Seedcamp Podcast, Episode 2: Evaluating Interested & Existing Investors in Your Startup

The ‘Take On:’ series sees the Seedcamp Partners, Reshma and Carlos explore various topics throughout the world of Startups and Early-stage Investment. During each episode they’ll speak with members of the Seedcamp family to hear their views; including the Seedcamp team, our InvestorsMentors, and Startups.

For the second podcast in this series, Reshma and Carlos look at what investors look for in other investors to syndicate with, but also what founders should look for in investors, when actively fundraising. They discuss:

  • why choosing your investors is like choosing a family
  • what an amazing investor looks like
  • what type of investor might be most suitable for your startup
  • why the size of your investor’s fund is worth considering
  • the pros and cons of working with specialist vs generalist skill-set investors
  • why an investor’s deal experience is important
  • how to tell if an investor might not be suitable for your startup

If the above player doesn’t work for you, you can also listen directly from our Soundcloud page.

For more information on what to look for in an investor, read our blog post that goes into more detail.

Subscribe on iTunes or by pointing your podcast player to the link below…

http://feeds.soundcloud.com/users/soundcloud:users:126198189/sounds.rss

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On trust, founder fall-outs, and 6 steps to getting things back on track

Originally published on Venturebeat – Aug 22, 2014

Relationships are built on trust, and they require work to keep alive and well.

In his book The Trust Edge, David Horsager outlines the eight pillars he believes enable trust to occur within a relationship. The eight pillars are clarity, compassion, character, competency, commitment, connection, contribution, and consistency. Should any one of these start faltering, a relationship can quickly start falling apart and possibly lead to permanent damage.

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The Top Ten Fundraising Fails

Fundraising isn’t easy, even if done well, its fraught with all sorts of ambiguity and frustrations. To that very point, I recently wrote a blog post about the fundraising mindset in order to help you set a tone on approaching the process.

That said, there are things you can do to make it go better than others and things you can do to make it go worse… and in the spirit of the ‘Tonight Show’s’ top ten list, below are my top ten things that will likely cause a fundraising fail situation.

Avoid them and learn from your mistakes and you will increase your likelihood of success.

– 10 – Presenting with a style that doesn’t capture the right attention. Yes, being over the top and dropping ‘f bombs’ might get you attention, but is it the right attention? Is it focusing the attention on what your message or just you? Also, what about a boring slide deck? Or a a deck that is missing product shots? Do these represent you well? What if you say your product is simple, but then your deck is really over complicated.. does that sound right?

– 9 – Not having a proper fundraising plan. Fundraising requires research. Find out if your potential investors are even interested in your sector.. have they invested in your competitor? What amount do they typically invest in? Going to someone that is a late stage investor when you are raising a little bit of money is like putting in a minimum order of 10 pizzas when you can only eat one.

– 8 – Not understanding your customer and how to reach them. When presenting or speaking about your customer, do you show a mastery about their issues? Do you understand what makes them tick and why your solution is the one that will likely best serve their needs? Do you also understand how to reach them? Where do they shop? What media do they consume?

– 7 – Unable to demonstrate a real pain for your customer (and how your solution fixes it). It is always tempting to create something that is useful to you, but is the solution you’ve created really a necessity or just a nice-to-have? Demonstrating a real pain, usually through some form of customer validation, is crucial in making a convincing argument for your startup.

– 6 – Assuming that a general market size study applies to your startup. One of the things you can do to quickly show that you don’t have a full grasp of your market is by showing a much larger segment than the one you operate in.  For example, I’ve seen pitches where an iOS app that is for sports tracking, mentions all mobile users worldwide as their market size… when actually, its more like mobile-sports-tracking-enthusiasts, which is a sub-segment of that bigger pie.

– 5 – Not truly understanding who your competitors are. This one is easy. If you think you don’t have competitors, then you probably haven’t researched hard enough. Rarely are there ideas that no one has thought about, but secondly and perhaps more importantly, sometimes there are substitutes which are ‘good enough’ which you need to be aware of and show how your solution overcomes the momentum that those existing solutions already have.

– 4 – Not knowing your cash needs & cash burn. If you’re going fundraising and you don’t know how much money you need, how long it will take you, to achieve what, and how you will spend it… well, then don’t fault investors if they aren’t impressed with your request for investment.

– 3 – Not explaining why your team is the team that will make this happen. Your team is 99% the reason why your company succeeds, and the idea is probably like 1% (I’m guessing on the numbers, but this guess feels right). If you skim through the ‘why’ of why your team is the right one for this investment, then you’ll likely miss an opportunity to impress an investor. I recently wrote a blog post about how to best think through your team slide here. Also, if you want to learn about how an investor evaluates your team, read this one.

– 2 – Having your existing investor shareholders own more equity than the founders. Toxic rounds that precede the round you are raising for can really negatively affect your fundraising plan. Read about why here. In general, try and make sure that you take investments that don’t jeopardize your future ability to raise follow-on funds.

