Understanding The Vision in a “Visionary Founder”


Originally published by TheNextWeb on Feb 19th, 2014

“If you have visions, you should go see a doctor” – Helmut Schmidt, one of the most admired German chancellors

Because I know how confusing and frustrating the fund-raising process can be for a founder, one of the topics I like exploring is ‘how to get into the mind of an investor’ when an investor is evaluating you for an investment. And whilst the easier topics to tackle tend to be quantitative in nature, the harder ones tend to be the ‘fuzzier’ qualitative ones…

In that spirit, I think we’ve all heard how investors want to invest in a solid team and how they want to invest in founders with a ‘strong vision’.. but what does that mean exactly? With visions, mission statements, and all that kind of fuzzy talk being part of many self-help books that are often dismissed as snake-oil, do they really have any place in the fast-moving, cold & hard world of startups? In the context of the early stage high growth startup world, what does having “vision” really mean?

Let’s start by defining what a founder’s vision* is not… *(feel free to replace a ‘founder’s vision’ with a ‘leaders’ vision’)

Vision does not equal power

A founder’s vision is not about how much money you want to make once you exit, nor is it about obtaining power or prestige. It isn’t about knowing exactly what the future will bring, nor is it about doing something no one else has ever done before. Rather, a founder’s vision is about how you communicate and put into action your values, beliefs, and ideals in producing & creating something of value for yourself, your founding team, your employees, your investors, and your customers. A founder’s vision is the foundation of a company’s culture and brand.

In the words of James Kouzes and Barry Posner, authors of The Leadership Challenge — “There’s nothing more demoralizing than a leader who can’t clearly articulate why we’re doing what we’re doing.

A founder’s vision, therefore, creates a company’s culture. This culture may not always be visible to outsiders of the company (nor is it generally communicated to potential investors specifically as such), but it is visible through the company’s culture, the brand and brand values of your company are ultimately determined. It is the brand of your company which is the outward-facing aspect to your company that customers and potential investors engage with. It is this brand that allows you to attract potential employees, customers, investors and partners. Thus, I believe that vision determines culture and culture determines brand. Think of many brands you love and respect and you will likely be able to trace their authenticity to one or several individuals (even if they are no longer there) who created the vision of the company and set the culture for all the employees to guide them through the creation of the products and services you love. Think of the ones that you liked at one point but no longer do, and you’ll likely be able to trace why to a point in time where there was a break-away or ‘sell-out’ from the original vision that started it.

How is a founder’s vision applied?

In some startups, a founder identifies a need they personally have (they are the customer), and thus, builds a company around a product or service to satisfy that need. Alternatively, there are other founders that find ideas within markets that didn’t previously exist (they intuit a need for a customer)… in some cases this happens by design and research and in some cases by accident, as was the case with the 3M Post It note.

Whichever way it may come, founders that have a strong vision that is synthesised, communicated and articulated to their team (and their customers) allows them to capture these opportunities and evolve them to become successful businesses. Effectively, a founder’s vision which is synthesized into a company’s culture and brand, facilitates the decision making process you and your team use to create your company’s products and services. It is through the clarity of a founder’s vision that  focus is brought to the planning and decision making process within a company, and as a consequence the company can function efficiently and increase its probability of success.

Authentically connecting with your clients

In a world were new products are constantly popping up and many being copied by unfair competitors, it is the strong adherence to your vision and the culture & brand it creates, that ultimately engages your customers to become loyal supporters and fervent defenders of your company. Unfortunately, if you betray your customer’s trust by deviating from your brand’s values, they will likely throw you and your products under the proverbial bus, so to speak.

In his TED talk about how great leaders inspire action, Simon Sinek, shares his golden circle of ‘why, how, and what’… and whilst I won’t go into summarising his talk here, the key point is that it all begins with the ‘why’ a leader must articulate to be effective… the “why” determines culture and the “why” determines ultimate “how” you do things and “what” you ultimately make.

A talented designer and good friend of mine, Gearoid O’Rourke  shared a thought in one of his talks that I really think captures why it is important to take the creation of a founder’s vision and company culture seriously, in his words: “Products can be copied, but culture cannot…” “Even if your products are copied, you will always be ahead of your competitors because they can’t copy your culture [and culture is what lets you innovate].”

