Why you should never raise less than $1.5M, how to get into the VC industry and 50 other things you should know by now.

 

Happy Saturday.

And hello from DC this week where I’m on a two week staycation between tour stops (read: I’m trying to catch up on email).

While in Port Huron, MI last week, I met the Hulabed team and replaced my mattress with one of theirs. You should too, seriously. Two weeks in and I’m loving this damn thing. I should have replaced my old spring mattress a long time ago.

1. “an upper bound of $1.5 million should be enough seed funding” [Link] [Tweet]

TLDR: try to avoid raising (or investing in rounds) less than $1.5M.

2. “You don’t need to work for a VC to start doing the work that an entry-level VC does.” [Link] [Tweet]

Outside view of a VC’s day: glamor, caviar, money and private jets.
Real view of a VC’s day: 10 rough pitches, 1 tiny economy seat, 300 emails and fast food.

3. “Throughout life I’ve realized that many people are back benchers.” [Link] [Tweet]

Someone smart once told me to focus on getting people to love or hate something I’ve said. Either way, they’re thinking about what you’ve said.

The alternative, of course, is to try pleasing everyone and then being surprised when you realize that no one cares about what you’ve said at all.

4. “Business is about creating value. No value = no profits = no business. Don’t believe your own hype.” [Link] [Tweet]

This.

5. “95% of VC’s aren’t actually earning enough ROI to justify the risk their investors (LP’s) are taking.” [Link] [Tweet]

Now that there are >300 VC firms managing funds in the US, I suspect we’ll see a shakeout similar to what’s been happening to accelerators around the world in recent years. LPs are going to be unhappy about returns, GPs will lower fees in an effort to woo them back and any of the firms that are not in the top 10 lists will likely fizzle out into obscurity.

If you’re a GP managing a small fund today, I have two tips for you:

  1. Start considering yourself a media company that happens to have a fund. You can’t afford to be a VC firm with a social media intern anymore. Your goal is to be the #1 VC within a 1,000 mile radius of your office — not your backyard.
  2. Start considering the idea that perhaps returning 3X-4X on your fund doesn’t necessarily have to be from 9 failures and 1 big win. Maybe it’s worth looking at bootstrapped companies looking to make the turn towards venture. Maybe it’s time to look at fast-follower models in deals outside your region. Regardless, you’re probably not going to make any money doing the same thing that every other failing fund is doing.

6. “Raise or don’t raise.” [Link[Tweet]

There’s a public story and a private story to every fundraise. I love this one because it’s super transparent — or appears to be anyways.

7. “will this founder be able to raise the next round?” [Link] [Tweet]

I’ve been thinking about this same idea as I’ve been driving around the US & Canada this year. I’m meeting a lot of founders that seem to have good businesses but I’m not entirely convinced they’ll know how (or what it takes) to raise their next round.

8. “These are high stakes markets where winning is everything and losing is nothing.” [Link] [Tweet]

I’m pretty sure that the vast majority of people claiming to be investors (and founders) today don’t quite understand that our world is driven by the Power Law. Read about it.

9. “moderation is necessary for a happy life and behavior change isn’t always as easy as it seems.” [Link] [Tweet]

Quit social media for a month? Nope. Nope. Nope.

10. “The chemistry between co-founders—good or bad—can help propel a startup to growth, or doom it to mediocrity.” [Link] [Tweet]

You’re probably going to spend more time with your cofounder than with your family/spouse (sad, but true). Choose carefully.

Firehose

You can get the full stream of the things I read, it’s all on Twitter — follow me: @paulsingh. Sometimes I write stuff too. You can always find me (and the rest of the Results Junkies community) in Slack, apply to join.

Have a great weekend!

-P

Leave a Reply