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 October 07 | American Venture Magazine article Competing for Capital: Real-World
Advice from a VC Investor Venture capitalists invested more than $7 billion during the first quarter of 2007, according to the National Venture Capital Association. Yet competition for that capital is fierce. AVM: How long have you worked in the venture capital industry? IN: Over the past 20 years, I’ve been both an entrepreneur and an investor. I’ve launched and led my own companies, and now I help other entrepreneurs do the same. My partners at Prolog also have significant experience in both investing and operations. AVM: What kinds of opportunities does Prolog look for? IN: Prolog focuses on life science investments. We’ve invested in biopharmaceuticals, medical technology, and other traditional healthcare areas, but we also look for opportunities in emerging fields such as nutrition, wellness, plant science, and bio-energy. AVM: How do you screen companies when you receive requests for capital? IN: Most firms focus initially on two things: breakthrough products and strategic fit. At Prolog, we look for opportunities that meet a critical unmet need in the marketplace, and they must fit within our life science focus and our current investment strategies. We also tend to focus on very early-stage companies, where we can add the most value. And while we do screen incoming requests, we’re very active in looking for investment opportunities ourselves. AVM: What happens when you identify a company that meets your criteria? IN: We do some initial research to determine key risks and opportunities – competitive landscape, strength of the technology, etc. If we believe it’s a good opportunity, we’ll meet with the management team and assess their ability to lead the business. AVM: What should entrepreneurs expect during a meeting with you? IN: They should be prepared to discuss their business plans in depth, and they should also know answers to other important questions: What critical milestones will this financing help you achieve? How many more rounds of financing do you anticipate? How will you exit this investment, and what other companies have done this successfully in your space? Venture capital firms usually want to make their profit within a few years, so demonstrate how you will make venture-like returns and provide examples of similar entrances and exits. AVM: Why should entrepreneurs consider seeking venture capital funds compared with other kinds of financing? IN: Some venture capital firms, including Prolog, specialize in offering more than just capital. We sit on the boards of most of our portfolio companies, and we offer expertise in refining strategy, negotiating strategic agreements, helping with key hires, and bringing in new investors as the company’s capital needs grow. This is often extremely valuable to early-stage companies. AVM: What additional advice do you offer entrepreneurs looking for capital? IN: First, do your homework to understand a firm’s areas of specialization to ensure that your opportunity is a good fit. Investment strategies vary from firm to firm, and from fund to fund. Second, if your proposal is turned down, learn from the experience. Find out why that firm did not invest in your business, and address the issue with your next opportunity. Finally, stay in touch with firms that turn you down. Keep them informed of advancements and key milestones, as they may decide to provide capital in the future. © 2007, American Venture Magazine.
All rights reserved. Reprinted with permission.
T O P I N T H E N E W S S E L E C T E D R E L E A S E S H O M E |
