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Venture Capital

11 Things You’re Probably Too Polite to Tell the VC Who Wasted Your Time

We’ve all seen the lists investors create outlining the lies they tell us.

Gabe Lozano

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VCs

As an entrepreneur, I’ve been exposed to hundreds of angel investors and VCs from around the country, few of whom realise that entrepreneurs are evaluating them as much as they are assessing us.

“I liked your company, but my partners didn’t,” or “Show us some traction, and we’ll invest.” It’s time for us to poke a bit of fun at the investor community and let them know what’s really running through an entrepreneur’s head during those financing pitches.

Related: (Slideshow) 8 Musts to Start Your Business With Little to No Capital

Before you get bent of out shape, know that there are many investors who I respect tremendously. They don’t conduct themselves in the ways I list below and have been genuine assets to my entrepreneurial efforts. Those investors are stark contrasts to  VCs who inspired this list.

1. People who give “strategic” feedback within 15 minutes aren’t worth listening to.

Sketching on a whiteboard 10 minutes into a pitch while explaining how building a native app doubled a portfolio company’s traffic – and why we should drop everything to do the same – makes you look strategically incompetent. The most strategically sound people I know take their time to listen, gather and process information before offering feedback.

2. Stop trying to convince us that you’re brilliant.

Responding “Yep, got it,” to every sentence of a pitch tells us that you don’t have a clue but are trying very hard to appear as though you do.

Look, we don’t expect you to know everything about our industry, so no need to fake it. We’re at your office because you have a checkbook. We also hope you have some brains, but that’s just a bonus.

3. Stop overselling the credibility you earned via osmosis.

We want to see that you have real substance. We don’t care that another partner at your firm pulled the trigger on a Facebook investment or that you joined Twitter’s team once it was a rocketship with a multi-billion valuation. None of that signals that you, personally, are the right investor for us to work with.

Demonstrate you’re the real deal by thinking through our market critically and collaboratively, ideally through a conversation that challenges the way we think and ultimately educates us.

Related: The Esquire Guy’s Guide to Asking for Advice

4. Don’t name drop.

You will instantaneously lose all credibility. Finding an obscure reason to name drop “Jack” (e.g. Jack Dorsey) doesn’t impress us. In fact, it simply demonstrates that you aren’t confident in your own substance and are trying to mask it by playing off others’ accomplishments.

5. We don’t believe your “value add” pitch anymore than you do.

Unless your words move mountains in our industry and you are completely in sync with our market, stop selling an entrepreneur on the “incredible value” you add to their company. The best thing most investors can do is to give operational teams space, let them execute and provide introductions and feedback when asked.

6. Stop saying “we” when you aren’t in the trenches.

Last time I checked, you aren’t the one fixing bugs at 3 a.m., taking customer service calls at 5 a.m., sleeping at the office to finish a major release or dealing with a broken coffee maker.

Public investors don’t walk around saying “we” simply because they own a few shares in Apple. In the same spirit, we ask that you please don’t walk around saying “we” in reference to your portfolio companies.

7. It’s offensive to call yourself an entrepreneur if you have never birthed a startup.

Joining Facebook as its 25th employee does not qualify you as an entrepreneur. Neither does launching a new product under Google’s roof, though it does make you an “intrapreneur.”

Entrepreneurs have tremendous respect and appreciation for early startup employees, operators and intrapreneurs alike but don’t discount how incredibly difficult it is to create a company out of absolutely nothing.

8. We don’t care what solutions worked for you in the ‘90s or ‘00s.

The game has changed dramatically. We respect that you’ve worked with great companies. Perhaps you even built one or two. You still need to remember that the game changes quickly and so does its solutions.

We employ numerous 20-somethings who likely understand the market today better than you do. The smartest investors know the best solutions are yet to be invented. They help you think critically through today’s market conditions to get there.

9. Looping in your secretary to schedule meetings makes you look ancient, Grandpa.

You walk around with a world of information in your palm, yet you require an assistant for a digital calendar entry my 5-year-old nephew could create. Come on, you’re better than that.

It probably takes you more time to communicate the meeting information to your assistant than it does to just schedule it yourself. Besides, aren’t you hoping to earn the respect of entrepreneurs who, typically, don’t have secretaries?

