Some wed night thoughts on investor “value add”:

1) At the end of the day, money is a commodity. That mere fact should make every vc shudder.

It is amazing how many ppl (incl myself) clamor to get into a commodity business!

Today's thread is a continuation on *how* you generate momentum in fundraising.

Here's a rough conversation I had with a founder (called 'C') over the course of days a few months back.

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1) C: I'm having trouble raising. VC A and VC B are taking so long to get back to me.

Me: Oh, when did you meet w/ them?

C: 3 weeks ago.

2) Me: Oh, are you mtg w/ anyone else?

C: No, I got busy working. I had all these sales calls to make.

Me: That's the problem - there isn't a reason for them to move quickly. There's no investor at the table.

3) C: But I have all these sales calls to make!

Me: I really don't have a great answer for you here. This is probably the hardest part about fundraising - juggling your actual job w/ your fundraising job, which is full-time too.

4) Me: You need to hand off your sales calls to your co-founder. And then you can do mtgs back to back.

C: Ok...

[some time passes]

C: Ok - I'm ready.

Me: How much do you want to raise and what are you using the money for?

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

Fun!

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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.

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.

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.

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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"

1/ Today I prepared for talking about common mistakes startups make (founding -> growth stages) by writing it in tweet form. I ramble too much when public speaking and hoped it would make the core ideas clearer in my mind and more concise. Think it worked. Here are the tweets

2/ Earliest mistake is picking the wrong co-founders. You have to be value-aligned (don’t have conflicting personal goals) and respect each other. With both of these, any other differences are irrelevant - can be worked out. Without them everything else you do is irrelevant.

3/ If you launch, next mistake is chasing top-line vanity metrics (sign ups) instead of growing the number of users who *really* love you. @paultoo advice - better to have 10 users who depend on you than 100 who a lukewarm. This requires patience and killing your ego.

4/ If you raise a seed round, it’s tempting to ignore retention. With money, there are always ways to grow top-line (buy ads, launch a new location). Strong fundraisers can do this for multiple rounds (though investors are more savvy to this now). Eventually, the bottom falls out

5/ Once you’re growing without churn, you find you have a diverse set of customers and can’t make them all happy -it’s easy to fail trying. Commit to a long term strategy for going public and build for the users who get you there, even if you lose the others. You have to focus.

It has been super tough to end up here but: Today, I have finally signed an offer for my next gig. TBA, still, but finally after such a tough 2018, honestly!

I learned so much about interviewing and negotiating globally that I thought I'd write a master-thread on my thoughts:

First of all: Everybody always thinks that there are "stars" in this industry who can go anywhere and get a job in an instant - some people would count me as one of them.
Let me tell you: It's a myth. Star or not, companies differ WILDLY in their needs, culture and requirements.

There is no guarantee for a job, ever. There is no holy grail level you can reach that will make you into this being that can pick and choose wherever they want to go. In the end, you need to find the exact right fit for both you and the company. That's a marathon, not a sprint.

Further: Interviewing in this industry takes FUCKING FOREVER. At every place I had interviews with I got at least to mid-tier stages and that always means at least 2-3 interviews. 3-5 interviews before an offer is STANDARD. Jup. I know. It's a lot.

With some companies I have been in on and off discussions for literal months. 2-6 months to get an offer ANYWHERE is completely normal. If you're looking for a job, you need to be really patient. I know that's super tough, especially when you desperately need a new job.

We found 6 startups that are growing way faster than everyone else.

We figured out their unconventional growth tactics.

This thread walks you through how to repeat them for yourself.

1/6 Experiment with timing.

Here's a clever example:

@brooklinen "leaked" a time-bounded discount and had one of their *best* revenue days of the year.

Great startups experiment not only with copy/creative, but also framing.

2/6 Get people to FEEL the problem your startup solves.

Here’s how Muzzle (notification hiding tool) uses their site to visualize the problem:

• Shows cringey notifications
• Makes them super vulgar
• Points out how Muzzle puts an end to this during Zoom calls

3/6 Poach potential customers from competitors:

• Create landing pages that compare you against them
• Address customers' biggest objections
• Show your product in action

Then, when people search for you versus your competitors, you'll show up on the Google results page.

4/6 Improve your attribution.

It's often unclear what drives a purchase.

So try this:

• Add a post-purchase survey asking customers how they found you
• Remove friction—limit choices. Make it super easy to quickly select the right one

Attribution helps you double down.