Category Archives: Funding

How to Turn the Table When Pitching Your Startup

Jester by mrpolyonymous @ FlickrIf there’s a subject every startup founder fears, is the pitching / fundraising. No matter how many pitch sessions, competitions, and training you do there is still room for improvement. But, as my kung-fu instructor used to say “practice doesn’t make perfect, perfect practice makes perfect!”. You’ve gotta know how to pitch right to be able to raise capital.

The Perfect Pitch

A recent Mixergy interview with Oren Klaff (author of “Pitch Anything“) is a great source of material to better understand the dynamics of the perfect pitch. A key concept he talks about during the interview is turning the table and instead being the jester performing in front of kings, make the VCs, Angels, Private Equity guys the ones who have to perform to get the privilege to fund your business.

Easily said than done? Sure,  but the interview is worth watching for great insight into how to better prepare yourself for the fundraising presentation.

The Jester is Not You

Throughout the interview Oren talks about key concepts he discovered that allowed him to get multi-million dollar deals. Here are a few:

Turn the Table: When you come in for a meeting with a VC or private equity firm, usually right in the beginning they will spend a few minutes introducing you to their partners and telling you about their company. Turn it around and instead suggest you pitch right away and have them at the end talk about their company in the context you presented. This will save you time and will put you in a stronger position.

The Big Idea: Instead of being too quick to dissect your pitch, talking about the market, opportunity, distribution, etc. think of the Big Idea. Capture the painful problem you are trying to solve and tell the audience (VC, Angel, etc.) how you can solve it. Your big idea should trigger an emotional response, be insightful. You want people to start thinking/saying “wow, I didn’t know that! That is very interesting. I want to learn more.”

Creating Tension: If you had two, three, five hours to pitch someone you probably could convince them that your idea is good and worthy of investment. But you have 20 minutes of their attention, so you have to use tension and novelty. When you lose the neediness, when you push people away, that is when the most amount of capital is raised. Be direct, forthright, not supplicating.

Want an example? This is a great clip to watch:

(Don Draper, from Mad Men, giving a pitch).

Novelty: People come to meetings or talk to you to learn about new things, meet interesting people, learn about places and ideas they have not heard about before. The second people can interpolate, extrapolate, figure out, or create a pattern on what you’re doing, they are checked-out and gone. Don’t use the same powerpoint deck template everyone uses, try something different, show that you are different. Peak their interest in you and your idea.

Big Picture: Don’t let yourself get bogged down during the pitch by detailed questions that want to escape the “big idea” frame, because that’s just a way they are using to filter you and go from an emotional to analytical frame of mind. So when asked about revenues, put that off by saying you have them and will get to that later but let’s just focus on the big picture first, the whole concept you are trying to present. You only have 20 minutes (even if the meeting is scheduled for one hour, you only have 20 minutes of their attention anyways), so better make it count and focus on the big important things.

The Full Interview

MixergyIt’s worth checking out the full interview at Mixergy. Andrew asks detailed questions and Oren is a great speaker. Definitely worth watching.

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How Much Equity Should You Give?

Allocating equity among co-founders is typically a process, involving a lot of gut feeling, some back of the napkin math, and good judgement. Is also a frequently asked question with no easy answer.

So here comes a great new tool, built by Foundrs.com, called “Co-Founder Equity Calculator“. Based on simple but important questions, it gives you what it believes is a fair equity stake for each founder.

Even if you don’t agree with the results, is a great way to get a productive conversion started with the founding team on how to allocate equity fairly.

Try it out!

C-Founder Equity Calculator by Foundrs.com

C-Founder Equity Calculator by Foundrs.com - Click to Use

How to Choose an Incubator and the Ideal Entrepreneur

Confused about incubators, accelerators, and all the in-between types of places geared for startups out there? Well, maybe this video won’t clear that up but it will give you some good laughs.

At the recent panel discussion “Incubator Summit: How to Choose the Right Incubator for your Startup“, some great entrepreneurs discussed what characterizes incubators, co-working locations, accelerator, and also talked about what makes for great entrepreneurs.

