Earlier quoted context omitted.
What were the other major exits other than twitch.tv?
cruise.
A different justin.tv founder founded cruise.
How Justin Kan fundraises
31–40 of 63 posts
Re: How Justin Kan fundraises
#32Story time: In early 2012, the startup I was working for, Thumbtack, had struggled for 6-8 months to raise a Series A but finally got to the finish line. Around the same time, Justin Kan co-founded a company called Exec, and within a few months raised a "party round" that was nearly as much as our Series A, with a valuation twice as high. Our company was years old and had serious traction, Kan's company had done esse…
That is a classic and ever insightful essay
Re: How Justin Kan fundraises
#33Re: How Justin Kan fundraises
#34Earlier quoted context omitted.
As an investor, I agree with you and disagree with the article. I dig in with factual questions because I'm excited, not because I'm not. If I'm not interested, that's when I pass instead of asking questions. FWIW the real truth is somewhere in the middle: some investors invest based on their gut, and if they are asking factual questions then that means they are not emotionally interested enough. Other investors inve…
Hey Leo, There's probably no objective truth, but let me offer a perspective: a founder sees 1 founder (themselves) and 100 VCs and a VC sees 100 founders and 1 VC. In the same way you look for patterns in founders, teams, products and markets to determine who to invest in, founders look for patterns in VCs to see who's likely to invest. A useful and common pattern founders pick up on is VC tire kicking: the ones who…
First, thanks for the thoughtful reply. Second, I agree that sometimes VCs aren't that interested but still waste a founder's time. That really sucks. I also agree with you that I have much more data on founder behavior vs. investor behavior because I rarely work with other investors directly. Inversely, founders often have a better view of investor behavior.
Where my opinions differ:
> Asking questions in a meeting is one thing, but following up in an e-mail with an itemized list of; "how do you think about [x], what about [y] competitor, have you thought about [z]" is a surefire indicator that an investor's not willing to move right now
That's not true in my case, and also not true for many funds I sometimes share notes with (w/the founder's permission). I often see Q&A email exchanges that either the founder or an investor in a startup forwards to me. So I can see firsthand that other investors are asking email questions (and then making investments), too.
Furthermore, how much follow-up there is depends on check size. If someone is investing $15k or $50k as an angel, they might make a decision after a single meeting because that meeting is often their sole shot to meaningfully interact with a founder. But if a fund is writing a $400k or $1m check, more diligence will be required. My fund can't write a $1m check just because I really hit it off with someone. That would be extremely irresponsible financially. Similarly, a founder shouldn't take a $1m check from me (or any other investor) without doing some of their own due diligence.
> For every 1 in 100 founders you invest in this way, you passed on the other 99
Yes, but if most investors (esp. funds) want to do more diligence, and you have to go through more diligence to be the 1 in a 100, then avoiding investors who want to do more diligence means you might not end up anyone's 1 in a 100. A crude dating analogy: a typical person might need to go on a date with 100 people to find their life partner. But if you set a filter like "if you want a second date before deciding whether we should get married then you obviously don't like me that much," then you might end up filtering out most or all of your suitable partners.
> If you, as an investor, really wanted to invest in a founder and they snubbed you a bit after a follow up question (not rudely, they just have to choose where to focus), would you suddenly lose interest, or would you pursue a great deal / great opportunity?
It depends. If I already want to invest, then being snubbed would give me pause, but I would probably continue trying to make the investment work. If I wasn't sure I wanted to invest, then being snubbed would make it much less likely that I'd try to invest. Whether you're a founder or an investor, how someone treats you during the diligence/courtship process is a decent indicator of what working with them will be like after the investment. Working together might be worse than the preview, but in my experience it's very unlikely to be better.
> I have a hard time believing you'd let somebody you thought was the next Zuck walk out of the room without a term sheet.
FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in the room. The majority of investments took 2-4 meetings, a few email questions between meetings, and several reference calls. From what I know, most funds that write $250k+ checks work in a similar manner.
> I've seen friends put through the ringer by getting too caught up in the weeds with VCs that clearly weren't interested, or were tire-kicking. Can happen to amazing founders and it's wildly distracting.
100% agree here. This behavior really upsets me.
Re: How Justin Kan fundraises
#35It's worth noting that Atrium's Series A had a mind-boggling 92 investors [0].
Read the article out of curiosity, but understand that this was in no way a normal process.
[0] https://www.crunchbase.com/funding_round/atrium-lts-series-a...
Re: How Justin Kan fundraises
#36Story time: In early 2012, the startup I was working for, Thumbtack, had struggled for 6-8 months to raise a Series A but finally got to the finish line. Around the same time, Justin Kan co-founded a company called Exec, and within a few months raised a "party round" that was nearly as much as our Series A, with a valuation twice as high. Our company was years old and had serious traction, Kan's company had done esse…
Jokes on him. Thumbtack still exists and is doing awesome! Exec... well... not so much
Re: How Justin Kan fundraises
#37Earlier quoted context omitted.
