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1
Breaking Through The Broken:
The Transparent GuideTo Overcoming The Ineiciencies In Early Stage Venture Capital
© 2009 North Venture Partners, LLCdontgosouth.com northangels.com
 So you’ve done the work, assembled the team,written the business plan...Now what? For mostentrepreneurs, successully raising capital is adaunting task. Ater spending countless hours atnetworking events and collecting a shoebox ullo business cards rom people who can’t really seemto oer any help or guidance, what is one to do? You start blasting out your business plan to anyonewith a working email address or a “submit a plan”link on their website. But ater hearing nothing butcrickets rom all your proactive eorts, you mayeven begin to second-guess your big idea, your entrepreneurial abilities, and your chosen career path. How can an entrepreneur break through andget venture unding when most investors don’teven read business plans?It’s true. Most VCs and Angel investment groups arecompletely buried in submissions rom entrepreneurswho have “remarkable products, stellar nancials,and a world-class management team,” or at leastthat is what their business plan would say i theyactually had the resources to read the thousandso plans in ront o them. Say what? That’s right,most investors don’t read business plans. Theysimply don’t have the time or resources to readthousands o highly subjective business plansthat all say pretty much the same thing. I that’sthe case, how do investors nd, lter, and undthe most promising new venture opportunities in adeep ocean o possibilities? The truth is, they can’t.This current process or ostering early stageinnovation is broken, and it needs to be xed.The problem isn’t with the number o opportunitiesinvestors are presented with, but is rather a lacko an ecient means o ltering the options. Theinnovation system is constrained by throughput,not supply, but how can we solve this problem tomake the process o creating new companies moreecient and generate the returns investors,entrepreneurs, and ultimately the global economyneed so desperately?
Breaking Through The Broken:
TheTransparent GuideTo Overcoming
The Ineciencies In Early Stage Venture Capital.
 
Transparent Guide
 
 
2
Breaking Through The Broken:
The Transparent GuideTo Overcoming The Ineiciencies In Early Stage Venture Capital
© 2009 North Venture Partners, LLCdontgosouth.com northangels.com
 Early stage investing will always be considereda high risk, high reward game. But what i therewere smarter, more ecient tools that enabled bothinvestors and entrepreneurs to optimize the processby making the investment process “less gut” and“more guided”? Could we eliminate some o the ear and conusion surrounding early stage investingand begin to truly optimize entrepreneurship?In case you’ve been living under a rock or the lastsix months, you know that our economy isn’t doingso hot. The system’s faws have unortunately cometo a head in recent times, leading to the near perilo once esteemed industries (goodbye LehmanBrothers and Merrill Lynch), a staggeringunemployment rate not elt since the 1970s, anda socialistic-like bailout o our cherished laissez-aire markets. With crumbling credit markets andan over-hyped housing bubble sparking the recent Wall and Main Street economic meltdowns, American innovation is now being trumpeted asthe last best chance to lead the impending economicrecovery. With Financial Markets in turmoil, andreal estate in a downward spiral, innovation islogically the economic game plan or the comeback
Cont’d 
Breaking Through The Broken:
 Introduction
o the century, with the ability to create new jobsand even spawn entire new industries, where elsecould we turn or game changing growth?But as promising as American innovation sounds,i we don’t step up now and collectively addressthe ineciencies in how new companies are beingcreated, our economic and social utures could beat serious risk…
 
 
3
Breaking Through The Broken:
The Transparent GuideTo Overcoming The Ineiciencies In Early Stage Venture Capital
© 2009 North Venture Partners, LLCdontgosouth.com northangels.com
 Fortunately, the timing or xing this problem couldn’tbe more ideal. With the new administration comes apromise o support in the creation o small businesses.Change will come with policies like President Obama’s“Innovation Agenda” which “leverages technologyto grow the economy, create jobs, and solves our country’s most pressing problems.”“Right now, somewhere in America,” believes Obama,“a small business is at work with the next big idea…an entrepreneur is sketching plans or the start-upthat will revolutionize an industry.” What Obamaorgot to mention, though, is that one garage downrom the next Facebook, an entrepreneur is workingon the next big fop. Along with the many brilliantand world-changing ideas seeking capital, there arealso plenty o terrible ones. How can an investor possibly know the dierence between the two at suchan early stage? How is an entrepreneur to knowthat the time (and capital) they are spending takingtheir project down a certain path may be much better spent directing it in an entirely dierent direction? With today’s one in ten success rate or creating new ventures, we don’t have time to just “bet more”;we need to bet smarter because what matters mostis the output that these invested dollars return.This all raises the question; what is the early stageinvestor community currently doing to optimizeentrepreneurship and increase the success rate o their investments?
Support Beyond
Dollar Signs
Let’s not orget that entrepreneurs, and the investorsthat support them, need all the help they can get toturn these ideas into world-changing realities, and
Change We Can Must
Believe In
contrary to popular belie, more money is not theonly answer.The central issue is not with the quantity o ideas or number o willing investors, but rather in properlypairing the two. There are plenty o investors willingto provide the capital needed by the entrepreneursworking to change the world, but there is oten acommunication breakdown between the two parties.On one side there are the mysterious “deal mak-ers” who might seem easy to reach with the clicko a mouse, but in reality are incredibly dicult toengage with meaningul dialogue. On the fip side,there are the passionate entrepreneurs who are eager to nd out what an experienced investor thinks o their “big idea,” but usually hear back nothing at allater submitting their materials or consideration.So what’s the rub? Well, there are a number o problems that areholding us back. For one thing, the process or raising venture capital is shrouded in secrecy. Isn’tit strange that in an industry hell-bent on buildingnew companies and “inspiring innovation”, mostinvestors aren’t even willing to take the time to giveentrepreneurs some valuable eedback; specicallytelling what they’re looking or, and guidingentrepreneurs to ocus on certain areas o a businessi they want a legitimate shot at raising investmentcapital? Don’t you think i entrepreneurs built their businesses around the actual criteria they werebeing evaluated on, they’d have a much better shotat connecting with investors? O course bothparties have to be judicious with time and energy,but the complete lack o communication is benecialto no one.
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