Aug7th
Tuesday, August 7th, 2007
The Oregonian, on Thursday morning’s edition for July, had a headline in the Sports Section that said: Seattle’s bullpen fails in ninth. Above the headline was a box score that said: Seattle 7, Los Angeles 7 (through 11 innings). Below the headline was a picture of a celebration by the Los Angeles Angels after a two-run, two-out homer in the ninth inning tied the game.
Below the picture a caption said: “. . . the Wednesday night game did not end in time for this edition of The Oregonian.”
We also get the local paper, The Columbian, which was on the porch and I read it first. Apparently the folks who work there stayed up to see the finish of the game. Its headline, also on the front page said: “Mariners salvage win in the 12th”
The article that followed the picture had this for its lead-in sentence: “Yuriensky Betancourt grounded a single through the left side of a five-man infield to score Adrian Beltre with one out in the bottom of the 12th inning and send the Seattle Mariners to a wild 8-7 victory over the Los Angeles Angels on Wednesday night.”
I love sports, especially for the metaphors they provide. In business many times there are those who give up, whether the score is tied or the game has gone deep into extra innings. Then there are those who stay to the end, but they never give up, and then they are the ones who are rewarded for their commitment and perseverance.
The next time you find yourself believing that a particular company or person is going to fail, remember the way The Oregonian handled the story where they highlighted that Seattle’s bullpen failed in the 9th, and then recall what The Columbian had to say because they stayed to the finish. The other day I saw a bumper sticker on a car that was being towed. It said: FAILURE IS NOT AN OPTION.
Yesterday I parked in a lot and the car in front of me said: “Something good is going to happen soon.” And the week before when in Salt Lake my fortune cookie said: “Soon you’ll be sitting on top of the world.” That’s the way it works in baseball (sometimes.)
Our dueling newspapers showed that it’s the final score that counts; not an inning by inning box score. “Fail” did not happen during the game. “Win” comes at the end of the game.
The moral to this story is:
Who cares how many innings it takes to win? A win is a win, salvaged or not!
Jacques B. Nichols
August 3, 2007
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Aug7th
Tuesday, August 7th, 2007
Was it always there, in plain view?
Of course it was, but I hadn’t seen it before.
But when I did, it struck me
Like a red flag excites a bull,
Like a dropping cross-arm signals a coming train,
Like a sounding car alarm; they get attention
Now it won’t go away
Every time I see it tucked inside the word
‘Business’, it’s in there, in plain view.
The word: Sin
Surely it has been noticed by others,
Comments must have been written
But still the question remains
Why is ‘business’ spelled this way?
Could it be because ‘sin’ always tries to hide,
The way it hides in every deal?
Well, some can say: ‘That’s business.’
But I want to change our way of spelling it,
Just like I want to change the world and have peace.
But how do we take ‘sin’ out of business?
Try transparency
Try full disclosure
Try integrity
Try to avoid what’s an acceptable sin
And spell the word: ‘Busyness’ like in ‘Happyness’
Maybe they’ll make a movie of it too.
Like that red flag in front of a charging bull
Drop the flag! Drop the ‘i’ and use a ‘y.’
Besides, asking ‘Why’ is always a good idea.
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Apr7th
Saturday, April 7th, 2007
TOP CLICHES ABOUT RAISING MONEY
Quotes by Jacques Nichols (unless by others, as noted)
2006 ©
- “There are three types of Venture Capitalist’s: venture, vulture and now the V——- gang. It is time for a new, better, class. It is time for ‘Virtuous’ Capital.”
- “You cannot make dough out of bread crumbs.”
- “You’re the reason I should invest, and you’re the reason I should not invest. I’ll pass.” Bill Tholke, Boardroom Consultants.
- “This is a great idea . . . I wish someone else had thought of it.”
- “Dilution is not a four-letter word, get used to it!”
- “It takes the first 90 seconds to connect with potential investors, everything you say and do after that can only lose them. And that takes less then ten seconds.”
- “Before making your presentation, take a look in the mirror. What do you see? Look and listen very carefully. You may get the gong.”
- “The sooner a potential investor uses the ‘we’ word, the surer you can be he’ll invest. The longer it takes, or he doesn’t use this word, bag the presentation. It ain’t going anywhere.
- “No company ever went broke due to dilution.” Les Fahey, Fahey Ventures.
- “Show me your team and I’ll show you your company’s chances of attracting great investors.” Mark Reed, Common Ground Partners.
- “No” is a very good word. Now you can focus on who may invest. “
- “No one ever calls you back on Monday as they promised.”
- “Be sure to give the good car to the guy who has to go to the airport to pick up the investors, just be sure it is not a Lexus.”
