No Leading, No Guts, No Glory

I spoke to a new seed fund investor the other day and they told me they don't lead.

I told them that was bullshit and they should, because founders need decisive investors who can be helpful, not ones that sit on the sidelines and outsource their decisions to other investors.

They told me their fund wasn't big enough.


I led the $1.8mm seed investment in goTenna with $250k.  I led the $4mm Ample Hills round with $300k.

There's no official definition of a lead other than someone who puts down a term sheet, helps gather the round, and who is most active with the company.  You don't have to be more than half the round.

When you're small, like my fund, I call it the flypaper termsheet.  You've got all these indecisive people buzzing around the company, and you put down some terms that are fair and everyone can agree to.  I love when the flypaper termsheet can help an entrepreneur tip the scales and get a round done.

To me, a fund that doesn't lead is saying to the market, "We don't really know how to make decisions, but we'll let someone smarter than us make the call."  

Do you really want that person invested in your company?

Or, worse, they're saying, "We think this is good, but we don't really want to do any work unless we know this round will close--so we don't want to risk wasting our time and we're not going to help you close it."


Or, even worse, it means, "We aren't honest enough to just say we don't like this.  So we'll feign interest, knowing no one in their right mind would ever lead this, so it looks like we were supportive, but we were just setting you up to fail."

If you can't put your stake in the ground, make an independent decision on a company, say what the price should be and the terms, or you just don't have the time, what are you even doing running a fund? 

I don't even know why someone would invest in a fund where the General Partners don't have enough conviction to hand someone a termsheet.  How in the world did you get LPs??

Saying to someone raising a seed round "Come back with a lead, " is lame.  It's a seed round, not a $40mm Series C.  

*That is the job.*

If you're in NYC and you haven't raised $750k yet in a previous round, Brooklyn Bridge Ventures leads.

Why #imwithher and voting for Hillary Clinton

First off, I think that Hillary Clinton and John Kasich are pretty much the only reasonable candidates left in the race, but I agree with her on most of the basic dividing line issues--choice, LGBT Rights, gun control, etc--so it's not too hard for me.

And yes, Bernie Sanders is an unreasonable candidate.  Change for change's sake is pretty dangerous.

Words like "establishment" ring hollow to me. Why is the word "establishment" negative?

Look at all we've established--all the freedoms we have, stability, economic prosperity (unless you've noticed a bread line somewhere that I haven't). Is it perfect? Certainly not! But "break up the big banks"? Why? How?  

Not even Bernie knows what it means.  

It wasn't Goldman Sachs that lent out all those shitty mortgages. It was little pseudo banks like Countrywide that have largely been eliminated.

And all you New York City Bernie people who are big into climate change as an issue, stop taking Ubers everywhere and use public transportation.  You care to talk about climate change, but you don't care much to do anything about it.  

The biggest problems we have in this county are partisanship and lack of personal responsibility. To me, Bernie represents the second worst of "Blame someone else" next to Trump. With Trump it's immigrants than are screwing up your life. With Sanders it's corporations. When is anyone going to say "We're screwing ourselves!" 

We screw ourselves in a lot of ways.  We don't have great options and food supply is an issue, but we mostly choose to eat like crap, driving up healthcare costs.

The gap between the rich and the poor has a lot to do with racist policies... And oh guess what white people, you've been plenty racist for a long time without the help of big corporations.

And who are corporates? It's us! Who do you think is running them?


It's us, feeding at the trough.  It's no different than your local cops and firemen getting pension and health benefits that the average non-public employee can only dream off.  They take as much as they can get, no different than the CEOs you love to hate--only when they take money out of the taxpayer pockets, it's a relatively small figure at a time.  You hardly noticed you're getting fleeced by your next door neighbor. 

Sanders and Trump, while at opposite ends of the spectrum politically, don't have the first clue about international politics or how the economy actually works. They just like to yell and complain without much in the way of solutions. Hillary hasn't exactly wow'd me with some amazing set of solutions--but what political candidate has? 

The best solutions piss a lot of people off, so you wind up with mediocre group think--you can't really get elected otherwise. But Hillary is probably the most qualified candidate I've ever seen in my lifetime.  She understands how the system works and is thoughtful.

