Using the power of Google Analytics, it’s easy for me to see which Startable blog posts were the most read in 2009. Keep in mind that I’m merely looking at the number of views, so stuff posted earlier in the year has a distinct advantage of making it to the top.
10. The hidden cost of down rounds – the antidilution provision. When venture backed companies’ values drop, the pain is not felt evenly amongst the shareholders. With venture backed companies’ valuations falling like rocks due to the financial turmoil and bad-economy-induced-missed projections, I’m not surprised that this post got a lot of traction.
9. 4 Ways to generate business ideas. Prasad’s post on idea generation and ways to come up with innovative businesses and solutions still attracts good traffic to Startable.
8. The Entrepreneur in Residence. The first in a three part series explaining what an entrepreneur in residence does at a venture capital firm. The follow up posts talk about how to deal with an EIR and how to meet with one. I think this post will continue to get good traffic; it is actually the number one search term driving traffic to Startable.
7. MBAs and Startups. Right when I was fresh from leaving venture capital and starting actually doing the entrepreneurial thing, I responded to a Dharmesh Shah post on 10 things MBA school won’t teach you. Now that I’ve been a “real” entrepreneur for the past 6 months, I agree with what I wrote. This post also had a bit of a TechCrunch boost.
6. Early stage venture capital valuations. Right after I left venture capital I felt that I could reveal the truth (as I saw it) on how VCs value startups. VCs have a target ownership, and the more you raise the higher valuation you startup will get. I continue to stand by this.
5. So you want to be a junior VC. My advice to someone who emailed me asking for tips on interviewing for a non-partner position at a venture capital fund.
4. Angel groups are professionalizing and I’m not sure VCs realize it. I was pretty impressed after attending a meeting of the Northeast ACA (Angel Capital Association.) This isn’t a meeting most venture capitalists get to attend, and I was pretty shocked at the level of sophistication. Angel groups are really getting good. Somehow this post got a lot of stumbleupon love.
3. The venture capital investment memo. Since I worked at a few funds, I thought it would be fun to compile the “average” investment memo put together during the investment process at a venture firm. I get good monthly search traffic to this post.
2. Leaving venture capital. Well, this is when I officially announced I was leaving Atlas Venture. I guess people wanted to read about it!
1. It’s not me it’s you, the real reason many startups can’t raise venture capital. Many, many startups are rejected by venture capitalists for the simple reason that the VC doesn’t have confidence in the founder. However, this is rarely communicated. I list some tips that the founder can use to tell if they are the problem.
Wow, so I’ve written a lot this year. Hopefully I’ll continue to have some good content going forward. I am always available over email or twitter, so don’t feel bad reaching out.
Happy New Years!!
Charlie O’Donnell has a great post on getting momentum in a seed financing round. He is talking about momentum, but an understated undercurrent is how to get a higher valuation. I’d like to elaborate on one of his points, which is “understanding the social graph of the investors.” Charlie’s point is a great one – that if you can get a group of investors who talk with each other (and invest with each other) to talk about your company then you dramatically increase the chances of closing a deal with them. Thus, he recommends focusing and lighting a fire under one of these groups and using that to push toward a close. He is 100% correct.
However, I’d like to point out that this strategy does not maximize the chances of a higher valuation. I’ve found that angel investors who regularly invest with each other tend not to like to compete with each other – instead they like to co-invest with each other. While this is great if you can get things going, since you are likely able to raise enough capital to hit your fund raising target, it does not help you create an auction type environment where you get a higher valuation. As I’ve said before:
Once one group (an angel group) sets a pre-money valuation I don’t think the other angel groups are going to get into an auction type-process. These groups need each other to fill in bigger financing rounds. One group can’t outbid another aggressively, or they will not be able to find enough capital to meet most startup’s financing needs. A startup can get different syndicates of venture capitalists in a bidding war; I don’t know if this is as easily possible in the angel financing world. It may be a better idea to try to pit a VC against the angel groups if you are really valuation sensitive.
(That quote came from my post on how angel groups are professionalizing)
So, I will moderately disagree with Charlie’s last point of not pitching in too many places. If you are going to get a decent valuation, you probably need a couple of different groups interested – groups that don’t naturally invest together or information share with each other.
Last summer I was lucky enough to be an advisor to Boston TechStars. It was an awesome experience, and I highly recommend the upcoming Spring session. Applications are due January 11th; you can apply on the TechStars web site.
