Who has time for meetings?

Nivi · April 12th, 2010

Venture Hack’er Naval Ravikant has a personal blog that I consider a must-read. It’s called Startup Boy and his latest post is Who has time for meetings?

“A lot of entrepreneurs assume that the initial way to engage with an investor is to *insist* on a meeting. It’s a relatively safe assumption that anyone on the buy side (an investor, an advertiser, an executive at a large company) receives far more requests for meetings than they can follow up on, and are constantly looking for excuses to say “no.”

“Synchronous activities, such as phone calls, screencasts, videos, and webex conferences are almost as bad. If you’re trying to get the attention of an investor or exec at a major company, and don’t want to waste either your time or their time, pay very, very close attention to the cost of their time and you’ll fare better. In order of escalation, one should proceed as follows…”

Read the full post. More of my favorite posts from Naval’s personal blog here.

Facebook acquires AngelList startup

Nivi · April 8th, 2010

Today, we’re announcing that Divvyshot is the third company to raise money with AngelList. And the first AngelList-funded startup to be acquired — by Facebook no less. The AngelList investor is:

Richard Chen (Investor in Aardvark)

And Divvyshot was referred to us by an AngelList power broker:

Jamie Quint (Founder of Simple Condo)

Divvyshot also raised money from Y Combinator (in a previous round), Jim Young and Gabor Cselle. That’s a great list of investors. Soon after raising this round, Divvyshot was acquired by Facebook.

Update: Jolie O’Dell picks up this story for Mashable.

New angels on AngelList

Some of the awesome new angels on AngelList:

Mitch Kapor (Investor in Posterous)
Ram Shriram (Investor in Google)
Mike Maples (Investor in Twitter)

You can track the day-to-day minutiae of these angel’s lives with the AngelList Twitter list. 2 years ago, you would have had a tough time convincing me that the best angel investors in the world would be publishing hourly updates about their lives via txt message. But here you go:

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

"AngelList is the real deal"

Nivi · April 7th, 2010

AngelList reviews from entrepreneurs in the trenches:

Tony Wright, Founder of RescueTime (and AngelList power broker) says:

“AngelList is the real deal. I’ve heard quite a few people having some success there. Even as a YC company, there is a startling hole after Demo Day… It can take months to close a round (it took us 5ish), even loaded down with Demo Day biz cards and meeting invites. If I were doing YC again today, I’d try to get on AngelList right after Demo Day…”

Paul Stamatiou, Founder of Skribit says:

“Nothing but great things to say about AngelList. I applied with my startup and while we weren’t selected for that week, Nivi sent me a nice personalized email and has been super friendly and always open to chat about startups.”

Dave Lifson, Founder of Postling says:

“So we pivoted (explained in the GigaOm post, but I’ll say more soon), and sent the new direction to AngelList. And this is where the craziness started.

“My first phone call was with Tom McInerney, 3 hours before I was flying out to SXSW. After about a 30 minute phone call, Tom was in. He then introduced me to his friend Paige Craig, who would also be at SXSW. I met Paige in Austin, and after meeting, he told me he was in. The next day, at a Venturehacks meetup at the Four Seasons hotel, he pulled over Dave McClure. We went out to the balcony (he wanted a cigarette) and I pitched him. He was in. The following day, I spoke with Thomas Korte, who moved up our scheduled phone call a couple days once he heard Dave was investing, and he was in. I also got an email introduction via my friend Russ (founder of SeatGeek) about his investor Kal Vepuri, who was also at SXSW. Kal and I spoke on the balcony of the Austin Convention Center, and I was blown away by his intelligence and humility. So Kal was in. Finally, my friend Michael Galpert of Aviary connected me with Gary Vaynerchuk, who is a perfect investor for us given what he is passionate about (social media for businesses). David Cohen finished off our round not too long after that.

“So that’s it. Through a combination of a great team (Chris & Haim founded Etsy), customer development, responding to feedback, AngelList, networking, and being able to articulate a compelling vision backed by domain expertise, I was able to raise $200k in the 6 days of SXSW!”

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

Interview: How to close an angel round

Nivi · April 6th, 2010


Sean Ellis taught me that startups need to be as creative and thoughtful about their marketing as they are about their products. But we’ve never applied that thinking to Venture Hacks. We focused on writing stuff that doesn’t suck, didn’t engage in marketing histrionics, and figured the customers would come. More important, we simply weren’t excited about marketing.

