Category: Start-ups

In my last post, I talked about how to write an email requesting an investor intro, but I didn’t talk about whom you should ask.

tl;dr – in order, the strongest referrals to investors come from:

1. Portfolio founders who have raised recently from that investor (i.e. not enough bad stuff has happened at their company to make the investor disillusioned w/ the entrepreneur) OR past portfolio founders who have made the investor money
2. Investors in your company
3. Personal connections
4. Other investors / founders / former colleagues of theirs (note: exercise caution here)

When I was raising money for LaunchBit and I wanted to reach investor John Doe, I used LinkedIn to see who knew him.  Very often, I was a 2nd degree connection to John Doe through a number of people including:

• Investor Billy Bob – someone I’d just pitched; jury still out on whether he’d fund LaunchBit
• Entrepreneur Sarah Smith – someone I’d known for years who is really nice
• Entrepreneur Erlich Bachmann – a well-known entrepreneur whom I’d met once at a startup party
• Investor Christine Tsai – an investor in LaunchBit whom I’d known for years and even worked together with at Google
• Entrepreneur Jane Do – an entrepreneur whom I’d met a couple times before at various startup circles and had just raised money from John Doe

Who is best to ask for a referral?

Obviously, this situation wasn’t super ideal.  In an ideal world, my best friend would be a super successful entrepreneur who would know John Doe and could make an intro, but when you’re asking for potentially hundreds of investor intros – yes hundreds (more on that later), this is not going to be the case a lot of the time.

The seemingly obvious person here is Christine Tsai because she’s known me for quite a while and also invested in LaunchBit.  I could ask her.  You certainly should leverage existing investors.  So, I’d ask Christine.

Investor Christine

But, Christine is also an investor and pings potential co-investors all the time about deals, so what is the weight of her recommendation?  In fact, to a certain extent, it’s her job to sell her companies to downstream investors…so will LaunchBit stand out to John Doe amidst all her other referrals?

I should probably also get a second intro in parallel in case Christine takes a long time to do this intro AND as a way to stand out once her email hits John’s inbox.  If he sees a couple of people mentioning my company, that would remind him about us.

Investor Billy Bob

I definitely shouldn’t pick Billy Bob.  Even though I’ve talked with him most recently, I don’t know yet what he thinks about LaunchBit.  I don’t know if he’d be an advocate, and I’m not sure if he’d recommend us.  In fact, if he and John Doe were to discuss the deal, they could both end up talking each other out of it, as often happens when investors get together.  Ideally, they should come to their own independent conclusions about my company.

Entrepreneur Sarah

I could ping Sarah, since she’s always been super helpful and nice to me.  But, I should find out first how she knows John.  Did she pitch John and did he say no to her company?  Just because John and Sarah are connected via LinkedIn, I’m not sure what John thinks of Sarah, so a recommendation from her may or may not be a positive signal.

Entrepreneur Erlich

I haven’t talked with Erlich in years and only met him once at a party.  Like Sarah, I don’t know what John thinks of Erlich and vice-versa.  Since Erlich is successful, chances are that John respects him professionally on some level.  However, I’ll need to pitch Erlich and sell Erlich first on LaunchBit before talking with John, and since it’s been years since I’ve spoken with him, that might be tough.  Erlich is probably not my first go-to person after Christine if I have a choice, but he could be a last resort.

Entrepreneur Jane

Finally, there’s Jane, who just raised money from John.  Based on that signal alone, I know that John thinks highly of Jane and is still really excited about her business.  Like Erlich, I would need to sell Jane first on LaunchBit so that she could sell John on meeting with me.  Note: you are always selling – even if someone isn’t an investor!  They can often help you sell your company to investors or other great contacts.  Even though Jane isn’t famous, she’s a much better person to get a referral from over Erlich because I already know that John not only respects Jane for her work, he’s so committed that he invested in her work.

Conclusion

In this situation, I would ping Christine and in parallel, also ping Jane to discuss with her briefly about whether she thinks it makes sense for me to connect with John about LaunchBit and whether she can help me with that introduction.

Getting investor intros is a game of hustle that often takes a long time.  Approach the best people who can help sell your company and whom an investor thinks highly of.  Approach multiple people.  And always be selling – even to people who are not investors.

The VC world is very relationship-based.  This is changing, but many VCs prefer to meet with founders who come highly recommended by close connections.  The problem is that well-connected people who can help with introductions are often inundated with requests.