Hey Leo, There's probably no objective truth, but let me offer a perspective: a founder sees 1 founder (themselves) and 100 VCs and a VC sees 100 founders and 1 VC. In the same way you look for patterns in founders, teams, products and markets to determine who to invest in, founders look for patterns in VCs to see who's likely to invest. A useful and common pattern founders pick up on is VC tire kicking: the ones who…
First, thanks for the thoughtful reply. Second, I agree that sometimes VCs aren't that interested but still waste a founder's time. That really sucks. I also agree with you that I have much more data on founder behavior vs. investor behavior because I rarely work with other investors directly. Inversely, founders often have a better view of investor behavior. Where my opinions differ: > Asking questions in a meeting…
> FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in the room. The majority of investments took 2-4 meetings, a few email questions between meetings, and several reference calls. From what I know, most funds that write $250k+ checks work in a similar manner.
Sure: but let's dig in. I'm interested. Out of those 65 investments, how many did you explicitly lead? Sure: the majority took 2-4 meetings. But...
(1) What's a meeting to you? Keep in mind that your Principals and / or Associates conducting meetings and diligence should not qualify as meetings. If it's not with a GP it's not really a fundraising meeting and no founder should reasonably consider it such. Yes, I'm adding a semantic layer here, but this semantic layer is extremely important to founder psychology and how we classify meetings, fundraising success and more.
(2) How many of these investments had a term sheet after only one meeting? Not necessarily with the founder in the room, but this is, for all intents and purposes, functionally equivalent to an investment offer made in the room?
On top of that, is the a correlation between leading an investment round and a fewer number of meetings with a founding team before investing? My intuition based on my own experience and anecdotes of other founders would be that there should be a correlation - happy to be wrong, though.
Also, out of the investments that took "2-4 meetings", did the founders ever roadblock you from investing (i.e. it's a meeting but the founder "isn't fundraising"?) - because this is pretty common (some use it as a tactic but often it's just flat out true), in which case "2-4 meetings" isn't actually "2-4 fundraising meetings." If a founder is at this stage, they don't need this Medium Article's advice: they've already developed the maturity to execute upon a fundraising strategy, you just might not see it due to selection and / or survivorship bias (seems natural, and just how things are done). In fact, they're executing the latter part of the strategy outlined here (have found a lead via "focus", or relatively confident in their ability to receive a term sheet when they pull the fundraising trigger).
We're really pulling apart the fabric at the seams here: there's a reason this article isn't a hundred pages or more, which is realistically the volume of information a founder has to internalize while they're developing their own understanding of the fundraising and investment landscape. They'll also find their experience to be very personal. This advice is meant as a launchpad, and I think it's a good starting point for novice founders.
If I were to give advice to new founders (and I do get asked occasionally, but I'm literally nowhere close to a celebrity fundraiser and still a fledgling entrepreneur) it's, "I still don't understand fundraising. Just be yourself and build something you're passionate about, have confidence, be persistent, be kind, and the right people will come along. You'll probably trick yourself into thinking you understand something about the process, but realistically, fundraising is just about people and relationships, and shit is messy. Be humble and thankful, and try not to waste too much time discussing fundraising strategy with investors on Hacker News."
Disclaimer: I often don't follow my own advice.
Re: How Justin Kan fundraises
#38Re: How Justin Kan fundraises
#39Earlier quoted context omitted.
First, thanks for the thoughtful reply. Second, I agree that sometimes VCs aren't that interested but still waste a founder's time. That really sucks. I also agree with you that I have much more data on founder behavior vs. investor behavior because I rarely work with other investors directly. Inversely, founders often have a better view of investor behavior. Where my opinions differ: > Asking questions in a meeting…
> FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in the room. The majority of investments took 2-4 meetings, a few email questions between meetings, and several reference calls. From what I know, most funds that write $250k+ checks work in a similar manner. Sure: but let's dig in. I'm interested. Out of those…
For what it's worth I think both of you have valid points.
The only point I want to add:
- the article explicitly mentions it is advice for EARLY STAGE startups (see "No one knows the value of an early stage startup")
Yes, if the startup is already Series D, the traction numbers are there, I'd see why you would want to ask lots of quantitative questions to get a yes/no decision.
But for an EARLY STAGE startup--would digging in with factual questions really change your decision? At that point everything is just projections and guesswork. The signals are more qualitative than quantitative.
Put another way--as an investor, when was the last time you met an Early Stage startup, came out of the meeting with a "default not invest", emailed them a follow up FACTual question, and the FACTual answer they replied back to you, turned you from a "default no" into a "yes"?
Re: How Justin Kan fundraises
#40Earlier quoted context omitted.
First, thanks for the thoughtful reply. Second, I agree that sometimes VCs aren't that interested but still waste a founder's time. That really sucks. I also agree with you that I have much more data on founder behavior vs. investor behavior because I rarely work with other investors directly. Inversely, founders often have a better view of investor behavior. Where my opinions differ: > Asking questions in a meeting…
> FWIW, my fund has made ~65 investments in the last 5+ years. Exactly one of those investment offers was made during the first meeting while the founder was in the room. The majority of investments took 2-4 meetings, a few email questions between meetings, and several reference calls. From what I know, most funds that write $250k+ checks work in a similar manner. Sure: but let's dig in. I'm interested. Out of those…
Better example. Imagine, as an investor:
- an Early Stage, pre-traction startup gave a pitch to you at a meeting
- you came out feeling "default not invest" (i.e. if nothing new happens you won't invest)
- you later emailed them a Factual question
- they replied with an elaborate Graph/Pie/Chart with lots of numbers to clarify some detail, that the founders decided were not important enough to be in the original pitch
- that Graph/Pie/Chart turned you from "no" to "yes"
when was the last time that happend?