Startup Advice

Fall is for Fundraising: 51 Tips from Danielle Morrill

Fallis forFundraising

If you’re like many entrepreneurs (including me) you’re about to start visiting VCs in an effort to raise capital before the holidays. Danielle Morrill tweeted 51 tips for you and I couldn’t help but respond to each one last night. Following the thread on twitter is almost impossible so I’m reposting the tips and my responses here:

Danielle: 1) Fundraising this fall? I have some unconventional tips for you to make your experience awesome.
Me: my unconventional responses to ‘fall fundraising’ to follow…

Danielle: 2) when visiting show up early not just to lower your stress but to peruse the awesome lobby book collection!
Me: regardless of your arrival time, your software better ‘eat the world’ if you plan to visit . Just sayin.

Danielle: 3) Sequoia is surprisingly difficult to find (perhaps an intelligence test?) so plan for extra time to get a parking spot.
Me: when visiting take the car from the across the street. They know where to drop you off.

Danielle: 4) have some downtime between meetings? The parking lot of DFJ/CRV has huge beautiful trees you can sit under, far from the buildings.
Me: I’d suggest working on your deck between meetings, it will get better if you listen to the feedback you get from VCs.

Danielle: 5) avoid the Sharon Heights Starbucks.
Me: I’d recommend the Santa Cruz Avenue in Menlo Park instead.

Danielle: 6) first time on Sand Hill road? check out some of the inspiring stuff nearby like Stanford campus and Computer History Museum.
Me: don’t worry about sightseeing on your first trip to San Hill Road, you’re going to be really busy pitching.

Danielle: 7) if you want a signed term sheet by the end of October start requesting meetings now.
Me: if you want a signed term sheet before the holidays you better start setting meetings the day after labor day.

Danielle: 8) Khosla you have to park in the garage underneath, it’s a tricky U-turn so plan a little extra time.
Me: if you’re driving your own car or renting one, you’re making a mistake. Take to see . Isn’t he an investor?

Danielle: 9) also Khosla has the most incredible garden outside the window with plants so big it’s like Alice in Wonderland.
Me: I’d suggest checking out ‘s tombstones instead, they’re far more impressive than his plants.

Danielle: 10) many VCs are in the same office park, can lead to awkward moments so just embrace it.
Me: and THANK GOD that so many VCs are willing to pay the highest rents in the Bay Area so we can save money on .

Danielle: 11) Accel is in downtown Palo Alto, so plan time before or after to get some macaroons on University Ave (in the downtime between meetings).
Me: btw hates me for some reason, so take that into account when trying to find their office downtown.

Danielle: 12) if they ask you to meet at The Battery you are the entertainment. Don’t do it.
Me: now if they ask you to meet them at the Cuckoo’s Nest Club instead, you should go:

Danielle: 13) early morning breakfasts at obscure spots are the real getting-to-know-you signal.
Me: or the early morning breakfast means they don’t want their partners to know they’re entertaining your hair-brained scheme.

Danielle: 14) unless you are the second coming of Zuck, pitch deck is absolutely required. It is 100x harder to raise A than seed.
Me: the pitch deck will get you a meeting, not a deal. Price of entry for Series A.

Danielle: 15) Ladies, skip the heels. A lot of investors like to do walking meetings, no need to suffer.
Me: completely disagree, the heels are a huge advantage, wear them with pride. No VC has ever asked me to take a walk.

Danielle: 16) understand pre-money vs. post-money, liquidation preference and other key terms. Read “Venture Deal” by e: I’d recommend reading by – I learned everythind I know from him.

Danielle: 17) people talk about 10 “brand name” VCs but you should plan to pitch 30+ firms. There are very good less visible investors.
Me: agree completely, pitch to the bottom 10 “generic name” VCs first. Get your story straight and then pitch the top 10 VCs.

Danielle: 18) it is 20 degrees hotter in the Valley than the City. If you don’t want to be a sweaty pig dress accordingly.
Me: and it is still 100 degrees in Dallas right now, so quit complaining about the temperature in Menlo Park. Geez!

Danielle: 19) ladies, it may look like the set of Mad Men but unless you normally wear dresses just stick with normal clothes and good hygiene.
Me: rent the runway ladies. Dresses are in and they are really comfortable. If I was Scottish I’d wear a kilt. 😉

Danielle: 20) you should know your numbers so deeply and your market so deeply that you could recite them if the slides don’t work, without looking.
Me: TOTALLY AGREE! You should prefer to tell your company’s story as if it was a real story – decks are for chumps. Know it all.

