You would be foolish to believe that the first time you meet an investor that they will fall in love with you, your team, and your idea.
This just doesn’t happen, unless of course you’re some type of rockstar entrepreneur that the investor knows through press. We’re not talking about these rockstars in this short post on raising money.
We’re talking about “no name” entrepreneurs like most of us are. Guys and gals taking their first swing at the bat.
When you first meet an investor you are creating a proverbial dot on a chart, as described by Mark Suster in his famous blog post titled Invest in Lines, not Dots.
This concept described by Suster is critical for first time entrepreneurs to understand. Suster states:
The first time I meet you, you are a single data point. A dot. I have no reference point from which to judge whether you were higher on the y-axis 3 months ago or lower. Because I have no observation points from the past, I have no sense for where you will be in the future. Thus, it is very hard to make a commitment to fund you.
For this reason I tell entrepreneurs the following: Meet your potential investors early. Tell them you’re not raising money yet but that you will be in the next 6 months or so. Tell them you really like them so you want them to have an early view (which is what all investor’s want).
Suster goes on to describe how in every subsequent meeting you have with an investor that you can demonstrate how you’ve done what you said you would do creates another dot.
These dots eventually get connected to form lines that an investor can then invest in.
I love this concept.
Please go read Mark Suster’s full blog post on this strategy to raise money here and let me know what you think.
Aren’t we in the business model generation? Whenever an entrepreneur brings up their new venture, there’s always some smartass in the room who wants to question your business model.
Next time this happens, tell that spreadsheet jockey to hold his horses. The business model is not the first thing on your things to do list when you start your new venture.
Fred Wilson does a great job breaking this down in a post he wrote in his blog titled: Product > Strategy > Business Model
Based on the title, you can see Wilson suggest that business model discussions should come only after the product and strategy are completed. He states:
We have also had many portfolio companies build revenue models that did not line up well with the strategic direction. And in some cases, the companies really did not have a well articulated strategic direction at all. That led to a lot of wasted energy building a team and a customer base that ultimately was not of value to the business. We have seen teams walk away from parts of their business because of such mistakes.
If you don’t have a strategy yet, but have already decided on who and what you are going to charge for you product, then I suggest you go read both Fred Wilson’s post on this topic, as well as go read a follow up post from Mark Suster riffing on what Wilson shared in his post.
There is something to be said about the psychology around being afraid of getting an answer of NO. As a bootstrapping entrepreneur you have to know that most doors won’t just open for you, you’ll have to kick them down.
However, kicking down doors doesn’t work if you are afraid to ask for uncommon things because you think the answer will be NO anyway.
This morning I came across an awesome blog post from Mark Suster titled The One Word That Shouldn’t Exist in an Entrepreneur’s Vocabulary. Suster states that his mom taught him at an early age that if “You don’t ask, you don’t get.”
Suster also says about his mom:
She was a hustler. And a ball buster. And a natural sales person. She was never afraid of the word “no” even to the point of embarrassing me.
The key takeaway here is that closed mouths don’t get fed. You should definitely go read Suster’s full post over on his blog.
Ditching the business plan is one of the biggest trends for entrepreneurs over the last 5 to 7 years, maybe longer. The prevailing thought is that business plans are old school, and in the new lean startup world they will do nothing but collect dust as history books in the fast changing internet economy.
This is true to some extent, but as entrepreneur turned VC Mark Suster points out in his post from his archives titled Are Business Plans Still Necessary, the financial model part of the business plan remains critical.
In an era of “launch and learn” is there a need for a business plan?
Short answer: absofuckinglutely. I have seen really great product people espouse the death of the business plan. Do so at your peril.
So, definition: when I talk about a business plan I’m not talking about a 40-page Word document outlining your market approach. That died with waterfall software development. I’m not even talking about your 12-page Powerpoint presentation that you need to raise venture capital or to talk with potential biz dev partners.
I’m talking about your financial spreadsheet.
One of the hardest things about being an entrepreneur is controlling the mind. Whether its managing the 50 different business ideas that keep popping in your head, or obsessing over what it will be like once you achieve your vision for success, controlling a wandering mind is tough.
When it comes to latter, Mark Suster has excellent advice. He has a post on his blog titled Why Entrepreneurs & VCs Should Focus on Basecamp, Not the Summit. In this post Suster provides a compelling argument to help entrepreneurs stop obsessing about their long term visions. Suster states:
So to entrepreneurs – don’t be so obsessed with “end game” as you are focused on building to an amazing basecamp position. That doesn’t mean to build products in an industry where there will clearly be structural challenges to ever become large. The summit eventually matters. And you still need to spend some time figuring out the basic economics of your business – at least for basecamp. Just don’t obsess on what life will look like in 7 years.
To understand the full analogy of the summit vs. basecamp metaphor I suggest you go to Suster’s blog and read this post in detail.
Mark Suster dropped another nugget of gold on his blog a few days ago in a post titled Stop Trying to Catch Lightning in a Bottle. This time his advice touches on how to best launch new products. Most people have heard the quote that you shouldn’t let perfect be the enemy of good. However, some people confuse this with the whole concept of going from ‘good to great’.
The key is to remember that launching a good product on day 1 is not going to stop the product from being great on day 365. However, if you wait until day 365 to launch, you risk that your product is still not great and it taking you until day 730 to get to great .
When you are launching a new product it’s better to get it out in the world and let your customers help you iterate on the improvements until it goes from good to great. In Mark Suster’s words:
No battle plan ever survives contact with the enemy. So the sooner you’re live the sooner you’ll be able to separate your own internal BS from what the market really wants and thinks.
Another one of the most insightful bloggers out there in the entrepreneurship space is Mark Suster. On his blog, Both Sides of the Table he has a massive amount of content on launching and running a startup. About a month ago he wrote a post titled Why your marketing campaign sucks. He talks about a concept he calls Point of View Marketing, or POV for short. The premise is that people (journalist especially) care about your point of view more than they care about your product. He says specifically:
So next time you’re thinking about how to get coverage for your new downloadable widget that third-party vendors can install and instantly get optimized gobblygook for some feature they didn’t know they needed and want a journalist who doesn’t give a fork about optimized gobblygooks and frankly doesn’t even understand what that is … think about leading with POV marketing instead.