Like Obama, Hillary understands that you don't govern with slogans. You govern with nuance, because problems are complex. She and John Kasich are by far the most qualified people left standing, and poor John Kasich--the Republicans are even more screwed up than the Democrats.

It's just not even close for me.

I know why people want to love Bernie, because you think he represents real change, but it just doesn't work that way. No one in the system wants huge change... and frankly, the system mostly works pretty decently... with lots of room for improvement but the country is stable, people get fed, work, etc. You want to know what happens when you get some bright eyed and bushy tailed populist candidate who thinks they're just going walk in and waive a magic wand and fix all our problems with obvious solutions that we'd all benefit from?

Read what happened to Schwarzenegger in California.

"He came into office with boundless faith in the American people—after all, they had elected him—and figured he could always appeal directly to them. That was his trump card, and he played it. In November 2005 he called a special election that sought votes on four reforms: limiting state spending, putting an end to the gerrymandering of legislative districts, limiting public-employee-union spending on elections, and lengthening the time it took for public-school teachers to get tenure. All four propositions addressed, directly or indirectly, the state’s large and growing financial mess. All four were defeated; the votes weren’t even close. From then until the end of his time in office he was effectively gelded: the legislators now knew that the people who had elected them to behave exactly the way they were already behaving were not going to undermine them when appealed to directly. The people of California might be irresponsible, but at least they were consistent."

It's hard to get excited about incremental change, but it's the only change that works.  Smart, experienced people promise you what they can do.  

Donald Trump and Bernie Sanders aren't candidates, they're circus acts.  Circus acts promise you the world and are fun for a little while, sure, but not over four years.  


Leave Your White Guy Behind

Over the weekend, Rent the Runway held an event for its Project Entrepreneur initiative, which brought together over 100 female entrepreneurs looking to get education and advice on how to take their businesses to the next step.

Unfortunately, one of the panelists, Skinny Girl vodka's Bethenny Frankel, told an African American founder in the audience that if she wanted to raise funding, that she should go out and hire a white guy to be the face of her business.  I wasn't present at the event, but I heard about it and found this tweet that separately referenced the comment:

Now, I've seen the stats and the studies.  I know that white males get a majority of the venture capital funding.  I know that in blind studies, people with male names get taken more seriously in business case students than the same characters with female names.  

But I also believe that the best person to speak for a business, regardless of their gender or ethnicity, is the founder--the person who is most passionate and most knowledgeable about the business.  

Yet, I can think of at least four occasions in my career where I took a meeting and a female founder clearly brought a token white guy to the meeting, seemingly in order to increase her chances of getting funding.  Two of the female founders were white and two were of color.  The men were all slightly older finance types that were exactly the kind of guy you would think someone would choose to connect them to financing. 

In every single one of those meetings, the guy detracted from the meeting.  These guys dominated the conversations, often cutting the founders off, leaving me confused whose vision I was backing.  They all tried to form a connection with me as if we were in some secret white guy financing club--with two of the guys repeating phrases like, "We know how it is" or "We know what you're looking for," meaning him and me.

Actually, dude, because you've been talking this whole time, you don't know anything about me.

I'm not your finance bro.

Their presence only served to successfully do one thing--undercut the founder's presence.  It made the founders seem less formidable, less confident.  The person I wanted to speak with was the person who was passionate about the idea, not some hired part-time gun.  

And that's one of the biggest issues we have in the funding landscape.  As someone who has backed teams with at least one female founder about 40% of the time, or a founder of some kind of diverse background at least 50% of the time, I believe that these founders can get funding--but they're not encouraged and advised properly.  

Yes, straight white males are getting most of the funding, but they're also most of the pitches.  It's not clear to me that other types of founders are getting less funding in proportion to who actually winds up pitching and what they ask for--and you can't get what you don't ask for.  

I'd like to think that when you get to the meeting and you are confident that you've got something special, all bets are off.  

Unfortunately, it's hard to go into these meetings with the same confidence when you go to a women's entrepreneurship conference and you've got people like Bethenny Frankel telling female founders to hire a white guy.  That's how you wind up with more white guys in the funnel, asking for more money, with more confidence, and getting it.  