Danielle: 21) okay back to unconventional stuff… Don’t be rude to assistants or other staff EVER.
Me: TOTALLY AGREE. The assistants and staff order the lunches – be nice to them or feel their wrath!

Danielle: 22) save the “power play” shenanigans theater moves for the actual target.
Me: btw, the theater moves and power plays only work in the movies.

Danielle: 23) regarding power moves, investors know what you are doing and yes it will work on some… But huge turn off to others. Know your audience.
Me: unless you’ve raised millions before, don’t be too clever by half and try to play a power move. Be humble. Be yourself.

Danielle: 24) in B2B the best metrics do often win, if you’ve got them flaunt them!
Me: hell yes, lead with your best numbers, but don’t forget to know your cohorts… The best numbers won’t help without them.

Danielle: 25) you need a CRM or at least spreadsheet to keep track of your VC relationships. Kids names, hobbies, companies they’re proud of.
Me: Agreed. Know your target VC. Follow him on Twitter, LinkedIn and Quora. Engage. Engage. Engage.

Danielle: 26) once you start fundraising ban yourself from saying things like “I hate fundraising” til money is in the bank. You fucking love this.
Me: raising venture capital is fucking hard, you’re going to hate it. Own the fact that it sucks, but keep it to yourself.

Danielle: 27) the sandwiches in the Sharon Heights deli are killer.
Me: “Lunch? Aw, you gotta be kidding. Lunch is for wimps.” ~ Gordon Gekko.

Danielle: 28) if you’ll be leading the pitch have your cofounder drive so you can sing and dance to hype up music in the back seat cc: .
Me: again, don’t take your own car or rent one. Take a freaking .

Danielle: 29) from my cofounder “do your research beforehand and look who does deals in your space, only talk to people you want.
Me: Agreed. There are only three or four VCs that will even consider doing your deal. Make sure you’re ready.

Danielle: 30) general solicitation is not ready for prime time, don’t be trendy get a lead who will partner with you. Think of it like recruiting.
Me: amen.

Danielle: 31) if you raised $3M+ in seed money you are competing with Series A *and* Series B candidates.
Me: chumps raise $3M in seed. $1M should be the most you raise in seed. Trust me. Don’t skip steps along the way.

Danielle: 32) don’t overdo it on slide design, it’s like a house that’s been on the market too long and is over-staged.
Me: Don’t try too hard. Put a Keynote deck (not Prezi) together and call it a day (unless you’re raising money for Prezi).

Danielle: 33) ladies if you feel you were treated differently because you’re female note that but don’t let it consume you keep going and stay focused.
Me: Ladies, you WILL be treated differently. Trust me, being a man isn’t a cake walk either. Only 1-2% of companies raise VC.

Danielle: 34) at the end of the day, go home to your support network and share your thorns and roses (learned this from ‘s 3 boys).
Me: no one will understand what you’re going through, don’t bother trying to explain. Raising VC is fucking hard.

Danielle: 35) would be great if collaborative tweet storming was easier. remember that hing you showed me? Hurry up!!!
Me: BTW ‘s got real issues (i.e. look at their stock price) besides your need for a tweet storm feature. 😉

Danielle: 36) if you’re not used to living by your calendar this will be really annoying. build in lots of buffer time for travel, food, and bathroom!
Me: If you don’t have a PA you better start embracing Google’s Calendar. Raising money is fucking hard.

Danielle: 37) if you go to the Rosewood with a VC everyone will know you are fundraising in 5-7 minutes.
Me: if you go to the Rosewood, take time to get a massage. They have a great spa. Trust me.

Danielle: 38) same deal with Coupa Cafe, The Creamery, Small Foods, 21st Amendment, The Battery — only do it once you have 2 term sheets.
Me: RIP The Creamery. :(

Danielle: 39) don’t subtweet how it’s going — I’m sure this will be hard for me.
Me: that’s what she said…

Danielle: 40) ladies here are some examples of pitch appropriate attire (picture redacted, but it was pants).
Me: This could work too (picture redacted, but it was zuck in hoodie).

Danielle: 41) slacks, a silk button down, and loafers from are always a good choice.
Me: Or perhaps this one (picture redacted).

