Most Popular
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Where's the future for FourSquare?
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Audience is growing large. They need to continue to innovate on the game mechanics beyond “check ins” and build deeper, more meaningful relationships with merchants.
For this stage in the game – they’ve executed beautifully.
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Mark - you've mentioned the importance of founders building relationships with potential investors - but how do you do that as a founder with no connections? How can I ask investors to meet with me when I'm not raising?
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Start by getting to know other early-stage startup companies. Earn their trust & respect. Over time they’ll intro you to their investors. Ditto lawyers.
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How do you think entrepreneurs should balance networking/marketing with head-down product development and iterations?
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Depends on phase of company. But no entrepreneur should be purely heads down. You always need to be out – meeting potential future employees – building a group of tech advisors to bounce questions off of – meeting future investors – talking with potential customers – understanding what others are doing in the market
That’s why founders get no sleep.
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Julian Waters , communico: I don't have an exit plan. Love the idea of building a company that endures, but also expect this might change over time. Do I need an exit plan before talking to angels or VC's?
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People have widely different views on this topic. Mine is … investors will debate the following when you leave their office – did we love the team? – did we love the product?
If yes, – how big can the market be? – who would buy this thing? or can it be big enough to IPO one day?
They can say otherwise but nearly every investor discusses. My view – don’t leave it up to their pure imagination. Plant positive ideas in their brains.
Good luck!
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Should an entrepreneur hold back any part of the strategy/product when pitching? How to know whether you should approach angel investors versus VC's? What should an entrepreneur be cautious about when signing term sheet for seed round?
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Oh, boy. That is really way too many questions wrapped in one and questions for which there aren’t short answers. But I’ll try to help.
Hold back? Naw. I wouldn’t. Ideas are cheap. They’ve heard it all. BELIEVE me. Every “proprietary” idea you have is floating around already. Execution is everything. That said, don’t meet too many people because the more people you talk to the more your ideas will find there way into other people’s minds.
Cautious in term sheets – watch this video. I covered it extensively. Most it’s price, liquidation preferences, board control, voting thresholds http://www.bothsidesofthetable.com/2010/07/22/want-to-know-how-vcs-calculate-valuation-differently-from-founders/
Covered all that here. See top tabs at top on angels and VCs http://www.bothsidesofthetable.com/
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Is it possible for a tech entrepreneur to create something that is the next Facebook?
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Of course! FB is 5 years old. Before that people said Google couldn’t be unseated. Before that AOL was a monopolist – laughable now. Before that Microsoft controlled everything.
Dream big.
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Top 5 tips for pitching VCs?
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Already written extensively, see: http://www.bothsidesofthetable.com/pitching-a-vc/
But …. 1. Need a great team 2. Need to solve a problem 3. Need a big market opportunity 4. Need to show how you can differentiate from what else is out there 5. Need to show over time that you do what you’ll say you’re going to do. Exceed expectations. Show progress in the business. People invest in momentum.
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@havasd from Primal Skill again : Does a VC even look at a company whit out sales ?
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Yes, most early-stage, seed deals have little or no sales.
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We're a small startup building a consumer facing internet product, we don't have many angel or VC connections, how far do we need to get our product before we approach angels or VCs (since they have no reference for us being bright other than what our product looks like)?
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I’m a big believer in building VC relationships early. Mostly investors are putting money behind teams and concepts that they see develop and evolve over time. The earlier you get there to build that rapport the better. But make sure that when you see them you have enough of an idea baked so that you don’t sound flaky. Once you set a poor expectation it is hard to recover from.
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How can someone get a meeting with you?
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We're launching a new service and are struggling with pricing - any insight on how to determine how much to charge?
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I think Paul Graham said it best. As much as you can where customers complain but still pay ;–) No easy answer other than to market test and compare with other options available on the market and your positioning (up stream product to charge more versus cheap option in the market).
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Enjoyed when you were joking around with the Meebo guy about being in Skull & Bones (on the most recent episode of TWIVC), cracked me up. What advice would you give 20somethings that are a part of a startup?
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Ha. Yeah, was just having fun ;–)
20somethings … learn. play lots of roles – even ones out of your comfort zone. ask to do “20% time” on sales, marketing, product development, customers service. seek to understand the business rationale of your company. most people never really probe. they just trust that somebody has figured it out. no matter what level in a company I’d want to know. Basically, be curious. What you learn now will help you later in your career when it is harder to bop around.
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What's the biggest mistake that VCs make when evaluating potential investments?
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Getting too emotionally tied to a deal, rushing to invest, not understanding the space and over paying. To name a few.
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What's a reasonable salary for the startup founder after angel round and series A? How does the number affect if a founder is young and single vs. in mid 30's with kids?
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Great question!
