Is there a right time of year to raise a seed round?

It's hard to answer that question, because even if you look at fundraising data, you don't always know a) when the round was actually closed vs. just announced or filed and b) you don't know when fundraising actually started.  Maybe it was wrapped up in a week or maybe it took six months.

That being said, I was super curious what my own track record had to say about it.  As it turns out, from 2010-2016 inclusive, 75% of my deals are done in the second half of the year.

What's the reason for that?  

I have a few theories.

First, you probably don't want to have the holidays cut into your fundraising process--so most people time their raise to wrap up before the end of the year.  There's a noticeable push to start raising in September to wrap things up right away.  That would explain why you don't see much in January and February--because those deals were done in the 4th quarter.

What it doesn't explain is the slow second quarter.  What's going on in April or May?

Well, perhaps a lot of people start new companies after the holidays--maybe after they wrap up a previous job.  If that's the case, and if it takes a few months to fundraise, then you probably wouldn't see much in April.  That would mean that you start fundraising almost as soon as you leave your last job--which is probably rare.  You probably want to put a few months into testing the idea, recruiting an early team, etc.

This points to the idea that deals are happening because of the founder's time table--not the VC's.  That I largely agree with.  In fact, I think the perception of the VC timetable is largely overblown.  Supposedly, all VCs go on vacation in August, but I've done as many deals in August as March, April, and May combined.  A few years ago, when I was at First Round Capital, we had our largest month of the year in August.  Obviously, those weren't new pitches, but it shows we were still working.

Similarly, I've found it super easy to get meetings with VCs before the holidays.  While you might not get your deal closed right then and there, they're still in the office, and their calendar is probably more open than you think.

Rather than try to game the system too much for your seed round, it's best to get to know investors as early as possible, and raise whenever you need to raise.  

 

Guys

I know a guy.

In fact, I know a lot of guys.  That’s good because guys are all anyone is looking for these days—or even speaking to. 

"Software guys."

"Hardware guys."

"Tech guys" in general.  

Guys who might want to fund our round.

How tired are women of being either excluded in the language of who people are looking for, or being lumped in with men and being described as "Guys"?

It’s bothering me, too, actually.  And it’s not just guys that do it.  

Women do it all the time, which kind of blows my mind.

How hard is it to refer to people like this?

Software dev.

Hardware hackers.

Tech people.  

Investors.

People use “guys” as a catch all term for addressing and referring to a group of people—and it’s just wrong.  I know it doesn’t seem so bad, but it’s just a lazy habit that makes me think people are being lazy about lots of other language things—the way job posts are written, the way HR manuals are still unwritten, what profiles of people are recruited, etc.

Do you think Uber set out from the beginning to be an environment unfriendly to women?

I don’t—but unintentional and lazy lapses breed a kind of broken windows environment that just compounds on itself.  Boundary lines get pushed everyday, millimeters at a time, until all of the sudden you’re actually surprised to find out you have a toxic culture.  

Be intentional about your language and your culture.  How you speak, and what you say, signals all sorts of things about you.

People ask why I don’t have much of a Brooklyn accent—and the answer was that I spent a lot of time to think about how I wanted to sound and what I wanted to say.  If I can avoid sounding like someone who might shake your bakery down for money, then anyone can speak like they care about how women get addressed.

Prove to Yourself that it isn't True

It's really easy to be dismissive these days--because people talk a lot of shit.

There's probably no more dismissive group than founders--because you have to dismiss a lot of doubt and negativity on your way to success.  However, a lot of founders have a tendency to be overly dismissive--to tell themselves a narrative and stick to that, no matter what anyone else, even if the criticism is warranted.

Sometimes, it isn't based on a lot of information--like when someone says you should be worried about a competitive product and a founder really hasn't even looked at it yet.  Other times, the criticism comes from someone who doesn't know the founder that well, so the excuse is, "Well, they don't really know me."

Over the last couple of years, I've started practicing a very different response to criticism.  I generally assume it's all true.

That makes me more open to it, and frankly, pretty vulnerable to letting some difficult to hear things sink in.  

Then, I try to prove to myself that it isn't true--which I can do pretty easily most of the time thankfully.  Going through that exercise keeps my actions well examined--and holds me more accountable.

So, if someone says I'm selfish, I look for ways in which I'm not to disprove that I am to myself.  Sometimes, you wind up in a situation where you might not feel a certain way, but you don't have a lot of evidence to the contrary.  Maybe I don't think I'm selfish, but I really haven't been doing much for other people lately or taking their feelings into consideration--so I've been inadvertently selfish even when I don't intend to be.

It's not the easiest exercise in the world, but I can't recommend it enough.

Thinking of Community as Marketing When You're Not Marketing Anything

Just had a few conversations with startups around how early to hire for marketing.  For most founders, it seems silly to hire for marketing when you don't have a product in market to sell.

So, when are you supposed to start marketing?  The day it launches?  Seems a little late for that.  You'd like to have developed an audience to be able to launch your product to--because as any PR person will tell you, relying 100% on other people's audiences can be a tough sell.

So now imagine developing an audience before you launch.  Would you do this with an incessant stream of marketing and company e-mails for a year?

That would be like the worst Kickstarter pre-sale ever.

"Hey, we're still working on it."

"Yup, still working."

"Oh, sorry... We're kind of delayed."

"Look, here's a picture of Bob in the warehouse with some parts that don't look like the thing you ordered yet."

