Yesterday, I saw this tweet come across my screen...
This feels like a West Coast mentality, because deals seem to feel "hot" more often out there--I believe because of founder pedigree. It's more often the case that founders are repeat entrepreneurs on the west coast. Combine that with a larger number of seed and early stage funds chasing deals, things "look good" earlier, based on the team or maybe some quick traction around a small, tightly connected base of people, and seem to pick up fundraising momentum quicker.
While I believe that personal branding is important for everyone, especially entrepreneurs and investors, I'm really bothered by the credence people put into a deal being "hot", especially given my own personal experience with "hotness".
Today, I can tell a nice little story about spotting hot deals, and, in fact, I raised my fund off of that narrative. Only, I didn't spot a hot deal any more than anyone makes a viral video. Videos don't start out viral. You make them, and then the audience decides that it should be passed around a million times.
All along this narrative, there was really nothing special about my interest in any of these companies. My brand didn't really have much to do with my ability to plant a noticeable flag on the company's behalf.
If you've read Nick Bilton's Twitter book, you saw my quick cameo...
"Do you twitter?” he asked Fred in the e-mail. “You should check it out. . . . I didn’t get it at first, but now that there’s a group going to sxsw, I get it,” Charlie wrote. “I’d never text all the people I’m texting now . . . but it’s a really seamless way to text groups and individuals at the same time.” Fred wasn’t convinced, telling Charlie that such a service would never work and that other companies that had tried to make Twitter-like products had all failed.
Of course, Fred was open-minded enough to dive right in as he usually does and quickly changed his tune, but think about that. This was *eight months* after the launch of the service and the guy who eventually led the deal still wasn't totally convinced.
Not exactly what you call a "hot deal".
Two years later, Foursquare launched at that same conference and I sat on joining it for months and months after. Dennis and Naveen had pitched just about every investor you could think of and came up with a whopping zero term sheets.
Not hot at all.
I just didn't quite get it until I realized that it didn't have to be about a game and that it could be my way of interacting with my locality. I wrote a post about this realization and it touched off a flurry of activity that led to their seed round.
The funny thing was, I was hardly the first to join it. *Anyone* could have funded it from March '09 until that July--and yet, now there's story about me "finding Foursquare."
Feels like a Columbus discovering the New World story. Tell that one to the Native Americans who were already here.
And now that I'm an investor out on my own, one of my best performing companies is an investment that the founder could hardly give the equity away for in the beginning. When Raul Gutierrez was fundraising for Tinybop in the fall of 2012, he didn't actually finish the round--instead getting about three quarters of the way and then deciding to just get started working on the app.
Not hot--and it wasn't a deal that anyone pat me on the back for "getting into". It wasn't my brand that got me access to that round. It was just my willingness to write a check. (Well, I guess I had to seem like a reasonable guy, but the company really, really needed the money.)
Of course, it's hard to be a "hot deal" before you've written any code, let alone launched, but the point remains--it was an investable deal for *anyone* for months and months.
It didn't get hot until it launched nine months later. Since then, they've been #1 on the app store in education in over 120 countries.
Just a few months later, when I led the seed round of Canary, we closed the round just a couple of weeks before their record setting $2 million pre-sale on Indiegogo. In fact, a local venture firm turned the company down just a week before the pre-sale. In fact, several of them did. The round itself took about five or six months in total.
A pre-launch hardware company? There was a good chance that I was crazy.
Not hot at all.
The point of this nice walk down memory lane of Monday morning quarterbacking?
Most of the best deals that an investor will get into won't look like much of anything at the time. Just about anyone can get into these deals if they're early enough and show some conviction. There was nothing special about my relationship to any of these companies and, in all four cases, I wasn't the first one to notice them. I might be in a sweet spot of mild notability and earliness, but in every situation I can point to lots of people who came before, took bigger risks (like, ah-hem, the founders themselves!) and who created a much bigger impact.
The lesson for people who want to get into the asset class?
1. Show up early.
2. Make quick decisions.
3. Visibly go all in with your reputation and effort. You don't even need money for this. My story as a "picker" really starts with two deals I didn't even invest in. I wasn't even at a VC fund at the time.
You'll often be spectacularly wrong, but those failures will still earn the respect of the founders you back--and that's all you have as an investor.
Then, just hope that when all is said and done, your wins allow you to survive another day.
And the next big thing? I'm completely biased, but follow Makrplace for some big news this week. :)
I find the Mike Bloomberg NYC tech legacy story really fascinating.
I mean, it makes sense, right? Tech entrepreneur mayor presides over NYC tech during an explosion in company creation, job growth and venture funding.
Plus, we started all these tech schools, creating all these engineers, right?
Only, that's not quite the way it happened.
