Working with VCs part 2: reverse due diligence

Earlier this week, I posted part 1 of a currently 2 part series on working with VCs.  As I mentioned there, and as I’ll repeat basically any chance I get: working with venture capitalists isn’t summer camp.  It shouldn’t be.  My personal experience and view is mixed–I’ve had great experiences and some bowsers.  But as I’m generally an optimistm, my basic view is that you’re served best by approaching the relationship with a well-grounded, objective perspective.  Again, this is business, not summer camp; you should know this as the venture capitalists with whom you might work certainly know this.  Not a ding on them, just the reality that you and they should share.

Alright so this post is about tips and tricks to drive reverse due diligence.  In other words, these are the questions and steps to take if you actually get a venture capitalist involved and you want to research whether they’re worth partnering with in building a company.  Feel free to suggest other ideas in comments.  FWIW, these are my concrete ideas and steps.

First, probably the #1 most useful data point would be a VC working with repeat entrepreneurs who’ve had sizeable exits in the past.  Founders who’ve achieved exits previously are the “A-Listers” of the Silicon Valley star system.  The Max Levchin’s or Kevin Rose’s are the Tom Cruises or Tom Hanks of Silicon Valley.   To a degree, they have a choice in working with the VCs they want to work with.  A successful founder who chooses to work with the same VC again is a signal that that VC is solid.  (Otherwise, why would the founder keep working with the person?)  Ask the VC which founders he’s currently working with, and research their track records on this specific dimension.  I’ve met and gotten to know a few VCs who can point to successful rockstar founders who continue working with them–these VCs are the guys you want to work with before anyone else.

Second, find out if the VC on your deal is working with founders on a repeat basis who did not have an exit.  Very similar to the above, except with founders who didn’t exit.  This is somewhat interesting, in that it conveys that both parties still think enough of each other to work together again.  There’s a slight flag here that you should check out, but in generla I’d interpret this as a positive.

Third, ask the venture capitalist to get intros to the founders he’s working with currently, and call them up.  Ideally you meet these folks in person, and you really get them speaking frankly.  This can be easier said than done, but you’ve got to do this. Here are the questions I’d ask them:

• Please describe your experience with them in depth.
• What is the best thing that has occurred in this experience. (This should be concrete.)
• What is the worst thing that’s happened.  (This should be concrete. )
• If you were to have a successful exit and you could work with anyone, would you work with this person again?
• What is the biggest and most significant impact this person ahs made on your business?

The purpose here is not to drive a gotcha type conversation.  You are just trying to get information as clearly as you can on the pros and cons of this specific VC.  I consider this must do work.  What I’m providing here is just a basic set of guidelines.  For your speicifc business, there will be a whole host of individualized issues that you need to drill in on.  The point isn’t so much that there’s a single list; its that you’ve got to go through it.

I’ll probably add more to this list as I mull, but here I thought I’d take the approach of getting this out there and then adding as I think further about it.  Comments welcome.

Filed under: business, entrepreneurship, free stuff for startups, venture capital , due diligence, entrepreneurship, Startups, venture capital

My Founder’s Institute Talk on Branding & Naming Your Startup

Last week, I had the pleasure of speaking as a Mentor at Adeo Ressi’s TheFunded’s Founder’s Institute with entrepreneurial superstars James Hong and Bryan Thatcher.  

First off, before I get into the topic, let me say that I think the TheFunded Founder’s Institute is innovating the approach to startups in an important way.  The approach is a mix of company building philosophies.  It’s one part bigger hammer–that is bring in lots of smart people as founders.  It’s also another part strong social networks, connect those founders to each other and to experienced, proven entrepreneurs.  Add top-tier, discounted, startup services (legal, accounting, etc.) and that gets at crux of the approach.  The new stock class—F-Class—which Ressi’s introduced is also super interesting.