Danielle: 42) you only fail if you stop trying to raise, we flunked out in the A round the first time and had our backs.
Me: sometimes it makes sense to throw in the towel. Lifestyle businesses aren’t that bad.

Danielle: 43) the reasons we did not raise our A the first time became objections to overcome, we took a learning mindset and broke them down head on.
Me: it took me 99 meetings to find an investor for my first Series A. I changed my pitch 20 times until I figured it out.

Danielle: 44) make a playlist of music that makes you feel like a BOSS. Music you find yourself strutting to. Music that reveals your best self.
Me: don’t underestimate the value of silence. I have my best ideas when I’m totally in my own head.

Danielle: 45) leave it all on the court.
Me: I agree, reveal yourself completely. Tell the truth. Don’t exaggerate. Your authentic self will win.

Danielle: 46) discovering so many more female founders through favs of this tweetstorm, ladies keep fighting to raise don’t give up!!!
Me: I made a list of female entrepreneurs before it was cool, check it out:

Danielle: 47) raising seed funding is like being 15, I’d love to be that skinny but never actually want to go back to being that much of a n00b again.
Me: LOL just wait, you’ll be raising seed for your next deal before you know it.

Danielle: 48) lobby I love the most is because of all the IPO tombstones. Lots to look at on the walls + very unique origin story.
Me: REDACTED 😉

Danielle: 49) tweets are slowing because the conversation is so good! dozens of CEOs and VCs have chimed in to share their perspectives.
Me: or perhaps the wine was catching up…

Danielle: 50) for the full effect of this tweetstorm, you need the Interstellar soundtrack BLASTING all day.
Me: no comment.

Danielle: 51) this tweetstorm powered by Peach-Pear enjoyLaCroix
Me: uh huh… I’m sure that is what it was powered by… 

Why is it cheaper to hire developers in San Francisco than in Dallas?

download (1)You would assume that with a lower cost of living and lower taxes you’d be able to hire software developers in Dallas for less than you can hire them in San Francisco. Surprisingly, in my personal experience this just isn’t the case. I’ve had software developers on my payroll in both cities for years and without exception I’m able to recruit and retain developers in San Francisco for less money than I can in Dallas.

On a per capita basis, there are a lot more developers in San Francisco as the city attracts coders and hackers like flies. When we’ve advertised openings for iOS and Android developers we typically get three to four times the number of qualified applicants than we do in Dallas. The software developers that flock to the Bay Area tend to be young and single with fewer fixed costs like cars and houses. They’ve bought into the same startup dream that Larry Page, Sergey Brin, Steve Jobs, and Mark Zuckerberg have made so famous. They are motivated by building great things and potentially striking it rich. You can’t lure a great developer away from a project that he believes in for twenty or thirty thousand dollars in San Francisco, it just doesn’t happen.

On the other hand, great developers in Dallas tend to be harder to find. Don’t get me wrong, there are plenty to choose from, but you have to look harder and longer than you do in San Francisco. The developers we’ve hired in Dallas tend to be a little older, married with children with lots of fixed costs like cars and houses. Many of them have the same startup dreams as their San Francisco brethren, but these dreams are tempered by the realities of marriage, children and the fact that there just aren’t that many examples of software developers making a dent in the universe and striking it rich in Dallas (this is starting to change btw). Near term cash is far more important to someone who is considering whether or not they can afford the extra $25,000 a year in private school tuition, a new BMW or a new house in the suburbs. This fact, more than any other, has led to wage inflation here in the Dallas area.

Don’t misunderstand my post. I am not saying there aren’t great developers here in Dallas. Nor am I saying they are too expensive. I’m simply sharing an interesting reality that impacts startups here in Dallas.

Interesting Stats:

Median House Value:
Dallas = $150,000
San Francisco = $700,000

Venture Capital Investment:
Texas = $1B
California = $14B

Cost of Living (100 average):
Dallas = 96
San Francisco = 164

Salary of a .NET Developer:
Dallas = $100,000
San Francisco = $85,000

Telling MORE Stories at StartupMuse

Ten years ago I began blogging about startups and entrepreneurship. I floundered around for a while until I shared one particular story about my own startup experience. Several years earlier my first venture backed startup had gone bankrupt after I raised more than $30,000,000 and I decided to share the ugly details with my readers (all ten of them). Something about telling that story helped me move to the next level of my career. Eventually, hundreds of entrepreneurs reached out to me to share their own stories and suddenly I didn’t feel as alone. While I’m not a writer, I realized that my stories might help other entrepreneurs with their startups. 
Tell your story...

