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Ambition, talent and (the lack of) cash

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. you've got to match your ambition to the amount of cash that's readily available to you. Click To Tweet

Bootstrap, if you can. Raise money if you must but skip the local investors (first).

 

Across the Midwest, entrepreneurs travel and investors stay local

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.

Naming your round is a bad idea

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.

If you're raising money, just say that you're raising money. Don't put a title on it. Click To Tweet

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If you’re looking for more actionable tips on raising money for your company, check out fundraising for startups.

How to raise money (from me) in 2017

Whether you believe it or not, raising your first $500,000 is easier than it’s ever been. And raising your next $1,000,000 (or more) is harder than it’s ever been.

When I first started investing in startups around 2010, you could count the number of micro-VCs — funds under $100,000,000 — on one hand. In 2017, there are over 300 other firms registered in the same category (with at least that many more funds trying to raise funds in that same category).

A couple of things you can do to stand out of the crowd:

  • Don’t make basic mistakes. You can’t raise money on ideas. You can’t raise money on outsourced teams. You can’t raise money on complicated business models. Keep things simple. I wrote about this in 2014 and it’s still true today.
  • Build a business, not a startup. The world is full of people that talk about ideas. You should be focused on your customers. Once you sell one thing to one person you don’t know, you’ve got a business.
  • There’s no excuse for a bad pitch anymore. Not when hundreds — if not thousands — of other pitch decks from funded startups are posted all over the web. Find some here.
  • Stop chasing investor money. The best time to raise money is when you know how to use it to continue growing the business. Investors want to put money into sales companies, not product companies. You should view investor money as a tool to grow your business.

I can’t promise you the perfect pitch deck or fundraising formula but I can tell you that the bar continues to rise for entrepreneurs everywhere. My hope is that you’ll consider some of these ideas and raise the bar for yourself.

In the worst case, you’ll build a better business for yourself. In the best case, you’ll build a better business for yourself and raise some money to help speed things up along the way.

If you’re interested in picking up a few more tactical tips for your next fundraise, I created a free email course on fundraising for startups.

Entrepreneurship isn’t binary

America is one of the only places on the planet where entrepreneurship is a binary choice. You’re either an entrepreneur. Or you’re not. As if entrepreneurship is a career path or something you put on your LinkedIn profile.

Everywhere else, entrepreneurship is considered a way of thinking and it’s applied to everything they do.

Being an entrepreneur doesn’t necessarily mean you have to learn to code. It doesn’t mean you have to be a founder. It doesn’t even mean you can’t work inside a cubicle inside a larger company.

If you’re thinking about ways to be more productive, you’re an entrepreneur. If you’re offering a service or product that will make you an extra $1,000/month on top of your full-time job, you’re an entrepreneur. If you’re doing both of those things, you’re an entrepreneur.

Side hustles matter

“I wish we would celebrate the side hustle as much as we celebrate those swinging for the fences.”

That was the main point I made during my opening keynote at EntreFEST in Iowa City, IA earlier this morning. (If you’re here too, let’s hang! The trailer’s out front…)

Everywhere we go, we find the same thing: community leaders that want more job creation, local investors wanting more deals and entrepreneurs looking for more money.

Regardless of which side of the table you’re on, there’s exactly one thing you can (and should) do: encourage your entrepreneurs to get to $1,000/month first.

 

 

How to take advantage of investor meetings

Imagine you had a full-time job and you screwed up nine out of ten assignments. You wouldn’t keep that job for long.

But being an investor is kind of weird. We’re wrong more than we’re right but, for some reason, people still want our opinions on their ideas.

The truth is that investors (and most everyone else) is notoriously bad at judging ideas. (Remember what most investors said about the iPhone, Uber and AirBnB?)

If you insist on talking to an investor about your ideas, focus the discussion on your growth / distribution tactics. Talk about what else they’re seeing. Ask them why they’ve chosen to invest (or pass) on other opportunities. Talk about everything but the idea.

Stop asking for advice and opinions. Learn to extract information.

Stop asking for advice and opinions. Learn to extract information. Click To Tweet

Market size isn’t all that important anymore

Don’t let anyone tell you that your market size is too small. It’s 2017, after all.

See, the thing is that there are only two kinds of markets: those that exist and those that don’t.

The internet allows you to build huge businesses off of niches. And enables you to scale beyond those niches, if that’s what you want to do.

The difference between Silicon Valley and everywhere else

Silicon Valley says you should lead with the traction. Everyone elsewhere encourages business plans.

Silicon Valley says you should build a prototype and iterate. Everyone elsewhere encourages “giving it your all” and “never give up.”

Silicon Valley says you should talk to your customers. Everyone elsewhere encourages sharing ideas at pitch competitions.

Seems to me — especially as I continue to drive around to new cities every week — that there’s a disconnect somewhere.

To someone from Silicon Valley, I’d say that it’s time to start spending more time in Middle America if you want to build a real business. To everyone elsewhere, I’d say that starting a business is cheaper (and easier) than you think.