Garage Entrepreneurs

by Eric Tags: angel groups, business acumen, domain knowledge, entrepreneurship club, ivey school of business, new businesses, operational expertise, richard ivey school, richard ivey school of business, school of business

Mar. 6^th 2009

We were invited to a talk some time ago which was given to the MBA Entrepreneurship Club at the Richard Ivey School of Business by Dan Mothersill, the President of the National Angel Organization.

Mr. Mothersill gave some great insight into the world of Angel and VC financing for entrepreneurs, with a focus on the Canadian market.  In Canada, there is currently a $5B (Yes, BILLION) funding gap, meaning that there are currently more ideas out there than can be funded, why is that?  It seems like most angel groups communicate mainly through word-of-mouth.  If they hear about a good plan, it’ll pass through a few hands until it lands in the lap of the angel who can see the opportunity and is willing to fund it.  With such an abundance of ideas out there, many of them really good ideas, what is holding them back?  Why aren’t angels going out to find the best of the best and relying mostly on entrepreneurs to find them?

It reminds me of the old joke of the man looking for his lost car keys under the light of a street lamp.  A police officer approaches him and asks “Did you lose your keys here?”  “No” the man responds, “I lost them over there in the dark, but the light is better here.”

It seems to me like many investors (whether angels, VC’s or private) are relying on these entrepreneurs to find them.  They’re sitting in the light on the street, getting hundreds of ideas thrown at them each year, but only a fraction are actually invested in.  Why not dig deeper?  We want angels to step outside of the streetlight and find the ideas that really interest them, not just the top 20% of ideas that land on their laps.  There are more opportunities out there, you just have to look.

Mr. Mothersill spoke about some barriers for new businesses in all industries, and one of the single largest problems is the lack of a good management team which should consist of three things: business acumen, domain knowledge, and operational expertise.  You need people who know business and how it works, have experience in the industry and have gone out there and actually done it before.  If you don’t have these pieces on your own create an advisory board to plug the holes, not a board of directors, an advisory board with industry and operational experience.

A second problem he sees is an entrepreneurs ability to sell.  So many entrepreneurs make pitches to him but are missing a GO TO MARKET STRATEGY.  They know what their market is and how to tackle it but they don’t address the channels available to sell to them, this is so important!  Many pitches state that they’ll do a direct sales method and once those take off they’ll hire a sales staff and they’ll take care of things – NOT GOOD ENOUGH!

A third problem is a lack of vision.  Mr. Mothersill’s entire presentation was called “Go Big or Go Home.”  Many entrepreneurs have a vision for their company that is focused more on a lifestyle business.  They’ll make some cash with it but they aren’t focused on how to make it bigger, how to grow it, how to “take over the world.”  Angels are looking to invest in businesses that have a big vision and a plan to get it there.

Read ‘Lessons From an Angel (Part 2)’.