10. It’s utterly disrespectful that you show up late to meetings.

Look, we get that you’re busy. So are we. Learn to manage your schedule better. Only take meetings that you can attend. We don’t care why you’re late. All we’ll remember is that you wasted our time.

11. Don’t answer phone calls, texts or emails during a meeting.

You’re not that busy or important. If you schedule a meeting, come ready to pay attention. If you can’t commit to that, don’t schedule the meeting. Being busy is not an excuse. I guarantee that the CEO of a startup gets as many calls, texts and emails as you do.

Gabe Lozano heads LockerDome, a social media platform built around what you like, as opposed to who you know. More than 40 million people per month use LockerDome to discover, collect and engage around things they like with others who share the same passions. MarketWatch called LockerDome a “future Wall Street darling.” Forbes magazine named it a "2013 Sports Names You Need to Know.” And AdWeek declared the company “in the sweet spot of the digital revolution.” Lozano is also the co-founder of GlobalHack, a non-profit organization that hosts quarterly hackathons and product competitions to spur innovation and foster technology talent. Learn more at lockerdome.com and globlahack.org.

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Venture Capital

Fitbit And Adidas Know Something That Venture Capital Doesn’t

Your startup might accelerate growth by forming a strategic partnership with established businesses — not just VCs.

Dan Lauer

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fitbit

The media would have you believe that securing venture capital support and funding is the epitome of “making it” in the startup world. But, leaving aside the influx of much-needed capital, what many fail to realise is that VC partners aren’t always a good strategic fit.

Take Fitbit, a company that VCs poured millions into just a few years ago. Unfortunately, the funding couldn’t stop Apple from overtaking Fitbit in the wearable market last year.

So, when Fitbit was looking to light a spark under its fledgling line of smartwatches earlier this year, it didn’t tap another VC. Instead, it turned to Adidas, the shoe and apparel giant known for reinventing itself.

The product – the Adidas-branded Fitbit Ionic – dropped at the end of March and seems to have reinvigorated interest in Fitbit’s Ionic model, which made its tepid debut last year.

Not only did Adidas lend financial support to Fitbit, but it also lent the smaller company the fashionable, influential fan base that Adidas has carefully cultivated in the past few years.

Even though the collaboration hasn’t yet propelled Fitbit past Apple in the smartwatch space, the lesson here is clear: Your startup might accelerate growth by forming a strategic partnership with bigger, established businesses — not just VCs — to access financial backing, mentorship and expert guidance.

The sum is greater than the parts

Companies across a wide range of industries, from technology and retail to media and telecommunications, are investing in startup partnerships. In 2014, Wells Fargo created its own startup incubator to nurture new clean-tech businesses in the marketplace. The incubator, known as IN2, has invested nearly $6 million in 20 companies since its inception.

Related: Developing Partnerships With Fintech Innovators

In successful collaborations, the relationship is symbiotic, with many layers of engagement. We saw a successful example of this at the Ameren Accelerator in St. Louis. Rebate Bus, one of the startups in our 2017 cohort, used the investment and mentorship to get off the ground and scale growth.

During its accelerator phase, Rebate Bus received funding and mentorship and has since secured a partnership with a large company to run a 90-day trial. The large company, for its part, added Rebate Bus’s valuable new technology to its arsenal to stay competitive in the marketplace.

One unintended benefit was that Rebate Bus added five new jobs to the St. Louis market, as well.

In addition to providing financial support, collaborations with bigger companies provide an opportunity to tap into a deep well of knowledge and senior-level management expertise that only a more established brand can provide.

And, because the larger company will likely share a common mission with your startup, it will be concerned about more than just return on investment – something you can’t always say about a VC.

Cultivating a successful partnership

Just like any healthy relationship, this sort of collaboration won’t be successful without care and attention. Here are three ways to build and sustain successful relationships with larger companies.

1. Don’t use a partnership as a crutch. Business relationships are fragile. In fact, statistics from The Association of Strategic Alliance Professionals show that nearly half of business alliances fail. That’s why it’s extremely important to set relationships up for success from the outset.

One of the best ways to do this is to approach the partnership as only one facet of your overall strategy for your business’s growth, not its make-or-break point.