- “And so what’s not to love about getting funded; well there can be lots of good reasons. They should easily come to mind if in your gut you didn’t connect with those guys in the room.”
- “Time is your most important asset. Wasting copious amounts of time on meetings without getting a check is a corporate mortal sin.”
- “Investors write checks somewhere, everyday to someone else’s company. Why not to yours?”
- “Trying to raise money is like fishing. What are you using for bait?”
- “Money follows success. Success follows money. It’s axiomatic.”
- Only one word gets an investor’s undivided attention. It’s the ‘E’ word. Without it no check will ever be written. What is the ‘E” word?” (It’s EMOTION!)
- “Investors fear a future cash call like you fear running out of money.”
- “Get you cheerleader/first investor on board and then let him/her bring in the other investors. Works like a charm.”
- “Always go for potential investors who have a ‘pre-existing’ connection to the company, its products, markets or some other tangible relationship. Avoid educating the uninitiated!”
- “A cheerleader is not as dependable as a bell cow.”
- “Cowboy entrepreneurs need not apply.”
- “God loves the cowboy investors. And so will you.”
- “In the 70’s and early 80’s potential investors considered it rude not to come to the meeting with a checkbook in their pocket. Nowadays, no one has a checkbook handy. Why?”
- “A community with stories and scores of successful investments made in local companies is what makes the Silicon Valley, and Seattle what they are, and what separates them from other cities.”
- “No company I know of ever raised too much money. Take your timidity and naïveté and double up your request.”
- “So what it the investor stands a good chance of making lots of money. How much more will you make if no one invests?”
- Raising money is like going to a new restaurant. It’s all in the presentation.’
- Break away from the mold; throw out 80% of the Power Point slides.”
- “Tell them, who, not what, you are”
- “Make them want to introduce you to their wives. Without the wife’s OK, a lot a promises to invest will die.”
- “Investors need another investment to attend to, like another hole in the head. Make them see you in a different light.”
- “Only you believe that what you are selling really matters. Those in the room will possibly think that you have them confused with someone who gives a shit.”
- “Know your limits, be prepared to counter, and if it means more to you to protect your company’s mission, vision and values, draw your line in the sand.”
- “Use gray matter, when negotiating, and not necessarily your own.
- Make sure you remember all the stories that will be associated with your company and its funding efforts. The moral to the story will be the best part of the story.”
- “Investors are not walking dollar signs. Don’t look at them that way. We want to be seen as real people, with all the common failings.” Donald Moody
- “Go after ‘Harmonic Capital,’ the kind that seeks to balance the Note with the Pitch.”
- “Don’t invest in a company run by a fat guy.” From a 70s’ VC.
- “Women entrepreneurs should tap into the untapped pool of money controlled by women.”
- “The wife may not be in the meeting, but when he gets home, can he sell her on the deal?”
- “Get creative and pop up a new formula that shows the investors that they’ll get their money back sooner, not later.”
- “Meeting milestones should work in your favor too, not just in the investor’s favor. Insist on having some that work for you.”
- “They ought to hold a ‘Morning After’ contest and give the top prize to the company whose Business Plan’s projections actually, over time, came the closest to what really happened.”
- “It’s the intangibles that’ll get a check written. You really can’t know in advance what will really make the difference.”
- “Investors are a funny bunch, but don’t tell them.”
2006 © Jacques B. Nichols: If you wish to reprint, pass around, or copy for any reason, please contact me for permission. I am happy to share my written materials as long as I am given credit for the writing and you have included my blog address.
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Mar27th
Tuesday, March 27th, 2007
- - - -HARMONIC CAPITAL - - - -
by Jacques Nichols
________________________________________________
There are two other defining moments that have contributed to my desire to start a new kind of venture capital fund. Actually, there are three, although the third reason may have to be left for the Rest of the Story, as Paul Harvey used to say.
The first one defined who is an ‘angel’ investor, although in 1981 when the particular investment was made, no one needed to use a label for private investors as being ‘angels.’ That came about later after the venture capital funds saw their money as the most important ingredient in the equation between entrepreneurs and VC’s.
This story goes back to the early investment in FLIR Systems, Inc. I had invited Chuck Wiper, an original NIKE investor to come with me to the Reno Air Show for a demonstration of FLIR’s infrared sensor. We took a flight in a helicopter at night and once airborne the monitor, in its greenish cast, showed the ground below. Suddenly two figures were spotted in the desert below, waving their arms. Looking out of the windows, only pitch black was visible.
When the craft landed I saw that Chuck was crying. His experiences in World War II as a B-17 pilot had come flooding back. I’d heard that he had survived a plane crash and engaged in hand-to-hand combat. He only said: “I wish we had had this during the war.” That comment was followed by: “How much money do you want?”