There are a lot more unique details to how Ressi’s going about this, which I’ll not go into here.  But suffice to say, it is both empowering for entrepreneurs and it has a bunch of detailed thought behind it.  Ressi’s vision is big and broad.  It is exciting to be a part of, and I’m eager to help it succeed.   More concretely, I wish I had had access to such a thing when I was trying to start out as an entrepreneur.

Ok, so that’s the Founder’s Institute, now onto what I was talking about when James, Bryan and I spoke last week.  Our topic was Naming—as in, you’ve now figured out what customer problem you think you’re solving and what you want to do, now what do you call this thing?

This is a fantastically rich and interesting topic.  It’s also, IMHO, super super important.  When you’re a startup, your name is about the only marketing you really have at first.  Also, everyone—customers, potential employees, and potential investors—will ask you about your company’s name.  So whatever you name and brand your company had better be good.

My slides from the presentation are embedded here (hat tip to the folks at Igor International, who’s free naming guide was very influential):

(Shared with permission from TheFunded Founder’s Institute.)

It was a good discussion, and my sense is that this provides a useful prescription for startups thinking about what to name their company and how to approach their brands.  Some key points for reinforcement.

Having a process for naming helps.  What I think is particularly useful about this approach is that you can put numerical scores next to how you think about names.  This enables you and your team to have a concrete discussion about why someone likes versus dislikes a certain name.  This is important, as it enables your team to come to a more objective decision, as opposed to just who yells loudest.

Think BIG picture first, then worry about finding the .com or URL that’ll work. Following my talk, one common theme in speaking with people afterwards is that I think many people get hung up on the challenge of finding a good .COM URL that’s not already been picked up.  While certainly a challenge, I think that worrying about this tends to drive entrepreneurs to small thinking.  You’ll have to work through it, but that’s an end point, not the beginning.

As I’ve said in other posts—as an entrepreneur, my advice to other entrepreneurs is to think big in everything you do.  So when it comes to naming and branding your company, think big.  Go for a big name, figure out what that makes sense and helps position you strongly relative to your potential competitors.  Figure out a name that really delivers on the strategy that you’ve put in place.  Get that strategy right and solid.  Then you can go and figure out the more tactical issues of what the URL hunting strategy needs to be.

Commit to going through the process.  The other thing that I’d encourage people to do is really commit to going through the process that I’ve described in the PPT deck.  I’ve met with several companies over the past year who’ve listened to this process, ignored it, and then have ended up hiring a naming consultant to basically help them go through the same thing.

Acknowledgments to the folks at Igor International. Igor International have open sourced their naming guide, which is a great thing.  My deck basically walks through how I used that free information to secure Moonshoot, an awesome brand name, IMHO .  The tool Igor’s provided is for frugal founders like us a tool to go figure this out on our own.  Invest the time to commit to doing it.

Filed under: business, entrepreneurship, free stuff for startups, internet, marketing, technology , Branding, entrepreneurship, Founder's Institute, marketing, Naming, Start-ups, Startups

Crowd-Sourcing a Name: A Loser’s Bet

TechCrunch writes up entrants to the field of crowd-sourced naming firms.  The idea as it’s explained is that a company looking for a brand name or whatever will submit a request to the site, and then the wisdom of crowds will spit out a killer name.

The article mentions that TechCrunch submitted a project on their own and was not super impressed with the results.  This doesn’t surprise me–thinking a crowd is going to light on a great name for something of your’s is fantasy-land.  Crowd-sourcing a name is a loser’s bet.

My view is that getting a killer name is one of the most important things you can do.  If you’re a start-up, you don’t have money to burn on marketing.  Every opportunity you might have to build and drive value from any source is useful.  In this environment, having a great name, an identity that can break-through and stick in the craw of someone is exactly what you need.  You won’t get that from a bunch of random folks who don’t know you.  If you’re starting a company, this is your responsibility.

The best discussion on how to build a name that goes the distance is courtesy of Igor.com.  I’ve written about them before, and their killer discussion guide.

If you need to name something, don’t go the crowd-sourced route–go to Igor.com.

(I have no professional affiliation with Igor.com.)