While corporations want to create an environment that spurs growth for everyone, they don’t want startups to become dependent on them. Show potential partners that you can stand on your own two feet and leverage a partnership to everyone’s benefit.

Related: The Foundations Of Growth

2. Don’t paint your partnership into a corner. So many venture-backed startups expect to see 12 years of growth in 12 months. These impossible expectations can hamstring a business partnership from day one. Instead, set time lines and goals with your potential partner that are specific and challenging, but also realistic.

Research from the American Psychological Association shows that setting these types of goals led to higher performance 90 percent of the time in the companies examined.

It’s critical to set these expectations early to ensure you and your partner are aligned from the start. The good news is that established companies whose sole purpose for a partnership isn’t ROI should be more open to realistic financial benchmarks.

3. Practice reciprocity. For startups seeking investment, landing capital can begin to feel like the endgame. But remember: Established companies are expecting something out of a partnership, too.

Older companies, meanwhile, are always looking for fresh perspectives; and startups usually have innovative ideas to contribute. It’s important to clearly communicate what each partner brings to the table.

Related: Win-Win: Strategically Partner With Your Top Competitors

Take the career-finding solution PathSource, for example. Co-founder and CEO Aaron Michel didn’t even consider partnering with a company that didn’t share PathSource’s goal to help people find better jobs. That’s why the company finally landed on a partnership with the GED Testing Service, the country’s high school equivalency testing administrator.

As Michel wrote in The Next Web: “A great relationship is a balance of give and take. When you approach a potential partner, don’t bother contacting them unless you know why they would want to speak with you. Know what you have to offer them.”

Legacy companies have a tremendous amount to contribute to entrepreneurs; often, these companies have even more to offer than a venture capital firm.

Related: 5 Things to Do Before Saying ‘I Do’ to a Business Partner

When both partners know what they want out of the relationship and know what they’re willing to give, the end result for both can be more lucrative than what each would reach on his or her own.

This article was originally posted here on Entrepreneur.com.

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Is Your Business Ready To Be Funded?

A venture capitalist and an entrepreneur who has secured funding weigh in on what you need to become funding-ready.

Matt Brown

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clive-butkow

1. Ability to Scale

According to Clive Butkow, CEO of VC firm, Kalon Venture Partners, there are many important criteria VC firms evaluate when making an investment decision, but the ability to scale is the most important.

“At Kalon Venture Partners we only invest in businesses if we believe we can make a 10X return on our investment when we exit the company. If we do not believe the business can scale, both in South Africa and globally, we will not invest,” he says.

“Scalability can swing an investor valuation discussion towards a ‘blue sky’ scenario, presenting an endless opportunity for revenue multiples on an initial capital cost-base,” agrees Benji Coetzee, founder and CEO of EmptyTrips.

“However, unless the potential is paired with execution capability it remains irrelevant,” she warns. “As a founder you need the perseverance and commitment to prove that your product will be scalable. In other words, you need to demonstrate your capability to replicate the offering to unlock upside, clients and product growth.”

Related: What’s Stopping Your Business From Growing?

2. Founder’s Mindset

benji-coetzee

“The founders and CEOs of businesses are the visionaries. They are the fuel in the engine and the Lieutenant General on the front line fighting fires. A founder’s attitude, resilience and ability to rally their troops is therefore paramount,” says Benji.

“Before a company can scale it needs to go through painful growing pains. The product evolves, customer orientation flips, the team matures and competition increases. To navigate this changing multi-faceted journey, the CEO is critical in the fight. Founders create the strategy, rally the army and lead the effort, in both the tough times and the victorious ones.  Without a good fight-plan, and consistent implementation of it toward the objective, the company cannot scale.”

Clive agrees. “In my experience, what got you here will not necessarily get you there. Meaning the skills that helped you build a R10 million business are not the same required to build a R100 million business. Some founders either have the skills or are able to re-skill themselves and take the business to the next level, while others can’t. Sometimes the founder needs to be replaced with a professional CEO that can scale the business. This does not imply the founder leaves, but rather that they take on a new role that is more aligned with their strengths.”

3. Take Action

Clive doesn’t believe it’s right or wrong to scale a business – instead, it comes down to what the founder wants. “Many founders are happy to grow their businesses organically and maybe only build a lifestyle business,” he says.

