Venture Hacks

Last week, I tweeted some thoughts for first-time entrepreneurs raising money and asked Naval, Chris Dixon, and Mark Suster to chime in. Here are the results.

Me

If this is your 1st time raising money…

1. It takes way longer than you think.
2. You’ll assume you’re much further along than you really are.
3. It’s not about optimizing the round, it’s about whether you can raise the round at all.

Naval (@naval)

If this is your 1st time raising money…

1. If you’ve launched and have traction but you’re not getting funded, your team is likely the problem. Look in the mirror.
2. Your financing usually goes nowhere until you’re suddenly oversubscribed.
3. Launch first, raise later.

Chris Dixon (@cdixon)

If this is your 1st time raising money…

1. Make sure the valuation is one that you can get a 2-3x step up on if you hit your milestones.
2. The earlier the investment stage the more you should think of them as partner versus buyers of stock.
3. After 3 months of pitching, you risk being perceived as damaged goods.

Mark Suster (@msuster)

If this is your 1st time raising money…

1. The biggest problem is “anchor tenants.” Once you get them, the lemmings will follow.
2. Everyone wants a “deal.” Even rich people. Get the highest profile anchor tenants and give them a deal. My commentary is specifically related angel investing.
3. Everyone obsesses with dilution from investors. The biggest dilution comes from co-founders. If you have 2 co-founders, you’ve diluted 66% before doing any of the hard work. Start by yourself and bring in co-founders for smaller stakes once you’ve got initial momentum. Unconventional wisdom, but the most economically practical advice you’ll ever get.

Today we’re announcing that MightyMeeting is the fourth startup to raise money with AngelList. MightyMeeting is “WebEx for iPad” and it also works on iPhone and the Web. They also happen to be based in New York.

George Zachary from Charles River Ventures introduced us to MightyMeeting’s founder, Dmitri Tcherevik. I think George met Dmitri at Founder Showcase. George was already committed to the financing and wanted to use AngelList to help raise the rest of the round. We sent MightyMeeting to AngelList, and Dmitri got 10 intros in 4 days. The AngelList investors, including George, are:

George Zachary (Investor in Twitter)

Bill Lee (Investor in Tesla Motors)

Andrea Zurek (Investor in Tapulous)

Shervin Pishevar (Investor in Gowalla)

Great startups can raise money wherever they are. In this case, a bunch of Silicon Valley investors invested in a New York startup. But AngelList has investors from all over the world (New York, London, Boston, LA, Europe…). And startups apply for intros from all over the world (Israel, Sweden, Italy, Argentina…).

Update: Read MightyMeeting’s story in their own words: Raising a Seed Round in 21 Days. And here’s a video of MightyMeeting on the iPad:

New angels on AngelList

Meet a few of the new angels on AngelList:

Geoff Ralston Investor in Powerset ex-Chief Product Officer at Yahoo

Sam Pullara Several stealth investments EIR at Benchmark

Josh Stein Investor in SugarCRM, Managing Director at DFJ

You can track the day-to-day minutiae of these investor’s lives with the AngelList Twitter list:

Startups: Get intros to AngelList here. Angels: Join AngelList here. Everyone: Get AngelList updates with Twitter or RSS.

I recently got on the phone for a cross-continent conference call with Chris Dixon from Founder Collective, Mark Suster from GRP Partners, and our own Naval Ravikant. The topic was VC signaling in seed rounds — and how these signals help or hurt your ability to raise money in the next round.

The interview was inspired by Mark Suster’s (VC) and Chris Dixon’s (super-angel) discussion on whether entrepreneurs should take seed money from VCs — and Mark’s claim that “if we discussed the issue live we’d probably end up agreeing more than disagreeing.”

This is the first time we’ve interviewed so many people. The resulting interview is fun, with lots of actionable info for entrepreneurs — at one point, Naval asks if we’re getting too deep and my response was roughly hell no.

