Initial Investor Lens

Investor Lens.jpeg

Not all good businesses are fundable. Just because an investor passes on making an investment into a startup doesn't mean the company is not successful and/or going to be successful. What is means is that from the investor's lens:

  1. They have better opportunities in the pipeline
  2. They don't believe a 'venture' acceptable return is achievable
  3. They can't add value

Entrepreneurs often get this confused. There is a big difference between a startup and a 'VC startup'. Frequently I'm asked what I look for in my initial meeting with a startup to determine if it is fundable. Here they are:

  • Is the idea credible? Does it pass the laugh test? If I know a little about the industry I use that to test their assumptions? If I don't, I ask a lot of questions to learn more.
  • Is the team credible? What experience do they have in the industry? Are they entrepreneurs and/or have that spirit? Do I like them? How do they handle themselves?
  • Is there an opportunity? Are they asking for investment that fits my profile? Could I attract other investors to it as well? For example a company saying they need $5M for TV ads with v1 product does not meet that criteria :)

In summary, is there a kickass team with big ideas that can generate extraordinary value.

Usually after the first meeting I like to step away, gather my thoughts, and research the idea to determine my next steps. I don't like to make a snap judgment, especially because I know I usually can find the positives in the deal. That is, I don't want give false guidance from an emotional opinion. Now there are times I really like everyone and know exactly what I want to do next. Also there are times I know it just isn't a fit and I say that. But most case, I like to step away before deciding on the opportunity.

This is my investor lens.

2 days in San Francisco

Some quick observations after being in San Francisco for two days:

  • People lives their lives through apps. If the product and service isn't purchased or delivered via an app, people don't use it.
  • Work is life. People only stop working for short periods of times and everyone is always connected.
  • Socializing and being friends with co-workers is expected. Also it's your most valuable network.
  • It's impossible to escape technology. Its everywhere.
  • The first question anyone will ask you is "What do you do"
  • Things move really fast. I mean real fast.  Time is measured in hours and days, never weeks and months. The world has changed by then.
  • Everyone is an investor in something. It's your badge of honor and status.
  • Fear of Missing Out (FOMO) drives investments
  • Often heard: investor, VC, funded, closed, unicorn, equity, valuation, growth
  • Never heard: consultant, mentor, government, failure, sweat equity, profitability
  • Haven't seen a suit expect people in pink jackets
  • Messenger bag or backpack
  • Minimum $10 lunches
  • Finally the weather is fantastic!

Demo Day

Last week I attended Demo Day for the Batch #3 companies at MSFT Accelerator in Berlin. It was a fun, well run event and all the companies absolutely rocked their presentations. (video). Every CEO gave a quality keynote presentation, each one had a specific theme that represented the personally of the company. The slides (more like pictures) were so in sync with the entrepreneurs that it felt like you were watching a movie. Clearly a lot of effort and preparation went into the event and it showed. In addition I got to spend time with Portadi, a company in the Bolt Capital family, for an update on the business. 

The frequent question asked during the after party was which company was the most attractive. Even given my bias of Portadi, especially because I've been an addicted user of their product for about a year now, for me it was all of the startups. The CEOs exuded confidence. The businesses claimed to have working product with real customers in massive markets. An investor's initial screening criteria were all checked. Based on the night, it's hard to say that any one was not worthy of an investment. Here are all the companies: 

tripdeltaWunderAgentSkooveQDatumQuantifiedCodeTandemployIPlytics and Portadi.

There is no doubt that each company will have follow up meetings with potential investors. I wonder what they will find now that the lights are gone and they peel back the layers of the onion? 

A batch 3 mashup from the Microsoft Ventures Accelerator in Berlin.

US gobbles up Europe

As a continuation on the IPO report from E&Y, the team @PitchbookData produced an interesting article about how US companies are eating up many of the attractive European companies. In fact there is "more cross-border M&A activity that the rest of the continent combined." US Companies have already spent around $70B acquiring European companies, putting 2015 well on track to meet and potentially exceed the past two years. It will be interesting to watch what occurs in the 2nd half of 2015, especially in terms of dollar strength and PE valuations. Will the strong trends continue?

Source: PitchBook Data

Source: PitchBook Data

Time's Up

The Rhein-Neckar Technology Ventures hosted their annual startup pitch event last week. Twenty passionate entrepreneurs presented their products to VCs and angel investors. These speed-dating sessions are great for entrepreneurs. It forces the pitches to be focused and on-point, which is actually no different than a standard face-to-face meeting with an investor. Five advice tips:

Tip 1: Get to the Point. 

Make your first sentence great, otherwise it's over. Most investors will mentally shut out your company if they don't immediately find it compelling. Of course they will want to learn more and ask questions, but you will not be memorable and nor will you get a follow up meeting.

Tip 2: Be patient.

You are going to get a lot of rapid fire questions. Some questions might not make sense, given the investor knows very little about your company. But based on your elevator pitch, many of the questions will be formulated on past experiences or other companies they know about. Do your best to 'translate' the question as it relates to your business when answering it. Don't get frustrated.

Tip 3: Listen to Advice.

But don't follow it. Listen and learn, you will be in front of people with experiences but following advice from every investors will have you bouncing around like a ping pong ball. Gather your thoughts after the event, evaluate the collective feedback and determine what advice is important for your business.

Tip 4: Use case.

No I'm not referring to slides of a pitch deck, I referring to a product demo or a simple graphic that clearly explains the value of the product. But most importantly, highlight the product in the most compelling use case. I'm often shocked at how many entrepreneurs don't do this. They talk about product features and specs, but completely ignore the real world example of why is the product needed. At the end of the day if no one uses and finds value in the product then the company will not succeed.

Tip 5: Personal Touch. 

Investors want passionate people that are truly committed to the business. Highlight how the product impacts you personally: it's an obsession for you. You had the problem and found no solution. It's a dream. Whatever it is, bring out a bit of you into the pitch.

In reality, the odds are stacked against the entrepreneurs and most if not all won't get funded. Many will get follow up meetings, but my guess is for advice, consulting and other work for equity scenarios (more on this soon). But to all the entrepreneurs: Practice makes perfect...Keep on pitching before your times up.