Hints on VCs from an entrepreneur

[Philip Johnson <johnson@hawaii.edu>]

The VC group forwarded me this email from Walter Roth, CEO of HotU, Inc., a
local high tech startup, who spoke briefly in our class earlier this semester.
Some sage advice to all of you from one who's been there:

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Dear Jie Xing Shek, Jade Roxas, Sam Kwong and Jun Yang,

I have to apologize.  I have been trying to get to this email all week, and it
has just been one thing after the other.  We have grown to 11 people and
getting all the legal work done in order to "close" a round of financing is
incredible.

I know it may be too late, but here are some quick answers. Let me know if
there is anything else I can do for you. Again, I apologize.

Here some quick ideas.  I know these could be easily debated, and I don't know
if I absolutely believe them myself...but these are the ones that first came to
mind.

1."What are the tips and difficulties when approaching the venture capitalists?"

Getting their time.  In my case, I was lucky to get 20 minutes.  If they liked
what they heard, they then gave me more time. Hitting the points they need to
hear to get interested.  (It is usually  different for each.) -- Know what
types of investments they have made in the past, and if they are  the type that
will invest in yours.  (eg, Internet Investors - they have a  completely
different profile from other types of investors)

2.How did you decide and prepare your list of venture capitalists?

Well, basically I just looked around at what connections I had, what
connections I could make and then talked to everyone.  It is hard.  In one
case, you don't want to tell everyone your idea, as it might be stolen.  In
the other case, you might talk to someone, who knows someone, who knows
someone, who can get you a 20 minute shot with a venture capitalist in  Silicon
Valley.

But to me, if I trusted that they wouldn't steal my idea, I would put as  many
"hooks" in the water as possible.  Kind of like making your own luck.   Good
ideas are not always seen as good ideas to everyone.  Sometimes  getting
investors excited is not about getting the right idea, but finding  the right
investor who likes that idea.  This may be obvious, but it is  absolutely true
and is good to remind yourself.  LASTLY, the more times you  talk to a VC, the
more you get a "database" of reactions.  You see what you  said that worked,
what you said that was bad, the types of questions they  asked and what types
of questions they didn't ask.

3. What should you prepare for the initial contact with a venture capitalists?

An elevator pitch - one to two minute intro to your idea. Your company idea
within 10 minutes. Answers to questions for about 10 mintues.

The first 20 minutes is the most crucial.  Investors are saturated with  deals.
They lose interest very quickly.  You must catch their attention  right away.
If it is a good idea, then you need to make them aware of that,  within the
first 5 minutes.  Then, you need to be able to answer questions to show that
they can't poke holes into it.  Once that is over, you then  show them that
there is so much more to the idea, and that the person behind  the idea is
solid.  Many times, the investor is investing in the person,  more than they
are investing in the idea.

Sorry this is late.

Aloha,

Wally
hotU, inc.