SlideShare: VC signaling in seed rounds
Audio: Interview with chapters (for iPod, iPhone, iTunes)
Audio: Interview without chapters (MP3, works anywhere)
Outline and transcript: Below

Thanks to the SlideShare team for helping us resolve a technical issue very quickly.
Read more→

Say hello to vh.co, our new short URL, powered by bit.ly Pro.

.co domains will be available to the general public in June. But! the registrar has created a program called .CO Founder to give legit startups early access to .co domains. That’s how we got vh.co.

I’m pretty psyched about .co. Other domains like .us, .es, and .ly are cool but I don’t know if they make sense to normal people. I think .co has a good chance of going mainstream and we’re putting our money where our mouth is.

venturehacks.com is staying right where it is — we’re just using vh.co for short URLs on Twitter.  You can also enter vh.co in your mobile Web browser and we’ll take you to the mobile version of venturehacks.com.

Startups who want to put .co domains to good use should apply to the .CO Founder program. Tell ’em we sent you. Everyone else can pre-register for general availability at their favorite registrar.

“Hacking the VC business one web service at a time.”

– Fred Wilson

It’s interesting how investors are turning into media properties and using those properties to promote startups.

1000+ people subscribed to our daily email newsletter when Fred Wilson wrote about it recently. That’s not 1000 visitors — that’s 1000 new people who have given us permission to invade their inbox every day. Fred also sent us a stack of new Twitter followers:

Venture Hacks also sends a good amount of traffic (and signups) when we write about a startup. Here’s a screenshot of [Startup Digest]’s traffic from a post on TechCrunch vs. a post on Venture Hacks:

How not to promote your investments

If you’re a VC, I don’t think you get much out of writing a single blog post announcing your investment. “Why I invested” posts won’t cut the mustard if they simply amount to “good team, good market, good traction.”

You might have to write about the company before you make an investment. You might have to piss some people off. And you will have to take risks with what you disclose. If you feel a little uncomfortable about the post, that’s probably a good sign. Look at Fred’s posts on Twitter, Disqus, and Foursquare for a model.

“There was certainly a few times during this transaction when I regretted how public we were with our interest in Foursquare.”

– Fred Wilson

Every blog should have an aggregator

I think Y Combinator has the smartest approach to the “investor = media property” problem. I read YC’s Hacker News every day because it serves up one or two gems every day.

What’s in it for YC? Among other things, every YC startup with a significant post will be sure to get on the front page of Hacker News. And every single one of Paul Graham’s posts will rise to the top.

If you’re a media property and you don’t run an aggregator, you’re simply ceding your audience’s attention to someone else’s aggregator.

“This is probably the first methodology that’s been crowdsourced. Big idea. Unlike previous methodologies where there was an author, textbook and take-it-or-leave-it, this is an iterative process and I think we’re all collectively getting smarter at a very scary rate.”

– Steve Blank (at 6:53)

Where can you find the best startup advice? Short answer: We collect it in this daily email, daily RSS, or real-time Twitter. Here’s a pic of the email version:

Long answer

When we started Venture Hacks in 2007 (April 1st to be exact), there wasn’t a lot of great startup advice on the Web. Of course, we weren’t the only game in town and guys like Paul Graham and Fred Wilson were rocking well before us (I’m sure I’m ignoring many other examples).

Since then, the quantity of good and bad startup advice on the Web has exploded. I listed 20 startup blogs I read religiously in The Startup MBA. Many good startup blogs have popped up since — Chris Dixon’s and Mark Suster’s blogs come to mind (I’m sure I’m ignoring many other examples again).

Who has time for this?

We do. We read every post on dozens of startup blogs and Hacker News. Then we link to the good stuff with Twitter. And if you don’t want to miss a link in your Twitter stream, sign up for the daily email or daily RSS too.

Help us find the best advice

Please tweet good startup advice to @venturehacks — that’s much better than email. We’ll try to credit you if we link to your suggestion.

Steve Blank is right — we’re all collectively getting smarter at a very scary rate.

I watched most of the Startup Lessons Learned Conference from home. Thanks to the magic of justin.tv, I also brushed my teeth, had breakfast, cleaned the bathrooms, and did a couple phone calls at the same time. Here are my two favorite talks from the conference.