– 1 – Not reaching out to an investor through an introduction. Lastly, the best thing you can do for yourself is get an introduction to investors that you want to meet. Introductions are great ways to have immediate validation. Here are some other ideas on how to reach out to other investors.

– Bonus – Not learning from your mistakes. Learn from your mistakes. You will make many, and that’s OK, so long as you don’t beat yourself up, understand what went wrong, and then iterate on it. In the words of Einstein – “Insanity is doing the same thing over and over and expecting different results.”

Below is the video of this presentation.

Below is the slide deck that I used to present at Google Campus’s Fundraising Day.

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The Perfect Team Slide And Why It Matters

Originally posted on Netocratic.com on July 2, 2014

When an investors considers your company for investment at the earliest stages, who you are is so much more important than your idea. Your team is such a crucial part of your company’s success, and yet many teams omit their team slide or bludgeon it because they don’t feel they have anything interesting to add other than team photos and a job-title.

What’s worse is when pitching, founders usually just point to the team slide, and say something like – here is our team, we have lots of rockstars or something generic like that. And that’s it…

Wow.. way to undersell who you are!

Let’s look at what the major selling points of a team slide should be:

1. To show a team’s capability to deliver

Basically, does your team know anything about what you are doing. If you are a healthcare company, do you have a healthcare background? If you are making something for the financial industry, have any of your team members worked there? What companies have your team worked in that can validate you? If you’ve worked at Google before, for example, it would be worthwhile to put that company logo up on your team slide because the image of the brand would speak faster to your audience, than any number of words you could say in the same time frame.

2. To show a team’s capacity to deliver

Are you effectively complete or incomplete as a team? Is your team mostly business people but lacking the technical capabilities to deliver or is your team well rounded and able to execute? If your company industry requires an amazing specialist, do you have that specialist?  By the way, do not assume that it is a bad thing to admit you are looking to hire for specific functions you don’t currently have in an early stage startup, it shows maturity and your team’s self-awareness, although you don’t have to state it as part of your pitch (just saying, in case it is asked as a question).

3. To show a team’s culture & communication style

What is your company like? Is it a fun place to work in or is the tone more serious? What ‘titles’ do people have? How many of your team are outward facing and how many inward facing? These details are all items that an investor can pick up on based on your team slide.

In terms of where your team slide should be… there is not hard and fast rule, but I’ve found that if you are building something born out of a personal experience at your prior job or of interest.. it makes for a decent early slide to explain the background to your story/pitch. If you are building something that isn’t part of your background story, then where the slide sits is more about flow. Focus on telling a good story that is complemented by your team slide rather than the other way around.

So next time you are doing a presentation in front of investors… ask yourself, are you doing your team slide justice?

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Creating a Brand that Lasts a Lifetime

In my last post on “Understanding The Vision in a “Visionary Founder” I tried to tackle the softer side of what an investor looks for, and as a continuation of the thread, I want to try and tackle how that vision evolves into a brand and brand culture and brand positioning.

Last night, I had the chance to watch the movie ‘Bones Brigade: An Autobiography’, about the lives and histories of many of my childhood skateboarding heroes… including Steve Caballero, Tony Hawk, Mike McGill, Lance Mountain, Rodney Mullen, and several others who were all part of the Powell & Peralta skate team: the Bones Brigade.

As I relived those memories, I recalled how passionate I felt about the sport because of how these guys made it amazing and accessible at the same time. They invented tricks, such as the ollie, which democratized skateboarding for kids so they could enjoy skating on their streets rather than hoping to see a half-pipe pop-up in their neighborhood. On a personal note, I can remember as a kid wishing I could be part of the Bones Brigade and riding with cool pro-kit from my favorite skaters. All the skater kids in school had Powell-Peralta stickers and patches sewn on (typically by disapproving mothers) onto our backpacks. I even went as far as building my own quarter-pipe and ‘branding it’ Powell Peralta!

carlos_stalefish_grab_old

Yours truly (many moons ago & with hair) launching off of my home-made Powell-Peralta branded quarter-pipe. I made it in shop-class.. in case you’re wondering, I got a good grade in that class.

However, with more adult eyes, what really impresses me now is the visionary machine that was Stacy Peralta (one of the two co-founders of Powell & Peralta) in crafting the Powell-Peralta & Bones Brigade brands that captured the spirit of skating in a way that lured kids like myself and my friends in to want to connect with it and live it.

Great brand lasts a lifetime.

As an observer and appreciator of great branding (the way some appreciate art), It’s amazing to see how, to this day, even long after its death in 1991 (the company fell apart due to a founder dispute) and recent rebirth (the founders patched things up by request of the team) the Powell&Peralta / Bones Brigade story stands out as an inspiring tale of a visionary founder that created an awesome brand and culture, and positioned it to stand out above and beyond the crowd of the other me-too companies of its time. The fact the Bones Brigade autobiographical movie came out recently and the brands have been succesfully reborn almost 20 years on from their heyday,  is a testament to how much the whole brand, and what it stood for, stuck with many of my generation.

It starts with a vision.

