Venture capitalists give their 2 cents worth to entrepreneurs - Minneapolis / St. Paul Business Journal:

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On the basics of the elevator most venture capitalists Company leaders have to succinctly describe theirtbusiness plan, how their product or service will gain traction in the markety and how funding the company in turn, benefit investors. Getting a foot in the door to meetwith however, can be a hurdle -- and one whosew height can depend, in part, on what stagee funding a firm is seeking. The easiesy people to approach for capital are friendand family. Pursuing federal grants also is common practicseamong entrepreneurs, particularly those involved in life-sciences companies.
Thes e are funding sources thatmany early-stage investors expect entrepreneurs to have already looked into before approachingh them, said John Alexander, chairman of , a group of high-net-worth individualz who have pooled their own money to invesgt in startups. "You have to show that you have a lot of skin in the For other venturecapita firms, a recommendation from a lawyer, accountanrt or other advisers the firm is familiae with can go a long way with gettiny a business plan to "ther top of the pile," said Joy Lindsay, president and co-founderr of Bloomington-based , an early-stage venture firm.
Often, those advisers will vet firms beforr recommending them to VCs as potential Targeting the right audience also is saidRick Brimacomb, a former venture capitalistg who now consults startups seeking "Understanding who you're pitching is very important. Most people lose sighyt of that," he said, adding that reviewing bios of VCs on Web sited and carefully considering the type of investmentz those firms are lookinbg foris critical. The impression a management team makews should notbe underestimated, said Michael managing partner at Eden Prairie-basedc .
"We're looking for a team or leader who has the rare combinatiomnof experience, passion and In a pitch, that comes through loud and clear." There are plenth of mistakes companies make when seeking funds. "Way too many entrepreneurs spendx way too much time talking aboutg how great the mouse trap is and not enough time talkin g about why someone would buy it orhow they're going to get it to Brimacomb said. Also, sometimes entrepreneura will underestimatetheir competition, Gorman "There's often an underappreciatiohn for how competition might unfold.
If it's an attractivee market, companies who are not in the business now mightbecome competitors," he said, adding that companies pitching venture capitalistas should be aiming to become a leaderf in their target market. "Just takinf a tiny fraction of an enormousmarket isn' t enough." That's not to say, that even in a crowded market, the righrt startup couldn't become a leader, he citing Google as a key Another common mistake made by entrepreneurs is that they don't carefullu evaluate how much fundingf they need or how far thosd dollars will get them. "Most often, people don'ft raise enough money," Alexander said.
"They don't think througnh how long [the funding] is goinv to last." Companies should be open at the start abouytheir shortcomings, Lindsay said. "Peoplee think if they don't have a histor y of revenue, they shouldn't exposr that. I'd rather know now." Also, entrepreneursa should be willing toaccept criticism, and shouldn'tt be afraid to approach investors again even if they didn'yt receive funding the first time, Alexander said. For Twin Cities Angels will reconsiderd investment opportunities if a company has addressed problem pointed out bythe group.
Many VCs and their advisers, however, recognize that finding early-stage funding is a challeng e these days. One tip Brimacomb offer is to seekout like-minded investors. A med-tec h company, for instance, couldf make significant progress by seeking out doctors who have a deep understanding ofthe product. And what about pitching in an actualo elevator? "I would say pitch everywhere and anywhere you Lindsay said.
"You never know who might be