50 Deals In

In January of 2010, just a few months after I joined First Round Capital, I got to back my friend Rob May and his company, Backupify.  Five years later, he sold that company to Datto, and I got to back him again to build Talla.

Backupify would be the first of what is now a 50 deal track record across my time at both First Round Capital and my own firm, Brooklyn Bridge Ventures.  Yesterday, I closed on this "golden" opportunity and so I thought I'd reflect a bit on how the 50 looked as a group.

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Well, most of them are still alive, so that's cool.  Some of those acquisitions were awesome, like GroupMe, Singleplatform and Backupify were wins.  Others, not so much. 

More than half the time, these companies have gotten follow-on capital--and another third haven't needed to raise yet.  Only a small handful have crashed and burned on just one round of funding.

A lot of the deals are in the "Business pay us directly" space, but most of them are not.  

Not a lot of geographic diversity, but I can bike to nearly all of these places, so that's good.

At least 44% of the companies I've invested in have had at least one female, person of color or LGBTQ founder.

Most often, I'm investing in pre-seed rounds, especially since I won't invest when the company has already raised $750k in a prior round.  

Most of the time, I'm investing in teams with ideas, not quite products.

Like most VC's I'm mostly investing in software and internet technologies, but about 22% of the time, I've invested in companies that make physical things--from food to physical spaces to consumer electronics.  

Mixing up these different categories has not only provided great return opportunities, but it's also a really interesting experience for me.  I'm looking forward to the next 50!

 

 

 

Being in the Minority

Over the last couple of weeks, I've been to a couple of tech events that were sparsely populated by straight white men.  

Yeah, can you believe it?  

One was a careers panel aimed at women in tech held at Flatiron School and the other was Alterconf.  The goal of Alterconf is to provide safe opportunities and spaces for marginalized people in tech and those who support them by highlighting positive initiatives of local community members.

I think there might have been more trans and gender fluid people in the room at Alterconf than there were straight white men.  That's not something one experiences in tech that often.

At each event, I felt my behavior change.  

Normally, when you're a VC, lots of people are coming up to you, asking your opinion on things--you cannot help but feel a sense of belonging in the room.  You're supposed to be there and there's an unmistakeable power dynamic in the room.  It's all too easy to get a sense of self-importance and to feel like you have a disproportionate influence on the room.

I didn't feel that way at either event.  I didn't feel like I belonged--despite the best efforts of both events to make everyone feel welcome.  It wasn't anything that anyone else did.  It was all in my head.  By being consciously different than others, I felt like maybe I shouldn't be there.  Unlike other startup events, the dynamic wasn't set up for me.  

It's undoubtedly a lot closer to how a big chunk of the population feels than I'm normally accustomed to feeling like.  

Would I say or do the wrong thing?  

VC's don't usually worry about saying the wrong things--maybe that's why we disproportionately seem to have built a reputation for saying the wrong things. 

Nor do we ever feel like we don't have anything to add to a conversation.  

In all honestly, that was a pretty good thing.  Feeling uncomfortable because you're in unfamiliar surroundings is a great learning experience.  It makes you hyper aware of everyone around you.  You can't generalize people so easily and you don't have easy language and anecdotes to fall back on.  You have to treat everyone as an individual, listen, and be really thoughtful about what you share and how you share it.  

Just yesterday, I was speaking to a founder who told me that if they raised a seed round, they'd hire "another guy or two on the tech team."

"Engineers, not guys."

"Huh?"

"They might not be guys...the best people for the job."

"Oh, yeah, sorry."

"Don't apologize to me.  Just be conscious of it."

I probably would have let that go had I not been to these events and I'm glad I went.  I'll never know exactly what it's like to be a marginalized person--but situations like this help make life more relatable to a wider group of people.

Plus, from a pure business perspective, if you're not going to stray outside the communities that hold the most power and influence, you're going to miss out on opportunities and talent from at least half the community, if not more.  

The future will look less and less like me than ever before.

There's less competition in these spaces and where there is great talent, it's my job as a "first check" investor and part time recruiter for my portfolio to be where other investors might not be. 

How to Perform Inception on a VC

One of my favorite phrases is "performing inception".  Inception is one of my favorite movies and I love the idea of meticulously planning out the placement of an idea in someone else's head.  

That's basically what founders have to do when they fundraise, because you'll never be more successful with an investor who thought it was their brilliant idea to invest in your company, not yours.

Remember what we learned from the movie.  Ideas that stick well in other people's heads have to be simple, and they're better when based on positive emotions.  

Who invests is also important--these are people who want to make money, but also be seen investing in the "hot" companies.  Sometimes, just proving out a business model isn't enough.  

Are you creating a company that looks like something they'd be excited to share?

So what ideas are you trying to place in your next round investor's heads?  And how do you do it?

It has to be simple.  

If an investor had to believe one simple thing about the world that would eventually lead them to investing in your company, what would it be?

That very idea should be at the heart of all of your PR.

Is it that there is a lot of money to be made in your sector?  

Is it that your team is the best out there?

Is it that your business model rises above everything else or is really innovative?

Maybe you're the next obvious iteration of a model that works?