So, even when you do get your foot in the door and get into the meeting as a female or diverse founder, there's no undoing the environment that affects your mindset as you pitch.  If you're not a white male, you've undoubtedly been told to try to raise less, and maybe not to be that bullish about your projections, so your likelihood of swinging for the fences in that meeting is going to be less.  Swing lower and there go your funding chances--because these are investors looking for only the biggest opportunities.  

Back in late 2010, when I was at a previous fund, I saw Chantel Waterbury of chloe + isabel run the table on a $3.25mm seed round--on a Powerpoint.  Not a single investor turned her down.  What struck everyone in the round was the confidence that she exuded.  It was an amazing thing to see a roomful of guys take a pitch from a jewelry company founder and say, after she left, "I don't know about the jewelry business, but Chantel is going to make us a shit ton of money."  She didn't have or need a token white guy.  She was doing just fine as a mom who knew her shit and believed her story through and through.

We need to be doing more to make every single founder, white, black, male, female, straight, gay, everyone, feel like they can move a room like that by being exactly who they are.  We need to be more conscious of our biases when we advise and encourage.

And, no, Ms. Frankel, we should tell diverse founders to leave the white guy behind, but make sure they feel as confident as one.

Selling a Vision or Blowing Smoke?

The other day, I sat in on a pitch practice with a company who, by all accounts, is the leader in its category.  They are doing things no other company like it has been able to do, on relatively little capital compared to their peers.  When they focus on sales, they crush it.  When they focus on making product improvements, they make great strides.  Consumer buzz in their market has been off the charts.

However, their story wasn't all quite wrapped up in a neat little box with a bow.  Because they have such a small team, these things didn't all quite happen in order--they've happened one thing at a time.  Sales have been a bit lumpy, for example, because there's no real marketing person driving it.  There's no sales team or channel relationships to get that flywheel turning in a predictable manner--yet.

Now, they're out fundraising.  The question they face is how do you tell an imperfect story about a company where you're sure all the pieces are there, but they're not quite working together in a train that is leaving the station yet.

You can go either two ways with this:

You can go out confidently, because you believe there's a big opportunity, point to all the great pieces that are there, and say "I'm raising this round to put them all together and take over the world." 

Or, you can go out with something smaller, theoretically easier to ask for--a turning over of the next card if you will, to fix all those little problems and show better the next time around.

The second option sure feels like the safer bet.  

Swinging for the fences with anything less than a perfect story feels like a huge risk, right?  What if you miss?

Here's my worry: If you go out swinging for anything less than the fences at any time, you're going to signal that this is a small opportunity, or something slightly strained or broken.  No one gets excited about "extensions".  Why pitch an "almost" versus a "sure bet"?

Entrepreneurs, especially in a questionable fundraising environment, might be asking for less, being less aggressive about projections, and generally self-conscious about the parts of the story that aren't perfect.  I saw this in their pitch.

But who's story is perfect?

If anything, in a bad environment, I suspect that only the screaming buys from entrepreneurs who come in guns blazing are going to get noticed.  To me, VCs have two reactions to things: excited and not excited.  

The not exciting reactions turn into passes and the exciting ones get worked on.  Your job in a pitch is to excite your audience for all the same reasons you're excited.  Then you can let VCs talk you off the ledge in terms of price, round size, etc.  However, if they don't sense that initial excitement coming from the founder, the sharks are going to smell blood in the water and you'll be toast.

Rounds are getting done--big ones, too.  They might take longer and not be priced as high as founders would have liked, but fundraising is like a game of enthusiasm telephone.  I tell one person and they tell one person and then so on and so forth.  If the entrepreneur doesn't exude a ton of confidence, it's only going to get more and more muted as the pitch gets passed around the partners of a firm.  

You have to be extra careful about trying to explain away your weaknesses before anyone's even asked about them.  Go over your deck and remove anything that detracts from your amazing story.  Eliminate it from your thoughts and your language.  

That doesn't mean you won't have well considered answers--but they need to be positive, confident ones that return the story to your vision.

The same goes with pitches that talk about how you're getting to break even.  That's nice if you're raising a later stage round, but when you're a seed funded company, you should have lots and lots of growth ahead of you.  You shouldn't want to get to break even as a strategy.  We're not building a mom and pop business, we're aiming for companies who can exit for hundreds of millions of dollars.  

Venture cycles can feel like a bank run sometimes.  The media says venture is slowing down, so VCs are more cautious, so entrepreneurs pitch differently, make different asks, perpetuating the downward cycle.  