So, even if you ask your well-networked friend who is a total supporter of you and your company for an intro, it could still take him/her a couple of weeks to get to your intro request.

Unfortunately, as a founder, you really don’t have time to wait a couple of weeks just to get an intro.  And sometimes, you need to get an intro from one well-connected friend to another well-connected friend who can do a strong intro for you.  And that could take weeks!

So what do you do?

You need to make it super easy – as easy as possible – for people to do intros for you.  Here’s how.

1. First briefly ask your friend or acquaintance if they wouldn’t mind pinging Investor John Doe with your request

Tell your friend that you’re raising a round, and you’re interested in talking with Investor John Doe to gauge his interest in your business.  Ask your friend if he/she wouldn’t mind pinging John Doe with your request to meet up briefly.  Tell your friend/ or acquaintance that if that’s cool, you’ll send a separate email with the request.

2. Write an email that makes it super easy to forward to John Doe

THIS IS SUPER CRITICAL.  If your referrer needs to think, write, or spend any more than 5 seconds on your intro, then it will not get done for weeks.

Write the email from you.  DO NOT TRY TO WRITE THE EMAIL FROM THE PERSPECTIVE OF YOUR REFERRER.  It will not be in his/her voice, and he/she will end up spending a ton of time editing it.

Here’s an example of a very good email requesting an investor-intro from one our batch founders (with details of the business changed for confidentiality reasons):

Hi Elizabeth,

Thank you in advance for sending this to Martha at BigCrazy VC. We’re raising our seed round and I’d like to get her thoughts on HippoCo. Here’s a quick background:

The $180 billion hippo education market is antiquated and ripe for disruption:

1. Highly fragmented – over 80% of hippo education is distributed through mom and pop stores and only 20% is branded, elite hippo education

2. Structurally inefficient – archaic supply chains require significant working capital for inventory and long lead times to launch new classes / educational content for hippos

3. Un-segmented – Product offerings are split mainly into expensive, elite hippo education or cheap made-up content for hippos with nothing in-between

HippoCo has addressed these issues and created a direct-to-consumer educational brand that offers affordable, useful educational content for the millennial hippo.  We co-design and market new educational products in collaboration with top teachers at traditional hippo schools.

The results are validating our model and popularity with hippos:

• Annualized revenue: $900K USD, growing +70% QoQ
• Margins: 50% – 60%
• Strong unit economics: CAC: $25, 25% repeat purchase rate in the past 6 months

Founders are third generation hippo teachers and technologists from the Bay Area.

My Best,

Sally

When I forward an email, I simply add my note to the top to give my thoughts and perspective on the founder and/or company.  The email above covers everything that needs to be said, including context (why the founder wants to talk with Martha) as well as key information about the business (KPIs and a description).

These are the biggest mistakes entrepreneurs make when asking for intros, which delays them:

• Not providing any context (why the hell do you want to meet?)
• Sending a blurb that doesn’t say anything (vacuous)
• Neglecting to include a couple of KPIs
• Asking for 9 intros but only sending one email that can be forwarded (you should create a SEPARATE email for each intro you want)

If you do any of these bullets, it means your referrer has to THINK about what additional information to add OR do a lot of copying and pasting.

These may seem like silly deal breakers, but if each task takes 5 minutes, and your referrer is inundated with even just 10 requests like this a day, it will end up taking him/her an hour to fulfill this.  This means that your intro requests will end up being neglected for a couple of weeks.

3. Follow up. 

If you don’t hear back from your friend/acquaintance within 5 days, follow up.  It may be that he/she forgot to reach out to the investor you want to approach. Or, it may be that the investor never got back to your referrer.

People’s inboxes get buried quickly, so don’t feel bad about following up!

4. Optional: Let your referrer know how things went

Lastly, assuming you get connected, let your referrer know how things went.  It goes without saying that you might like to thank your referrer at some point during this process.

If you end up sealing a deal with the investor, make sure to mention that to your referrer.

As an investor, I’ve noticed that our best-performing companies tend to send investor reports frequently while the ones that are flailing or flatlined never do unless reminded.  As an entrepreneur, I know that it can be tough to convey bad news to your investors because you don’t want them to think less of you or be angry or disappointed.  Every time I had to write bad news to my investors when I was running LaunchBit, I would cringe a little bit before hitting the send button.

