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Each week, the web-based, early-stage venture financing firm Garage.com receives This is a
single/personal use
hundreds of proposals from prospective high-tech startup companies looking for copy of
Knowledge@Wharton.
mentoring and investors. Only a few make it to "Heaven"–the section of the firm's web For multiple copies,
custom reprints,
site dedicated to showcasing promising startups for its venture capital members and e-prints, posters or
plaques, please
individual investor "angels." On September 27, Garage.com CEO and author of Rules for contact PARS
International:
Revolutionaries Guy Kawasaki spoke at Wharton about Garage.com's operations and the reprints@parsintl.com
P. (212) 221-9595
criteria for successful fundraising in today's high-tech world. The talk was part of an x407.
All materials copyright of the Wharton School of the University of Pennsylvania. Page 1 of 2
Heavenly Strategies for High-Tech Startups: Knowledge@Wharton (http://knowledge.wharton.upenn.edu/article.cfm?articleid=78)
raising," he says. When the right investor shows interest, Kawasaki also advises entrepreneurs to accept
more financial dilution than they might otherwise. "A small increase in the percentage of dilution doesn't
matter over the long haul. In this business, either you end up more successful than you ever imagined, or
you're already gone."
That said, Kawasaki also warns that it is still important to give any interested investor serious
consideration, even if it doesn't seem like a perfect match. "Don't be too proud," he says. "The market
changes too quickly to pass things up."
In what may seem a counter-intuitive turn, Kawasaki also coaches companies to ask investors for less than
they actually want. "If you need $2 million, ask for $1 million–not $4 million." It all has to do with
perception and what Kawasaki refers to as "Silicon Valley logic." "If you ask for $4 million and an
investor only gives you $2 million, then you aren't fully subscribed," he points out. This, according to
Kawasaki, sends up a red flag to other investors. "If you ask for $1 million and get $2 million, then it
won't be long before other investors want in. You need to create the illusion of scarcity," he adds.
On the subject of company longevity, Kawasaki advises entrepreneurs to "keep cash balances high and the
burn rate low." Many companies, he explains, begin with one business model but then find the need to
change that model as they grow. "If you have some cash, you have time to make mistakes and to grow,"
he says.
This is a single/personal use copy of Knowledge@Wharton. For multiple copies, custom reprints, e-prints, posters or plaques, please contact
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