"Delayed again."

"Want to buy another one before you even have the first one you ordered?"

No, you wouldn't build up much of an audience this way.  So how do you build up audience?  You do it by gathering people around something they care about--by providing a network value, connection, and engagement around the thing they care about.

Sounds a lot like "community," doesn't it?

Communities should be built around values, not around products, so you don't need to wait until you have a product to launch a community.

Let's imagine you're building a de-stressing wearable.  You put this band around your wrist, and you automatically feel completely zen.  The only issue is that the product isn't going to be ready for a year.

That's actually an exciting opportunity because you have a year to develop a really thriving community around reducing stress.

How about...

  • Writing a book on the topic, perhaps a curated set of essays on de-stressing from the world's most zen executives, celebs and processionals.
  • Setting up a series of local meetups across the top 25 MSAs dedicated to reducing stress.
  • Creating a great de-stressing tips e-mail newsletter.
  • Starting a de-stressing podcast.
  • Launching the StressTech conference.
  • Creating a "Humans of NY" style Instagram featuring tips from regular people about how they deal with stress.
  • Offering online and offline courses related to fighting stress--maybe even a certification around stress coaching.  

If you did all of these things, is there any doubt that you'd have somewhere on the order of 25,000-50,000 e-mail addresses of people who care about fighting stress in their lives or workplaces or whatever?  How amazing would your wearable launch go if you could market it to this cultivated community?  

Not only would it be amazing, but how much would it be worth to you in actual dollars?  Could you double your launch targets with a community like this?  How much more would you sell in a pre-sale?  

The point is, before you wonder who is going to do all of the above, if you do the math on how much better your launch outcome would be, is it even a question whether or not a hire to do this would make for a great investment?  The dollars in salary of a person on staff to build this community *well* ahead of a launch could easily be made back based on your new increased launch trajectory.  In fact, I'd argue that the earlier you hire this person, which means more dollars spend, the increase in the chance of your success.  

The key to hiring this person would be making sure they are extremely organized and process oriented.  It would be easy to think of them as "creative" and while they would definitely need to be a clear communicator, they're not really creating any *new* ideas.  The themes and values they'd be working around should be carefully fostered by the founders--and ideas of what's possible are already out there.  The key to a good content and community person is the crispness of the execution, making sure you've got lots of moving pieces working in order and on time, and organizing things like examples of voice, tone, and things to keep in mind about stakeholders into editorial and community processes and rules.  

Plus, this community strategy wouldn't just end at launch--it's something you'd probably want to do anyway, and the earlier you start it will just compound your returns more and more over time.

 

What You Heard About VCs is Usually Wrong and Why You Can Blame VCs for It

VCs lie.  Everyone knows that or at least suspects it.

What you don't know is whether they're lying to you or to themselves.  I can't tell you how many times I've heard an entrepreneur make a generalization about VCs based on a few meetings that was completely wrong--and they were usually basing their statement off what the VC told them.  

Often, it's that the company didn't have enough traction, which could mean either one of two things:

1) The VC just didn't like the idea or the founder, but didn't want to just come out and say it, so they raised the bar to a level the founder wasn't capable of hitting anytime soon--which is lying to the founder.

2) Or, they just don't really take this kind of early stage risk, but they call themselves opportunistic, which is mostly lying to themselves, and kind of lying to the founder, too.  

Logic would dictate that you either don't invest at this stage, or you don't like the company, or you don't like the founder.  One of those things has to be true when you pass.

When you aren't honest about why you passed, word gets out into the market on whatever you made it, and it grows like the worst kind of fake news:

VCs don't invest in food (Blue Apron).

VCs don't invest in brick and mortar (WeWork). 

VCs don't invest in women (Rent the Runway, Zola, Houzz, Modumetal)

VCs don't invest in education (General Assembly)

VCs don't invest in...    Yeah, you get it.  Just about everything I've heard VCs don't do, I can think of an exception--and that's the key.  VCs invest in exceptions.  Given that we'll see thousands of opportunities for every one we invest in, it is the exception that we ever invest in anything.  

Most of the time, we say no.

Our default is "no", but the process dictates that we're supposed to come up with a reason everytime we do.  Sometimes, that reason is just, "It didn't get me to a yes," and they can't figure out why it didn't, so they make something up.  

On top of these falsehoods about VCs that get out into the market, you've got entrepreneur cognitive dissonance.  You go into a meeting thinking you've got something good, and when an investor tells you no, your inclination is to be dismissive of the investor.  They didn't understand because X.  They were stupid.  They don't understand your market.  They're not risk takers.

Very rarely do I ever see a founder attempt to raise money and say, "Hey, you know, this idea wasn't nearly as good as I thought it was, and the fundraising process helped show me that."

Even fewer times do I hear, "The fundraising process helped me understand that I'm not really prepared to run this business."

Being anti-founder is pretty taboo, so the community is always going to point figures at investors before they'd ever suggest to a founder that maybe they're not cut out for this.

It's only after absolute failure, burned friends and family money, burned savings, and probably a year or two, do founders ever really admit these kinds of things.

I should know.  That's what I did.  I blamed investors for my own shortcomings as a founder.  So, yeah, add a third lie to that list.

So, whatever you heard, you probably heard it wrong--because usually VCs are lying to themselves, lying to you, or you're lying to yourself.

Getting the truth in venture capital is really, really hard, so just be careful when you're spreading fake VC news.