The question that seems to be a deal killer, no matter what type of product you are building, is the market sizing one. It comes in various formats:
- “What is the size of the market?”
- “How big can this get?”
- “What are the growth prospects?”
Among others, is a key question that often turns off potential investors. Especially if you can’t answer it “correctly”. A nice post by Bryce Roberts titled “You can never size a market in Excel“tackles this pesky problem entrepreneurs face and gives sound advice:
“An investor’s instinct around something as fundamental as whether your business can reach the scale needed for venture capital returns is one that won’t be found scouring the latest market forecasts from Forester or Goldman Sachs. It won’t be found in endless meetings and it won’t be found in detailed financial forecasts or market sizing exercises.
It will be found in the connection an investor makes to you, your product and your vision. Either they will believe it or they won’t.”
It is a refreshing view on the question of market sizing. And also tells you a bit about how to assess whether the investor in question will be really a good match with your startup.
Check out the full article here.
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.
Brendan Baker wrote a really nice post on Quora on “How To Hustle With AngelList in 10 Steps“. He talks about:
- Make sure your profile is solid
- Leverage markets
- Leverage your location
- Be visible
- Build your team
- Get their support
- Get them to share your profile
- Expand your team
- Convert and exploit your new supporters
- Reach out to AngelList
Brendan explains that:
“In the last year I’ve seen thousands of startup pitches and coached hundreds of founders while working with the AngelList crew. I’ve also seen how quickly the AngelList platform improves, giving startups new ways to reach investors with every push. This is about using those tools.”