 

Earlier this year Robert and I bought a regional digital lifestyle brand called CultureMap and its been consuming almost all of my time (free or otherwise) so I haven’t had as much time to blog as I’d like. I was fortunate to be able to convince Lauren Zeien and Raquel Vincent to join StartupMuse as Editor at Large and Editor in Chief (respectively). I’ve asked them help me recruit other entrepreneurs in North Texas to tell their stories and share their experiences. If you’re interested in joining the effort please shoot me an email and I’ll make sure you’re included.

Barns and Startup Communities

Barns were the first startups.

Listening to Tedd Benson and Ken Burns on PBS this morning I learned that barn raising is a uniquely American endeavor. It is a democratic and communal event that for some reason never happened in Europe or Asia. Timber framing goes back over 2,000 years, but outside of the United States you don’t find timber framed structures that required a whole community to raise. You can watch the three part series here. It got me thinking about startup communities and how they’ve fostered the growth of entrepreneurial endeavors throughout the United States. Building a startup is a lot like raising a barn – it takes a community to make it happen. I don’t know about you, but I feel so blessed have such an amazing startup community here in Dallas. Now back to my regularly scheduled vacation.

How long should it take to build a mobile app?

Build Less...Unless you're a pharao.

If you are like me (and condolences if that is the case) you wake up everyday with an idea for a mobile app. The hardest part about designing and building mobile apps is determining what NOT to include in the release. The app should be compelling enough to entice users to download it and reviewers to review it, but not too complicated to require months or years of development prior to launch. Eric Ries calls this the MVP or Minimum Viable Product.

My goal is to launch an MVP within 45 days of design completion. This means that you’ve already completed the design specifications, the rough wireframes, the first and second design comp AND the final design. This can take months or weeks, but I’d argue that if you’re really working on it, ‘design completion’ should only take 30 days. In my experience it really takes four people to design and build an application in this 30 + 45 day timeframe.

Product Manager – Owner of the product vision
UI/UX Designer – The artist responsible for the look and feel
App Developer – The guy who builds the frontend that’s on your phone
Backend Developer – The guy who builds the backend on a remote server to make the app work

I’ve done it with more and less people, but I’d argue that any fewer resources and you compromise the timeline AND quality. Interestingly, having more people will similarly compromise the timeline and quality. You need enough other people (i.e. three) to help you get a quality product out the door, but too many people (i.e. four or more) and you risk having too many cooks in the kitchen. Two frontend developers will just get in each other’s way. Your app shouldn’t be so complicated that you could easily divide the work between two developers. The same goes with the backend. You can have two UI/UX people, but again, it will likely slow you down because you’ll have more choices. Sometimes choices lead to paralysis. Finally, if you start getting more than three other people involved you’ll need a project manager and then he’s going to want everyone to attend regular meetings to get everyone on the same page. You’ll argue about everything. Some of your folks will get frustrated and undermine the project. Stay small and lean as long as possible.

If you’re not an artist or developer AND you’ve got the idea for the mobile app you are the ‘product manager’. It is your responsibility to determine the who, what and why (even where). This is actually a full-time job. First, you’ll need to work with your designer to determine how to create a user interface that meets the what and why of your app. If you’re smart you’ll keep reducing your idea over and over until your app does ONE thing really well. If there are TWO things you think you can really do well don’t include the second on your first release. You’re going to learn a lot from your first release – mainly that launching a mobile app is a lot harder than you thought. Additionally, you’re going to want release that second big feature in your second release – i.e. to get reporters, reviewers and new users to get in the game. Don’t blow your wad in the first release.

We’re knee deep in the development effort of the CultureMap (CultureMap’s Mobile App) and everyday we’re removing features and functions from the first release. Interestingly, the app is getting better and better the more we cut out of it. The most important thing to start is to release your application quickly. Don’t build up expectations – just do one thing really well and ship. You can start working on the second release the moment the first release is in the market, but you might want to take a break and focus on quality assurance and customer feedback before adding something new to your app. You might want to read my post about NOT building a mobile app unless it includes three important things.

