Today, we’re talking about taking intros from investors who passed. I know this is really tempting but it’s just not worth it.
In most cases, if an investor just said “no” that’s the last person you want as your referral to another investor. Their pass is a strong negative signal. It’s kind of like smelling a plate of food and saying “this stinks — why don’t you eat it?”.
If you really can’t find a warm intro to a potential investor, a personalized, well-crafted, cold email is always better than an intro from someone who passed.
There are some exceptions…
We’re going to start publishing the diversity of the Sterling Road portfolio. The goal is to hold ourselves accountable, as there’s a lot of work to do in our industry and beyond.
Overall, 53% of our investments in Fund 2 have founders from underrepresented groups, representing ~65% of the total investment $$. There’s a lot more to be done, especially around providing opportunities for LatinX founders.
In my opinion, a big part of building a diverse portfolio, involves having a diverse investment team. A founder recently reminded me of the pattern on our team page. You can expect some big changes to the investment team with our new fund in 2022.
Today, we’re talking about a common misconception in fundraising. You don’t need to spend time building relationships with VCs, great traction will be enough to get them interested, when the time comes.
Spend your days focused on customers, rather than investor meetings, and when it’s time to fundraise you will find investors are much more excited about a fast growing company, vs one they’ve simply met a few times.
Of course, the reason why coaches like me exist is because a lot of companies cannot wait and have to raise immediately, in those scenarios — tactics matter. But if you can mimic the best fundraisers and time your raise to match up with great growth in your business, fundraising will be quick and easy — no relationship building required.
Your startup’s “Sales Playbook” records how you close a sale from start to finish. You can use the Sales Playbook to onboard new salespeople and improve efficiency — by ensuring the current best practices are being executed at each step along the way. In general, the founders should write the first version of the Sales Playbook, as they should conduct the first sales. Here are the elements of a strong Sales Playbook:
What: Begin with an overview of your company including the “1 Liner” and an introductory paragraph from a customer perspective. …
Today, we’re talking about when to tell your team about an acquisition.
1st option. Wait until you have the letter of intent signed — so written terms agreed. Obviously, your team will figure out something is going on, so you have to be prepared to punt on a few uncomfortable questions. The advantage of this approach is that it minimizes the distraction for most team members.
The 2nd option. Be honest and talk about it early. Add in the huge caveat that acquisitions are extremely low probability and the team needs to focus on growth. Being honest with your team is almost always the right approach but remember that some team members will be distracted by this news and so you should expect some productivity loss.
No right answer on this one.
Today, we’re talking about what metrics to use at your startup.
First of all, your core metric of success should be either revenue, how much money you’re making, or engagement, how many people rely on your service.
Next I like to look at your business as a simple funnel, where you measure: distribution, user engagement and churn.
When selecting the actual metrics to use for each of these categories, make sure they hold you accountable and measure real progress. For example, don’t use a metric like website hits or app downloads to measure your distribution, instead measure qualified leads. Don’t measure Monthly or weekly active users, look at daily users. And don’t use $ churn to measure people leaving your service, look at actual user churn.
Today, we’re talking about: how many features you need to launch an MVP?
Ideally — we start with zero. We launch the product manually with almost zero engineering. You’re essentially an individual concierge service for your first alpha testers.
If your product means that you do have to build something for alpha testers, don’t build more than 1 feature. For example, don’t build login, signup or settings pages for your MVP — just the core feature.
Taking this approach allows you to iterate rapidly and ensures you’re building something people actually want.
Today, we’re talking about why you shouldn’t exclusively focus on finding a lead investor when raising your seed round.
One of the most common mistakes I encounter with founders raising a seed, is they’ve only met with Seed Funds and Larger VCs. Then after 50 meetings, they have no term sheet, no other money raised and time is running out.
To avoid this, meet with all types of investors: Angels, Micro VCs, Seed Funds & Larger VCs. This improves your chances of success because you’re more likely to raise at least some money, even if you don’t find a lead, so you can keep the business going. Plus, the smaller checks that say yes will be able to introduce you to other investors, building your momentum and pressurizing any potential lead to make a quick decision.
Today we’re talking about if it’s ok to start your company using freelance engineers? Of course many entrepreneurs do not code and may not have coders in their network, so hiring freelancers to build an MVP and then fundraise is a very common approach.
But does it work?
Well, if your product doesn’t require new and innovative engineering, and should not be that hard to build. Then it might be ok. It won’t be easy but you can make it happen.
However, if you are trying to build something new and unsolved, hiring freelancers will rarely work. As you likely need experts committed for the long term.
Also remember, rightly or wrongly, investors tend to favor teams with technical co-founders.
Today, we’re talking about how to handle overwhelming investor interest.
Sometimes a small startup goes viral or gets mainstream press and then receives 100s of inbound requests saying something like. “Hi — I want to invest in your company”. If this happens, here’s how you filter down to the right investors for you.
1. Initial filter — reply with the terms you’d want on valuation, the document you’ll use, e.g. a SAFE, and your minimum check size, let’s say $25k. You should also ask them their location or the location of the entity they would invest out of. …