Obviously it depends on location, equity ownership, age, etc. Harvard has a great study on this that you can publicly access. I don’t have the link – sorry.
These are not my “official numbers” or what I endorse. Just gut feel to help.
For SF, LA, NY type locations:
Young CEO on large equity with $0-5m in sales … probably $80-$120k base. Mature CEO (with kids, etc.) … probably $125-$175k.
Non CEO, but co-founder, senior person – salary pretty similar.
Mature CTO, CMO, VP Sales, VP Product that joins … often has a higher salary than founders but lower equity … obviously.
As company matures you can see salaries in the $180-250k range. Seldom higher. Mostly you then see a shift to variable compensation.
Hope that helps.
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Josh Mullineaux from Highlighter.com a TechStars Seattle company... Hi Mark, how important is a company's name/domain name?
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Very.
Don’t choose a name for which you don’t own the URL. People do this all the time. Stupid. A derivative of the name is not good enough.
Try not to choose a name that “paints you into a corner.” If you call yourself TweetName then what are you going to do when you need to be multi-stream or pivot. A famous example is Salesforce.com. They got away with it because they raised tons of cash and were successful. That said, they would be much better off with a more generic name like “Amazon” where they can extend the brand into whatever they want / need to.
Do yourself a favor and do a simple trademark search. If well trademarked in your exact field (e.g. software, tech) then be careful. But don’t let lawyers scare you if trademarked in a different way and in a different industry otherwise you’ll never pick a name.
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Say your sole tech guy isn't executing and is instead splitting their focus to more business related activities. What would you advise?
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Get a lawyer. If an option, divorce early.
See: http://www.bothsidesofthetable.com/2009/08/18/founders-ownership-and-stock-options/ and: http://www.bothsidesofthetable.com/2009/08/17/most-common-early-start-up-mistakes/
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What are the biggest benefits you get from blogging on Both Sides of the Table?
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I enjoy the creative process. It makes me feel more like an entrepreneur because I get to do stuff rather than analyze stuff. So if I didn’t feel that way I wouldn’t do it.
It helps with deal flow both because entrepreneurs can build relationships with me through comments and because other investors know me better. Not everybody will love me. Those that don’t can opt not to work with me. Those that do pretty much know EXACTLY what I’m like because I lay it all out there on my blog. I wouldn’t want to invest in a great entrepreneur where we didn’t have good chemistry. So better that we both know up front.
Also, I get to learn what people think by reading the comments. People change my views. I LOVE the one-to-many format. By the way, my blog is just and extension of the 1-on-1 debates I have in-person. Maybe I filter 15% but barely.
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You're a VC and angel investor - can you tell me you approach each style of investing differently?
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Yes.
Angel: – Invest small amounts of money & very, very early. I’m price sensitive – Invest in companies with very low burn rates.
– Invest in companies that are not planning to raise lots of money. I don’t want my money to get crushed. – Mostly I invest to help first-time entrepreneurs that I like and want to help – I prefer not to be an angel investor. I do it in the true sense of the word – to help.VC: – Invest in really big ideas – Invest in teams that want to build big business – Invest in companies that IF they start to become really successful will want to sieze that opportunity, which may mean raising larger sums of money to differentiate from competition.
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What mistakes should entrepreneurs be cautious of making when pitching investors?
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I cover much of this on my blog here: http://www.bothsidesofthetable.com/pitching-a-vc/
But quick summary: – be open & transparent – don’t do all the talking. the best pitches are discussions / debates and not “pitches” (there is a whole post on this on my blog) – show more than tell (e.g. demos are hugely important) – know your market intimately – know your competition – know what problem you’re trying to solve – make sure you can explain why this is a big market opportunity. That’s the number one thing that kills deal momentum – know the history of what has been tried in your category – know the investor you’re pitching
Those are all traps.
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When you created your first "major hit" companies, were you motivated by the opportunity or the money?
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In my first company I was all about the passion of building something big and meaningful. We were approached early on about selling for $150 million and we said “no” because we wanted to change the world. I was 31 and single.
When my second company came along I was 37 and had two kids. I still wanted to change the world but when a buyer came knocking on my door I was willing to sell because it changed the trajectory of my life and I always assumed my next one would be the big, change-the-world.
I decided instead to become a VC and help young companies achieve their dreams and hopefully we can change the world together.
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Which is more important? Being passionate about a business or having the idea and the means to getting it executed? (The latter person is more aware of opportunities vs creating a business because of their passion.)
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Seems like slightly a false choice to me if I’m honest. First, you should never go into a startup business unless you’re passionate about the topic. I made that mistake in my first company and paid for it for 6 years. But you must also have the ability to execute at world class. I think the “idea” doesn’t need to be fully refined as long as you directionally know that there is value in what you are doing.
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