Actually, the opposite is true. I think less of entrepreneurs who never send any information because I think they have no hustle to ask for help when they need it nor are brave enough to own up to the situation.  On the other hand, if an entrepreneur rallies everyone together and says, “Hey look, this situation is not going well, can you all help with ABC?”, I really do want to help, and I think highly of an entrepreneur who can bring people together for a tough conversation.  Every company goes through tough times. There is always bad news, and you are not alone. If your investors have done multiple startup investments, they should know that very well.  One of my investors at LaunchBit once told me that tough situations are actually an opportunity to shine much more than when things are going well.  So, not only should you send investor reports to fulfill your fiduciary duty, it’s also a great opportunity to demonstrate what kind of an entrepreneur you are.

Moreover, it’s a way for your investors to get to know you as a person.  At the seed level, you often don’t have board meetings, and so you’ll want to get to know your investors personally through other means. A monthly investor report is a great avenue.  This makes it easier to ask for help, and investors want to help people they know well.  The worst situation to be in is to go MIA for 10 months and then out-of-the-blue ask your investors for a favor.  Whether it be intros to downstream investors or intros to other companies for business development or intros to job opportunities… sorry, if an investors doesn’t know you well enough, they aren’t going to be able to refer you or put in a good word.

Investor reports can be quick and simple and should only take at max 10 minutes to write.  You should send them at least monthly.  The Hustle writes one of the best investor reports I’ve seen and sends them weekly:

Here are 3 things you should make sure to include:

1. KPIs

Every company will have different KPIs they are tracking, but for most companies, this will revolve around revenue. At a minimum, include:

• Last month’s revenue
• OR if you are pure consumer company, DAUs / MAUs
• Growth

Other potential metrics (depending on the nature of your business) may include:

• Monthly leads
• Churn / re-engagements / upsales

Some companies include a graph of their KPIs, which makes it easier to visualize.  If you don’t have one or it’s not useful to your company, don’t sweat it.  Investor reports do not need to be a chore.

2. How long are you in business?

You should also include your burn rate and runway.  Most entrepreneurs don’t realize that investors can potentially help you broker an acquisition or coach you through an acquisition if you can’t raise more money or get to profitability.  But, they cannot help if you have too little time left, which is often the case when most startups start to seek acquirers.

Similar to how you should allocate months for fundraising, you’ll need even more time to kick off relationships with would-be acquirers.  Sending an email out of the blue telling your investors that you have just 8 weeks of runway left and that you are only now seeking an acquisition is not helpful to anyone, and if you do find one, it will not be material.

3. How can your investors help you?

Put your investors to work.  How can they help your business?  Do you need specific intros?  Do you need them to provide feedback on your deck for your next round?  Do you need help filling a specific role?  Do you need UX feedback?

You should ALWAYS ALWAYS ALWAYS have a call-to-action in your investor reports.  They may not all be able to help, but you should ask.

Investor reports can be used to connect people

As an aside, investor reports are also a way to be a connector.  Investors LOVE to network, and so you have the opportunity to connect all your investors with each other.  The Hustle, for example, will often host and email its investors about exclusive events. Later, whenever I run into a co-investor, we’ll often exchange a line or two about The Hustle, and everyone will feel good about themselves for being an investor.

I should note that their events are not fancy or costly at all.  It’s about the exclusive attendee list, not the actual food or drinks.  People can have a really good time with just $2 wine and simple cheese or pizza.  Exclusive events are also a good way for investors to bring in their friends, who will in turn also feel like they are part of something exclusive (and may even invest in your company).

Be transparent

Be transparent with your investors about your business.  They are already invested, and so you have nothing to hide, even if you have bad news. Sending reports on a monthly basis will make them feel closer to you, and they will be more invested in your personal success.

For all intents and purposes, I’m the non-technical co-founder of my internet company LaunchBit, an ad network for email.  I barely write a line of code anymore.  So what do I do?  I sit around and boss people around. I’m the ideas person.  I write strategy docs.  I manage products.

When I started my failed startup Parrotview, I had no idea what to do.  This is a primer that I wish I’d received myself.  Moreover, if you are a non-technical entrepreneur looking for a technical co-founder, showing that you can do these things effectively will set you apart from nearly everyone else.

