Vator’s Post Seed Conference last week in SF was another enormous hit for those who missed it. The consistently high level of speakers, content and relevancy of the information shared is what was perhaps the most salient take away. The open and frank candor of the discussion was also refreshing.
It’s a bit of a challenge to write this article because there is so much to communicate in a succinct way, but I’ll do what I can. While most of the content is geared to entrepreneurs, and some applies to both, I gave the info specifically for investors its own section at the end.
In the interest of brevity, most of what follows are generalized thoughts, bits and bytes summarizing points expressed during the meeting. My goal being to give you the most info succinctly as possible.
For starters, the cost of starting a business is way down. Now, it can be anywhere from 50-500K. So it’s a disruption in Venture. In the 90’s, it used to be 4 – 5M to start. In an early A round, proper sequencing of funding is important. As is being capital efficient. Be a contrarian. Because everybody bets on the consensus winner.
Raising a series A can be a crunch! 2009 was a peak. Rate of graduation from seed to A is less than 10%. It’s getting hard to get more seeding, although initial seed VC’s are plentiful. Getting to A round nevertheless remains difficult to very difficult.
Why post seed? More control. More optionality, more likely to supersize A, so stay lean to accomplish that.
Great Companies solve big problems and work at 2X the speed. Optimize processes. It’s about onboarding . The 15% of your best accounts pay for everything. Commit to winning. Great venture takes risks on non-traditional things.
Money is tightening. Less competition is good for choosing spaces. It’s going to be hard to raise the next round. Milestones are key. Corporate investing is currently very passive. In good part because in venture, you’re wrong 90% of the time.
There are 3 types of companies: 1) Bits to atoms – exp: Tesla. 2) Sticky bits – exp: Facebook. 3) Everything else is poo and a time suck.
Social media is modern feudalism. We do the work but don’t get paid. New media eliminated scarcity. There is no “Truthiness” in social media. A monetization formula dominates social media.
Hard things take time and are worthwhile. Everyone thinks everything happens in 2-4 years, it doesn’t. Be thoughtful about experimenting.
VALUATION MEANS NOTHING! Value it at zero until you go liquid. Less liquidity in last 5 years than ever.
There is more profit in hard businesses. Winning is about recruiting. It’s getting harder to be successful and get funding. Companies that produce the most with the fewest people and resources win.
Series A difficult to raise yet big successes still happen. Top 5 companies in the world are in tech. There is no certainty in raising funding.
Originality and how you tell your story is absolutely key. It is as important as anything. The product / story / solution has to sell itself. It’s a crowded angel and seed stage market.
Raising series A is hard. Seed round is much easier. Partner with seed investors who will help you with getting an A round. We’re in a tougher market. Spend as little as possible to get to market fit. Premature scaling is the main reason companies fail.
Book Recommendation written for the entrepreneur: Magic Box Paradigm A Framework for Startup Acquisitions. Startups wait too long to think about M&A. Acquisition isn’t an exit but an entrance. An entrepreneur’s narrative to a VC should be; “I’ve got everything figured out.” How do we fit into the direction of the acquiring company? Value only exists in the eyes of the buyer. Have a shared view.
You’re going downhill when they’re coming to you and uphill when you’re going to them.
Entrepreneur’s need passion to get through the tough times. You’ve got to love the customers you’re serving.
Remove friction to innovation. In biz, create more at-bats for yourself. When investments work, double down on them. Convince your customers who will then convince investors. Tell people what you’re going to do, then go do it. It’s the best way to get people on board. The #1 thing you’re selling is trust. Values and culture matter. Why do people continue to walk through the door? Add meaning to your company.
Bits for investors
The idea of 10 – 15 great co’s a year is not consistent with the data. There were a lot of great companies in a little period of time. 38% made greater than 10X in last 10 years. Market fit and momentum work together. Post seed is about data. Look at a company’s value creation. Listen, ask difficult questions. How do you define success?
Figure out what people are all about. It’s more about how a company is performing rather than a funding round. Do you really click with the founder?
Liking the CEO is of paramount importance. Do they have high EQ? Empathy is critical. The ability to see forward from multiple perspectives. Are they ambitious and bold? Are they willing to try at what has been failed many times before. On the other end is founder drama which is a huge killer.
Look for problems when thinking about what company to invest in. What’s on demand? Realize 6 – 10 years equals how long until a market gets created.
The above is just a smattering of the shared wisdom from the conference and proof positive why attending future Vator events is well worth while. Not only for the insights, but also for an incredible networking opportunity that is far above most others, not to mention engaging, fun time well spent.