Nivi · November 12th, 2007
Brian Norgard (Newroo founder and Venture Hacks investor) recently interviewed my brother, Farbood Nivi, about his experience raising money for Grockit from Benchmark et al:
Brian: Tell me about the funding process.
Farbood: I think raising money is great fun. The bottom line is that the money has to be spent. VCs are not in the business of holding their Limited Partner’s investment in a 5% security. They have to spend the money on startups. So, either your startup gets the money or someone else’s startup gets the money.
No VC has a perfect track record, nor do they pretend to. So, (1) either your idea or business sucks and the VCs knows it (despite their imperfect record, they are not bad at telling) or (2) you suck at explaining it. There is literally more money to invest than the world’s VCs know what to do with.
Getting a meeting is another issue.
What did you learn from raising your Series A?
I learned that a disproportionately large percentage of VCs, relative to most populations I’ve encountered, are extremely smart, gregarious, easy to get along with, excited, positive and insightful. I’m usually surprised when I meet one that isn’t.
This makes financings a far more positive experience than they would otherwise be and, just as importantly, makes the time and energy spent in meeting with them worthwhile in and of itself.
I also learned that, amazingly enough, of time, money and great people, time and great people are more scarce.
Any parting bits for entrepreneurs out there?
Make sure your deck is great not good.
Read the rest of the interview where Brian and Farbood discuss Grockit and the massively under-served education market.
Topics Case Studies · Pitching
Couple of questions: If getting a meeting is another story then how did you proceed to convince the other party in meeting with you? How many doors did you knock before getting a meeting and how did you approach these people? (Referral, email, phone call, etc.)
Thanks!
Denis. Good question.
The journey of a thousand miles begins with a single step?
If I worded things well, I think every founder fits in either situation 1 or 2.
Situation 1
Founder knows literally nobody in the VC community or, knows nobody who knows anybody. The founder is literally unconnected in anyway to anyone or anything in the VC or Angel world anywhere in the world.
Situation 2
Founder knows one, just one, or more people in, or connected to the VC/Angel world.
Response 1
I think the first situation is not realistic. Everybody knows somebody, who knows somebody. If you take yourself seriously as a internet founder, you’re in LinkedIn and should be making sure you have a presence there. Make sure you follow and contribute to blogs like venturehacks.com and get people’s blog reading lists so you know what blogs to follow. Get to know these people. Get yourself into situation 2. If you can’t, you cannot be a founder, it’s the first cutoff.
Response 2
Once you know one person, you ask them to connect you to another via an email introduction. You ask the new person for a meeting. Keep adding quality people and impressing them with you and your business idea. Rinse and Repeat.
Anything useful in there Denis? Hope so.
Best!
Denis,
One thing: a referral is the single most powerful way to get into a VC firm. Most of their deals come from people they trust.
If you can, go through this method, it works.
Go for it.
That is definitely gold. Would you consider the amount you raised for the Series A “big” enough? Is there a limit on how much you would look to raise? Surely the more you raise the more strings there would be, but otherwise are there any other things affecting how much you would want to raise?
Cheers
There is an argument that says too much money can cause one to take the foot off the gas.
I can’t say it’s a false statement. I can say it doesn’t make sense to me or apply in Grockit’s situation. Raising the Series A we did, as opposed to a few hundred K seed round, has given us an engine with a lot more horsepower. That knowledge, if anything, should keep your foot feeling like lead. That said, keep in mind, a more powerful car requires more adept steering, braking and maintenance.
Money well spent buys time (far more precious than money), quality (translate: scalability and user satisfaction), people (translate: your company), access, resources. Do you need any of these?
Money is to a business what oxygen is to a human. But, I digress….
I hope there was something helpful in there.
I think the argument is that too much money makes you less desperate for revenue. That could be bad… or good.
You probably raised the money in the first place because you didn’t want to be desperate for revenue.
All founders are desperate. The question is what for.
I would rather be able to pursue my desperate need to create the ass-kickinest app I can over my desperate need to generate revenue for it.
Money allows you to reduce revenue based desperation and replace it with product building desperation.
True.
But too much money, too early can make you drunk.
Aeron chairs — check
HUGE launch party — check
PR firm — check
Cool SF digs — check
30 inch monitors, everywhere — check
Life Coaches for team — check
Dog day care — check
On-site hypnotist — check
Then, you know you are screwed.
PS If you make tons of cash and are executing you *should* indulge.
Increasing monitor size is the cheapest, fastest way to increase productivity in a computer based work environment.
If your competitors are hiring devs with the lure of life coaches and dog day care, you bet you better have both and the on-site hypnotist.
If you could provide more hypnotist and less options, then does it make sense? Then are you drunk? If so, with genius.
If people come for money, they will leave for money.
If they come for hypnotists, they will leave for hypnotists…