Raising Venture Capital is HARD!

tumblr_lscnqyt6zM1qz6pqio1_500Yesterday I wrote a post suggesting that the funding landscape in Dallas is favorable for startups. I contend in the post that it is easier than ever to raise seed capital in Dallas and that institutional funding is available to ALL viable startups here in North Texas. I was surprised to hear from several people who vehemently objected to my post. Based on the tone of some of the messages and comments I feel like some people took the post personally – i.e. that I was suggesting that there must be something wrong with THEM. Please don’t get me wrong, I know first hand that is VERY hard to raise capital for the highly speculative investments known as startups. Two things are true in the venture world – a) most entrepreneurs fail to raise venture capital and b) most entrepreneurs who do raise money fail. I don’t care where you live – convincing investors that you can take a dollar from them and return ten is almost impossible.

1% Success Rate. When I sought venture funding for my first startup, LayerOne, I talked to approximately 99 venture capital firms before I found one willing to make an investment. Most entrepreneurs I talk to who suggest that the funding landscape here in Dallas is bleak haven’t talked to 10 venture capital firms, much less a hundred. Be honest with yourself. If you aren’t willing to do what it takes to convince a venture capital firm to invest in your startup are you really willing to do what it takes to actually make your startup successful? Raising money is hard, but building a startup is infinitely harder.

Adapt. When I was out raising money for my first startup I actually listened more than I pitched. Every meeting helped me understand what I was doing right and what I was doing wrong. I’m a pretty hard headed guy, but I knew that the investors weren’t going to change. I had to change. I had to make my deal more attractive to the investors I was pitching. We reinvented the company in a rental car on I-280 on our way to Sand Hill Road just before a pitch and it worked. We raised $15M in our first round of outside capital because we listened.

Bad Deals. Seriously, your deal sucks. The market you’re going after is too small. There are too many competitors. There are huge technology risks. You’re an untested manager/leader. Your credit sucks. Your beard is to big. Your grades sucked. Your numbers are bullshit. Your logo is all wrong. You don’t listen to your mentors. You don’t listen to potential investors. You’re a trainwreck and you know it. Go get a job and quit your bellyaching. If you can’t take this abuse from me, how do you expect to deal with the rejection you’re going to be getting from the venture world? I was channeling some Glengarry Glen Ross there (watch it if you don’t know what I’m talking about).

The fact that you live in Dallas is not the problem – the real issue is that raising capital is REALLY hard regardless of your ZIP code. Here are some interesting statistics you might find helpful:

• Only 1350 Startups Get Funded Each Year (of that 800 raise seed).
• Less than 1% of Startups Seeking Funding Actually Raise Capital Each Year.

 

Raising Venture capital is fucking

Raising Startup Capital in Dallas

You can build your dreams here...

Earlier this week I got a call from a reporter asking about my thoughts on a recent report that startup funding was declining in Dallas. While I hadn’t read the report, lots of the articles I read in the local press about startup funding use data from the National Venture Capital Association and PricewaterhouseCoopers. The most interesting thing about the data is the fact that it isn’t accurate. In many cases local deals aren’t reflected in the numbers. In others the funding is attributed to the location of the investor and not the startup. For example, our first round was included in the NVCA numbers as an investment that occurred in San Francisco and not Dallas (some of our investors are located in San Francisco). In the aggregate the data is great for revealing trends such as the fact that last year saw the most venture investment since 2000, but it isn’t very good at giving you an understanding of the local funding scene. Here is my view of the current state of startup funding in Dallas:

Raising Seed Capital in Dallas ($25K to $1M)

Raising seed capital in Dallas between 2001 and 2010 was almost impossible. For years I encouraged early stage entrepreneurs to move to San Francisco primarily because of the easy access to seed capital. Over the past five years everything has changed. It has never been easier to raise early stage capital in Dallas. In fact, I would argue that it might be easier to raise seed capital in Dallas than it is in Silicon Valley today. There is a thirst for access to early stage deal flow here in Dallas like I’ve never seen before. If you’ve got a novel idea and the ability/skill to execute on it you WILL find investors eager to give you a chance here in Dallas. 

