BC STARTUP
Saved by @SteveeRogerr

Last week, I wrote a thread about generating momentum for startups.

Today's thread is on how emerging fund managers can generate momentum for their fund.

Whatever you do, momentum is so impt to get ppl onboard -- for hiring, for sales, for fundraising.

Read on >>

 1) First, why does momentum matter?

Think about it from the "buyer's perspective" -- it is almost ALWAYS better to wait and get more information if you can get the same deal. Right?

More info on a potential investment. More info on a new product. Etc.
2) There are few situations where it's impt to be a first mover.

If you're a product buyer, it could be you have a dire situation at your company that alternatives can't handle.

But if you have a decent alternative (alternative product or alt investment), it's better to wait.
3) That means it's YOUR JOB to create momentum. Whether for fundraising, sales, or hiring.

So with that in mind, how do you generate momentum for fund fundraising?
4) In a prior tweet about generating momentum for startup fundraising, essentially I said to limit your supply (the amnt you are raising) in tranches AND to increase demand by packing in mtgs.

Unfort this doesn't quite work well for funds.
5) This is because when you are you trying to raise a $10m fund and have $0 committed, how do you get ppl to invest $100k or $1m checks?

Larger raises have this problem.
6) There is a technique that some ppl use that I don't think works well for EMs. And that is to charge fees to later investors -- essentially the equiv of raising the valuation on a later tranche.

However, most LPs would just walk away from a first time fund.
7) One of the things we did for @HustleFundVC was to increase the min commit which is the fund equiv of scarcity.

We will only take a limited # of small checks. Starting at $25k. Then $50k. Then $100k. Then $250k. Later $1m event.
8) I had a few ppl say they wanted to know how long we were raising for (and since the answer was months), they wanted to know if they could wait until a later close. And telling them yes, but the min check size was going to increase worked!
9) This is how we were able to get a number of smaller checks signed within a week.

We got small checks in. Then used that to build momentum for larger checks.
10) In addition, small check writers were incredibly helpful in doing intros which is the #1 thing that is impt for EMs. 🙏

@chudson gave me great advice for my fund 1 - "Don't run out of leads". One of the best ways to get leads is from ppl who are already invested.
11) Everyone, of course, would prefer bigger checks, but I'm so thankful to our small check writers for helping us get that momentum -- such an impt component to fundraising that most ppl overlook (whether for startups OR for funds).
12) As you can see here - this is what our @HustleFundVC Fund 1 fundraise looked like (see red line) -- most of the money was signed in the last few weeks of a 9 month raise!

Momentum is everything.
13) Aside for limiting the number of checks at smaller sizes, other ways to build momentum incl relentless updates on a scheduled cadence. Get ppl excited about the deals you are seeing / funding.

@ericbahn sends ours on the 1st of every month on the dot.
14) @MacConwell does a deal-breakdown w his LPs. Background of the founders. Why they will win? Why the biz is interesting?

Investors want to be part of something that is moving fwd, & updates that show you're doing this with or without them is a great way to show momentum.
15) Lastly, show momentum on OTHER THINGS that are impt to LPs. Angel LPs invest for all kinds of reasons - def ROI AND also to network w/ others, to learn new things, to get deal flow, to support founders, etc.

You won't have returns to show but you can move other things fwd.
16) Things we did on Fund 1 to move other things fwd incl doing social events (open to our LPs). We shared deal flow (still do). Etc.

So the sooner an LP commits, the sooner someone will be able to access all those other things which is a forcing fx for signing earlier.
17) One of my biggest learnings over the yrs - since this doesn't come naturally - to me is to now think in terms of forcing functions. How do you create urgency to overcome natural, logical reasons to wait for more information?

That's how to build momentum.

More from Elizabeth Yin

Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today I want to talk about the legal aspects of startups. How to set up? How to think about legal costs?

Fun!

Read on >>

1) Lawyers are expensive -- oof! A startup lawyer can cost you $300-$1k per HOUR! An associate paralegal may be slightly cheaper. But still pricey.

What do you need from a lawyer?

-company setup costs
-doc creation and review for financing rounds
-exit negotiation

2) For the purpose of this thread, we're just going to focus on setup costs, because this is where I see the most mistakes.

Once you get going, you may quickly realize you need a better lawyer - hah - and that generally helps w/ solving for financing rounds and exits

3) If you want to potentially raise money from VCs, you'll want to set up as a Delaware C Corp. If you don't ever want to raise from VCs, an LLC is fine.

Lots of ppl start out as an LLC because you can get tax benefits if you are not profitable.

4) But to me, if you know you want to raise VC money, it feels a bit penny wise / pound foolish, because you will need to spend $$ to convert your LLC to a Delaware C corp.
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
A thread on employee equity in early stage startups -- what are the compensation norms? What every early employee should ask? Some thoughts on whether the structure is fair.

Read on >>

1) First, there are NO NORMS! Hah. I have literally seen everything from giving early employees no equity to giving employee #1s near co-founder level of shares.

But what is more common than not?

2) In the Silicon Valley, if you're hiring your 1st employee, & you've raised NO $$ & are paying very little (e.g $0-$10k / yr or thereabouts), your first employee is basically a co-founder.

And the equity tranche for employee 1 should be closer to a co-founder level.

3) For ex, a friend of mine gave his employee #1 10% (vesting over 4 yrs of course) of the business. This employee was only getting his housing paid for. And this was 10 yrs ago, so it was during the bust.

4) On the flip side, if you have raised some $$ & are paying employee #1 near mkt rate, typically I see around here ppl get 1-5% (w/ vesting).

