @

http://www.xconomy.com/san-francisco/2016/07/28/allegis-capital-leader-co-founds-datatribe-to-tap-government-research/?single_page=true

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WSJ | DataTribe Launches To Back Entrepreneurs Leaving Government Roles

  |   Entrepreneur Resources, Portfolio News, The Latest
By: Cat Zakrzewski | July 26, 2016

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DataTribe Co-founder Mike Janke, Onyara Co-founder Joe Witt and Synack Co-Founder Jay Kaplan speak at a gathering in Maryland. DataTribe helps scientists and engineers leaving government jobs build startups.  Photo: Yonald Chery 

A venture capitalist, a SEAL Team Six veteran and a CIA alumnus are skipping Silicon Valley’s garages and heading to government labs to groom a new wave of entrepreneurs.

Their studio DataTribe launches in Fulton, Md.. on Tuesday to help engineers working in government agencies, labs or the intelligence community to launch their own cybersecurity and big data companies.

Mike Janke, co-founder of DataTribe , served on the elite SEAL Team Six before serving as Silent Circle chief executive. He said the government spends billions of dollars on research-and-development projects that are ahead of commercial business. However many of the scientists coming out of government don’t have business backgrounds and face a steep learning curve when try out entrepreneurship.

“They’re like, ‘What is a term sheet?’ ” Mr. Janke said. “We actually bring them in and we teach them. Before we even give them a term sheet, we make sure they have an independent counsel, and they go through a class on what term sheets are.”

Backed by Deloitte, Yahoo Japan Corp., Allegis Capital and other strategic investors, DataTribe will provide up to $1.5 million in financing to each startup that participates in its 9-to-12-month program. Though DataTribe participants may have developed engineering chops in government, the program will aim to teach them the ins and outs of running a commercial business.

Mr. Janke, Allegis Capital Managing Director Robert Ackerman andSteve Witt, a former CIA officer and entrepreneur, said they recognized a need to build an “ecosystem” for startups in the Washington area. Some Silicon Valley accelerators take a “spray and pray” approach to building companies, investing small checks in hundreds every year. But Mr. Janke said to build a lasting startup ecosystem on the East Coast, DataTribe borrowed from his military training and instead took a “sniper” approach to pick and choose its targets. The studio will only invest in three to four startups a year and provide them with more resources and funding than a traditional incubator.

DataTribe will provide these entrepreneurs with office space and access to its in-house product management, product development, marketing and sales staff until they’re ready for traditional venture financing.

Although Mr. Janke said there is an excess of technical talent in the Washington area, entrepreneurs inside the Beltway have noted a lack of experienced enterprise sales professionals or marketing professionals. Mr. Janke thinks DataTribe can help companies fill that gap. By pairing them with DataTribe’s experienced marketing and sales professionals early, they can train other employees to help the companies run like traditional Silicon Valley startups.

“You can’t expect to draw all those tiers from [Silicon Valley],” Mr. Janke said. “So what we do is we actually build that ecosystem.”

Mr. Janke said DataTribe won’t limit itself to engineers leaving the U.S. government. They’re also seeking entrepreneurs from similar backgrounds in other nations.

The studio launches as venture funding has flowed to cybersecurity startups in recent years, and with it, former government employees. Several startups that have raised significant funding rounds are led by former intelligence community professionals. Keith Alexander, a former chief of the National Security Agency, launched IronNet. Other companies led by entrepreneurs with military or government ties include Tenable Network Security Inc., Area 1 Security Inc., Endgame Inc., Synack Inc., and Qadium Inc.

Such links have been forged even as tensions have mounted between Washington and technology companies. Much of that stems from confrontations over governmental access to digital communications, but another source of friction is the competition for talent. On a recent trip to California, Homeland Security Secretary Jeh Johnsonsaid that is the government’s chief point of contention with Silicon Valley as people change jobs more frequently and technology companies offer much more competitive salaries.

But Mr. Janke says the DataTribe founders have drawn positive responses to the program from colleagues in government. He said government agencies have encouraged engineers to test their ideas with DataTribe before leaving their current jobs.

