You may not know it, but Central Oregon is full of self-made entrepreneurs. We are a creative bunch that is not afraid to strike out on our own or test our creative ideas. This was very apparent at the recent Economic Development for Central Oregon (EDCO) 2010 Bend Venture Conference.
Numerous local companies vied for the $200,000 prize, including Manzama, Inc., Whippersnappers, and wild card entrants Element One, Elements Naturals, PlayOutdoors, StreamIT and Web Blox. Congratulations to the ultimate winner, Manzama, and also to all of the companies that made it through the screening process and onto the presenting stage at the Tower Theatre.
We are also very fortunate to have a number of venture capitalists in the area and beyond who are searching for good investment opportunities. But these persons do not have capital available to invest by accident – they are savvy, sophisticated investors who look for certain qualities in the companies or people they invest in, qualities that they believe will lead to success and generate more capital for future investing.
Aspiring local entrepreneurs should be keenly aware of these qualities if they hope to successfully attract venture capital and build the growing “made in Central Oregon” brand.
According to the EDCO BVC selection panel, some of these qualities include:
Strong Management Team. Experience is the key here. Venture capitalists look at start-up experience, as well as experience in the targeted business sector. They also look at management experience and if there is a demonstrated history of past success. Another factor is whether the management team is complete or if there is a clear plan to fill it out. Advisors or a board of directors who can help fill any gaps is also a consideration.
Market. An essential component is the marketing opportunity – is it large or growing? As a local entrepreneur, ask yourself: “Do I know who my target customers are? Do I understand what my target segment is? Can I translate my market opportunity into money?” If you answered “yes” to these questions, then you are on your way to becoming strategically positioned to attract venture capital. Having a unique competitive advantage is also critical, along with a clear marketing and
sales strategy.
Product, Service and Technology. Of course, the key to success for a local entrepreneur is offering an outstanding “got-to-have” product or service. You may have such a product if it solves a significant problem or angst, or is unique. Venture capitalists will inquire about the status of your product: is it just a concept, have you developed a prototype, or is it already in production and available for customers? It will also be important to demonstrate that you are protecting any intellectual property surrounding the product by obtaining patents, trademarks, etc.
Financial, Liquidity, Opportunity. These factors will be vital to ensure success. It is always a plus to be able to show customer interest or orders, and a revenue stream. Also make sure that your financial projections are realistic and feasible, and show that you expect to be cash-flow positive/profitable within a reasonable time frame. Venture capitalists will also want to know whether more than one round of financing will be needed and, if so, that the amount and timing of that financing is possible. Be sure that your investment terms are fair and reasonable, and always plan an exit strategy. If the venture capitalist’s exit can deliver a 10-20 percent return, you may just be in business.
Of course, venture capitalists are not a “one-size-fits–all” group, and so they will likely have other criteria and questions. The key is to be prepared to effectively sell yourself and your product. It worked for Manzama at the 2010 BVC, and it may just work for you.
Katie Tank is a shareholder in the Central Oregon office of regional law firm Schwabe, Williamson & Wyatt. She currently serves as President of EDCO and President-Elect of the Bend Chamber of Commerce. She can be reached at 541-749-4011 or ktank@schwabe.com.