But! Since we started AngelList, we’ve suddenly gotten excited about marketing — who knows why. And so, on to the histrionics…

Interview: How to close an angel round

Naval and I have recorded one of our best interviews yet: how to close an angel round. But there’s only one way to get it: apply to AngelList. And if you don’t want to apply AngelList, apply anyway, tell us why you don’t want any intros, and we’ll still send you the interview.

Here’s a 10-minute teaser of the full 40-minute interview:

SlideShare: How to close an angel round – Teaser
Video: Interview with chapters (for iPod, iPhone, iTunes)
Audio: Interview without chapters (MP3, works anywhere)
Transcript: Below

¡Get the full interview by applying to AngelList!

Outline

Here’s the outline of the full 40-minute interview (not just the teaser).

  1. You can close an angel round with ‘mass syndication’
  2. Start with terms and valuation below market
  3. What you want in your term sheet
  4. What you don’t want in your term sheet
  5. Should you have a board seat for seed investors?
  6. This isn’t comprehensive term sheet advice
  7. Memorize the term sheet before your first meeting
  8. How do you set your valuation? Price it to move
  9. How do you bring up the terms in a meeting?
  10. Describe how the terms are investor-friendly
  11. A preferred round is a good way to set up good initial terms
  12. Does a small seed round need protective provisions? Pros and cons.
  13. Get feedback on the terms in the first meeting
  14. Drop names to build social proof
  15. Social proof works differently in a Series A round with VCs
  16. See if the “interest” includes a dollar amount, intros, and name-dropping (a.k.a. soft circled)
  17. When do you need a lead?
  18. Approach the financing as if you won’t find a lead
  19. What’s a lead investor?
  20. If they say “find a lead,” ask why
  21. How to create a deadline
  22. Raise the money when you don’t need it
  23. Send two emails to the angels
  24. Do a rolling close: the cash comes in just- in-time
  25. Mass syndication can fail if a very high social proof investor drops out
  26. Use AngelList and StartupList to get intros to angels
  27. What do angels look for?
  28. Advisors are good for getting your foot in the door, not in a pitch
  29. Get advisors by going to events or talking to entrepreneurs
  30. Before you raise a seed round, you need a product in the marketplace
  31. Use customer development and lean startup techniques to get to market with less
  32. Pitching hacks free chapter: Advice on getting investor intros
  33. If you need money to get something in the marketplace, pitch idea investors
  34. Pitch incubators or do your startup on the side
  35. What are the different types of seed stage investors?
  36. If you’re talking to a VC, make sure they really do seed stage rounds
  37. Potential concerns with pitching multi-stage and seed-stage firms
  38. Get intros to seed investors with AngelList/StartupList

Transcript

Here’s a transcript of the first 10 minutes of the 40 minute interview.

(Music: Squarepusher)

Nivi: Hi there, this is Nivi from Venture Hacks.

Naval: And Naval from Venture Hacks.

Nivi: And we’re going to talk about how to close an angel round, how to put together an angel round, or in other words, how to herd a motley crew of angel investors and turn those meetings that you’re getting into money in the bank.

I think we’re going to start off by talking about mass syndication, which is an approach that I think more entrepreneurs should be taking to close their angel rounds.

[Read more →]

Can I send my pitch to just some of the angels on AngelList?

Nivi · April 5th, 2010

Some AngelList applicants don’t want to send their pitch to everyone on the list. Maybe they don’t want to send their pitch to angels who have competitive investments. Or they simply don’t want to distribute their pitch widely.

No problem. Use the ‘Custom Intros’ feature when you apply to AngelList:

We can give you custom intros, a mass intro, or both. Most startups ask for both. Even when we’ve already done a mass intro for a startup, custom intros get high response rates — about 50%.

And how do you research the angels you want intros to? Guess.

I hope you’ve enjoyed the introduction to this new introduction.

Top heavy startups

Nivi · April 4th, 2010

Seed-stage investors don’t like top-heavy companies: CEO, COO, CXO, CYO, VP of X, Y, and Z. It’s almost an immediate pass. No sophisticated investor is impressed by titles in an early stage startup.

If you’re an early-stage consumer internet company, you don’t need fancy titles, you need founders and employees who get can either build the product or sell it. (One of the founders should be the CEO so you can make decisions quickly.)

There are many exceptions to this bit of advice but, unless you really know what you’re doing (you’ve been starting companies and investing in them for the last 10 years), keep it simple. CEO, founders, engineers, salesmen, marketers. If one of the founders wants to be the President, give him an internal title, but keep it simple for investors.