Be careful not to let the cycle shake your confidence.  

Brother, can you spare a rockstar? How else to get that next hire.

I get a lot of "Do you know anyone for this?" e-mails.

It's good to know what people are searching for, but the chances that an investor knows the right person are quite low.

Here are five tips for improving your chances:

1) Hire someone to do the blocking and tackling.

This is a volume game, just like sales.  In my estimation, you need to reach out to roughly 100 people to score 10 interviews to hire 1 person.  Results may vary.  You might get a rando in from a job post, but I wouldn't leave it to chance.  Go find the right person yourself.

In sales, when you want to generate good leads, you hire an SDR--a sales development representative.  They basically work towards filling your pipeline and booking meetings.  It's a largely administrative job full of sniffing out contacts, vetting them for basic criteria, and creating opportunities.  

This kind of person could come in handy in recruiting.

They could do the legwork of finding relevant people, or people who would be likely to find the relevant people.  Arm them with a short, focused explanation of the job you're hiring for, and why you think it would be an interesting experience to work with you and your team.  

When you agree on a message, you might even give them an account with the founder's e-mail alias to send messages from, because who wants to get an e-mail from an RPD (Recruiting Pipeline Developer)?  The best ones will add 1-2 specific sentences why they're specifically reaching out to that person in the e-mail.

If you're asking for referrals through your network, make them specific.  As an investor, I'd love to get a note that says, "Hey, Charlie, we noticed that someone in your network knows Jen.  It looks like she could make for an interesting addition to our engineering team for X, Y, and Z specific reason.  Could you find out more through your connections?"

This way, the work of finding the person has already been done, and all I need to do is find the connection we have in between and say "Hey, Joe, what do you think?  Would Jen be right for something like this?"

Makes my work easy peasy.

Sometimes, you have to play network golf--and you don't have the specific person in mind, but you have a vague notion of who might know that person.  Same deal.  Just send me a note that I can send to the person who is a lot closer.  Asking me if I know any front end engineers is going to have a lower hit right than if you send a note to me because I noticed that you know the person who runs the Front End Engineering Meetup, who might know someone.

2) Create events that your target hires want to attend.

How could you get 100 of the kind of people you want to hire in one room?

Certainly, hosting an event about how awesome your company is probably wouldn't work.  What are they interested in, and how can you associate yourself with it?  Certainly, there's got to be some kind of innovation, best practice, or advice that they want to hear about.

And when you figure out what that is and offer it to them, you're welcome to ask them in the RSVP whether they'd be open to hearing about opportunities going forward.  Even if you have to pay a speaker and for some food or drink, the cost of these events will be significantly less than that of just a single fee paid to a recruiter.  

You just have to make sure you're targeting invites well.  Seed the audience with influencers, experienced professionals, and figure out which meetups, outlets, and organizations would be your best partners for getting the word out.

3)  Recruiting is everyone's job.

If you've got budget and open positions, then your early folks need to be spending a lot of time on helping to fill them.  If it's your first 10 employees, I'd say as high as 10% of their time.  Think about it--each hire up to 10 adds more than 10% capacity to the organization.  So, doesn't it stand to reason that the organization would have a positive ROI on spending 10% of its time recruiting?  

That means getting out there in person showing off the awesome problems you're trying to solve and the creative solutions you solve them with.  That means thought leadership--and helping each other to hone your stories.  Make time at the end of each week to give each other feedback on presentations, and always be on the lookout for speaking opportunities.  It bodes well for potential employees if you're the kind of organization that puts its people on a pedestal, showcasing them and doing as much for their career as they're doing for your company.  

4) Use advisors.

If you're making the first hire in a particular area, or you don't have a senior person that someone would get excited to work for, think about using at advisor.  Could you get someone amazing that anyone would be thrilled to spend time with to spend a day every week or two at your company mentoring new employees.  Maybe you could never afford them or doing so at this early stage would be overkill, but you could leverage their presence to get talented folks in the door.  

5) Go out of your way to build diverse teams. 

If your first ten employees are white guys, do you know how much harder it will get after that to hire from the rest of the 70% of the population that isn't white males?  If you build an environment that looks more like a smaller version of what you'll look like at 100 people, you'll have an easier time getting there.