Category: Blogs

What ‘power’ means today.

A thousand years ago, power belonged to those people that owned the dirt. So, if you owned the dirt, you could say, “Hey, you can use this dirt and I have the power.”

Then, a hundred years ago, power belonged to the people that had all the money. If you wanted to build a business, you borrowed money someone and they had power over you.

Ten years ago, power belonged to people who knew how to use technology. If you knew how to use email (seriously), you could easily get a job in some IT field and have power over others.

Today, power belongs to people that understand that we live in an attention economy.

When you get a 30-minute meeting with somebody today, you don’t get 30 minutes of attention. You have to earn all of your attention every 30 seconds. And then you have to re-earn it every 30 seconds.

It’s the unfortunate truth of the reality we all live in today.

We’re all busy. Even the investors you’re trying to pitch. Even the employees you want to hire. Even the customers you want to sell. (As a reminder, that’s exactly why investors outside your hometown don’t take your calls.)

Never forget that.

When you decide to pitch anyone, make sure that every word coming out of your mouth is something that grabs their attention.

Early stage investing is emotional.

I’m a big believer that the soft skills of fundraising are far trickier than the hard skills of fundraising.

If you’ve ever worked in a sales job, you now that FOMO and greed are great drivers to get any sale done. It’s the same with fundraising for your company: you want to create FOMO and, especially for investors, understand that greed is important.

Don’t get me wrong: your product, your market, your team and everything else in between matter… but only to the extent that you talk about them and move on.

OK, let’s quickly talk about definitions:

  • FOMO: Fear Of Missing Out. It’s exactly what it sounds like.
  • Greed. Again, exactly what it sounds like.

When you’re talking to any investor, it’s ultra important to keep the conversation focused on business growth because it’s FOMO and greed that will get your deal done.

In order to do that authentically, you need to do a couple of things:

  • Have a business. We’ve talked about this already but you need to have some sort of traction to justify a fundraise these days.
  • Fundraise full time. You can’t half-ass this. Building a company is hard. Getting people to invest in that company is harder. If you’re serious about fundraising, you need to keep the company growing and then carve out a month of your own time to setup meetings. If you want to raise $500K, plan on setting up 500 meetings.
  • Keep the meetings tight. The goal of the meeting is to focus on business growth, try to avoid spending too much time on pleasantries and other unrelated things. Don’t let the meeting go long — in fact, try to end the meeting early and casually mention that you need to get back to work. Better yet, casually mention that you have another investor meeting scheduled and you want to respect everyone’s time.

If you find yourself talking about anything other than business growth with an investor for more than 50% of the allotted time in your meeting, your deal isn’t going to happen.

If you’re raising money from someone else, your goal is to build the biggest / best company within your vertical. If you agree with that, then you have to agree that business growth is the only thing that matters.

If you find yourself trying to rationalize your investment opportunity in your investor’s mind, it’s just not going to happen.

Investing in early stage startup companies is emotional, not rational.

Why investors outside your hometown don’t take your calls.

I’ve spent the last few years on planes, trains and my Airstream. The conversation with entrepreneurs in every city goes a little like this:

Entrepreneur: “My local investors just don’t get what I’m doing.”

Me: “OK, so why don’t you start reaching out to investors in other cities?”

Entrepreneur: “Well, I have been. Every time I get on a call, it seems to end pretty quickly and the conversation dies off after that.”

Me: “SO STOP USING DINNER PARTY ETIQUETTE IN A BUSINESS MEETING.”

Entrepreneur: “…”

Let’s say you’re calling an investor in New York City who wants to invest in companies, right? You know they’re active because you’ve been tracking them on AngelList. There’s no doubt this investor is active.

That New York investor is probably taking 10 pitches on the same day you call. And, while you’re on the phone with them, they’re thinking about 60 other things simultaneously. They’re thinking about their kids. They’re thinking about their next meeting. They’re thinking about the awful coffee they had this morning. They’re thinking about everything but you.

And then you call. And you start saying stuff like this: “Hey, how’s it going? Hey, so, where are you from originally? Hey, so, what do you like to see?”

You’re using dinner-party etiquette in a business meeting, and then you’re surprised when the business people are like, ‘I don’t have time for this.’”

DON’T DO THIS.

Traction is credibility.

If you have any traction at all, lead with it. If you find yourself talking about the product more than the traction, you’re done. The deal’s never going to happen.

 

Traction is credibility.

If you want to raise money, you need to have small but measurable usage. No one funds ideas anymore.

You don’t need hundreds or thousands of customers (though, that won’t hurt), but showing investors that someone is actively using the product often and/or paying for it shows them that you’re building something that people want.

Traction gives you credibility. Credibility gets you meetings. Meetings are where the magic happens.

Once you get the meetings though, don’t screw it up.

Actually, I’ll spare you the pain: there’s something you should never EVER say:

“We did all this through word of mouth.”