"Being open early worked well for us"

Nivi · April 2nd, 2010

In Where’s the demo?, I asked, “Unless you’re famous or a big company, why do a closed beta?” There are lots of good reasons why in the comments.

But my favorite comment is from Rob May, founder of Backupify and AngelList power broker:

“In the early days of Backupify (when it was still called Lifestreambackup), not only was I worried that someone would steal the idea and execute it better, but I was also embarrassed by the quality of the product when I demo’ed it.  But ultimately, some early users loved it and that kept us going.  By releasing an early buggy minimum viable product, we got a pretty big lead on everyone else.  Now we have a bunch of competitors, but with more than 60K users and 30 terabytes of data backed up, we are pretty far ahead in terms of traction. Being open early worked well for us.”

By the way, Backupify recently raised money from General Catalyst and First Round Capital.

Postling gets funded with AngelList

Nivi · April 1st, 2010

We recently wrote about the first startup that got funded through AngelList: Matt Mullenweg invested in a Y Combinator startup we called Startup #0.

Today, we’re announcing that Postling is the second startup to raise money from AngelList. The AngelList investors are:

Dave McClure (Investor in Mint)
David Cohen (Investor in Twilio)
Thomas Korte (Investor in Heroku)
Chris Yeh (Investor in PBworks)
Paige Craig (Investor in Plancast)
David S. Rose (Investor in Ambient Devices)
Thomas McInerney (Investor in Mochi Media)

Gary Vaynerchuk and Kal Vepuri, who aren’t on AngelList yet, also invested. That’s an awesome list of angels.

How did Postling do it?

First, Postling had traction — in fact, they were already charging for their product.

Second, they listened to customer and investor feedback and pivoted into a larger market during their fund raising process. More details about the pivot in this post on GigaOM — Postling’s website doesn’t reflect the pivot yet.

Third, the company was started by two of the founders of Etsy. But they didn’t need that pedigree to raise the round — they could have done it with just their traction and pivot.

Update: Read Postling’s story, in their own words: The inside story on how I raised $200k in 6 days.

AngelList is growing quickly

There are now 75 angels on AngelList and we’re adding 1-2 new angels a day like Mike Maples, Ram Shriram, and Aydin Senkut. You can track the day-to-day minutiae of these angel’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. Thank you all for being part of this.

Where's the demo?

Nivi · March 31st, 2010

I just replied to a startup that applied to AngelList with a website behind a closed beta wall:

"Thanks Jeff. Where's the demo? If your team isn't pedigreed (founded a company and made money for its investors) and you don't have outstanding traction, the #1 thing you have going for you is a demo. I also think closed betas are generally a bad idea. Who cares if someone sees the site? Hope you don't mind the direct feedback. Send us a demo and we can take it from there."

Unless you’re famous or a big company, why do a closed beta?

What's the vision?

Nivi · March 26th, 2010

High concept pitches are great for getting your foot in the door (“It’s Friendster… for dogs!”).

But once you’re in the building, pitch a bigger vision. I’ve been talking to a lot of startups that apply to AngelList and most of them don’t have a vision that would separate investors from their money. Here are some great visions:

Facebook isn’t a social network. Facebook “gives people the power to share, making the world more open and connected.”

Plancast isn’t a place to share plans. It’s a “platform for all intent data.”

Sequoia isn’t a VC firm. They’re “the investor and business partner in companies that make up over 10% of NASDAQ’s value.”

Twitter isn’t [insert whatever Twitter is here]. They’re “the best way to share and discover what is happening right now.”

Google isn’t a search engine. They “organize the world’s information and make it universally accessible and useful.”

Vision principles

Vision isn’t a replacement for traction and milestones. But a compelling vision helps differentiate you from the competition (i.e. every other startup pitching that investor). And vision is especially helpful for a startup like DailyBooth where the value proposition isn’t immediately clear (It’s not an online photo booth. It’s your life in pictures.)

Don’t make your vision too abstract. Be concrete like Plancast and Sequoia. Facebook and Twitter can get away with abstraction because everybody already knows what they do.

Vision is aspirational. Google couldn’t claim to organize the world’s information when they wrote their first line of code. But they could aspire to it.

Make sure your vision is crisp, short, and articulate. No ums, ahs, justs, you-knows, or likes. This is hard for everyone, but there’s a solution: talk slower. You say um when your brain needs time to think. So give your brain time to think by slowing down and replacing the ums with silence.

Don’t belabor the vision. Keep it brief — extremely brief. Consider mentioning it once at the beginning of the pitch and once again at the end.

Vision is free. Unlike your product, team, and traction, you can literally make it up.