Raising Money From Venture Capitalists

Posted: April 28, 2010 in Entertainment, Research, Websites
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Our last ‘Introduction to Online Communities’ class was held on Monday, April 26, 2010 at Clearstone Venture Partners in Santa Monica. Former USC grad and Managing Partner William Quigley talked to us about venture capital and the best way to get it for a startup. As with our other guest speakers throughout the semester, William shared great insight on what I call the business of money and the Internet.

I think the most important advice he gave to us was about the role entrepreneurs play in a potential startups. He said that there are three types of entrepreneurs: a starter, a builder and a maintainer. The smart entrepreneurs know which category they fall into and once their part in the startup in one of these roles is completed, then they move onto the next project.

William also gave us great advice about how to stand out in the VC process. We need to look for trends developing rather than go after what is hot today. By the time our sites are completed down the road, what is hot now probably won’t be hot when the sites are launched. William said that we need to be in the space two years before it becomes hot.

It’s getting harder and harder to find original ideas since there are only a few companies in the world conducting true research. The only companies doing research are sales-based companies, so they can find out what makes us buy products.  I think this is truly incredible since companies are spending millions of dollars on their marketing efforts. Just think how much money companies would save on their advertising costs if they did a basic research project for about $25,000 and tested marketing messages in focus groups before they released the campaigns. The results would show if their marketing messages had the potential for success, and if they needed to make any changes before the campaign’s release.

William also talked about vision. If you’re going to start a new business, you have to have a clear vision on what you want to accomplish. He said that no idea is too big to fund if you have a vision. Demand Media raised $50 million on a business plan, because they had a vision. You must have an idea about what the market will look like in three years and how your business will fit into that market.

William gave us some tips on what we should do when making a presentation to venture capitalists:

  • Know as much as you can about your competitors and know how you’re going to be different.
  • 75% of the presentation is entertainment. Be informed and excited about your pitch.
  • Share predictions of the marketplace where your business will exist.
  • Find trends and share with investors.
  • Be a great spokesperson for your company. Get in front of people and practice your pitch.
  • Be capable of dealing with setbacks.
  • Be informed about the space. The potential investors will do the due diligence, and you don’t want to be in a meeting where the investors tell you about competitors that you didn’t know existed.
  • Use charts in your presentations, especially when presenting the economics of your business.

You must be right twice about when you launch a business.  William said that you have to be right about 1) your three-year predictions about what will happen and 2) the timing of those predictions. If you hit those two elements, you’ll have a successful venture, and everyone will make money.

If you’d like to know more about William Quigley, check out his blog.


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