Once determined, the culture of your company will help you make decisions about how to engage and communicate with your customers, whom to hire, what to prioritise, and whom to partner with. In effect, you vision, your culture, and your brand will become the foundation and focus of all you do.

Where to find your vision

Your ability as a founder to set this vision and culture is the attribute that investors look for. If you are unable to determine and set a vision and culture for your company, unfortunately, you are likely to have others, such as influential mentors and perhaps even your investors set it for you, and as we all know, we can’t be someone we are not, and ultimately, this will likely lead to failure.

Once you have determined your culture and then you want to communicate it externally, authenticity is the key to retaining trust. In the words of Gabbi Cahane  “if it’s just words on the wall, then it’s meaningless. Your culture is what you believe in and how you behave. Codify it, live it, recognise it and reward it. And do that every single day.” “Early stage investors are looking for the signs that you instinctively get this.”

If you are in the early early stages of starting a company and you’re really more just thinking of starting a company, I’d highly recommend you spend some time trying to understand what drives you and why, for if you want to embark on the difficult journey that is to become a founder and leader of future employees and future shareholders, it would really help you and them for you to be able to share ‘the why’ of why you do things.

And in case you are reading this and thinking to yourself, ‘but investors only care about traction’, I’ve seen several cases of where an investor is willing to take a huge leap of faith on a founder, even before any visible traction, but only when the investor feels there is a strong vision behind the company. Therefore, I leave you with this thought: Traction comes from happy and loyal customers, happy and loyal customers come from a great product or service that does what you say it does, a great product or service that does what you say it does comes from a team that has a coherent culture that allows them to know what to do, and a coherent culture comes from a strong and clear vision from the company’s leadership team.

Image credit: Shutterstock/Skylines

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Model Equity Calculator for Founders with Option Pool Expansion

English: Historical valuation on the secondary...

SeedCamp’s hackathon, Seedhack, took place at Google Campus, London, on the 8th to 10th of November. It brought together some of the brightest talent in the startup community from 15 countries with one of the best accelerator programs in the world and mashed it up with awesome content providers like Twitter, Facebook, BSkyB, BBC, Getty, HarperCollins, EyeEm, Nokia Music and Imagga. There were a total of 12 teams working on interesting and exciting projects.

As part of this hackathon, Ali and Will helped me aggregate resources to help founders better understand the process of raising equity and the impact it can have to their founder stakes. We aggregated resources to help entrepreneurs to understand  the numbers and implications of raising money and giving out equity. Valuing a company and calculation its impact on your equity is a very complex and confusing for entrepreneurs as well as being far from an exact science, this is the pain point that we wanted to address.

In the words of Seedhack attendee Will Martin (@willpmartin)

“Fundraising is one of the most difficult parts of the startup world, as first time founders this is an even more daunting process. Experience of raising a round and understanding the numbers and implications of that round and the related equity issued to an investor as well as employees in the form of an option pool is vital, but sadly is only fully understood by going through the process for real. Our intention was to give founders the knowledge required by being able to go through the process in a simple and easy way, thus giving the founder the confidence when it happens for real.

Ali and I are first time founders currently actively looking for investment. We know the total value we need in terms of money we want to raise as well the percentage of equity we are comfortable willing to give up to the investor. What we didn’t know and learned through the process is the implications in future rounds as a result of that initial funding round. Having an option pool for employees, advisors, board members etc. is something that complicates the issue and is often a requirement in the terms an investor is offering. This complicates the issue for the founder, so being aware of the impact of their shareholding as a result is vital for a founder as it is them that gets diluted in the first round but also any subsequent round, but it is often overlooked.

The changes to equity positions of the founders, investors, employees etc. is very important to understand as it dictates control and value of a company. Having this knowledge now gives us as founders a huge advantage over other founders we are competing with for funding and bridges the knowledge gap that exists for first time founders.”

