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Finding the Golden Needle
Netpreneurs Discuss Their First Funding Experiences

How Mack Trucks Build Character

Mr. Riechers: Susan DeFife is founder and CEO of Women's Connection Online (WCO). WCO is the leading online community for professional women and women business owners. WCO provides news and feature articles updated daily, moderated chat sessions with guest experts, bulletin board discussions, polls, surveys and directories of women-owned businesses and women's organizations. It also includes a personal finance center, complete with interactive finance tools, online trading capabilities, related articles and guides, plus a career center with listings targeting women professionals. The WCO community, which has grown 3,000% in the last 12 months, is more than one-third women business owners and 46% professional women. The company closed its first round of venture capital in May of 1997 and its second round this month.

Ms. DeFife: Thanks, Gene. I'm going to be extremely honest, even with the investors in the room. This is a brutal process. You need to have a strong stomach and not take any of it too personally. We got money, but we also got a real good education along the way.

My first point is obvious: develop a good business plan, but make sure it is a flexible document. Don't print and bind it and make 100 copies and send it out. You might find that you are getting the same question over and over again. If so, you are not hitting that point in your plan, so go back and address it.

I remember the first time we sent our business plan out for comment to a few people, including Mario Morino. Mario came back and said, "You forgot the URL." We are a Web-based company, but we had not put our Web address on the plan. Don't take it personally, and adjust as you can.

Tell investors what you can do with their money, but show them what you can do without their money. Build a team. That's hard without money, but one of the things we did was to get commitments from key people to come on board if we had funding. We got an editor from USA Today and a community builder from AOL.

We told potential investors, "This is the caliber of the team we can put together if we have your money." We weren't actually paying those people, but we did have their commitment. That helped a great deal in the funding process.

Build strategic alliances and sign contracts. We signed a deal with IBM, which took a long time to get done. It wasn't perfect, but it was something to take to the investors.

Get press coverage. It doesn't matter if it's true or not. If The Washington Post covers you, it's credible. Build a buzz and get people to talk about you. If enough people hear about you, they are going to come to you. They can, in turn, point you in other directions.

Target the investors carefully. One of the most precious resources you have is time. Are you going after investors who invest in companies like yours? At what stage do they invest? Do they really do seed capital? There are a lot of companies that say they do, but don't. If you are an early-stage company, make sure you are talking to the right investors for your stage. Do they have companies like you already? If they do have a couple, they are probably not going to invest in you, especially if those companies are doing badly.

Ask investors if they have money. Some funds are still raising their money and won’t be ready to invest for six months or so. You don't have that kind of time. The first time we asked that, an investor was shocked. But he said, "Yes, we do," and we went on with the conversation.

What's your product and service? What's your target market? How are you going to get that product to market? Who are your competitors? What's your exit strategy? Investors want to hear the answers to those questions, and your presentation matters. It will make you stand out if you are able to go through all of those points.

Find mentors and advisors. What I mean is, find somebody who is going to beat you up. You need somebody who is going to sit with you and hammer home the questions that you are going to hear from investors.

The first time I met John Burton of Updata, who is now an investor in my company, I didn't think I was going to like him at all. We had a second meeting, and I still didn't know if I liked him, but I was getting somewhere and learning something. After several visits, it got to the point where I thought, "Damn it, I don't care if you ever invest in this company, I'm going to show you that I can do this." I pushed myself and he pushed me. The harder we pushed, the more successful we became.

One of his character-building lessons was to bring Art Marks, Chairman of MAVA, to the table. Art was the Mack truck that ran over me and backed up on his way out the door. I had heard "no" about 20 times so far, and I thought the last thing I needed was character-building. But they knew the lessons I needed to learn.

The second time we went out to raise funding, I was calm and confident. I didn't know if an investor was going to invest or not, but I could sit at the table and think, "Go ahead and take your best shot, because I've beaten up by the best of them, and I can answer your questions."

next: By Hook Or By Crook >


 

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