Capital insights - can you hear me now?

Wow, last week, I listened to a great set of insights that pertain to all of our constituents!

The first, and topic of this post, comes courtesy of our very own TAG analyst Al Quaye (great job Al!). Al led a great Carnegie Mellon alumni event with a fantastic speaker - CM alum/entrepreneur/ceo/investor: Ray Smith. Ray is among other things, the former ceo of bell atlantic/verizon, a long time techie, and a capitalist that has raised and deployed well over over a billion in capital through a variety of ventures. Thanks for making the time to give back Ray!

I thought it might be of interest to pull out the top 3 or 4 insights I managed to catch from his chat and share them to emerging entrepreneurs, angels, and investors. I might also add that Ray and his wife were absolutely pleasant, sharing, and open - before and after the event...It never ceases to amaze me that some of the most successful people I meet always make time for strangers and display such a great demeanor and high energy when speaking to other entrepreneurs!

So now on to the points I managed to catch with my 'treo-thumb' even while asking Ray questions and listening fervently to the stories he used to illustrate these...

1) When Picking success - There's always a guess...
No company has it all. So even the best due diligence practicers have to use an element of 'voodoo' once they "satisfice" that at least quantitative and graspable subjective factors are evaluated and a good bet - it still comes down to a guess!

2) SIX Qualitative things you can do to raise capital, Be Ready for them:
a) Super Due Diligence - prepare crisp answers before being asked them. Look for due diligence to increase on two to three orders of magnitude! No smart investor goes in without extensive due diligence!
b) Demonstrate Management Flexibility - Show that you can adapt to changes in strategy, from outside and inside forces, and do so before being forced to
c) Truth Telling and Honesty - Fess up to any holes in your plan and show how they will be fixed!
d) Crisp Scenarios - Describe your business scenario CRISPLY.
e) Show Possibilities of scale and scope - Use Milestone objectives that impact scale and scope - those can be measured and worked towards clearly. (ie "make verizon #1 or #2 in wireless and landline service" and NOT I want to ipo in 3 years)
f) Additional Value - how can you then build out even more value once you've achieved your possibilities - ray called this "franchise value"

3) Remember the 4 keys to private equity and when raising capital from Private Equity investors, be sure to think about them:
a) Leverage - capital, position, connections, exposure
b) Compensation - get the talent the company needs
c) Adding Value - to the company and the investment
d) Due Diligence - picking winners and understanding the market

4) Capital Trends :
The amount of capital is dramatically increasing - many funds have done well (not mentioning china and other international capital sources entering equity markets) and there are correspondingly many more experienced investors with great wealth and capital to deploy. BUT, they also will be very careful about it - so expect diligence intensity to dramatically increase - along with higher valuations for the companies that earn funding.

Ray's Parting thought....
Yes, several opportunities to cash in on great next big things are gone... Google, Amazon, etc... but SO WHAT! there are so many new opportunities to focus on and leverage now.

And my parting thought...
I was really amazed by Ray's experience, insights, stories, and demeanor - but also with the fact that he really is a well balanced individual - 5 kids, an author and a playwright, and more. He obviously took a significant amount of time to prepare and share his entertaining stories and valuable wisdom for a relatively small group of people. He clearly has many demands on his time, and I was impressed at his sincere desire to give back personally and authentically!!

...and that's the latest tag-tip, have a great week!

-Grow Faster!
Michael Beirne
Managing Partner, TAG
www.acceleration-group.com