I tweeted something yesterday that seems to have struck a nerve:
(Check out the comments on the FB post, it’s actually kind of funny.)
Most of the entrepreneurs we meet along the tour tend to want advice from us (and from pretty much anyone else that has a pulse). The sad part is that it’s an incredible waste of time for everyone involved.
“Do you think we should try Facebook ads?” is a bad question that will likely lead to terrible advice.
“We’re going to try Facebook ads, what’s a good baseline clickthrough rate?” is a much better question that might lead to usable information.
If you’re building a company, you need to get good at extracting information — not asking for advice.
You should be using technology to go around gatekeepers instead of taking nearly endless meetings trying to go through them.
Just hear me out for a second.
Many entrepreneurs we meet along the tech tour, especially in more “traditional” industries, spend the first few weeks (and, sometimes, months) talking to as many experts as possible when they should be talking directly to their customers.
I know most of us take this for granted (or maybe it’s just me) but it’s yet another example of “common” startup advice along the coasts that hasn’t yet become common knowledge throughout the Midwest.
I hate that I’m about to say this: the people that have visited the most cities with me and Dana over the past 18 months know that I’m constantly repeating the same stuff over and over. And over again.
To be honest, it gets boring. But I have to constantly remind myself that there are things I’ve learned over the past few years that simply haven’t made it to the rest of the entrepreneurial world outside of Silicon Valley.
So, if you’re starting a company soon (or are within the first year of doing it), here’s a couple of things you should know:
Yes, I know I’m probably missing something. Email me with your favorite resources and I’ll add it to the list.
The people we meet along our travels usually guess that the driving is the hardest part of investing everywhere else. The driving, believe it or not, is the easy part.
When you visit new places, meeting people — especially entrepreneurs — is the easy part. The hard part is figuring out who to trust. After all, we’re looking for lines, not dots.
Deal terms are the second hardest part. It’s surprisingly common to see local investors using homebrewed term sheets and often “forgetting” to think about pro rata, information rights and everything else in between. If you’re raising your first round, use something off the shelf: 500 KISS, YC SAFE, Series Seed or Indie.vc.
Stay simple, keep growing and — above all else — don’t be weird.
“I have a startup…”
That is quite possibly the worst way to introduce yourself to anyone. And, yet, it’s the most common phrase I’ve heard over the past few years.
Now that we’re in the second year of our tour, we’re meeting many of the same entrepreneurs again. And I love that. Until they introduce themselves the same way they did last year.
- If you’re an entrepreneur, listen to the way other people introduce you. If you don’t like it, start introducing yourself differently. Humblebragging is ok.
- You’re not building a startup, you’re building a business. When someone asks what you do, talk about your customers — not about your startup.
- If you don’t control your own narrative, someone else will create one for you. And it probably won’t help you or your business.
I meet an awful lot of people that seem to think entrepreneurship is risky. It’s not.
I meet an awful lot of people that want to “do” a startup. That’s a terrible idea.
In fact, having a job is riskier than you think and most startups die. The truth is that every good business is built in steps.
To keep things simple, I’m going to suggest that there are three stages to any business and you can’t skip one to get to the next:
- During the side hustle (or $1,000 / month), you’re probably holding down your full-time gig — maybe you’re consulting for others or sitting in a cubicle — but you’re focused on getting to $1,000/month first.
- Next, you build that side hustle to $10,000/month and you’re working for yourself — you’re a solopreneur. You’ve made the leap from your previous gig and you’re working on your own business full time.
- Then you’re on your way to building a business and you’re growing to $100,000 / month. You’re probably hiring people to help you — maybe they’re part-time or virtual assistants, but you’re growing.
Earning your first $1M in revenue is an act of brute force. Don’t waste time looking for growth hacks or strategy. Instead, focus on speed, tactics and iteration.
Dumb ideas don’t get funded. Dumb ideas aren’t getting funded. Dumb ideas aren’t even getting second meetings.
The only people complaining about “dumb investors” and “dumb ideas” are the lazy ones.
The lazy entrepreneurs that would rather complain than try to understand exactly how investment decisions are made.
The lazy community leaders that would rather complain than learn about investor’s fiduciary duty.
The lazy local investors that would rather complain than research the portfolios of the “dumb investors.”
Let me share a little secret I’ve learned about investing over the past few years: in a world where you can’t predict which businesses will be ultimately successful, the business of investing is about listening to the most pitches and investing in the least-worst in any given time period. And then you wait.
Ambition and talent seems to be equally distributed around North America — and the world. That becomes more and more clear in each new town or city we visit each week.
What’s not equally distributed around the country is access to cash. Some of that is because most investors don’t travel. Maybe some of that will be fixed with the new AngelList Funds (though, I’m not holding my breath, the AngelList Syndicates should have helped with some of this but they’ve proven to be anything but predictable from a lead’s perspective — especially if you’re investing outside of Silicon Valley).
If you’re an entrepreneur, you’ve got to match your ambition to the amount of cash that’s readily available to you.
Bootstrap, if you can. Raise money if you must but skip the local investors (first).
Now that we’re just about to hit 40,000 miles of driving in just over a year, I can count the number of investors I’ve seen more than twice on one hand. It’s not surprising, however, to bump into entrepreneurs we’ve met in one city in other cities hours away (and weeks or months later).
Midwestern entrepreneurs, it seems, are hustling to grow their companies more than Midwestern investors are trying to find returns. The thing is that it’s the investors that should probably be a bit more nervous than the entrepreneurs.
Entrepreneurs don’t always need outside capital to build a successful business. Investors, however, need to generate returns if they want to raise their next fund.
Seed. Pre-seed. Pre-A. Series A. Bridge. Just stop.
There are so many names given to people’s fundraising these day. And they mean nothing.
If you name your round, you’re unintentionally allowing investors to make some judgements about the status of your company.
Bridge round? Oh, so you’re running out of money?
Pre-seed? WTF is that?
Series A? Ah, so you’re about a $1M run rate?
Seed? I’m going to bet this is going to be a $500K ask.
If you’re raising money, just say that you’re raising money. Don’t put a title on it.