I’m not affiliated with TechStars at this moment, and I want to make it very clear that I have absolutely no involvement with the application screening process. However, I do have some opinions on what made some of the Boston companies successful, and I have a strong suspicion that the screening process is designed to bring in a certain type of entrepreneur(s). By a “certain type” I mean someone who will get a ton out of the program, engage with the mentors and create something really cool. I also happened to have been around Shawn, David and Brad when they were talking to the Boston mentors about what they look for when picking entrepreneurs. So, I’m no expert, but…
Here are my opinions on some of the characteristics TechStars is looking for:
You need one, preferably two plus rockstar developers. You are going to be creating something from scratch over the course of a few months. Whatever you are going to make would likely take a big corporation’s tech department a year or more to build. But you are going to have a working demo and hopefully customers in just a month or two. So you better be pretty awesome in the technical department.
How you prove it: Have real, working demos or alphas that blow their socks off. Really impress them. Do something totally new with a piece of technology, even if it is not related to what you want your company to do. Check out what Brad Feld says about why he liked the founders of RedLaser.
Ability to accept criticism
If you are accepted to the program you are going to be exposed to some of the most successful technology executives in the Boston area. These are people who have walked the walk and who are involved with the program because they want to provide mentorship. Being provided mentorship means you can accept criticism and be flexible in shaping your vision.
How you prove it: This may be one of the hardest things to prove in the application. But other entrepreneurs have done it, so I know it’s possible.
Have a business model
Understand how your idea will make money. This means you understand how customers currently solve the itch you are going to scratch. Is the way you want to make money consistent with their willingness to pay? Check out David’s post on the business models from previous TechStars companies.
How you prove this: Make it clear you understand what customers already pay to solve the problem; who the competition is and how much money they make selling a solution. Look for similar business ideas and see how those companies are monetizing. The way your company actually makes money in the future can be different, but you need to prove that you are thoughtful and that you are more than just an awesome developer – you are an awesome developer with some business savvy.
When you raise venture capital, you try to raise enough so that you can hit critical value creation milestones. In TechStars, you’ve got three months of reasonable funding, free office space and dry humor provided by Shawn. What the heck are you going to accomplish with that? You had better be able to achieve some real milestones by the middle, end and a few months post program. Know what the metrics are that show you’ve created value. I don’t know what your business is, but if it’s anything like the other TechStars companies I saw perform well then you will want to have 1) a working product (even if it’s a minimally viable one) and 2) highly visible customer traction.
How you prove this: Have an aggressive developmental timeline that you can actually hit. And, see my next point:
Hit goals during the application process
I remember Shawn saying “we admitted these guys because look what they did during the application process.” The company he was referring to launched product, on the schedule the proposed, in between the time they applied and were accepted. Set goals on development (or marketing) milestones that will occur between January 11 and Feb 1 when acceptees are notified.
How you prove this: You do it! You say, we are going to launch our iPhone app in three weeks and you do it. You say we are going to have the private alpha ready on January 20th and you get it out.
Great interview with Don Dodge, tech luminary who recently joined Google from Microsoft. Don was technology ambassador for Microsoft and is now in a similar position at Google. Don has a very unique view into both companies strategies, technologies and cultures. Some of the best quotes:
One of Google’s biggest challenges: “Another challenge is to earn a reputation for communicating clearly with developers and partners, providing them the support they need, and being as clear as possible about our product road map. ”
On how Google is prioritizing its efforts vs Microsoft: “All the exciting new applications are running in the browser, with application code in the cloud and the cell phone as the platform… Microsoft has product offerings in each of these areas, but they weren’t the high-priority programs… At Google, Chrome (browser), Google App Engine and Google Apps (cloud), and Android (mobile) are top priorities…”
On the state of MSFT: “I think Microsoft today is a lot like IBM was in 1985.”
On the cloud: “It all comes down to your application needs, workloads and design architecture. Amazon, Google and Microsoft are all solid choices.”
It’s a great interview; check it out.
It’s great news that Laura Fitton’s oneForty has received venture funding, in Boston, by Flybridge Capital. I’ve blogged about oneForty being one of the most exciting companies coming out of TechStars Boston this past summer, and it is great news for the local New England internet scene that oneForty has been funded by a local firm.
I had a bad feeling that oneForty would move West, as Laura had good angel funding backers from the SF area. She also was working closely with a web design firm base in SF. Of course, the major thing that had me scared she’s leave Boston was the recent ZenDesk move – cool company leaves Boston after it gets funding from a West Coast VC. But Boston was in luck! Jeff Bussgang of Flybridge had the cojones to step up and keep this cool company in New England. Good luck with the investment Jeff and good luck to Laura as you grow the business! (Also, congrats on recruiting Sachin Agarwal to the team and bringing a talented internet entrepreneur to the area from Chicago.)