Category Archives: free stuff for startups

Thru the looking glass: Fund-Raising Lessons

Handling QA in investor pitches

Udemy’s Gagan Biyani wrote a super useful, practical guide on fund-raising lessons learned.  Gagan is a great Silicon Valley startup CEO: he’s tireless, he’s persistent, he’s nice, and he’s adaptive.  All that comes through in his post.  Give it a read here

He set an example that I wanted to follow on slightly with some of my own lessons learned and lessons borrowed.  I’ve gained the opportunity to participate in the fund-raising process from a few angles. As an entrepreneur, I’ve raised money for my own company, Moonshoot.   I’m also at times a venture capitalist/investor at BlueRun Ventures, so I see things from the other side of the table too.  

I’m putting together a series of posts, which aim to share these learnings.  I’m going to start this series with one of the most important –and under-discussed – elements of the fund-raising process: answering questions.  

“Say it once.  Say it well.  Don’t say it again.”

I attribute this quote to one of my best friends, Nils Gilman.  An intellectual historian, published author, and polymath, Nils is a fountain of knowledge, thinking and ideas.  He can also flat out turn out well-written text at a factory pace—it’s crazy.  He uses the above adage, in coaching me on writing.  I apply it to what we say, specifically when answering questions in a pitch. 

Why questions matter

Most fund-raising posts will focus on pitch decks, meeting etiquette, etc.  All that stuff is useful.  In my experience though, a key skill for any founding team is how to answer questions.  Investors want to ask questions to probe more deeply and to see how you respond.   In addition to getting us information we want, asking questions provides a different lens into the thinking and quality of the founding team.  How you answer questions conveys a great deal about you, your team,  your credibility, your command of data, etc.   You may not win by answering questions well; you risk a lot by answering poorly.

Where to Start

As answering question is more improvisational, it tends to get less attention than preparing a pitch, getting the deck in shape, etc..  Don’t ignore questions though—spend time thinking about how you want to answer questions.  Nothing is more painful than presenting a great pitch, only to feel as though you gooned a few key questions and lost your credibility in front of a potential investor. 

I recommend Jerry Weissman’s book, In the Line of Fire: How to Handle Tough Questions.  Jerry is a friend, mentor and teacher.  He’s one of the very best in presentation training and skills.  His thinking and exercises on Q&A (and among presentation planning) are among the best.  Get his book here.

I also recommend writing down the top 10 questions you expect.  Figure out how you want to answer them, and answer them that way.  As you go through pitching, write down the questions you’re getting, along with the answers you provide at the time.  Assess whether there are better answers you could have provided, and add that to your repertoire.  Evolve this so that as you do this more, you’re ready.    

My Observations

Few founding teams handle questions extremely well.  Many struggle with basics—hearing the question asked and answering.  For example, if an investor asks you if you’ve raised previous money, a simple “yes, we’ve raised $80K in friends and family” is a fine answer.  Instead, often there’s some whole discussion of who gave you money, when all it came in, why you took it, etc.   TMI.  Understand the question being asked, and answer it.  Remember the adage:

Say it once.  Say it well.  Don’t say it again.

Focus on this, and you’ll be in good shape. 

As you are focusing on this, I’ll add the two most common breakdowns I see in founders answering questions during a pitch.  Though different, they’re related.  Here are the two most common problems I see in answering questions in a pitch:

Answering about the unknowns

Founders are dealing with big unknowns.  Known unknowns and unknown unknowns.  As someone assessing whether I’d invest, I know you’re dealing with unknowns.  Its generally fine to say, “I don’t know, and here’s my plan to learn/figure out.”  So long as this is credible, that’s fine. 

There are two cases where that does not work.  First, you say you don’t know, when I think you reasonably should.  For example, this summer I spoke to a mobile location-based platform company seeking investment.  The exec with whom I spoke hadn’t heard of FourSquare.  This was unacceptable, as this person should have known of them—something he should have been able to figure out. 

The second is where you dress up the “I don’t know,” in a bunch of bullshit.  I have sympathy for this mistake.  As a founder, we want to know everything on the business.  We don’t want to feel like we don’t know an answer to a question.  We may even have some decent hypotheses.  But if you don’t know, you don’t know.  Just say, “I don’t know yet.  I plan to figure that out this way.”  BS is pretty easy to identify and its hard to watch.  I understand the temptation, but avoid. 