OR

“WE HAVEN’T SPENT A SINGLE CENT ON MARKETING!”

Ugh.

When you say that, the investor is thinking, “Shit. We’re going to bleed money on this next round, aren’t we?”

If you want to raise money, you have to always be proving that your goal is to build a business. A BUSINESS.

In today’s age, that’s easier than ever: exploit the shit out of online distribution channels.

You’ve got access to 1B+ people via Facebook ads. You’ve got even more access to people via Adwords. And don’t forget about LinkedIn ads, Quora, Pinterest, Twitter, Android, iOS and other networks. Show investors that you’re testing distribution models on those channels.

That doesn’t take a lot of money (most ad platforms will let you test with as little as $25) but it does take some effort. SHOW INVESTORS THE EFFORT.

Stop talking about your idea. Stop talking about your product. Stop talking about changing the world. There are too many other startups saying the same thing. Just prove that you’re trying to build a business.

Just talk about your business. And, in order to have a business, you need to stay focused on the traction.

No one funds ideas anymore.

If you’re planning to raise money, your goal is to be the least-worst pitch that an investor’s heard in any given time period. You don’t have to be the best.

your goal is to be the least-worst pitch that an investor's heard in any given time period. Share on X

Let that sink in for a minute. I’m dead serious.

I’m sure we all know “idea guys” – people that have been talking about an idea for a long time but haven’t ever built it. (These people are notorious for hanging around networking events every week and repeating the same ideas week after week.) Don’t be that person.

At the very least, hack together a “ghetto, but useful” prototype and get it in front of users. Better yet, get that prototype in front of potential customers. If you can’t get a prototype together for some reason, then pull together some slides / visuals and put that in front of people.

Just. Ship. Something.

In the worst case, that shows others — including investors — that you can hustle. In the best case, you’ve gotten at least one person you don’t know to buy something from you and that shows others you know how to build a business.

Jason Calacanis said it best:

Simply put, showing up without product today is like showing up without a business plan in 1995 — you simply won’t be taken seriously by most investors.

On a related note, come to the table with the right founding team: you need some combination of the hacker, hustler and designer on the team.

NOOB MISTAKE: avoid outsourcing any of your early work unless you have solid experience with that model. You’ll probably pay too much and, worse, you’ll scare off a huge set of investors that avoid early stage companies that outsource too early.

Founders should look at more deals.

There’s something obvious about investors that every entrepreneur gets wrong: an investor’s job is to end up with financial stakes in potentially successful companies and projects.

No one cares about your idea. No one believes you when you say you want to change the world. No one wants to fund your app.

That’s because there are too many people claiming to be founders out there and you’re competing with them whether you know it or not.

If you’re trying to raise money today, you should know that it’s only getting harder: the entire market is getting noisier. Everyone wants to be an entrepreneur. Everyone claims to be an entrepreneur. And your pitch is getting lost in the thick of it all.

Everyone claims to be an entrepreneur. And your pitch is getting lost in the thick of it all. Share on X

Before you even think about raising money, you should know your space inside and out. That includes knowing which companies exist, which have raised money, which investors appear to be most active in those markets. Thankfully, AngelList makes that super easy.

Take a look at the companies that have listed themselves on AngelList. (While you’re at it, follow me on AngelList.) Use the “Market” filter to reduce the list down to the companies that are actually in your space. (Don’t forget to hit “Save” so you begin to receive the weekly emails on deals happening in the markets you select.)

Once you’ve narrowed the list down, I recommend sorting the list by the amount of money raised. Now click to open the top 10 companies in separate tabs. Now, study everything those companies have disclosed.

More founders, from all over the world, are going after the same finite pool of money. The fundamental investor-founder relationship is based on asymmetric information. The bottom line is that the investor sees (in some cases) hundreds of deals while you probably are only thinking about yours.

Whether you decide to raise outside money or bootstrap things entirely, you can’t afford to not keep an eye on your entire industry at all times.

Get to $1,000 first.

One of my biggest regrets around the tech tour is that it isn’t about tech at all. It’s about entrepreneurship.

My personal goal is to meet as many entrepreneurs around North America, I don’t really care whether they consider themselves “tech” people or not.

I tweeted something yesterday that got me thinking about this:

At the time, I was listening to a Q&A session with Jonathon Perrelli and thinking about some of the people we’ve met in the last 39 cities we’ve visited this year.

At the early stage, so many entrepreneurs get hung up on things that just don’t matter. (i.e., patents, business plans, logos, NDAs, etc.)

The reality is that the default state of any company is failure and the #1 reason why it will likely fail is because there wasn’t enough money coming in the door.

The good news, however, is that sales fixes everything and that’s entirely in the founding team’s control.

If we could get more people all over the world to be thinking about how to make their first $1,000/month — even if it’s on the side while they hold a full time job — just imagine how much better off they would be.

Some of those side gigs would turn into a nice cash stream for themselves. Some of those could turn into $10,000/month businesses that support the founder full-time. Some could turn into $100,000/month businesses that support entirely new jobs for others.