Raising Venture Capital in Dallas ($1M+)

Once a startup is ready to raise their first institutional round, regardless of location, the capital markets are wide open for companies with real traction. I can’t think of a single Dallas startup that was doing well who failed to raise a Series A. In the Valley, unlike Dallas, it is very possible to raise your Series A without any traction. I would argue that the fact that we don’t see ‘traction-less’ funding rounds here in Dallas is a blessing in disguise. Dumping a bunch of money into a struggling startup (we call them zombies) keeps a potentially great entrepreneur on the sidelines for years. Instead of pivoting or starting a new startup, a funded entrepreneur in a zombie is trapped. He can’t abandon his investors so he will keep ‘trying’ until the money runs dry. If you’re struggling to raise your Series A take a long hard look at your business and be honest with yourself – investors are dying to get into great deals – if they’re not dying to get in your deal it is likely that your deal sucks. Fix it or do something else, but don’t complain that their isn’t any money available for Dallas startups (primarily because it isn’t true). 

At the end of the day Dallas is a great place to start a business and raise a family. There is plenty of monetary and human capital. Now get busy.

Do you have a right to work for free?

downloadOver my career I’ve worked for several employers and in each case local, state and federal governments had a say in my wages and my benefits. Eventually most of my employers came to the conclusion I’d be happier working for myself or as Donald Trump would say, “You’re fired!” Since then I’ve started several companies and in each case I was fortunate because the government had no problem with me not getting paid. In fact, in EVERY case I worked for free to get my company started – sometimes for two years. More recently I’ve been hearing more and more rhetoric about how we need to protect ‘workers’ from themselves and that’s got me really concerned for entrepreneurs and small business owners. We need to allow them the chance to fail – just as we need to allow them the chance to succeed.

CJ0M4amUYAA2xR-This week Hillary Clinton railed against the sharing economy and the entrepreneurs and business owners who are taking advantage of the opportunity it provides. Uber has given millions of people across the globe the ability to start their own businesses. They can work when and where they want. They have total freedom. In fact 60% of them work for Uber’s competitors as well. This ‘ride-sharing’ economy that Uber pioneered is become more and more perfect in matching consumers and small business owners, but the biggest concern for politicians like Mrs. Clinton is the fact that these ‘workers’ fall outside of their control. Entrepreneurs and business owners can decide how much to charge and how many hours per day to work. Progressives fought for decades to have the ability to dictate the number of hours a worker could work and how much they could be paid. They will fight hard to preserve this power.

It makes me sick to hear venture capitalists like Fred Wilson (whom I have always had great respect for) take Mrs. Clinton’s side in this debate. What the New York Business Journal failed to mention was that Fred is an investor in two of Uber’s primary competitors. He’s been a longtime critic of Uber suggesting they demonstrated, “ruthless execution combined with total arrogance“. If politicians had their way the only car you could order would be Yellow®. If Uber’s success is any measure both consumers and drivers prefer their cars to be black.

I’m of the view that every American citizen should have the ability to free themselves from the bonds of their employers and their government. If my 13 year old can start his own business, everyone should have that right. I truly believe that. Allowing entrepreneurs the freedom to fail is a TOTAL requirement of entrepreneurship. Mr. Wilson and Mrs. Clinton have forgotten this important concept. If our safety nets are fool proof; if we prevent people from taking the sort of risks that result in failure will anyone have a chance of real success: we’re ALL doomed to fail. Imagine having to pitch your startup idea to your local city counsel for approval. Uber, Lyft, Postmates, TaskRabbit and Instacart are amazing experiments. Some of them will succeed and some will fail, but we should let entrepreneurs and small business owners do business with these companies as they choose. We shouldn’t let the government intervene. We shouldn’t let the Democrats reclassify entrepreneurs, small business owners and contractors as ‘workers’. We ALL work, but the ‘worker’ is a term better associated with Marx and not Reagan.

Ten Startup Tips for First Time Entrepreneurs

10 startup tips

Here, in no particular order, are my ten tips for first-time entrepreneurs.