“Other founders want to build a business that will change the world. We call these exponential entrepreneurs. The key to scaling a business, in my experience, is having the right skillset, as well as a mindset that embraces a ‘can do’ attitude and has a bias for action.”

“I call it AA or Attitude of Abundance,” says Benji. “Founders are the alphas. They need to lead, aspire to and believe in scale.”

Related: 3 Start-up Funding Tips To Help Launch Your Company

 

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Venture Capital

You’ve Raised Early-Stage Funding! Now What?

Four ways to set yourself up for success with your new high-maintenance stakeholders.

Candace Sjogren

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business-funding

I had 225 conversations and pitched 95 separate investors in order to raise my first $2.2 million. I remember applying for every possible pitch competition, attending every startup event and chamber meeting, tracking down every high net worth individual I could find – anyone willing to listen to my 30-second, 5-minute and hour-long presentations. It was a full-time job raising money, and it took me more than a year before the final investor closed.

But then, on that fateful spring day in 2012, the seed stage fundraise was complete. Then the real work began. It is one thing to paint a vision and promise a movement. It is entirely another to meet milestones, generate revenue, and keep the company on track for an exit. The one thing that I could have never prepared myself for was the pressure that I’d feel from the investors after the money had been raised.

If you are gearing up for a fund raise or are in the midst of one, you may think that you are undergoing the toughest part of your journey.  And if you can prepare appropriately and build good habits early on, you will be.

Related: The Investor Sourcing Guide

Here are four tips for managing the investor’s expectations before you create cause for concern:

1. Communicate early, often and to everyone

When I first began interacting with investors, I made the (incorrect) assumption that they invested in me because they expected me to know what I was doing, and that they only wanted to hear from me if I had dividends to pay. This could not be further from the truth. As a (now) early-stage investor, I invest in businesses when I believe that 1) the founder has the passion and fortitude to stick with it through the tough times; 2) I have experience that can be helpful in propelling the business to first revenue, cash flow positive or exit; and 3) I will be engaged throughout the early days of the company.

To engage your investors, whether current or future, you want to be consistent and honest. If you are sending a prospective investor email and a current investor email each month, continue to send both. If you are undergoing a colossal failure or your burn rate has grown to three times what you had projected, your investors should be the first to know.

The biggest failure in building a relationship with your investors is not sharing everything that might affect them. An investor never wants to be surprised, but if you hit a wall, they would much rather hear the news from you and as quickly as possible.

2. Structure board meetings before you have a board

One way to structure communication formally and in a way that investors will appreciate is to schedule monthly board meetings before you have a formal board of directors.  Invite all current investors to join this meeting/call, send an agenda in advance, and ensure that any items discussed during the meeting are followed upon in as timely a fashion as possible. Show your investors that you know how to work with them, value their time, and heed their direction.

Related: Is Venture Capital Right For You?

3. Engage your investors for assistance

I enjoy being engaged by my companies. If I have a connection that could be useful to a sale, additional investment or a decreased expense, I expect that you will ask me for an endorsement and introduction. If I have modeled financial projections for several previous companies, ask me for help in modeling yours (if relevant). If my home would serve as a great venue for a client dinner, ask me to host.

By engaging your investors for operational assistance, you build stronger champions for your vision, and empower them to better advocate on your behalf with the outside world. If they invested in your company, they have likely found personal and/or professional success themselves, and appreciate using their credibility to propel your company forward.

4. Know when to say “no”

Perhaps the most difficult lesson I learned in my early days of investor interaction was learning to differentiate when to heed investor advice and when to respectfully disagree. Your investors come from all walks of life and have varying motivations for involving themselves with your company – not all selfless. Often, you will receive guidance that does not agree with your business model, other valued opinions, or common sense. In these moments, it is important to voice your opinion, backed by evidence, to ensure that the direction you ultimately take is a sound one for the company.

Related: 6 Money Management Tips For First-Time Entrepreneurs

Humility and coachability are important, but you raised the money because you know, inherently, something that others don’t. Be sure to use that experience of yours to guide your investors, and use their experience, where appropriate, in turn.

This article was originally posted here on Entrepreneur.com.

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