Stacy Peralta, helped create a brand and culture upon which he positioned the company in a way that resonated with his customers and led to Powell & Peralta’s success both in attracting the kind of riders that lived this vision to join his team, but also in successfully selling many skateboard decks to kids wanting to live his vision themselves.

As a bit of background, Stacy himself was a champion skateboarder and member of the famous Z-Boys (arguably the first skateboarding team in the world), and in many ways that helped shape his vision about what a team should be like, having himself experienced the eventual falling out and disbanding of the Zephyr team.

Stacy’s vision of forming a better team without the attributes that broke apart the Z-Boys, drove the engine that would come to power the Bones Brigade brand from the very beginning. In the movie, you can hear Stacy himself share his vision (at minute 8:53) about how he wanted to make a team that would last, and (at minute 7:40), you can also hear how his co-founder George Powell narrates  Stacy approaching him on the idea of building a team with a specific ethos, which eventually became the Bones Brigade.

To dig deeper, the brand’s development and success wasn’t accidental (although there were likely many many many failed experiments along the way)…  rather, it was through meticulous work that Stacy Peralta and his team developed a culture, tone, and imagery to communicate the values and positioning he wanted to convey for the brand, both externally and internally.

It was this hard work, as well as Stacy’s ability to inspire his team, that can be attributed for keeping the Bones Brigade together for as long as they did. In one part of the movie, you can even hear several riders struggle with various aspects of their success, but ultimately staying with the team for Stacy.  If Stacy had simply been driven simply by money (or an ‘exit’) he wouldn’t have conveyed the genuine care necessary to merit the loyalty of his team.

To showcase the point about how Stacy chose how to communicate his vision through his brand, in the movie (starting at minute 29:40), Stacy Peralta shares how his marketing campaigns, ranging from the burning of a car while the guys posed for pictures, and the crazy advertising style choice over the typical ‘action shots’ of the industry’s advertising at time, were chosen to cement the new brand’s tone and voice as different from the rest of his competitors that were pushing out bland ads in the magazines of the day. I’m not sure they knew ‘for a fact’ that these crazy ideas would 100% represent what they wanted to convey and convert into sales, but I’m pretty sure they knew that if they did what everyone else was doing, they’d for sure NOT be able to be different in the eyes of their customer.

From the Bones Brigade website:

Stacy recruited the skaters and handled marketing along with his longtime creative cohort Craig Stecyk III. Rejecting the expected action shot marketing, they used their young team to create esoteric images conveying the culture’s sarcasm and disenfranchised dark humor. While spitballing about his stable of skaters, Stacy commented that he never wanted to call them a “team,” a label that invited all kinds of jock baggage. Craig shrugged and simply said, “Bones Brigade.”

In effect, Stacy understood his customers and how to position his brand within the  skateboarding competitive landscape of the time, and he recruited those that shared his vision, including the Bones Brigade team of skaters along with artists like Craig to help him evolve and communicate his vision and branding strategy to make it stand out from the crowd. Stacy & George worked hard to recruit the right riders, work with the artists that understood the brand, hire staff to help them build it, and attract customers that lived it.

As with most companies, that’s not to say that all was rosy within the Powell & Peralta company. In one segment of the movie, George talks about the disgruntlement that some of his more senior factory employees felt at the fact that his young team riders were making upwards of $20,000 a month from deck royalties.. however, it seems that George & Stacy were able to at least convey the importance of the Bones Brigade for the company’s success and managed to convince their factory employees to stay so that things could carry on for the brand. In effect, sometimes not everyone will agree with your vision, but sometimes you need to made difficult decisions.

And continues with Positioning and Branding.

Even if at times he was merely experimenting, Stacy Peralta intrinsically knew that what would make Powell & Peralta and the Bones Brigade successful, would be to have a strong positioning and branding strategy to help them differentiate from their competitors and to help bring the industry into the mainstream (for more on the difference between branding and positiong, read this article).

It was this solid company culture stemming from a strong founder vision around building a winning team, a clear positioning strategy of being different, and a strong brand values that powered Powell & Peralta and the Bones Brigade brands to success, and it was their consistency in execution, ranging from the art on the decks to the arguably kitsch videos they created (such as the classic “The Search for Animal Chin“),  that allowed Powell & Peralta to dominate the skate scene during this era and to cement itself in the hearts of many kids around the world for many years to come.

In conclusion, as you consider starting or evolving a startup, give thought to what really drives you.. determine what’s your vision, and once you know the ‘why’ and who your customer is, then communicate it and your brand’s values and positioning with your employees and partners so that your product or service is consistent with everything you say and do for your customers. Potential investors know that companies that nail down their branding and positioning strategy company-wide, are that much more likely to succeed in the sea of competitive startups out there.

In case you are wondering why I choose skateboarding as an analogy for this post, it’s because I believe there are many similarities between startups and skaters:

1) Entrepreneurs, like skaters get knocked down many many times before they succeed, but they keep on getting back up.
2) Startup life like skate life is very much its own culture, operating at a different speed and risk level than others.
3) By having a movie that highlights some of the key points, if you want to hear them from the founders directly, you can simply rent it.

 

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