I replied that the company wanted to raise $2.5 Million and I added that a venture capital fund in Seattle was on record as offering to take one-half thereof. Chuck said, in a few words, that he would get the other half together with his brother and a couple of other friends. Three days later I had checks that came in the mail and his word was good.
About ten days went by and Chuck called me. “Has the fund sent in their money? He asked. I suddenly realized that I had not heard from them since I was at the home of the managing partner for dinner. I recalled that before leaving he had gone into a closet and came back into the room wearing a T-shirt that said: “He Who Dies With The Most Toys, Wins.” Maybe it was a prophetic message for a venture capitalist, as he did point out the large yacht moored at the dock below his home on Lake Washington. Apparently he was on his way to dying.
I promised Chuck that I would call Seattle for a status report. I did and was told that the attorneys were preparing a Stock Purchase Agreement. It arrived a few days later. Just based on the number of pages I suspected it would require a careful reading. But, I also knew that Chuck would be impatient if I did not immediately send him a copy.
Chuck lived in Eugene, Oregon and the mail service was swift. The next afternoon he called again and there was irritation in his voice.
”Have you read this? He asked.
“No, not yet,” I replied.
Chuck continued. “ Read it and go to page 42. Tell me what it says?’
I quickly flipped pages and started to read. He had obviously been referring to a section that said if he and his co-investors, at any future date, desired to sell any of their FLIR shares, they would have to first offer them to the venture fund. I read the offending language out loud to him.
Then he said: “We don’t need them. I just came back from the post office. I’ve mailed you another check for $1,250,000. Call them up and tell them you just got some screw you money!”
I made the call. It only lasted a couple of seconds.
The lesson I learned this time was that one person’s money ought to be as good as another person’s. That is a lesson that the venture community has lost sight of. Once they invest they look down at the early investors, notwithstanding that but for those investors the company would not exist and they couldn’t make an investment.
The second story is also FLIR related. It is in two parts too. During my tenure on the board of the company I urged the hiring of Dick Kerr, Ph.D. Dick had been the president of the Oregon Graduate Center. He held three degrees from Stanford, including the Ph.D. in Physics. FLIR needed a scientist to advance its product offerings and fortunately for Chuck and the other shareholders, Dick accepted an offer to be the Senior VP for Advanced Development.
Over the ensuing years Dick and I met about monthly, either for lunch or drinks. He kept me informed of progress at the company. Toward the beginning of 2001 he began to talk about a new invention he was working on, one that would combine infrared and radar. The more often we met the more I knew he was going to leave the company and continue under a license to further develop the technology.
One day he called and asked me to join him again. This time he was set to launch Max-Viz, Inc. and wanted me to assist in raising the seed capital. I called on Chuck’s son Tim and a couple of other potential investors I knew. Fortunately for the new company, the money, about $2.1 Million came in and they were on the way. I served for a time on the board of directors and acquired some common shares too.
Shortly after I left the board to concentrate on an offer from a major law firm the company engaged in a round of financing from a group of venture capital funds. The valuation at the close of the offering represented a 50% increase over the price paid by the investors I’d introduced to the company. I felt good about this, for all concerned.
Even though the VC’s took control of the board of Max-Viz, somehow the funds were spent before the cash flow could support the undertaking by management. However, knowing that the company and its technology were catching on in the aviation industry, these investors, and a few new ones, continued to support the company with monthly bridge loans. The conversion price for the loans was to be the same per share price as the funds had paid earlier for their preferred shares.
Somewhere along the way, and just before a shareholder’s meeting to approve the sale of shares upon conversion of the notes, the pricing and valuation for the company dropped like a rotor falling off of a helicopter. We are talking about a down round greater than a 90% drop in price! I’ve called it the Down Round from Hell. Nothing so adverse, in my opinion, had happened to justify such action, other then greed.
I spoke at the shareholder’s meeting of my disappointment. I told the story of Chuck and the famous line about the “ . . .screw you money!” As I rose to leave the room, I added: “If I can, I am going now to find some more of that screw you money.”
Here the lesson learned is one I actually knew from the days with First Source Capital Fund. Keep the number of investors down and be sure you know your co-investors well. Having different agendas among investors is more damaging to a company then not having enough money. Management can’t figure out whom to listen to among a room full of investors/directors.
The third story has to do with the termination of First Source. To know that story and the lessons I learned that time, you’ll have to get a copy of my forthcoming book:
WHO THE HELL SIGNED ME UP FOR THIS CLASS?
or
IF YOU WANT TO SEE GOD’S FOOTPRINT, CHECK YOUR BUTT!”
Copyright September 26, 2006, Jacques B. Nichols
If you wish to reprint, pass around, or copy for any reason, please contact me for permission. I am happy to share my written materials as long as I am given credit for the writing and you have included my blog address.
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