Customer Development

As a non-technical co-founder, it can be easy to sit around and do nothing in the beginning because no product has been built. Actually, this is when you are MOST needed.

When there is no product, your job as a non-technical co-founder is to somehow get customers AND keep them happy.  (tweet this)

At the beginning of a potential business idea, I would meet with random people of our target demographic to ask them questions about their pain points and problems. When I first started customer development, it was really daunting.  I would often have to cold-call and approach random people I didn’t know to do these customer interviews. It was absolutely necessary to make sure we were solving a problem, and it was a my job.

Wizard of Oz Customer Validation

Then, after figuring out what problem to tackle, my co-founder Jennifer and I would figure out the minimum viable product (MVP) we’d need to create.  Since speed is everything, we forced ourselves to do MVPs in 2-4 weeks.  This meant there wasn’t a lot of time to build much technically.  So, most of our MVPs have been very concierge-style.  To put it bluntly, the product was just us doing operations manually behind the curtains.

For example, with LaunchBit, our advertisers emailed us their creative, and our publishers would copy and paste it into their newsletter.  Advertisers would send money to my personal PayPal account.  There was no ad server.  No dashboards.  Virtually no technology in v1.  Once we started getting more advertisers and publishers with this approach, things started becoming chaotic.  We needed to keep campaigns straight and keep track of who paid and who needed to be paid.  Sometimes, because there was no technology, mistakes would be made.  A publisher might inadvertently leave off the last couple of characters in an ad campaign.  Or an advertiser might forget to include an image. I’d have to sort out those mishaps.

Customer Service

As a result, both advertisers and publishers would get frustrated or angry because this concierge-style service was tedious – not just for us but everyone involved.  It both hurt a lot and was incredibly exciting to hear these complaints.

Complaints are our #1 indicator that someone even cares about what we are doing.  Indifference is our #1 enemy.

Doing customer service was also my job.  (In parallel, after we had all these customers clamoring for a non-manual product, my co-founder Jennifer started coding like a madwoman to address the most complained about issues.)

Direct Sales

In parallel to Jennifer’s product-building, we needed to keep getting new customers to continue getting feedback to make sure we were improving.  So, I would do a lot of cold-calling and cold-emailing to keep a pipeline full of customers.

I’d never been a salesperson before, so much like with customer development, it was difficult at first to work myself up to emailing and calling random people to do sales.  It still is sometimes.

Growth Hacking

Lastly, once you have product and market fit, it’s the non-technical co-founder’s job to figure out how to grow.  It could be through business partnerships and direct sales.  It could be through online marketing, including advertising, content marketing, built-in product, and virality.  Since your particular company’s growth could come from a number of different channels, the most important skillset at this stage is to figure out a) how to test lots of growth channels quickly and b) how to measure those tests both qualitatively and quantitatively to see what is working.

I’m certainly no expert on all of these things, but these are the skills I’ve found to be the most important as a non-technical founder.  This is what I think non-technical co-founders should be doing in a startup to make themselves useful.  What does the non-technical co-founder of your startup do?

Cover photo by bruce mars on Unsplash

I’ve been working full-time for the past decade or so, and here’s everything I’ve learned about careers.

tl;dr

Believe in your f***ing self.  That’s it.  That’s all that matters.  Everything else stems from this.  

1. Failure opens doors to success.

My first job out of college was in customer support/sales in Tokyo.  Getting that job was a total fluke.  One month into it, I got fired.  I couldn’t speak or write Japanese very well, so my company didn’t want me talking with customers.

I was devastated.  Who gets fired from their first job within a month???

Turns out it was one of the best things that happened to me.  In the subsequent weeks,

• I got moved into the marketing department at the same company.  Even though they’d fired me, they let me stay for a year, and my job was much more interesting going forward.
• Because I was not allowed to stay at my job for more than a year, I got into business school at MIT Sloan at age 23.

When one door closes, you’re forced to find another one to open, and that one could be better.

2. Don’t worry about what other people think.

One day in grade school, I was upset by something that some kid on the playground said.  My dad said, “Don’t worry about what other people think.  They can think whatever they want.  They can think you’re 10 feet tall, and there’s nothing you can do about it!”

This turned out to be the best advice I’ve ever followed.

In late 2008, Sequoia came out with their famous presentation on how they were going to stop investing.  This was a week before I’d planned to turn in my 2 week notice at Google.  I briefly thought that maybe I should not go through with leaving Google to start my own company.