  1. Recruit a co-founder. You don’t want to go through the startup process alone. Your first job as a founder/co-founder is to find someone who shares your vision and is willing to take the same risks you’re taking. If you can’t convince anyone to join you, you should seriously reconsider starting a company. 
  2. Be frugal. Don’t rent an office, buy furniture, a phone system or office supplies. Conserve your cash for as long as possible. Leverage co-working spaces.
  3. Go through a startup accelerator. Apply to ALL of them. Being accepted by an accelerator is great social proof that you might be onto something. It is a great signal for investors. 
  4. Don’t worry about dilution or percentage of ownership. Raise as much money as fast as possible. Never worry about valuation or dilution. Startups are basically zero sum, you’re either going to hit a homerun or fail. Negotiating the downside is just a waste of time. Get a reasonable deal and move on. Time is far more valuable than money in the startup world. Get the money in the bank and start building your company.
  5. Don’t be creative when it comes to raising money or organizing your company. You want your company to look like every other company startup investors have seen. Incorporate in Delaware as C-corp. Raise money in the form of a convertible note or a preferred equity offering. Do a seed round, an angel round and a Series A – don’t skip a step even if you don’t need the money. You need the social proof when you’re hiring employees, getting press and raising money from investors. Trust me, don’t get fancy here.
  6. Hire employees slowly and fire them fast. Take your time. Find the best people you can. Never make a rash decision. On the other hand, fire fast. The moment you’re convinced someone isn’t right for the team, terminate them. Don’t feel bad. This is a startup and everyone knows that startups aren’t about safety, they’re all about risk.
  7. Build relationships with investors BEFORE you ask them to invest. Get to know them. Ask them for advice. Tell them what your plan is and what steps you’re going to take. Follow up with them letting them know each time you achieve one of the goals you set for yourself. Build credibility with the investor and when it is time to raise that Series A you’re much more likely to get an investment from an investor who knows you than one you just met.
  8. Communicate with your board and your investors regularly. You should be emailing your board members individually each week. Giving them updates, but more importantly tell them how they can help you. Reach out to your investors in the same way each month. Stay on top of your board and investors or they’ll stay on top of you.
  9. Know your numbers. So many entrepreneurs don’t know how many months of cash they have left in the bank. You should know how much money is in your bank account down to the penny. You should sign every check, every time. Understand your burn rate and keep your board and investors in the loop so they aren’t surprised one day that you’ve only got three months of cash left. 
  10. Celebrate the little wins. Startups are hard. They are a rollercoaster of emotions. When you get a win like a new hire or a new customer, take a step back and celebrate with the team. Celebrate when you have a great meeting with an investor. Celebrate when he gives you a term sheet. Celebrate when he funds. Your team is going to need the encouragement to be able to deal with all the negative stuff that is bombarding them constantly. 

Sand Hill Road: The VC Address of Choice

 

My first visit to Sand Hill Road was in the late 90s when I was raising money for my first startup, LayerOne. Sand Hill Road, located in Menlo Park, is the address of choice for venture capital firms. The price per square foot of space is the highest in an area known for sky-high rents – hovering between $110 and $150 per foot. The first venture capital firm to move to Sand Hill Road was Kleiner Perkins Caufield & Byers in 1972, since then companies such as Microsoft, Amazon.com, Facebook, Twitter, Instagram and Skype have raised money from Sand Hill Road investors. In fact, almost every major silicon valley startup has raised money from one or more Sand Hill Road venture capital firms as seen below (from Bloomberg).

SandHillRoadInvestments

 

My father raised capital from Sand Hill road in the late 90s and early 00s for his companies as did I. Many are predicting the demise of Sand Hill Road as more and more venture capital firms move to downtown Palo Alto and South Park. They suggest that Sand Hill Road is where your ‘father’ raised venture capital. Which in my case is true. The truth is that for a VC the “economies of agglomeration” rule – you want, no, need to be near your peers in the venture capital game.

When I’m in fund raising mode I book a room at the Rosewood Sand Hill (directly across the street from most of the VCs). They have a car service that will drop you off and pick you up from each of your meetings. No where else in the world can you schedule 6 meetings in one day with 6 different venture capital firms. If you head south from the Camino Real on Sand Hill Road the first venture firm you’ll run into is Kholsa Ventures and then Lightspeed Venture Partners, GGV Capital, Shasta Ventures, Accel-KKR, August Capital Management, Mayfield Fund, Greylock Partners, Interwest Partners, Kleiner Perkins, KKR, Sequoia Capital, Makena Capital, Silver Lake, NEA, DFJ, Andreessen Horowitz and Menlo Ventures to name a few.

More and more firms are moving to San Francisco to be closer to the ‘cool kids’, but there is no denying that a visit to Sand Hill Road is a requirement for any startup serious about raising venture capital.

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