In order to read some of the terms on this cap table model, below are some definitions which you might find useful:

Pre & Post Money Valuation

“The pre-money valuation is the valuation that a company goes into raising a round of financing with. By establishing this valuation, it helps investors understand what amount of equity they will receive in the company in exchange for their capital. Once the financing round has been completed, the post-money valuation is the sum total of the pre-money valuation plus the additional capital raised. So, if the pre-money valuation of a company is $10 million and they raise $2.5 million from investors, their post-money valuation would be $12.5 million. Investors would own 20% of the resulting company.” – Dave Morin, Source Quora

“A PRE-MONEY VALUATION is the valuation of a company or asset BEFORE investment or financing. If an investment adds cash to a company, the company will have different valuations before and after the investment. The pre-money valuation refers to the company’s valuation before the investment.

External investors, such as venture capitalists and angel investors will use a pre-money valuation to determine how much equity to demand in return for their cash injection to an entrepreneur and his or her startup company. This is calculated on a fully diluted basis.

If a company is raising $250,000 in its seed round and willing to give up 20% of their company the pre-money valuation is $1,000,000. (250,000 * 5 -250,000 = 1,000,000)

Formula: Post money valuation – new investment

Source – http://en.wikipedia.org/wiki/Pre-money_valuation

A POST-MONEY VALUATION is the value of a company AFTER an investment has been made. This value is equal to the sum of the pre-money valuation and the amount of new equity.

The Post-money valuation is the sum of the pre-money valuation and the money raised in a given round. At the close of a round of financing, this is what your company is worth (well, at least on paper).

If a company is worth $1 million (pre-money) and an investor makes an investment of $250,000, the new, post-money valuation of the company will be $1.25 million. The investor will now own 20% of the company.

The only reason it’s worth spending time on this term at all is that it “sets the bar” for your future activities. If your post-money after your first round of financing is $4 million, you know that to achieve success, in the eyes of your investors, any future valuations will have to be well-in-excess of that amount.     

Formula: New Investment * total post investment shares outstanding/shares issued for new investment. “

Source – http://en.wikipedia.org/wiki/Post-money_valuation

Option Pools

“An option pool is an amount of a startup’s common stock reserved for future issuances to employees, directors, advisors, and consultants.” – from startuplawyer.com

Option pools can also be formed by Restricted Stock Units, but whichever one you use, they are generally still called ‘Option Pools’.

The OPTION POOL is the percentage of your company that you are setting aside for future employees, advisors, consultants, and the like. Employees who get into the startup early will usually receive a greater percentage of the option pool than employees who arrive later.

“The size of the Option Pool as a percentage of the POST-MONEY Valuation and where ALL of it comes from the founder’s equity. This is the least founder-friendly way to present this, but it is also the point at which most early stage investors will start the negotiations. The expectation from traditional venture firms is that this will equal 15%-25% of the company AFTER they make their investment. The Option Pool is one of the most complex and, from the entrepreneur’s perspective, confusing terms in an equity financing scenario.” – source http://www.ownyourventure.com/content/tips/op.html

Round Size – 

The investment, or money is how much money is raised in a given round of financing. However, the decisions (and their implications) surrounding this number are among the most important that a founding team makes. It is not just about how much money is raised, it is about the terms that the money is raised on and, maybe most importantly, whose money it is and what they bring to the table in addition to money.  – Source http://www.ownyourventure.com/content/tips/inv.html

Link to the Model Cap Table: http://bit.ly/1ayKk8p

NOTE FOR MODEL TO WORK – It needs to run on Excel (Google docs coming soon) and with circular calculations turned on. This can be done by going to (Mac Excel) Preferences -> Calculation -> Iteration -> Click on Limit Iteration

If you are considering using Convertible Notes as part of your round, check out this variant of the cap table with notes on how to convert as well: http://bit.ly/17kHlSA

Additional Equity Calculation Tools (Thanks to Ali Tehrani for finding these – @tehranix) –

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10 Tips for Succeeding in a Startup Accelerator Program

Article originally published on the SiliconRoundabout on July 4th, 2013

Accelerators come in all different shapes and sizes. With many new Accelerators coming into existence within the last few years, the job of selecting one to join and getting the most out of your chosen accelerator program isn’t always obvious. Some programs, like Seedcamp, cater to high ambition & high growth companies spread across various industries, whereas others focus on specific verticals such as clean energy or healthcare to name a few.