Customers need your product to live happy lives--perhaps that's it.

How many times can you repeat that, and where, and who can you get to repeat it for you?  What relationships does this VC have that can help reinforce the message?  Content you create, interviews, podcasts, speaking engagements, survey data you research and disseminate, events, engagement over social media...   VCs need to see your message time and time again. 

Founders should also be spending time in networks of other venture-backed founders--not only to learn, but to have their message and reputation echo back to other VCs.

"Have you met so-and-so?  They're really impressive."

Simplicity, consistency, repetition and pervasiveness.  That's how to get an idea to stick in a VC's head.

Five Lessons Founders Can Learn from Donald Trump

Honestly, it's difficult to think about anything else besides the election and this impending clown show of an administration these days--but I'd really like to get back to blogging about startups.  

Consider this post part of my own transition team of posts.

While the country is far from a startup, founders find themselves as essentially newly hired CEOs with a lot of uncertainty surrounding them.  This is the position Donald Trump finds himself in now, and by watching what he's up to, we can learn a lot of lessons around how to handle it (or how not to, mostly.)

1) Get to work.

Watching a President-Elect comment on every single SNL skit is like watching a founder who won't stop adding on to their fundraising around.  Fundraising feels good when it works out, especially towards the end when there are always a few more angels who want to squeeze into an oversubscribed round.  You need to come off of riding that high and put your head down and out of the spotlight for a while after that, and do some real work once you've got your fundraising win.

2) Hire people who create confidence, not the people you already happen to know.

Hiring should be a process--from Day One.  If you don't create a process that seeks out the best people from wherever they are today, how are you ever going to do it two years from now, four years from now, etc.  Eventually, you run out of people you know well--and frankly, most of these people aren't the best people for the job anyway.  Once again, this isn't exactly what's going on in the Trump administration and anyone who has built teams knows it's going to hurt his chances for success later on.

3) Stay positive.

Your competition is going to launch just before you or there's going to be some press saying how the funding cycle is done for your industry.  Maybe you'll get a bad review or two for your beta release.  These are all people you will need to convince and get the support of in the future, so while discrediting them might feel good in the short term, it doesn't help you win in the future.  Instead, why not listen to their criticisms fairly and double down in your efforts to win their support with action and results later?

4) Being a CEO isn't that glamorous.  

A lot of people start companies because they want to be their own boss or be in a fast paced environment, but most days, you won't feel like either of these things are true.  You're always lacking for resources or time, and you're not moving nearly as fast as you want.  The best companies build for the long term, and the job of the CEO is to create processes that effectively take the founder out of way.  So, if you're a developer, marketer or salesperson, you're going to have to reckon with the fact that you're now a manager.  Instead of building, you're taking meeting after meeting after meeting, and you won't be able to have your hands in everything.  

This is the job you asked for--so don't kid yourself what it's going to be like once you get into it.  Success can be a curse if you're not realistic about what it's like--it seems from the sobered expression Trump seems to carry around all the time, actually being President isn't nearly going to be as fun for him as running for the job.

5) Don't surround yourself with "Yes" people.

It's easy to live in your own little filter bubble, especially as a founder, or, apparently, as a President-Elect.  You can forget that there are lots of people who didn't think your ideas were very good--and those are the people who can make you a better founder, and who can make your company better.  It's easy to satisfy a small, vocal minority that feels like "everyone" until you need to build things that really scale.  Make sure you listen to a few skeptics along the way and really hear out what they have to say.

 

"About Last Night..." The note I just sent to my portfolio.

In 2008, I tried to fundraise for my startup the week that Lehman Brothers went under. 

You can imagine how well that worked out.

Basically, VCs told us that they were going to wait and see how the election turned out--and things didn't really thaw out until the following September.  

Extreme uncertainty slows the VC market to a crawl--that's what I learned.  We didn't get a bubble, but we got a really tough year fundingwise and that's what I'm expecting.  Over the long term, innovation prevailed and 2008 turned out to be a great year to have a 1-3 year old company if you could make it through the next year.

Here's what I would suggest:

1) Reassure your teams about your mission.  If you felt good about what you were doing at your company yesterday, you should feel good about it today.  Listen to them.  Let them ask questions and listen to them.  Talk out their concerns.  That's most important above all.

2) Find a way to extend your runway--whether it's pausing hiring for a little bit, and yes, thinking about salaries.  I don't think there's any worse morale killer than a salary cut, but if you're worried about your company going out of business, some hard decisions may need to happen.  Feel free to reach out to me and your other investors and talk about this.  This also means taking on extra capital.  If you're concerned at all about the fundraising cycle, reach out to anyone who has been floating around the company.  Preemptively tell them that you're concerned about the near term uncertainty but you believe in your business and believe you'll have opportunities to make hires, double down on sales, etc., so if they want to talk about coming in at a reasonable valuation, you want to fill them in on all the positives.

3) Find something positive to do as a company--like volunteering.  Clear your heads, feel good about helping--because if there's anything we learned last night is that a lot of people feel disadvantaged and we need to start caring about a much wider tent of people than we have been.

I'm available if you need to chat.

Charlie
Text me and I'll ring you back...