This book offers nothing new by way raising capital.
My main issues are;
1. Outdated info.
2. Funding sources are wrong, and we learn nothing about the ones that matter
3. No mention about how to determine if the idea is fundable.
4. Huge gaps in the fund raise process.
At 400 pages it makes for a brutally long read.
This is my beef with this book and business books in general- they are too long. This book could be condensed into a small article as it offers no real insight or even no new insight into these mythical angels. My opinion is to limit all business books to no more than 251pages. If you need more, write 2 books as the topic is too big, or your editor is too dumb.
Breaking down the main points;
1. Outdated info
Business plans are obsolete. They take too long, are never accurate and are difficult to write and update. And no one reads them, they just skip around- everyone wants the 1 liner.
Think of a tag line for a movie: "A boy and a girl from differing social backgrounds meet during the ill-fated maiden voyage of the RMS Titanic."
Ok, so you know where the movie is set, what the plot is, what period it is in, and can figure out what type of movie and what the demographic is even how much it would cost to make.
ALL from this 1 sentence. You don't need to read the script first and see the budget to say that you would be interested in learning more.
Everyone reading this knows the business failure rate- chances are you will fail and lose money.
But don't spend 2 years preparing the business and then fail. FAIL QUICKLY not slowly, do something else keep throwing mud on the wall. The market may change faster than you expect. A real current example is Square, that tech company that came up with a neat gizmo that plugs into your iphone and then any merchant can take credit cards. Problem is they are going up against guys like paypal with millions of customers and lots of cash- the better way would have been to sell the company after a short period- you know Square is not going to be around for long and the valuation is plunging daily- how did their 5 yr plan account for this. THINGS CHANGE QUICKLY NOW.
Make a teaser, pitch it and vet the investors quickly and get cash quick worry less about perfect investors than getting money. WHO CARES WHO YOU GET THE EQUITY FROM. If you don't get the money there is no badge for ethics and you cannot put it on your resume you just look like someone who is idealistic and cannot work with others.
And you are still without a track record. Better to have a bad one than no one, change your name if you blow out that badly.
BOO HOO of the founder with only 5%, it's better than 100% of nothing, and no track record- and it's still better to be able to hire who you want than being a wage slave and sitting next to the idiot in the cubicle. That is what none of these books bring up. Ever.
2. Funding sources- No talk about "private placement agents" they are just there, in the shadowy netherworld of funding. Good luck finding a person like this- that is not shady. NEVER MET A LEGIT ONE. Angels-no real info on these guys. Assumes you have an existing dbase of these people already. Which you don't. Doesn't go into any detail about any of these people but yet stakes the book title on them.
IF you do use one figure 10-15% commish.
For authors Gerald and Joe, I would like to propose a test- get them to get any accredited investor to read the full business plan. DOESN'T happen, will not happen, let alone get the investor to shut off their phone for 30 mins. And if they are like this and read everything, they will be a major pain in you're a** with monthly reports and meetings- but again suck it up you will know better next time.
Friends, family- this is the THE worst place to get money- they are not savvy accredited investors and they are emotionally attached to you. MOST BUSINESSES FAIL. So can you live with yourself if your mom loses all her money and your friends hate you? If an investor tells you to get this kind of money- walk away this guy is a scum bag. You see people going to jail for scamming the elderly couple out of cash for an investment deal- in the end what's the difference between them? Nothing, both lost all their money, that really should have not invested in the first place. They are not accredited investors.
Your own money- put enough in, take a reduced salary for a while, no real investor would ask you to put in your life savings- the reason why banks don't let brokers trade their own money is because they put their interests first. This is why you cannot get employees easily on a budget, the whole reason employees are that is because of the "security and stability" factor. You will never persuade a young one because they have no money, and the time they get old and have some they have too many commitments.
3. No mention about how to determine if the idea is fundable
Like above, better to fail quickly than slowly. The point of a teaser is to gauge interest- you should be shooting for overwhelming demand, on both sides. If the response is cool then recheck the teaser, call the prospects get some feedback- and tweak it, it's easy with a short teaser or powerpoint. Remember, most ideas change and evolve- that's ok, all you are looking for is lots of demand and money- again the market changes 3 months can be huge in the market.
Does it scale? What does the business look like 5 yrs down the road- make big numbers here and make sure it looks huge- hype the hell out of it, scatter facts about the industry, but stay away from mkt share estimation. The old 10% mkt share in 2 yrs is so done. Better to say that estimates for majors are all over the place and that we would be mistaken to attempt to do so at our stage.
4. Huge gaps- already covered most of it above- better to get out there and pitch then sit at home prepping- throw it on the wall. Ask people how they did it. Pick up the phone and ask many people.
This is your number 1 job, calling and asking for help. But also give some value and ask them questions and be interested in them- not just "how do you get the money?" "Can I have a list of people who gave you money?" type idiot questions.
The many issues I have with this book is specifically the way the book makes people assume that the idea is fundable and should merit months of prep work, specifically a business plan and then spend $20-25k on legal to get the risk disclosure right. SO right there you are in months of pre work, a legal retainer of 5-10k then the 20-25k for the copy and paste risk disclosure that you can get off any prospectus, then prepare a business plan that no one reads. Again 50% of you will fail so you cannot put a business plan on your resume.
IF I CAN, WILL YOU?
Should be your guiding principal. If I can deliver X product at X price with X specs will you put down a deposit, (not an expression of interest this is a polite f you) for a discount of 10% over cost or free maintenance or upgrades or whatever?
IF I can get X customers interested will you invest X capital for X ownership with X provisions for you? OR can we negotiate X provisions? Don't try to be a know it all you won't say the main points are always negotiated.
Disregard anyone who says get a business plan this early, I guarantee you they are over 55 or are not real investors used to seeing teasers.
The market changes so quickly the research and the plan will be outdated the time it goes to market. Also it is easier to update a powerpoint than a huge 200 page plus document. You may have a killer idea, but if you cannot get it funded you are dead. Ideas are cheap, so don't even worry about your idea/concept. Funding and money are your main goal, say and do anything to get it and you may have a chance. Those are the types of guys and the mindset of what it takes nowadays.
Why do I know all this- because I was the guy that had to get ducks lined up, everything perfect - and the market changed and what was fundable was no longer. Don't do what I did just throw it on the wall. Forget about thinking about not burning bridges and lasting impressions just pitch it.
Thanks to the "founders dilemma" and "save the cat", books I have alluded to in the review.