“They actually have asked to send entrepreneurs in residence to be in our office now,” Mr. Janke said.

In forming DataTribe, the founders have taken notes from Team8 Labs Ltd., a foundry that builds cybersecurity companies with talent from Israel Defense Forces’ Unit 8200, that country’s equivalent of the National Security Agency. One of its companies, Illusive Networks Ltd., has raised $30 million in funding.

The DataTribe team—which receives no government funding—has already tested their approach with Onyara Inc., which Hortonworks Inc. acquired in 2015. Mr. Witt served as chief executive of the company, which commercialized NSA-developed technology.

Now DataTribe is beginning to work with others. One is Dragos Security, an industrial control center cybersecurity company started by former NSA officers. Dragos CEO Robert Lee said it was important to him to find investors that also shared a government background and were mission-oriented.

“There’s a lot of talent on the East Coast that’s not getting a lot of attention,” Mr. Lee said. “[DataTribe] was a perfect fit.

Find More @

http://www.wsj.com/articles/datatribe-launches-to-back-entrepreneurs-leaving-government-roles-1469532619

 

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Reuters | Investment firm to fuse startup culture with U.S. intelligence complex

  |   Entrepreneur Resources, The Latest
BY HEATHER SOMERVILLE | July 26, 2016

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A Silicon Valley venture capitalist, an ex-Navy SEAL and a former U.S. Central Intelligence Agency officer have banded together to form a company to fund and incubate startups that can break ground on cyber security and intelligence gathering.

 

The company, DataTribe, seeks to fuse aspects of a venture capital firm and startup incubator, with leaders who are well-connected to the nation’s intelligence complex. It was launched on Tuesday, with offices in both Silicon Valley and Maryland, outside the nation’s capital.

While DataTribe is as yet untested, it launches at a critical time. New and more sophisticated attacks continue to threaten businesses and government agencies, but funding for early-stage cyber startups from traditional venture capital sources is challenging.

Finding sufficient cyber security expertise – in both company investors and founders – in Silicon Valley has also been difficult.

DataTribe will license technology created by the national laboratories or government intelligence agencies and build new startups around that technology. It will also provide those startups with an operating team of executives and an initial investment of up to $1.5 million.

According to DataTribe co-founder Robert Ackerman, the federal government has some of the most sophisticated cyber security and intelligence gathering technology, and Washington is home to some of the most skilled cyber experts.

But the startup culture, he said, can do a more efficient job of scaling that technology and selling it for commercial use.

“(Cyber security) is an arms race,” Ackerman said in an interview. “And when you are in an arms race, you are looking for any kind of competitive advantage you can get.”

Ackerman is founder and a managing director of Allegis Capital, a 20-year-old Silicon Valley venture firm that invests in cyber security startups. He cofounded DataTribe with Mike Janke, a former member of the Navy’s SEAL Team Six and co-founder of mobile security company Silent Circle; and Steven Witt, who worked for the CIA and co-founded Onyara, a startup based on technology developed by the National Security Agency.

DataTribe aims to take advantage of technology already developed, tested and used by the government. It will use open-source technology or license it from the national labs, the NSA, law enforcement and even foreign intelligence agencies, Ackerman said.

Among the first to receive funding is Dragos, a cyber security startup comprised of former NSA intelligence officers that offers security solutions for the control systems of critical infrastructure, such as a power grid.

 

Find More @  http://www.reuters.com/article/us-cyber-startups-idUSKCN1061JT

 

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The Most Common Reasons Startups Fail.

  |   Entrepreneur Resources

BEFORE DIVING INTO YOUR OWN STARTUP, CONSIDER FIRST THESE COMMON MISTAKES THAT HAVE COST ENTREPRENEURS THEIR BUSINESSES TIME AND AGAIN.

By Trin Linamagi – fastcompany.com

Founders blame investors, investors blame CEOs, CEOs blame research and development (R&D), R&D say the product is fine, the market just doesn’t get it, and marketing people blame it all on the recession. Some startups succeed, yet so many fail, and it’s failure that teaches us the best lessons. What are the main reasons why startups fail? In a survey carried out by tech blog ArcticStartup and CoFounder magazine, more than 100 startup entrepreneurs share their experiences and lessons learned.

