Monday, December 17, 2007

Program pairs experienced execs with start-up entrepreneurs,1,4245138.story


Program pairs experienced execs with start-up entrepreneurs


December 17, 2007


When approaching the Valley of Death, most entrepreneurs don't seek comfort from the Psalms. They prefer cash.

The valley is what start-up companies call the period when their original "angel" investor cash begins to run out, but the young firms haven't matured to the point where venture capitalists or others are prepared to invest.

"Almost any young entrepreneur you ask will have the same answer to the question of what they need to succeed," said Tom Churchwell, managing director of the Chicago-based ARCH Development Partners venture fund. "They say it's money."

That's inexperience talking, he said. While money is essential to fueling a start-up, sound management, good planning and smart execution of a strong business plan not only will put a young firm on the path to success but also will attract funding from savvy investors.

To impart these lessons, several experienced chief executives have joined together to offer a mentoring program for Chicago-area firms. After a competition among several young firms, three have been selected to receive intense mentoring for the next six months.

The firms are RevStor LLC, a Schaumburg-based data storage firm; ParkWhiz LLC, a Chicago-based firm that uses the Internet to match people wanting to rent out parking spaces with motorists needing a place to park; and PrepMe Inc., a Chicago firm that helps people prepare to take standardized tests.

"We see this as a pilot program," said Churchwell, president-elect of TiE Midwest, the group sponsoring the project. "After six months, we'll see how well this scales up."

The effort is tailored after experiences of Silicon Valley entrepreneurs who take their firms to success, make bundles of money and jump back into the fray either by starting other firms or investing with young innovators while acting as mentors, said Churchwell.

"Serial entrepreneurs know pitfalls they can help younger guys avoid," he said. "They also recognize and avoid blind alleys."

Knowing how the game is played can be more helpful than being handed a bag of money, Churchwell said. To pave the way for future investment once initial funding runs low, an experienced entrepreneur plans ahead.

"You contact potential investors way before you're ready to ask for money," he said. "You explain your business plan and tell them the milestones you intend to hit over the next six months. When you go back, if you can say you hit those milestones, plus some other accomplishments, an investor appreciates that. You'll get serious consideration."

Even though most entrepreneurs are in love with the bright idea that causes them to start a new company and the technology behind it, Churchwell said, investors aren't impressed. Instead of listening to descriptions of slick technology and rosy sales projections, they look for solid management with a proven success record.

"When you put up your money, it's always about the management team," Churchwell said.

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