Steve Blank: Customer Development 2.0 “Why Accountants Don’t Run Startups”

Steve’s talk is a must-watch. I’ve watched it twice now.

Kent Beck: Beyond agile programming

Kent Beck is a natural speaker, brilliant, and humble to boot. Fans of agile software development and extreme programming will especially enjoy this talk. At least watch until he talks about scratching goats — that’s my favorite part.

There were many other excellent talks at the conference — see them all here. Now I’m looking forward to the Startup School conference, coming later this year.

I recently answered this question on a Q&A site: “What generic first order principles should a new technology project or startup follow?” But I used the politician’s prerogative to give an answer to the question I wish he had asked:

1. Move to Silicon Valley.
2. Pick a great co-founder with complementary skills.
3. Select people with intelligence, energy and integrity.
4. Pick a big market.
5. Develop the minimum viable product to test your hypothesis about what the market needs. Preferably it’s a product that you’re passionate about since you’ll need to stick with it to an irrational point (the Internet especially is efficiently arbitraged).
6. Iterate like crazy until you find product/market fit. If you don’t find it, do not raise money, do not pass go. Start over.
7. If you have found product/market fit, raise money from high-quality people that you trust. Keep control.
8. Scale. Hang on.

Howard Greenstein from Inc. recently interviewed Naval and me for a post called 5 Questions for an Angel Investor:

Howard Greenstein: How does a start-up know when it is ready for Angel funding?

Venture Hacks: If you’ve just got an idea, check out incubators like Y Combinator and TechStars. Or you might be able to convince someone who knows you well (a former boss or family member) to invest. Or you might be able to convince someone who knows the market really well  (they’ve had the same idea as you) to invest if they believe in the team.

If you’ve got amazing pedigree and connections (your last company was acquired and the investors made money) you might be able to raise money on just that alone. If investors are clamoring to invest before you start raising money, you can take this route, otherwise, you can’t.

Otherwise, build something (anything), put it in the hands of customers and get some traction before raising money. Any hardware/software/whatever startup can do this thanks to lean startup and customer development techniques and the decreasing costs of doing *everything* — the exception is startups with predominantly technical risk. Also get some social proof (brand name advisors) before contacting angels. Social proof lubricates getting in the door.

Read the rest of the interview for our answers to 4 more questions, including our thoughts on what to look for in an angel and trade-offs between raising money vs. boot-strapping. I think the interview turned out well. Thanks for pulling it together Howard.

“Startup Lessons Learned Conference #sllconf is going to be the Woodstock for entrepreneurs. If you weren’t there you will say you were.”

– Steve Blank

Startup Lessons Learned, the best startup conference of the year, is this Friday:

I think this is going to be the most actionable startup conference ever and the lead organizer, Eric Ries, has given us a whopping 25% discount for Venture Hacks readers who use the discount code VENTUREHACKS. (If you’re not in the Bay Area, check out the simulcasts.)

The list of speakers and mentors at the conference is off the hook. And we’ve interviewed Eric Ries many many times:

What is the minimum viable product?
How IMVU learned its way to $10M a year
Opening board meetings to the entire company

My lean journey

I first learned about lean software development when my brother Farb closed a Series A for Grockit with Benchmark. He was looking for developers and I told him to check out my del.icio.us bookmarks for developers and designers. He went through my bookmarks and hired Pivotal Labs, a team of contract developers that follows a rigorous Extreme Programming process (Farb has hired his own team since then.)

Fast forward a couple years and Farb turned me on to Pivotal for a project I was working on. I hired them and got hooked on Extreme Programming. I started learning more about lean and eventually wrote a half-wrong post called Lean startups find their moment. Fortunately, Eric Ries was already blogging about lean startups, saw my post, and corrected my errors in Lean startups vs. lean companies.

Now, Eric has roped Farb in to speak at the conference:

(The video also seems to imply that Farb is auditioning for the cast of CSI.)

Learn more about the Startup Lessons Learned Conference and don’t forget to use discount code VENTUREHACKS.