|Finding the Golden Needle
Netpreneurs Discuss Their First Funding Experiences
A Wildebeest On The Serengeti
Mr. Riechers: Bob Schmonsees is the founder and CEO
of WisdomWare. WisdomWare was formed in 1996 to
develop high-performance, knowledge-sharing solutions that make sales, marketing and
customer support organizations more effective. Its flagship product is Enterprise @nswer
SYstem, otherwise known as E@SY, a next-generation, knowledge-sharing system that helps
organizations gather and share frequently-needed, mission-critical knowledge and business
intelligence throughout the enterprise. In December of 1997, WisdomWare received funding
from a consortium of venture investors led by FBR Technology Venture Partners, Anthem
Capital, Walnut Capital, the Ocean Fund and Triad Investments.
Mr. Schmonsees: Thanks, Gene. I wrote that elevator
speech which Gene just read about a month and a half ago. It is too long. We are basically
in the business of helping companies sell more. You have to figure a way to describe what
you do in business terms.
As Gene said, we raised about $4 million back in December.
Our participation at the Mid-Atlantic Venture Association
(MAVA) Fair in November was icing on the cake. We had gotten a lot of people interested in
us, but the presentation at MAVA helped nudge a couple of people over the edge. Hopefully
MAVA can get even more people there this year.
Remember that every deal is different. WisdomWare clearly
offered a "pure vision" play. We didn't have a business model that was proven.
We were selling a second generation technology in a market that hadn't even had its first
generation. We had to sell a lot of vision. Our way of getting attention was much more
about creating a situation to talk with the VCs; spending time with them discussing the
business opportunity that would result if we could crack this problemone that every
company in America hasand that we had a unique way of doing it. You always have to
look at your business and ask, "Are we offering technology or are we offering a
business solution?" Frame things in terms of the business solution in order to get
people interested. There isn't any magic in this. It's hard work, and it's executing the
fundamentals over and over again. As you do, talk to people, get the message honed down.
Sooner or later you'll have that one call where the VCs lights go on. Hone in on that like
bees on honey and make sure that the deal happens.
Valuation is not important. I learned long ago that
valuation and control are only important to people who don't have a lot of value to give
and who don't have a good business plan. If your business is good, then get the funding.
The VCs will try to get you as low as possible. It will be fair, though, because they want
you to succeed. So don't worry too much about valuation. Get an investor who is a partner,
who can provide both capital and advice. You want somebody who is in the boat with you,
because there will be times over the first couple of years when holes will spring in the
boat. The valuation discussion at that point is going to be different than the first
valuation. It doesn't really make a difference whether the valuation you get is $5 million
or $3.5 million, because it's not going to make a difference if you're successful down the
road. Fight for it when you are in negotiations, but don't make it a big stumbling block
in the early discussions.
Control is even less important than valuation. You earn
control by performing.
Another bit of advice I would give you is to be
intellectually honest with yourself and with the VCs. Openly admit you don't have all the
answers. Say, "I anticipate that I'm going to face these problems over the next two
or three years. Heres how I'm going to try to solve them." That honesty is
important because you are trying to find a partner.
Look for one VC that you can close on, because VCs operate
in packs. In the last four weeks I felt like a wounded wildebeest on the Serengeti. All of
these jackals were circling around, figuring out who was going to take the first bite. I
focused on one of them and got him to take that bite. Then the rest began to feed in the
frenzy. Get it started by focusing in on one VC, and all the rest will happen.
It Without The Money >