In the end, I decided to leave.  I left during the biggest downturn in the last decade.  Everyone thought I was crazy and stupid, and lots of people told me so.

This turned out to be one of the best decisions of my career.  Had I cared what other people thought, I would’ve lost out on the opportunity to learn a TON about growing a company, work with amazing people and partners, sell my company, and get multiple opportunities to join various VC firms as a partner (not to mention a financially better outcome than staying at the GOOG all these years…).

Worrying about what other people think prevents you from taking risks and, by definition, limits your reward.

3. Persistence trumps all.

When you learn to play the piano or soccer, people always tell you to practice to get better.  You read stories about Michael Jordan, who got cut from his basketball team initially and then practiced night and day to eventually become the best basketball player to play the game.

When it comes to other things such as starting a business, no one tells you to practice.  No one tells you that you need to do 5-100 startups before hitting upon some semblance of success.

Since high school, I’ve had many startups and side projects including Pajel, Bazaar, The Stacks, &Backpocket, Parrotview, Shiny Orb, DressMob, and LaunchBit.

The first one (Pajel) was horrible.  It was a web design company that my friends and I started in high school.  This was in the dark ages when no one had websites.  We had 0 paying customers. Zippo.  Nada.  I was so scared to talk to customers, so no one paid us.

Each venture I’ve done has gotten better.  Still no billion dollar successes yet, but each one has been a step in the right direction.

For LaunchBit, I was still scared to pick up the damn phone, but I had no choice in the beginning. I had to work the phones, or we wouldn’t have ramen to eat.  Like everything else, you get better.  By the time we brought onboard our first sales hire, I had sold near $1m in ads myself.

Anything worth doing is hard.  Just keep going.

4. Optimize for one thing.

There are many blogs that give you advice on what job you should take.  They tell you things like: Take a big corporate job that will challenge you.  Work at a startup.  Start your own company.  Work for the best boss possible.  Hop on a rocket ship.

You can only optimize for one thing at a time in your career.  Think about what that one thing is.

In my early 20s, I optimized for travel.  I wanted to be paid to work internationally.  That’s it.  This is how I ended up working, interning, and doing gigs in Switzerland, Japan, New Zealand, and India between college graduation and when I turned 25.  During that time, I had to forgo making lots of money or working at a notable company or fast-growing startup, or even living near my friends in San Francisco.

What you optimize for may change over time, but you can only optimize for one thing at a time.

5. Find feedback buried in a haystack and improve yourself.

We all hate criticism and avoid it, but the best thing you can do for yourself is actually the opposite: grow a thick skin and seek feedback on how you can improve yourself.

The best entrepreneurs I’ve met – even rejected – ask questions like, “What can I do to win your business?”  Or, “What would it take to get you to say yes?”

Feedback is sometimes very nebulous, though.  I remember pitching one investor on my company LaunchBit.  At the end of that meeting, I asked him, “So what do you think?”  to which he responded, “Well, I don’t want to say the wrong thing and call you a meek Asian woman, but I question how you will lead 100 people…”

I was shocked.  And pissed.  Who says that?

Days later, I was reflecting back on that conversation.  I started to look at it in a different light.  I was no longer thinking about it in an angry way, but rather, what could I learn from it?  Clearly, he didn’t have conviction that I could lead a company.  If he didn’t have conviction, then how many other investors also didn’t have conviction?

Going forward, I did everything I could to combat any “meek-Asian-woman” impression that investors might have when meeting me.  I became over-the-top loud.  I sat up in my chair more.  I was more outgoing.  And it worked.  After that, I closed a lot more investors.

6. Keep perspective

As an entrepreneur, it can be easy to lose sight of the big picture.  A customer asks for a $45k refund – and you’re wondering, how am I going to deal with this?  (True situation that happened to me).  Your problems can feel so big and overwhelming sometimes.

But, in the last decade, I’ve had several friends my age die.  Cancer, car accidents, childbirth, and other sudden unfortunate fates have taken them.  Though there are plenty of problems left to solve, we live in an amazing world, and all of this can be gone in an instant.

Time is actually your most important commodity, not money.  You don’t know how much more time you have, and every day that passes, it becomes even more valuable.

Keep perspective and make sure that you are using your time wisely.

Happy Thanksgiving everyone!

 

Cover photo by Simon Abrams on Unsplash