Entrepreneurs sometimes get lost and it’s the community’s job to make sure they stay focused on the goal: get to $1,000/month in revenue and then worry about everything else.

The problem isn’t local investors, it’s you.

Investor pitches, particularly outside Silicon Valley and NYC, generally fall into two buckets: the founder either asks for too little cash or aims too low.

When founders ask for too little cash, usually in the realm of <$250K, alarm bells start ringing for most investors. We worry that you have no idea what you’re talking about, how much it costs to build a business or worse. If we give you too little money to hit a significant milestone, the likelihood of you hitting that milestone (or even surviving for 12-18 months) is small. That’s bad for everyone at the table.

When founders aim too low, it’s often even worse. This is when you get called a lifestyle company, regardless of whether it’s true, and the investor stops paying attention. It sucks, but it happens. As Charlie O’Donnell says,

Venture investing is hard.  You’re going off of very little in the way of predictive data–so if you’re not telling a big story, it’s hard for us to imagine one if we don’t hear it from you first.

Look, I get it though. Outside the big hubs, the local tech community will often tell founders to lower their ask to align with the local investor’s checkbooks. That advice is well-meaning, but terrible — ignore it. The problem isn’t the local investors, it’s you. No one’s a gatekeeper anymore.

The problem isn’t the local investors, it’s you. No one’s a gatekeeper anymore. Share on X

Get on AngelList, look for other companies in your industry and align your ask with the average seed round. If you can’t find the money locally, go elsewhere.

Understand that learning how to pitch a business is just as important as building the business itself.

Having a job is riskier than you think.

“People think entrepreneurship is risky. The thing is, it’s much riskier to have a job.”

At the time, Andrew Myers was driving us back to Fort Wayne, IN after a quick visit to Warsaw, IN when we started talking about the common concerns from people when they think about what it means to be an entrepreneur.

Now that we’re just about to visit our 40th city this year, I still find it odd that community leaders continue to talk about innovation while local residents worry more about entrepreneurship — or the risks that come with it. This gap is yet-another-reminder that innovation and entrepreneurship aren’t the same. If we want people to innovate, we need them to make the leap into entrepreneurship first.

If you drive around North America, you’ll quickly learn that most people are concerned about losing their jobs. They may not say it when you first meet them but this is the kind of thing that comes up when you actually live someplace for a week at a time and see them at the local diner for breakfast over the course of a full week.

At the same time, many of these same people express fear when asked what they would do if they became an entrepreneur. They worry that their boss won’t like them working on the side, they wonder whether they have enough education or they share stories about how someone they once knew failed at something.

Here’s the thing: the best entrepreneurs take the least risky bets.

They’ll figure out a way to keep their day job for a while. They’ll find ways to cut their personal burn rates. They’ll spend any free second they have looking for a new customer.

The best entrepreneurs know that sales solves everything. They figure it out.

If you choose to stay (and you’re happy) in your cubicle, do yourself a favor and make sure that you’re on the revenue-producing side of your company. If something goes sideways, the people that make the company money are the least likely to get cut first.

For everyone else, just start something.

For most of our parents, success was a function of hard work over a period of a long time. For our generation, success is a function of the number of things you try.

If you want to reduce the risk in your life, start to think more entrepreneurially. Start to take control of your own future.

Fear drives me and, if you want control of your own future, it probably ought to drive you too.

We need to do more about the technology skills gap.

“I don’t even know how to use my own damn email,” says the Mayor of a city I visited on the tech tour this year.

It would be easy to publicly shame him for admitting that he still hasn’t quite figured out something that most of us take for granted but, in his defense, he also asked me to bring a few investors to town for a week and allowed me to park my Airstream right in the middle of his downtown business district. He means well and he’s trying to make things right for his people.

His city, like many cities around the US & Canada, is faced with an impending problem: one of the biggest factories in town is planning to downsize and nearly 1,000 local jobs will be eliminated within the next year. He and his team now recognize that bringing another factory to town — particularly one that can re-employ those 1,000 people — is near impossible.

He needs to find ways to provide training for these people and the tech community hasn’t made that easy.

On one extreme, local colleges and universities have created certificates, associate’s degrees and bachelor’s degrees, but these cost money and not everyone has the months or years required.

On the other extreme, we’ve created code bootcamps for adults that want to enter the software development industry, but those cost money and not everyone needs to code.

Middle America need something else.

Middle America needs a basic on-ramp into the technology world for adults coming out of decades-long careers in other industries.

Two suggestions:

  • If you’re an entrepreneur in this space, you could build a huge business on technology skills training across Middle America. Go do it.
  • If you’re a city leader, consider incentivizing your adult constituents to seek out and obtain technology skills.
  • If you’re attending any tech events in your city — no matter how big, small or sophisticated — take one non-tech friend with you to every event. Collisions matter.