Filed under: entrepreneurship, free stuff for startups, marketing

The Need for Speed

Mike Cassidy’s very useful presentation on the need for speed in a start-up. Embedded below

Filed under: entrepreneurship, free stuff for startups

Presentation Training : “How To Avoid Death by PPT”

I’ve viewed this a few times, and every so often I return to it.

So many of the over-filled slides, 9 point font, and so on I saw in my past life. Love this deck and wanted to share.

Filed under: entrepreneurship, free stuff for startups

‘One Bad Investor Can Ruin a Company’ — A. Ressi

Adeo Ressi, Founder of the Funded, is one of my favorite entrepreneurs and people in Silicon Valley.  At a recent talk at a STIRR get-together (embedded), he puts together a bunch of practical, useful advice.  Most useful, in my view is his point of thinking carefully about who an entrepreneur takes money from.

The moral of the story–captured in this headline–is a great caution for all founders and entrepreneurs.

Filed under: entrepreneurship, free stuff for startups, internet, technology

Free stuff for start-ups : insight from IDEO

Being an entrepreneur in Silicon Valley, you get a lot of different input on what is must do in order for your business to succeed. A lot gets written about this. Here’s my short list of the most critically important must do’s that I have experienced to date. It’s a pretty simple list:

1. you must not run out of cash
2. you must not give up
3. you must build something people want

The first two are obvious: running out of cash or giving up kill the company.

The third one is where the magic of creating a customer is. And by extention, while the other two are hard, this is the most difficult, most challenging. It also is where you hear the most divergent advice.

The most useful advice I’ve gotten on how to go about building something people want is from IDEO. I did a recent tour of their facilities and got an overview spiel. I’ll write that up in a separate post.

More useful, I bought The Art of Innovation, a book by IDEO’s co-founder on how they operate. It is to building products what Igor’s guide to effective naming — a deep, obvious and useful approach that any entrepreneur could use.

Filed under: bootstrapping, entrepreneurship, free stuff for startups

Randy Pausch’s Time Management Talk

Professor Pausch’s Last Lecture gained international fame last year.  In the course of watching this and reading about him, I stumbled upon a talk of which he is more proud.  It’s his tips on Time Management, a topic (weirdly) I’m really into.

Here’s the HTML link to his notes from this–keep it close.  I refer to it about once a week!

Time Management Talk

Filed under: bootstrapping, entrepreneurship, free stuff for startups

What’s up with Rememberthemilk?

As part of my ongoing quest for finding free productivity tools, I recently found RemembertheMilk.Com. Awesome site, and by far the best integration I’ve seen with Gmail. It just automagically renders on the righthand side of your screen.

Until today, that is. Not sure what’s going on, any hints on how to fix?

Update 1/28/08: Looks like Rememberthemilk (RTM) was ReleasingtoWeb(RTW) a new version.  All back and working.  I’ve commented before in my series on Free Stuff For Start-Ups that Todoist was a great tool.  Todoist is great, but I’d have to say that Rememberthemilk is even better.  Far better integration with Gmail and GoogleAppsMail.

Filed under: free stuff for startups

Free stuff for startups : Will Price’s summary of Weissman’s Handling Q&A

Just saw Will Price’s blog entry on Jerry Weissman’s book, In the Line of Fire, How to Answer Tough Questions When It Counts. I recommend the posting, and I certainly would recommend the book.  
Agree with everything Will says there. I’ve taken Mr. Weissman’s training course twice as a function of my time at MSFT. Its super effective–in particular the approach to handling Q&A is notable. One of the videos that Mr. Weissman shows during his class is General “Stormin’ Norman Schwarzkopf” taking quesitons from the press during Desert Storm. I found part of this on You Tube, and IMHO it’s a best practice on how to deal with QA (the first part in the press conference, not the Barbara Walters part)
   

He answers the questions crisply, concretely, confidently and moves on.

Filed under: entrepreneurship, free stuff for startups , free stuff for startups, Public speaking