There’s a new person in your life. It’s probably a guy. He probably wears chinos with a blue shirt. He’s probably standing awkwardly next to the coffee machine in the kitchen of your startup trying (and failing) to make small talk with your backend server team.
The primary reason startups take venture capital is because of just that – the capital. But entrepreneurs should expect their investor to bring a whole lot more than just money to the table.
Every entrepreneur can expect their venture investors to bring seven main benefits to the table. If you already have venture investors, you can use this article as-is. If you are currently considering fundraising, reverse it and ask prospective investors if they are able to support you in these key areas. If not, ask yourself if you’re talking to the right people.
- The Long Haul – Mileage may very, but you can assume that your Series A venture investors will be on your board for five to nine years. That’s about the same length as the average marriage in the US. In other words, it’s a long time. This means you need to build a relationship.
Like any relationship, you need to start with a positive attitude and work to dispel any niggles in the early days. I’ve seen entrepreneurs immediately slap a new investor with unexpected terms after a term sheet is signed. I’ve seen investors turn up to the first board meeting and demand that every aspect of the business is run a different way, before they attempt to understand the company’s current cadence.
My advice to both is: go slower; there’s plenty of time, you should take it.
- The Network – Venture capitalists tend to be networking machines. Their success often depends on it, and the day to day reality of their work means that they meet up to 10 new people every day. In addition to this sheer level of ‘exposure’, VCs occupy a unique position as a ‘gateway’ to new technology and cutting edge industry trends. This means that they are usually able to lean on people they don’t know and often get a meeting if needed.
Before every board meeting or conversation, think of who you need to meet. Use LinkedIn and discover who your investor knows, and ask them to put you in touch. As an entrepreneur, you should exploit this network unashamedly!
- The Next Round – It may seem early, but at some point, you may have to raise another investment round. This may be another private, venture round or a public offering. As most investors focus on particular ‘stages’ of investment (seed, Series A etc), they are likely to have worked with companies at a similar stage to yours, who went on to raise additional funding.
Use that experience. Ask your investor what your next investor is likely to look for. Ask for access to presentations that worked well in the past (assuming confidentiality can be lifted or sensitive information redacted), and – most importantly – before you start your next fund-raise process, ask to present to your existing investors. Their feedback will be invaluable. I’ve had a couple of portfolio companies miss this opportunity, and I won’t let another make this mistake.
- The Critical Hire – The typical venture investor usually has a slightly higher level understanding of any given company. Therefore, venture investors are genuinely rather good at painting the big picture of the company. This can be super-useful when convincing that critical, senior hire to join your company. This is one of my personal favourites. I’ve helped a number of CEOs on this, and nothing feels more awesome than knowing you’re helping build the team.
- The Critical Sale – Similar to above, sometime you will have a large potential customer that needs some extra reassurance from someone who, ultimately, has your company’s (financial) back. I have found this to be especially crucial for enterprise software companies. As you can imagine, if you’re selling your solution to a large corporate customer, they often need convincing that you are not going to go bust in the next year. Your investor is often the most authoritative voice on this topic.
- The Counsellor – No investor or board member can tell you what to do. That is the great (and also terrifying) thing about being a CEO. The buck, ultimately, stops with you.
However, a good investor is an experienced soul, and will have been through many similar trials and tribulations that you find yourself battling against. Some will have done it all before themselves – which is one of the reasons our firm has always had a healthy balance of entrepreneurs on the team – and others will have seen it as an investor with other CEOs. The good investors spot the patterns, and are able to be a thoughtful and engaged listener as you talk through an issue and decide how to deal with it.
On a human level, this can be a rewarding part of the investor/founder relationship – of course there are many conversations on things like pricing strategies, marketing ideas or human resource issues, but the most memorable conversations are always personal. Dealing with an employee who is facing a difficult situation at home, working through the tough steps that need to be taken when a founder exits a company, and confronting failure – whether this is of a person, a team, a product or even the whole company. These things are tough, but they all happen, and a good investor will be by your side when you confront them.
- The Exit – whether you’re selling to another company or taking your company public (which may or may not really be an exit in itself) good investors will have experience of this. Again, the best firms will have a mixture of people who have done it with others, and those who have done it themselves. I took my company public so I can talk people through my experience on a personal level, but one of my partners advised on over $500B of IPOs and M&As over his career as a banker which gives him an entirely different perspective on the process. Great firms will have investors with deep experience in this area and be able to bring it bear when you hit that point of your company’s progression.
The best entrepreneurs are resourceful beings who pull in whatever they can from those around them. While that has to be balanced in the case of, say, employees, where there is an obvious power differential, I always encourage CEOs to exploit their venture investors. Let’s be honest, we are perfectly capable of taking care of ourselves!
Of course the investor starts by providing the capital your company needs to grow, but the right kind of investor should deliver a whole lot more too.
The biggest startup battle in the world is currently taking place, so what better time to brush up on the things you need to present to judges, if you want a fighting chance at taking home the big prize. Assuming that your product demo went well and your user interface and experience was compelling, here are ten questions that you can expect to hear from the judges at your startup competition.
What proof is there that this is a real problem?
What proof is there that this is the right solution?
What is your defensibility? (i.e. Why won’t an existing company do this? Why can you do it better and/or faster?)
How will you get your first 100 customers?
How big is the market? (i.e. How many people can potentially use this solution?)
How often does your product show up in your user’s day or week?
What will be your phases of product and business development?
How will you monetize and scale?
Why is now the right time to solve this problem?
- Why is your team the one who can pull this off?
Anything missing from this list? Add it in the comments section below.
It’s great to be back this time as a co-organizer working along side a team that allowed me develop both an idea and myself under 54 hours. So in retrospects, here are 5 tips I’d like to share with you going into the weekend to start something amazing.
1. Be open to new ideas
My favourite ideas pitched at the last Startup Weekend where those that were thought up during the weekend, so be open to coming up with and listening to people with new ideas. It’s definitely easier to have a new team excited about an idea they all chipped in to form than another just one person brings to the table with an attempt to get a buy-in from others.
2. Be friendly and get talking
Smile. Walk around. Say hello to people. The weekend is meant for more of collaboration than competition. Get talking to other people, volunteers, organizers, the photographer, and the chef. They may just be the future customers that will validate your idea or give that priceless feedback. Everything to gain and nothing to lose by being friendly.
3. Leave the building
I cannot stress this enough. Get out of the building and get talking to prospective customers. If possible go ahead and make a sale. One thing you want to get out of Startup Weekend is to validate your idea and business model. So spend a good time having customer interviews. Call people up for feedback and cold call to make sale if need be.
4. Network with mentors
These folks are industry leaders, technical superstars, business gurus, growth hackers, and more – and they will be hanging out with you all weekend. Use them! I remember last Startup Weekend when just a 2 minute conversation with a mentor cracked open the code on our business model.
5. And most importantly, have fun
No matter what happens this weekend. Don’t forget to have fun. Work hard but play harder. Don’t go running home and missing out on after-drinks. Take a break, ride the seesaw and try the gaming console. There’s also a #swdubselfie competition so don’t miss out on that.
That’s all for now. Follow @swdub on twitter and vine and share your experience with the hashtag #swdub.