21–30 of 119 posts
Evidence of success often makes the first two way less relevant. Up to the point where tables are turned and investors will be trying to convince founders to take their money.
This advice applies to many things in life -- getting a job, proposing marriage, networking in general.
For instance, I've occasionally met people who obsess about crafting the perfect CV. For many of those people (not all) if they'd brought the same level of intensity to doing good work in the past, they'd be fighting off would-be employers, without any need to sprinkle pixie dust on their CV. Ditto people who try to find some magical method for networking. Do awesome work, and networking becomes mostly a matter of showing up and saying plainly and understandably what you've done.
Every decision made starts with an emotional trigger, and ends with a defensible position.
The only thing you need is traction. Anything else doesn't matter. It seems insane, but investors are blinded by traction. If you are a startup that has low scalability, but you have traction, you will get funding If you are insanely scalable, a great idea, but you don't have traction, you just won't get funding. It doesn't matter how awesome your team is. Investors just can't see good ideas through the traction curt…
To be fair, I think most people tend to underestimate the scalability (as well as the Total Addressable Market) of successful startups at the early stage. As PG puts it, the big winners often look like bad ideas in their earliest stages.
Take Rap Genius, for example. I'll freely admit that, when I first heard about the site and all the funding it received, I had no freaking clue why it was getting so much attention. I thought that this time, finally, unquestionably, the VC community had gone truly bonkers. Later on, when someone explained the potential to me -- that the underlying technology and platform could become X, Y, Z -- I was floored by the possibilities. And I felt like an idiot for not seeing it earlier.
I know a lot of people who had very similar reactions to airbnb, and to this day, a lot of people still have that reaction to Uber ("An app just for calling cabs??? Seems pretty narrow!"). Same thing with Tesla ("It'll never work at scale; you need to whole infrastructure of power stations on the street corners!").
Scalability is very hard for the average observer to gauge. It's even hard for the average tech enthusiast to gauge, and probably hard for the average VC to gauge.
"The people who are really good at acting formidable often solve this problem by giving investors the impression that while no investors have committed yet, several are about to. This is arguably a permissible tactic. It's slightly dickish of investors to care more about who else is investing than any other aspect of your startup, and misleading them about how far along you are with other investors seems the compleme…
"Inexperienced founders... try to convince with their pitch. Most would be better off if they let their startup do the work—if they started by understanding why their startup is worth investing in, then simply explained this well to investors." This advice applies to many things in life -- getting a job, proposing marriage, networking in general. For instance, I've occasionally met people who obsess about crafting th…
Team - not your first rodeo, know how to win, subject matter experts. Focus - clearly stated value proposition. Dream - big market, big value. Plan of Attack - clear path to capture market share. Validation/ Traction - customers! Tech - solid, non-obvious, not easily replicable. (i.e. if your successful, someone else can't just hop into the market and eat your lunch). Use of proceeds - not just pay my salary, but grow this business. Next big milestone: profitability? another fund raise?
If you hit on these, then investors will want to put money in their favorite types of companies: the one's that don't look like they need it. ;)
I have about a decade worth of sales experience. Sometimes not very successful, some very successful. I've also succeeded with convincing investors. The two were very similar for me. I've also worked with many other people in sales roles; of the ones that were successful only a small handful sold in the way Paul writes about.
Moving forward I won't be working with, or hiring anyone who doesn't. It's better for everyone.
Thanks for the essay, Paul.
"Inexperienced founders... try to convince with their pitch. Most would be better off if they let their startup do the work—if they started by understanding why their startup is worth investing in, then simply explained this well to investors." This advice applies to many things in life -- getting a job, proposing marriage, networking in general. For instance, I've occasionally met people who obsess about crafting th…