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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 problem—one that every company in America has—and 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. Here’s 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.

next: Do It Without The Money >


 

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