We all have different approaches, but with over 90 companies forming the Seedcamp family we’ve had a chance to see many different industries and what it takes to get those companies to the next level.

Below are Seedcamp’s top tips for succeeding before you enter a accelerator programme:

1) Asses Program Fit – Research what an accelerator’s deal is regarding investment and terms before applying. perhaps your company isn’t ready yet or is too mature for the program you are considering.

2) Do your Due Diligence – Get in touch with founders or mentors that are part of the program, read blog posts from the Accelerator’s team to see what is important for them. This will help you get a better feel for the program but also how the program leaders think.

3) Rehearse your Pitch and prepare to answer questions – Be transparent, confident, and open. If your pitch isn’t ready or you are defensive in your approach, it’ll be a huge red flag.

 Once you enter the program:

4) Be Proactive – Don’t wait for the Accelerator’s team to chase after you, you should chase after them and if you can, be as physically close to the team as possible..

5) Understand your startup is more than just techFinding Product-Market-Fit is crucial at this stage of the game. Don’t focus entirely on tech, embark on a mission to learn and master all the commercial aspects of your startup as well.

6) Attend as many of the curriculum events as possible – They are there to help you. Don’t skip valuable content.

7) Network as much as possible – email all the people you meet and get to know as many of the Accelerator’s mentor base as possible.

8) Build a board of advisors from your networking efforts early. They will be of incredible value

9) Start developing your fundraising strategy after the first week of being in the program

10) Lastly, don’t be afraid to experiment and ask questions – You will have lots of people supporting you. Your mantra should be ‘test test test’ – and that applies to all aspects of your company.


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On Growth, Virality Loops, and Customer Acquisition

Evernote Camera Roll 20130411 111108_SnapseedEveryone loves a personality test. Whether for fun, or to better asses our skills as part of choosing a career, we all love hearing about how others perceive us, how we function, and how we are likely to react in situations. We are all naturally narcissistic (up to a point) and it is at this point that Traity, a Seedcamp company that specialises in helping its users figure out how they rank in a variety of psychometric test (think of them as a more thoroughly complete Myers-Briggs test), helps users identify their core attributes as ranked by people in their social graph.

For the purpose of simplicity when speaking of Traity’s technology, I’ll use the term ‘personality test’ loosely, however, what was confusing for the founders was that while ‘personality tests’ are generally well received and actually fun for many (as in magazines or online for example), Traity struggled quite a bit, in their early days, in converting people to use their service because their personality test, while far more accurate and useful than those you take online where you assess yourself, requires you to have had your friend assess you as part of their process.

Traity was having a classical conversion/acquisition problem. Traity’s CEO, Juan Cartagena, could funnel people to his website, but couldn’t get them to go through the sign up process and then get others to sign up (which he needs as part of his product). So he went on a mission to find out how to optimise this. Here the video of Juan sharing his story of discovery (it is embedded at the bottom of this post for your convenience).

After this video came out, I recently had the chance to catch up with Juan and ask him if he could help me summarise how he worked his way through to where he is now. Firstly, he told me it all started with a chat with social games guru Blake Commagere (http://www.crunchbase.com/person/blake-commagere), who pointed him in the right direction…

Next, he identified the key metric he wanted to optimise around. In his words: “There is generally one key metric for every business that matters- optimise around that metric.”

He then decided to experiment with design as a key growth driver vs. the traditional MBA-type solutions which, until then, had not been working for him. For the record, Juan has an MBA from the Chicago Booth School of Management. One of the top MBA programs in the world, so for him to make a jump like this, really does mean a lot in terms of not adhering to ‘traditional-type’ thinking.

He then further committed to this path of experimentation by reading two books which greatly influenced his thinking on how to further evolve his customer acquisition process:

After having read both books, he went through each one of the key influence factors outlined in the book and scoured through his product to see how we could apply the concepts. Once identified, he then went about applying the appropriate design principles to yield the ultimate effect on the influence factors.

