It’s only the second week of the Straight Shot accelerator, but seven startups already got advice from Dundee Venture Capital’s Beth Engel and MindMixer CEO Nick Bowden about fundraising, dealing with investors and more tips on becoming a successful business.
Straight Shot has given SPN access to sit in on some of its curriculum throughout the 90-day program and share some of their mentors’ advice. Engel talked about what to do after you secure investment.
“Cash can cause a lot of problems,” she said. “Who do you hire? When do you hire?”
She said co-founders need to understand their strengths and find people who complement their weaknesses. But that doesn’t necessarily mean you need a co-founder, she said. That role could be found in a consultant you work with for a while.
She also said not to get discouraged if you don’t get funding right away since not all VCs are looking for the same thing. Some try get venture capital only to get turned down, but later get angel funding, then customers, and become revenue positive. Then the VCs may be interested down the road, she said.
Bowden said the same thing about finding the right fit in investing.
“Don’t spray (VC inboxes) and pray,” Bowden said. “Do your research. What are their portfolios like? What does their investment thesis state?
“It’s a waste of time if you don’t fit their business model. If you do find out you’re not a fit with each other, ask them to help you get better. They scheduled a half hour to talk to you so ask them why they said no and what you can do to improve.”
Here are some of the lessons from Bowden, who shared his story for more than two hours:
“You only need one investor to say yes, so ignore the 50 who say no”
- “At the seed stage, it’s no difference where the dollar you get comes from. The ‘who’ is less important than the right terms.”
If your goal is to make $200K a year in cash you’re in the wrong gig
- “Compensation for yourself should be tied more to equity than salary. If you were in the fair market, you’d probably be making $200,000 a year at ConAgra. If that’s the lifestyle you want, go work at Con Agra. Of course we all have different life situations, some have families so the cash is more important for them. I don’t, so I hedge toward equity. But have that honest, candid conversation with your co-founder. Talk about what happens at every level of success. Shared value and alignment is so important in co-founders. Investors will pick that out.”
The best CEO is a deck ahead
- “We had a new series deck the week after we secured our last funding. We use it as a measurement tool. The best investors will ask to see your previous deck to see what you did and didn’t accomplish out of the last one. They’re going to pick out the inconsistencies If you said you were going to do $5 million in revenue and end up doing $2 million, investors will and should have questions about the difference.”
- “Keep your deck focused. If your deck can’t say the focus of your company, than a two-page Google Doc isn’t either. Nothing can. I keep mine to about 15 words per slide.”
- “‘I don’t know’ is always better than a made up answer. Investors write stuff down and three months later they’re going to say, ‘During your April 27 pitch you said XYZ. Where are we on that?'”
Being selective, doing less, keeps you focused
- “Good companies stick with the original form of what you’re good at. We would’ve been much better had we stuck to our original intent and not gotten distracted. A lot of companies struggle with saying what it is they are the best in the world at doing.”
Put most of your capital into growing customer base, finding new ones
- “The single most important hire we made was an experienced sales manager. For a long time I thought I wasn’t going to dump a bunch of money to pay someone for that. What we found is he brought in 10 times what we paid him.”
- “It gives me anxiety to spend money. If I spend a dollar today, it should be $10 in return in customer down the road or valuation increase or something in revenue, in my eyes. A random example: If someone is going to a $5,000 conference, I ask them to justify it by bringing back $50,000 in sales.”
- “The answer early on for us was to hire more people. I thought that if I hired someone for sales, then I could spend more energy on strategy. If I hire someone to develop features then I don’t have to. But it doesn’t solve a problem. Instead of taking stuff off your plate, you then have to manage and direct people.”
Seed is to build product, Series A is to build business, B is to scale
- “In that early stage, if an investor wants you to build your product and get X amount of customers, you should ask him if he’s going to be running the sales team. Seed rounds should be about building your product. Series A is about building your business, creating an organizational or communications chart, finding your cost of acquisition, user engagement. Series B is when you should scale your business. This is when you have proven you have a viable product and proved you can hire good people and know how to acquire customers.”
- “The big misconception is that money causes failure, but really it’s time that causes failure. Not hiring that sales manager soon enough, not getting product out soon enough.”
Managing investors: Take care of yourself before taking care of them
- “Taking care of yourself happens before you take care of investors. For me, I’m a routine person. I build in time to read a book at night because that’s a healthy state of mind for me. I schedule at least two hours for just my wife—no cell phone, no computers. If I didn’t do that I wouldn’t be able to function. There’s even a few times a year where one of us just needs a day to crash and take time for ourselves.”
- “I think the lack of sleeping thing is a bunch of bullshit. I’m always wary of CEOs who post stuff on Twitter at 3 a.m. You’re not going to work for 19 hours a day forever. The human body and mind can’t do it. If you’re intentional about your work, it’s hard to work more than 12 hours. Sure there are some days when you’re trying to get your product out that you need to put in that 16 hour day, but that isn’t the norm for me.”
Amount of communication is inversely proportional to level of trust
- “I usually try to send communication to the entire board (of investors). I don’t want to have one-off conversations with someone and then no one else is informed on it. We use Google Drive to disseminate documents. Everyone treated the same way.”
- “If you have bad news, you didn’t meet revenue projections or some other goal, say it right away. Explain why it’s happening and discuss how we can fix it. Then it’s done and attention is on strategy. They know you’ll have potholes. People tend to want to cover it up or put it at the end of a meeting, etc. Don’t lie. Don’t bullshit. Also, fight the urge to be overly positive.”
Investors work for you. You don’t work for the investors. They are your partners.
- “If I go into a meeting and don’t give them something to do, that’s on me. That’s my problem. I expect them to be prepared, read the deck and come with ideas to solve problems.
- “Every board meeting should challenge the way you think. Whether you use their advice or not is up to you.”
Be loyal to your investors
- “Never forget who took a chance on you and always do what you can to support them. I feel indebted to life to (Dundee Venture Capital’s) Mark (Hasebroock) because he took a risk on us. We always try to help them when and where we can.”