1. THE TEAM DOESN’T HAVE WHAT IT TAKES TO SUCCEED

A startup’s biggest challenge is getting the team right, according to 37% of the founders surveyed. Having enough diversity for a variety of skills that are needed to succeed from day one is essential. Not less important is trusting your team and giving them control over their responsibility areas.

There’s a reason why all the top investors and incubators place such heavy emphasis on the team. Ideas change, products pivot, markets can take unexpected turns, but people are what hold everything together. A great team is not just about selecting a group of smart people; it’s about complementing each other’s strengths and mitigating each other’s weaknesses.

As a founder, you must attract and retain the right people to build the technology, understand your industry, and scale your company.

2. THE IDEA IS NOT SERVING THE MARKET NEED

Sometimes the market simply isn’t there yet. Of the surveyed entrepreneurs, 20% said their startup failed most likely because of the product market fit. The biggest mistakes startups make are not talking to enough prospects before diving in and not understanding the target market, which might result in focusing on multiple ideas rather than one main idea.

Consumers are highly resistant to change and biased against trying a new product. Founders tend to believe their product is great since they’re always the first to try new products themselves. But mainstream consumers might not always understand why or how to use the new products. In this instance, startup entrepreneurs might think the market should change to fit their vision, but this thinking ignores the market realities.

3. RUNNING OUT OF CASH TOO FAST

Cash isn’t everything when it comes to starting a business, but when you run out of it, there’s not much that can help, according to 13% of the surveyed startup founders. Google and Facebook can afford taking risks on their cash by dedicating a fraction of it to crazy ideas, but small startups can rarely afford this.

Many businesses that fail aren’t insolvent or even unprofitable, they just run out of cash. Once you have a viable business model, managing your cash flow is the single most important thing you can do. It doesn’t matter how much cash you raise, without revenue generation you will eventually run dry. The biggest mistake to be made is carelessly spending money on features that are not needed or spending your marketing budget with no control on measuring what you are getting back.

4. NOT BEING ABLE TO SUPPORT GROWTH

Things could go smoothly for a while, that is until you decide to scale up. Ten percent of respondents said their startup failed because of the growth problems.

When you’ve built a business model that works only up to a certain size, your model can’t sustain growth. Sometimes you must change your model sooner than expected. The founders who are not flexible, who are stuck in their own stubbornness, and who don’t think ahead, will end up being their own downfall even if the startup was successful.

5. POOR ALLOCATION OF RESOURCES AND MONEY

Where startups often fail is not having a proper plan in place about how many people they need to hire, when is the right time, and which teams should be invested in at the first stage.

Startups that run out of resources also usually do so because the founders don’t want to give up a piece of the pie, the budgets were not planned properly, the burn rate was too high, or it just took longer to raise the first round than initially expected.

6. NOT REALIZING THE COMPETITION IN THE MARKET

How often have we heard, focus on your own thing instead of getting distracted by the competition? This does not mean, though, that you should ignore the competition.

Where startups go wrong is believing they are the only ones with the great idea and going out there without proper competitor research. Ignoring the competition is a recipe for disaster in 19% of startup failures.

As Peter Thiel suggests, ask yourself what you’re doing that no one else is doing. Or if someone is not doing it well enough, what are you doing differently to win the market?

7. IGNORING CUSTOMERS

The tricky question has always been whether entrepreneurs should open up shop for testing or spend a few more months making it perfect. First talk to your customers and then develop your product according to your market need. That’s where many startups go wrong.

When you don’t validate your market aggressively enough, you can’t build a good product. Without measuring, trusting the numbers, tracking, validating, and optimizing the data you get from your clients, it’s not possible to create a viable product in high demand.

There are many other reasons startups fail, but these seven came up as most common when questioning the founders and team members involved with the startup ecosystem. Should your startup fail, it’s worth spending some time to understand what went wrong and learn from your mistakes to make it next time.

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