For your reference, the key influence factors highlighted in Caldini’s book on Influence include:

  • Reciprocation
  • Social Proof
  • Commitment & Consistency
  • Liking
  • Authority
  • Scarcity

Before proceeding any further, I should state that in order to better apply these concepts, that you understand what your Minimum Viable Segment (MVS) is. Without understanding your MVS, any optimization of design or messaging will likely not be targeted enough to yield directionally measurable results. For a primer on an MVS, go to Northbridge Partner, Michael Skok‘s site here: http://www.mjskok.com/resource/gtm-segmentation

The design process Juan subsequently followed, included not just the obvious making of buttons, bigger, correctly placed, or prettier or red (one of the points he mentioned about colors and engagement) or choosing a different logo, but more importantly in coming up with the correct messaging to convey the influence factors he was trying to exploit. This is crucial. The messaging is just as important, if not more, than the more traditionally-experimented visual elements of design. Although not from the books that Juan mentioned, two good books to get you thinking about how messaging matters for positioning and differentiation are:

As far as Juan’s design focus, think about it this way, he moved away from just building a more explosive gunpowder to thinking more about how to package and propel it forward (otherwise all you have is explosive gunpowder that will explode in your face).

Evernote Camera Roll 20130411 111052_Snapseed

Although it seems obvious when you read this, Juan discovered that a key aspect of using both influence and design as part of evolving his process, was understanding that his costs of user acquisition would go down the more his viral acquisition would go up, and in order to scale this virality he would need to leverage the emotions of users to have a stronger reaction. However, I’d venture to say that many don’t consider this as part of their design process, Juan admits he didn’t at first.

Specifically, Juan saw how, via design, narcissism and voyeurism was used by sites like Facebook & LinkedIn to yield frequent use, fear of missing out by sites like Instagram, Twitter, and Groupon, and Inspiration by brands like Coca-Cola. He set out to understand how he could leverage these feelings as part of creating better copy on his site’s messaging to both yield better conversion but also more virality.

He then took things one step further by truly delving deeply into what virality is… and then nesting virality loops within his product that amplified his ‘K’ value  (For a primer on Viral Marketing, check this Slideshare presentation from David Skok: http://www.slideshare.net/DavidSkok/the-science-behind-viral-marketing ) oh, and yes.. he’s Michael J Skok’s brother. Also from David Skok, an excel model you can use that might help you plan and predict this to investors: http://www.forentrepreneurs.com/lessons-learnt-viral-marketing/

Lastly, because without metrics you are just flying blind, Juan used Kissmetrics to analyse his efforts and truly understand whether his changes across the board were yielding his desired results. Build, Measure, Learn… Build, Measure, Learn.

In summary, if you have identified a real need within a market and built something awesome (gunpowder) but you just can’t seem to reach your customers, perhaps go through the journey Juan went through and assess whether perhaps the issue isn’t what your product does, but rather how you are presenting it to your users.

Additional Resources:

For a curated list of talks on what will get you on the right track in Customer Development – http://www.hackertalks.io/index/2
For a curated list of talks on UX – http://www.hackertalks.io/index/3
Growth Hackers Conference Lessons Learned – 
Growth Engineering – https://www.blossom.io/growth-engineering
For a list of Growth Hackers – http://www.aginnt.com/the-growth-hacker-mafia#.UWvHXSv70qv

Juan’s original video –

Juan Cartagena: Getting What you Want from Interaction Design Association on Vimeo.

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The Importance of Good Mentors

Mentoring a Demography trainee

The importance of having great mentors in your career or company cannot be emphasized enough. Mentors can generally provide you with a structure and feedback that school or books alone cannot provide. If you don’t have access to great mentors where you work, look for them in structured mentoring programs such as Seedcamp’s if you are a startup, or in your school’s Alumni if you are a student, or your industry’s groups if you are an employee. Look for mentors that can help you on functional areas as well as ‘bigger picture’ areas. Build your own ‘advisory board’, per se, of people who can help ‘polish’ you, your skills, and your thinking process over time.

From a personal perspective, I’ve been lucky in having had some great mentors throughout my career, and lucky enough to have had them as my co-workers as well. In my first post-university job as a network consultant with what was then called GTEi Professional Services and led by one of the most supportive bosses I’ve ever had, Adam Lipson, I had the pleasure of working with two great mentors: Allen Gray and Walter Urbaniak. Allen Grey is one of those guys that if you ever had a weird technical problem, he was the guy to call. He was the Navy Seal Team Six, all by himself, for any problem a client had. He was a hacker in the truest sense of the word. One of the most impressive things at the time for me, was when I visited Allen’s house and witnessed what had to be the closest thing to having a “HAL” from the movie 2001, controlling every aspect of his home environment both locally, and even more impressively, remotely.

