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Entrepreneurs: Post Seed with Marc

Thursday, December 8th, 2016

Marc

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.

If the Shoe Fits: Where’s the Money?

Friday, August 26th, 2016

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here

5726760809_bf0bf0f558_mAs an entrepreneur, the constant stress around money in vs. money can at times be overwhelming and deeply emotional. Anxiety/angst/anguish/fear-and-loathing, and all synonyms thereof, best describe the feelings swirling in and around the entrepreneurial community these days when the subject of money, AKA funding, comes up — although not so much if you are one of the “chosen”, i.e. connected/entitled.

That said…

Bambi Roizen, Vator Founder and Managing Partner of Vator Investment Club, actually sees more money available. (Here is the video and full transcript of her talk at Splash one year ago. The quote is edited for clarity.)

There were about 20 post seed venture funds; now my friend Paul Martino counts probably 200 and there’re going to be a lot more funds. If you think that there’s going to be a crunch, don’t worry about it. I have a feeling there’s going to be a lot more funds coming to fill that void. I think there’s going to be a lot more specialized funds. (…) I think that’s we’re actually going to see local funds. Local funds investing in local businesses.

Because remember, this is the opening up of title 3 to the average investor. (…) It’s so hard sometimes to look at companies, because they’re so good at telling stories these days. I knew that was going to happen — you’re such great storytellers, you have to be, because you have to sell your vision. But it makes it really hard for investors to know what to invest in, so they’re going to invest in everyone, right? Money is available.

I asked KG what he thought from his perch as a serial entrepreneur who has raised funds in very different economies and attitudes over the years.

 “What she says is interesting. However, what we’re seeing is the financialization of the startup/entrepreneurship industry, with the consequence that financial investors will get involved earlier, take larger stakes and leave less for the entrepreneur and the team. 

One could say that it is good that capital may become easier to access (if this is true), but the cost of that capital is also increasing since there are now two layers of return that has to be provided much earlier than before — that to the VC and also to the VC’s LPs. 

In other words, entrepreneurs are coming earlier into the VC model where only a few outsized returns matter and the majority of companies are pushed/allowed to fail.”

Many VCs treat startups the same way commercial agriculture treats seedlings — once they get to a certain size they are thinned in order to concentrate resources on fewer plants that will yield a larger harvest.

“This may actually be negative for a whole host of companies that have no way of maturing before being put under the pressure of the VC return machine.”

However, newly emergent investors may bring change to the game. Kobe Bryant and Jeff Stibel have invested together since 2013 and have started a new fund with their own money.

Dozens of other musicians, actors and athletes are investing directly or through funds they started or joined.

Hopefully, that money will be more patient and come with a different mindset than the typical Silicon Valley focus on the connected and entitled.

It would be good to see at least some of the new funding go to the unconnected — especially people of color.

But no matter how much money is out there, I’m willing to bet that will take a lot more than vision/great story/rapid user growth to access it.

These days investors want a solid business plan focused on generating revenue, and, in many cases, a strong spotlight on social responsibility/giving back.

Image credit: HikingArtist

Entrepreneurs: Marc at Vator Splash 2016

Thursday, March 3rd, 2016

Marc

his year’s Vator Splash Health, which took place at Kaiser HQ in Oakland, was Startup focused and well worth the price of admission.

As we’ve come to expect, it featured a very impressive line-up of panelists and speakers dealing with extremely relevant topics ranging from opening remarks (kidding), tackling cancer with technology, to patient-centered healthcare, to telemedicine and patient engagement, to protecting yourself as the founder, to uncovering new data from API’s and platforms, to big picture items, such as the future of healthcare altogether.

There were supercharged Splash competition presentations featuring three of Health Tech finalists creating an opportunity for new businesses to effectively message their product.

Participating vendors were easily accessible; including Bloom Technologies, DocDelta, Lighthouse, from the American Diabetes Association, Lab Sensor Solutions, Carrum Health, and Crediyo.

Event partners included KPMG, SAP Startup Focus, Bread & Butter, Artis, Scrubbed, Stratpoint, and Healthiest.

On the agenda throughout the day were fireside chats with the likes of Helmy Eltoukhy, founder & CEO, Guardant Health and Vator founder/CEO Bambi Francisco.

Other splash talk topics showcased — when software eats bio, funding the science behind healthcare, Who’s financing the digital health ecosystem?, and Are You in Kaiser’s Line of Sight: A Buyer’s Perspective.

Big data was discussed at length, crystallizing the notion that it is the current ability, made accessible by modern technology, to put meaningful patterns together that are deployable that will affect outcomes and achieve objectives.   

An additional topic or two that I was pleasantly surprised by was the acknowledgement by Dave Schulte, Managing Director at McKesson Ventures, of the importance of the virtue of humility, in admitting “not knowing”. Kudos to Dave because this, of course, comes against the backdrop of Silicon Valley’s famed hubris. 

Leading to another interesting point in that, at a minimum, the possibility (if not certainty) exists, that there will be a falling away or clearing of many of the startups and downturn both in investment activity and new business creation.

A sober but fair assessment and reminder of the unavoidable cyclical nature of business that correctly tempers expectations. 

More than simply being a fun event, populated by interesting shakers and market makers, with good,  healthy food (a very pleasant change), it was a phenomenal networking forum and that, perhaps, is its most intrinsic value.

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