Participated Adeo Ressi (Founder Institute), Dave McClure (500 Startups), Jonathan Abrams (Founders Den),  Kindra Tatarsky (Astia), and Cameron Teitelman (StartX). A great exchange of ideas (especially since the panelists didn’t necessarily agree with each other) and good content worth checking out.

Click below to go to the video page.

Incubator Summit How to Choose the Right Incubator

Hackers & Founders Launch New Incubator

If you’re in San Francisco and wished you could join an incubator but for any reason you didn’t, now there’s another option. Hackers & Founders “The Co-Op” is a different type of incubator, focusing more on business advice than in giving you money, is an interesting proposition.

How The Co-Op Works:

  1. Founders in The Co-op get together for weekly dinners where they listen to speakers and mentors and become a community.
  2. Founders are encouraged to become advisers in each other’s companies by trading small (0.25% to 0.5%) equity stakes.
  3. After working together on things like learning how to pitch and present, as well as the ropes of funding, founders are connected to the investment community (office hours are setup with a prominent angel in the community, personal introductions are made and AngelList).
  4. Towards the end of the program short video pitches are made and investors can view them online.
  5. Finally, there’s a party where investors meet founders in person.

For a full description and the history behind this new incubator-style program, check out the full article on Hackers & Founders site.

Wired Tells Us How YCombinator Works

YCombinator LogoAn interesting article appeared recently on Wired Magazine talking about YCombinator. If you’ve been following the incubator for a while, there’s not much new but it gives a nice account of how the demo day works, the internal meetings, and a bit of what it feels like to be part of the lucky ones that make the cut and are accepted into the program.

Link to the story “YCombinator is Bootcamp for Startups“:

http://www.wired.com/magazine/2011/05/ff_ycombinator/

What Makes a Successful Startup?

An interesting post from Steve Blank talks about how he met the guy who went on to found The Startup Genome Project and just released their first report on what makes a startup successful.

Key findings are:

  1. Founders that learn are more successful
  2. Startups that pivot once or twice times raise 2.5x more money
  3. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet
  4. Investors who provide hands-on help have little or no effect on the company’s operational performance
  5. Solo founders take 3.6x longer to reach scale stage
  6. Business-heavy founding teams are 6.2x more likely to successfully scale
  7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects
  8. Balanced teams with one technical founder and one business founder raise 30% more money
  9. Most successful founders are driven by impact
  10. Founders overestimate the value of IP before product market fit by 255%
  11. Startups need 2-3 times longer to validate their market than mostfounders expect
  12. Startups that haven’t raised money over-estimate their market size by 100x
  13. Premature scaling is the most common reason for startups to performworse
  14. B2C vs. B2B is not a meaningful segmentation of Internet startupsanymore because the Internet has changed the rules of business
It’s worth checking out. Get the Startup Genome report here.

Choosing Your Angel Investors

Max Shapiro from People Connect Staffing turned me on to this great video of a recent gathering of Angels and VCs titled “How to Select Your Angels“, from a Total Access session sponsored by Orrick.

The panelists were Jeff Clavier, Jared Hansen, Rob Hayes, Mitchell Kapor, and Naval Ravikant and moderated by Larry Kane.

Here are some key points from the talk:

  • The bar for startups is set higher, you need more than an idea to get funding, need to show traction.
  • Investors want to see something that actually works, if you have revenue is better.
  • What’s your team structure? Investors want to know who’s going to actually do all the work. Make sure you have more “doers” thank “executives” in your team.
  • The product that gets funding is almost never the product that ends up winning, so investors are looking for a team that can move in a big enough market, take whatever they started out with, and make it work, become massive.
  • You’ve gotta know how customer acquisition, retention, and referral will work for your company. If you don’t, is likely investors may pass (higher risk).
  • Naval says “focus on the product, the team, when the time is right the money will show up” and what he means is that the funding process takes time and energy, don’t let that distract you.
  • On incubators, they suggest you pick one as if you were choosing the best college. Each incubator has its own culture, find one that fits you.
  • A key aspect of getting funded is showing you know where you are, how far you’ve come, and that you know the meaningful milestones you have to reach for your next round of financing.
Click below to watch the video.

How to Select Angel Investors