Benefits of Being a Young Entrepreneur

The Founder Project is a new type of venture fund run by students investing in students' startups to create a global student startup ecosystem.  The founder of Founder Project, Ilan Saks, did a guest post and asked me to return the favor, which I did here.  Currently, Founder Project is only in Canada - Montreal & Toronto, but Ilan has plans to expand to the USA... I sure hope so!!!

 

 

Why am I a VC?

Last March, Whitney Johnson and I were dining on exquisite sushi in Boston celebrating the upcoming launch of her powerful book, Dare, Dream, Do.  We also discussed the lack of women in Venture Capital (VC) because I had never noticed I was the only female partner in mine! While this subject is a blog post I been asked to, but not yet written, two things happened today, 1 in Cleveland, 1 in California, that made me write this from Maine:

  1. Neuros Medical, a company my VC firm, Glengary, invested in at its very early stage, closed a second round of $3.5M led by Glengary and Boston Scientific.
  2. My friend, Adrian Ott, responded to my tweet about Neuros thanking me for supporting neuro-medicine.

So what’s the big deal (no pun intended)?  I felt overwhelmingly privileged and honored to be able to invest in a company like Neuros Medical!  Wow! I have the ability, albeit insignificant, to make a powerful difference in someone’s life – to give a quality of life he or she didn’t have or dream of having (ah! Back to Whitney’s book!). 

Neuros’s device is designed to reduce amputees’ pain when a neuroma (a bundle of the cut nerve endings that form a ‘tumor’) develops at the end of the amputated limb continually firing intense pain signals to the brain (not phantom limb pain).  This is usually treated with narcotics – obviously not a great option that also isn’t very effective.  In clinical trials, Neuros’ device greatly relieved, even eliminated, pain beyond our expectations, allowing people regain their lives.  It’s not every VC whose deals bring tears of joy and amazement to their eyes.  

Another one of our investments, Cleveland HeartLab, was at TEDMed 2012 demonstrating their blood marker test for MPO (Myeloperoxidase) that predicts the odds of a cardio event based on atherosclerotic plaque.  Talk about having an impact – this test has tremendous implications for improving and saving lives.

For me, being a VC is not just about profits and money, it’s about purpose and meaning.  In my own small way, with the help of so many others (my partners, our investments, the ‘network’ that supports all this), I can improve, even save, lives and the families around them. 

If that doesn’t get someone jazzed, I don’t know what will.

 

Side Note: Neuros Medical and Cleveland Heartlab’s successes are two of many successful and impacting startups in Northeast Ohio and Cleveland.  The city of 19th & 20th century startups – from oil to steel to automotive to polymers to coatings is undergoing a renaissance on many levels and let me tell you, it’s one exciting place to be a VC – there is no shortage of quality deal flow and the excitement is palpable – economically, socially, culturally, recreationally, you name it.

The Business Plan Fallacy

As I'm reviewing business plans from college grads I'm mentoring (as an alumnae mentor at Brown Univ ) and from Glengary , the VC firm I'm a partner in, this whole business plan process is getting to me.   So much of what I see in biz plans (and strategies) is, pardon the phrase, BS.  We all know none of us believe any of the numbers is the proformas, the market growth, etc., so why do we bother with all this stuff when we know it's a joke?  I don't know, but here's what I'd like to see in a biz plan for a change.

  1. The current, accurate, realtruthful view of the world - market(s) as it exists and will exist. If it doesn't yet, why, what are the real needs, current and potential competitors (in/out of your market space).  What have others tried and what has succeeded or failed and why. Tell me a TRUE story of the world you're going into - you can use spreadsheets, analysis, etc...you should give me #'s, but tell me how this world really works, not how you'd like it to work.
  2. Clearly state your assumptions and hypotheses (e.g., if we do x, then y will happen; we can make A with $X in T months, we will take C to market and the market will do S) - how will these impact the market you're going after or creating - and ideally, do it in a way that you can change the assumptions so they automatically change the outcome.
  3. Delineate your plan ‘management/mitigation' story - since we know you'll make mistakes in #2 above, what are you going to do when this happens?  This has 3 critical areas: 1) how flexible is your management - can you adapt and shift if necessary? 2) how flexible is your product or service? Can it adapt or is it a binary choice? 3) if things really don't happen as planned, are you done? Do you have other ways to go to market?
  4. People - you need the required resumes of course, but what matters more is their level of passion, commitment, heart/soul into the biz, attitude, abilities, history of executing, of doing, of making things happen.
  5. Money - how much do you need, what are you going to do with it, cash flow, P&L, balance sheets, margins, exits etc. - the usual stuff.  But, what are you doing while you're waiting for the money - are you still moving ahead? Are you able to straddle ramping up based upon funds? Investors want to see that you can still make progress while you're waiting for funding or if you don't get enough.

Treating Start-ups like Adults? Wait!

Humans are one of the few mammals whose babies are not fully developed at birth. Unlike horses, whales, etc., human babies can’t stand, walk or forage on their own at birth. They are totally dependent upon adult humans for constant, continual support just to live.  We are used to this, we accept it, we don’t expect anything different.

Yet, when we discuss the birth and development of innovations and companies, it’s totally different. We expect an accelerated path from birth to adolescence to adulthood. It doesn’t need to as long as human development, but it’s rarely Google-speed.

We know innovation and entrepreneurs need nurturing and support, but usually just pay lip service. The similarities, and therefore lessons learned, between newborn babies and innovations/ideas are seldom applied.

Within companies, many innovations aren’t given the time or support (e.g., prototyping, experimenting, testing) to ‘prove’ their worth – they are subjected to processes (e.g., stage-gate) and reviews prematurely and are not given a chance to try to crawl let alone walk. While vetting is critical, vetting too early can be fatal to the company as a whole longer-term.

For startups, entrepreneurs usually have to grow up (too) fast if they want to get the funding to nourish their growth. As a mentor to startups, my role is paradoxical - to nurture and advise but also help push out of the nest.

As a partner in Glengary LLC, an early-stage VC firm, we provide the necessary support and network AND hold them accountable for milestones, without asking for meaningless data in business plans. It is always a balancing act.

So, as you are involved in innovation and with entrepreneurs, apply some of the lessons learned from raising your kids, if you have. Provide a path providing sufficient nurture and nourishment for growth that teaches self-discipline and self-sustenance for independence.

It isn’t easy to do as parents, and it isn’t easy to do in business, but few rewards are easy.