Walter Urbaniak, shared many traits with Allen, in that he too, was a one man army, but if Allen was the Navy Seal, Walter, ‘Doc’, as we called him, was the General who laid out the plans and arranged troop movements. Being one of the contributing creators of ‘Layer 2 routing’ and someone who regularly collaborated with the inventors of the internet’s backbone (you can read more about some of the early works here: Where Wizards Stay Up Late: The Origins of the Internet), Doc always ‘knew’. In its simplest form: Doc excelled and the “Why”, and Allen at the ‘How’.

Working with Allen and Doc together taught me the value of not just smart mentors, but about the process of smart mentoring. Allen would inspire me to come up with cool ideas and hacks, but would never ‘finish’ the job for me.. always leaving me halfway for me to figure out the rest. I can vividly remember us playing around with a Gnome hack for Red Hat Linux on my live ‘work’ machine and him leaving me mid-way through the hack and with a full work day ahead of us and my basically having to blunder my way through to ‘a’ solution.

Doc’s teaching style was 180 degrees from Allen’s. I remember one day when I was stuck with some subtlety of TCP/IP and Doc took me to his blackboard and asked me to walk him through every step a packet takes from the moment it leaves your computer until it arrives where it needs to go, with him heaping me fill-in the blanks along the way where I couldn’t. This ‘overview’ of the bigger picture helped me understand where things could go wrong, rather than just focusing on the specific micro-problem that I had, and getting bogged down with just those details.

Fast forwarding to a closer time period after my days as an engineer, I had the pleasure of working with Ivan Farneti & Nigel Grierson while I was at Doughty Hanson Technology Ventures. Ivan was personally responsible for some of DH’s greater exits, including the sale of Gomez to Compuware back in 2009 for $300m and had seen many a deal in all their varieties leading to his deep understanding of just about any situation and question I could throw at him. What made Ivan great as a mentor was his ability to help you analyse & dissect businesses for their business and not get distracted by other attributes. He regularly admits not understanding the ‘technology’ of a company (or at least that’s what he likes to say), but curiously, he is always dead-on in understanding the business challenges that a company can and will have. Nigel, similar to ‘Doc’ from my days at GTEi, was excellent at providing the greater context of an industry and explaining how things came to be. Nigel is also passionate about teaching and more importantly, learning about teaching, a key attribute of good mentors.

Of course I can’t say that these mentors were ‘it’ for me, quite the contrary, I have a number of friends and colleagues spread out throughout the industry who have provided me with invaluable direction over the years in every aspect of a company’s development and my own personal development as an investor. I know I still have so much more to learn, but am glad that I work within an industry and environment where I can continuously learn from others.

Over the past several years, I too have become a mentor to others. The feeling is always a bit strange when it starts happening to you, but many people underestimate their ability to help others. As a mentor, other than developing your own style of mentoring, I believe your three main duties are 1) to have a passion and desire to continue learning about the subject your are mentoring on, 2) to know what you know and what you don’t know and be clear about it during mentoring, and 3) to continuously seek to improve your mentoring skills so that you can structure the advice you are giving for best effect. This does require a discipline of self-analysis to catch yourself when you are falling short on any of the above, but that is a good price to pay when you see the progress you’ve helped others achieve.

And with that, I encourage you to seek out the best mentors that you can for what you are trying to achieve, but also, perhaps so you can also be a great mentor to someone. Don’t discard the idea until you try it!

Summary of “The Importance of Good Mentors” (via tldr.io)

  • Mentors are very important for your career and your company. They provide a structure and feedback that scool or books cannot give.
  • Build your own “advisory board”. You need to have mentors that help you on functional areas and mentors for “bigger picture” areas.
  • Over time, you will also mentor others. You need to have the desire to continue learning about the subject you’re mentoring on.
  • You must be aware of what you know and what you don’t, and be clear about it during mentoring.
  • Finally, you need to continuously seek to improve your mentoring skills to achieve the best effect.

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