Caveat - near mkt rate doesn't mean compared to Google or FB salary rates. I mean compared to "normal big cos"
STARTUP
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Saturday thoughts on funding: Where it helps. Where it doesn't. And how it affects team, success, and PM fit.

This is just my $0.02 after looking reviewing 30k+ early stage startups personally and having led 350+ investments across 2 VC firms & as an angel.

Let's begin! >>

1) Money is great to have in building a startup (for the least dilution and pain possible) That's true and always will be true. 😆

But just like how money can't buy you happiness, it also can't buy you PM fit.

2) PM fit is the holy grail for software startups. (we're not talking biotech - if you have a cure to cancer, I guarantee you everyone wants it).

But for software startups, it's unclear if ppl want your product at your price pt.

3) If you don't find PM fit, in this day and age, you will be able to get some sales. Maybe even say $1m in sales (or more!) per year, and you can still make a living.

But having sales does not mean that you have a repeatable customer acquisition process that can be sustainable

4) As an aside, that is why we invest at pre-seed & don't care about startup traction, because I don't believe traction at the earliest stages suggest PM fit. Traction only shows that a founder can execute (& that's impt too) but there are other ways to assess execution earlier.
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Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Some gems from @MacConwell of @RarebreedVC in Clubhouse right now:

1) VCs are looking for startups that can get to $100m / yr in rev by yr 7-10.

VCs need this kind of return in order to produce great funds.

2) And so many companies won't get to this level - and that's not a bad thing - but then it means you should be thinking about trying to get going w company revenue since you can't count on VC backing.

3) someone asked about age and fundraising & do accelerators help?

Age doesn't matter. But just make sure no one is taking advantage of you. And as such, accelerators can help sometimes w that guidance.

4) Someone got a rejection because he had a teddy bear in his room (side note: what investor says that?!?)

Mac says he's been there and has heard that saltiness. But you're going to get a lot of nos. And you gain more leverage w more progress and traction. So just keeping going.
INTERNET
Elizabeth Yin
Elizabeth Yin
@dunkhippo33
Today's thread is on the affiliate business model. Many years ago, I used to be an affiliate marketer. If there is any way to get schooled in marketing, becoming an affiliate marketer is probably the best way.

What is affiliate marketing and why should you care?

Read on >>

1) Affiliate marketing is selling products or generating leads on behalf of other companies and getting paid a commission for those products.

2) Some notable examples you've seen before:

NerdWallet - you read their articles on best credit cards. You click on a link to one of those cards. You fill out an application. They get paid for delivering that lead to the cc company.

3) In https://t.co/kSfWS69ybp - same thing. Any of their financial products -- you fill out an application, and https://t.co/mCrBT43mOj gets paid for that.

But the affiliate revenue model applies beyond financial services products.

4) Wirecutter -- you see a neat product they review or talk about. You click through and buy.

Wirecutter gets a cut of that transaction.
STARTUP

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The clearest sign of finding product-market fit is feeling "pull" from the market.

But what does "pull" look like?

👇 Read on 👇

1/ Sign 1: A sudden inflection in organic growth

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Tinder: "Downloads started to skyrocket" – @badeen

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Carta: "I've been trying to get to your sales people for weeks!!! Why won't you take my money???" – @henrysward

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3/ Sign 3: Users flip from excited to upset

Datadog: "When we hit early product-market fit, our users switched from being excited at all the things our product could be to them to being upset about all the things it didn't do yet." – @oliveur

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(From my notes helping 400+ founders grow their startups.)

The smartest people I’ve met:

They retrain their minds to enjoy being wrong.

They get a dopamine hit when proven wrong because they’re excited to be closer to the truth. The truth is addictive.

In contrast, if you refuse to lose a debate, your brain keeps running old firmware.

I don’t know one highly effective person who isn’t strongly biased toward taking action.

They defer the stuff that doesn’t matter, and they always finish the stuff that does.

It's about rate of iteration and persistence, not brilliance.

The successful people I know have mastered delayed gratification:

They let themselves feel a dopamine hit when they do something that makes their future selves better.

They've learned to value their future self as much as their present self.

Success in life really appears to be two things:

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@Julian
My day job is growing startups.

I've worked with a few hundred by now.

Here's how to grow your podcast, newsletter, blog, YouTube, and Twitter.

Hope this helps! A thread:

Growth marketing, a timeline:

2015: "We need to go viral."

2017: "Well, we raised $25m of VC. Let's dump it on Facebook ads."

2021: "Wow. We should have been focusing on content and building a great product."

How to grow a podcast:

• Be YouTube-first; do video
• Split eps into 8min YouTube clips with SEO’d titles
• Get guests that are searched for on YouTube
• Consider not publishing bad eps
• Exchange eps with other shows
• Niche is fine, but be widely accessible

How to grow a YouTube channel:

• Describe the video's value in the first five seconds
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Here are 7 simple things that helped me build a 25K+ audience:

👋 Join +4,143 others in Growth Tribe Newsletter

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THREAD: Here are 10 insights I've learned over the last 5 years from cofounding and selling business.

On startups, investing, marketing, and career advice:

👇👇

"I learn more from speaking with others than reading" is complete nonsense.

The smartest people in the history of the world have distilled their life's work into a few hundred pages.

No, a 30 minute convo with your buddy won't teach you more.

The best businesses in the world expand their target market

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Champion customers and they will reward you

"Follow your passion" is complete complete crap.

People are passionate about things they are good at. Get really good at something, and you will become passionate at it.

Then you will make enough money to follow your original passion in your free time.

There is no industry in the world that is easier to get to an 8 figure exit than digital media.

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