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.

Winning with Winners

A new post from CBInsights about the 'Recycling of VC Dollars' sparked me into action to pen a blog post I've been meeting to write..... 

Silicon Valley is a false economy. Many companies have an interesting idea, raise capital, launch product, get buzz, get early customers, and then fizzle like a flat soda that’s being sitting in the refrigerator for months. Why is this?

Because many of their customers are also startups themselves. They feed off each other. Startups as customers use their VC capital to buy the latest and greatest software packages, helping create website 'logo' noise for each other. In reality many of the products don't solve real needs, don't apply to a broad base of the market, and promote wrong business decision behaviors. Most of these companies fail with short-term winning.

It is critical from the early stages of product launch that a company finds real, linchpin customers that will be customers for a lifetime. Build your customer base with real companies. Your first customers should be your longest tenure customers in the years to come. 

This was also one of the points made in my favorite product management book called 'Inspired - How To Create Products Customers Love' by Marty Cagan. (I'm sure I'll reference it more).

Win with winners. Don't fall into the Silicon Valley trap of shift VC money from one startup to another in something called ‘revenue’. It's really a false economy.