Answering about the knowns. 

If founders talk too much about what they don’t know, they are also prone to talking to much in answering questions on details that they do know.  The problem here is lack of empathy.  Investors are flying at a different altitude than the founder.  Founders have everything invested in a company, and are very close to the businness.  Investors are much more removed—trying to assess in a brief conversation the viability of potentially investing  money in a venture.  An investor is flashing through in his/her mind whether the market, the team, and product could be a fit.  This mismatch leads to times where an investor can feel a pitching founder is just off on a tangent and “in the weeds” to a degree that they won’t be able to manage or lead a company.   

Sometimes an investor really is interested in getting down into the weeds, but that’s pretty rare.  As a founder, you should know whether the investor is asking for that detail—if yes, then go into weeds.  If not, hold back. 

I posit that when most potential investors ask a question, they want to see whether a founder can understand it quickly and credibly clarify the essence of what I’m asking.  Sounds easy; hard to do.  Most of us are so close to our specific worldview that its difficult to context switch and communicate at a more bubbled up level. 

For example, I spoke by phone with the CEO of an outstanding company this summer.  Very clearly, they’d built a better mousetrap.  The issue was, no question I asked, regardless of how basic, had less than an 8 minute answer.  This did damage.  I literally got spooked because the executive’s answers were too disjointed and long.

As I reflect on this, it could well be that these symptoms are related.  As founders, we want to hide the stuff we don’t know and expand the stuff we do.  The result is unsurprising.  For stuff we don’t know, we retreat and hem and haw and deflect.  For the stuff we do, we want to expound and show you in 10 different ways why we know this particular thing.  The problem is, both are exactly the wrong approach.  Which leads me back to the mantra I’m repeating…

Say it once.  Say it well.  Don’t say it again.

In conclusion, I’m kicking off my series on pitching observations with a (hopefully) useful primer on answering questions.  Think about this.  Write down key questions you expect and prepare answers.  Track the questions you get asked and how you answered them.  Be mindful of whether you’re more effective saying “I don’t know, but…” or answering what you do know. 

And good luck.  Happy hunting. 

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Can You Handle the Truth? Advice for Founders

Always tell the truth, its the easiest thing to remember. — Glengarry Glen Ross

I have started my second semester at the Founder Institute, Adeo Ressi‘s awesome incubator.  It has been a blast so far, in my view, a lot of really strong founders wiht great, viable business ideas. It has been a lot of fun to be involved, and it is as always humbling to have smart, passionate people asking for my input.

As it is still early in this group’s process, some of the ideas are a little earlier on, still in “ideation” (terrible word) mode.  This is of course a natural state of being in a startups life, that early stage when you’re still not even sure you’ve got a good idea.  Its an exhilirating time–you’ve not made any mistakes (yet) and the world seems ripe to take on your vision, while at the same time, you definitely have those soul-shaking moments of doubt as to whether you’ll ever be able to turn your idea into reality.

Int this stew, founders will come to me to ask my advice on their idea, and I’m happy to try to take the time to listen and provide a few minutes of helpful input.

A question I have had and answered for myself is how hard core or harsh to be on someone’s idea when it is still on the drawing board.  Although it certainly has its risks and drawbacks, I’ve decided that this is a time to be very blunt and hardcore.  The risk is that this approach dissuades someone or that it gives them an impression that I’m a jerk.   This is the last thing any founder wants to become–the startup world is too small afor people t get such an impression.

The counter argument is that by being hard core you toughen up a founder, you help him or her focus on the key challenges in their business, and  at an extreme, you convince the founder that the idea is not worth investing time and life in.  At the ideation phase, the costs of switching an idea are low.  I have become comfortable with this being on balance the preferred approach–the pain is worth the value.  I also try to remind the founder whenever I do this that my opinion is just one, and I’m certainly perfectly happy to have the founder prove me wrong and make a boatload of money doing just that.  In other words, its not personal, and I’m hopeful that it does help.

I have come to believe passionately that this is the only appropriate response for founders asking for advice.  My input is not costing anything, and if I’m off by a mile, there’s no reason that a founder should listen to me.  You asked and I answered.  No harm, no foul.  Totally makes sense, right?

Right.  As founders we should all be pushing each other in as hard core a way to make our businesses kick ass and take names.  Give the advice, hit hard.

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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.

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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.   image

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.

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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.)

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The Need for Speed

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

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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.

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