Don't get me wrong, I'm THRILLED that we're going to have some new engineering campuses in NYC and that will pay dividends to the NYC tech community for years to come--only, we only just started educating students in a small starter version of the Cornell program. The multifold growth we've had in the startup engineering base of NYC happened before we even decided to build these companies.
In fact, much of the groundwork of the NYC tech community's growth came before the late 2008 economic crash--when the city started paying attention to the tech community as the economic savior poster child.
In many respects, what the Bloomberg Administration did *directly* for tech in NYC was to shine a light on a transformation that was already happening. Education initiatives did not create the community. There was no major city broadband initiative that created this ecosystem. City money didn't spur on the massive venture capital investments that have been made by the private sector. Spaces like General Assembly were basically funded with private dollars, and would have happened whether the city gave them a grant or not (See WeWork).
*Indirectly* however, what Mike Bloomberg did for New York City's tech community was the greatest thing since sliced bread--and that was continuing and expanding exponentially what Rudy Giuliani did to make this a livable city. If NYC crime didn't plummet, we wouldn't have a tech community to speak of. DUMBO wouldn't have existed unless the Giuliani administration hadn't rezoned it to provide local developers an incentive to build a neighborhood here. Giuliani cleaned up the city, Bloomberg made it work and grow. Bloomberg efforts like 311, Riverside Park, the High Line, Brooklyn Bridge Park, improved walkability, bike share, ferries, the Atlantic Yards/Barclay's Center, etc have all contributed to making New York City an attractive destination to plant your roots and to invest economically.
That is the single most important thing Bill DeBlasio can do for NYC--continue to improve livability--and he should do so with unwavering focus. That's going to mean making sure union contracts don't bankrupt the city. The current pension benefits system is economically unstable and threatens the welfare of this city. Penion reform is unpopular, but necessary. Yes, we all appreciate your efforts as a city worker. No, we can't pay you out for 35 years after you retire at age 55 when no one in the private sector gets the same kind of benefit.
That's also going to mean improving education from early on. We completely overinvest in college educations when it isn't even clear that college is right for everyone, nor is it clear that the debt created by a college degree is worth it. I applaud investments in early education, but we also need to make those investments effective. We spend more per child than most education systems in the world, yet we don't get the same results.
That's going to affect our tech community--not a year from now, or even five, but if we can't educate and inspire our kids, we're going to fill this pain for decades to come.
I think NYC tech has left the station--there's no turning back now. Investors are here to stay and companies will continue to get build. Are there issues? Sure. Issues like Airbnb and the taxi hailing will get solved with improved communication with city government. We need to enable politicians to understand the repercutions of government intervention in changing markets.
I'm less worried about DeBlasio enacting "anti-tech" policies than I am about the city facing bankruptcy ten years from now because too many people have their hand in the till, and no one ever likes being told no. It's a tough road to reform, but the money for DeBlasio's "One City" agenda is going to need to come from all of us, not just a handful of rich bankers, who, by the way, have been footing the tax bills in NYC for quite a long time. Anyone who understands local economics realizes that.
There are only a few times in my life where I felt like all of NYC was on the same page--sharing the same moment, and most of them were pretty bad. We all went through 9/11 and Hurricane Sandy together, but of course, we'd rather not have had to endure those tragedies, even though we were resiliant.
The blackout was shared citywide, and I suppose we fared ok, taking it in stride and even having a little fun, but again, we probably wouldn't choose to go through it again if we had to.
Sports championships aren't the same. Yankee fans weren't all that enthused in '86 and lord knows us long sufferring blue and orange folk weren't thrilled to have to see the Pinstripes come down Broadway time and time again. At least I'm not a Jet fan, too.
But yesterday--yesterday was all in for the NYC Marathon, including me. I finally ran my first after last year obviously didn't work out. The race was extremely hard. I'm not going to lie--it was the hardest phyiscal thing I've ever pushed myself to do, and I say that after doing four NYC Triathlons and a Tough Mudder.
Pro Tip: Write your name on your shirt so everyone cheering will call your name out across all 26.2 miles. That really helped.
Being a part of yesterday was like something I've never experienced. Literally, the whole city was watching--across so many different communities, both local and international. Standing on the Verrazano Bridge was amazing--and it's the one time you can do that. I've cycled over just about every other bridge we have.
Honestly, it was really hard not to run too fast, which I completely did, because of all the excitement. Yes, I blame you, NYC, with all your cheering, makeshift signage and little kid high fives, for convincing me that I could run at an 8:15 pace the whole day. That dream died around Mile 17, with 8:30 dying around Mile 20.
Damn you supportive folk!
I saw my dad just after the bridge, on the turn to 92nd street in Bay Ridge. I ran out of the turn over to give him a high five. I think he was holding the "Go Charlie" sign my mom had made for one of my triathlons. Hilarious.
I'm glad he made it out, because he has a knack for talking himself out of crowds and events. He'd generally watch things on the big screen and his couch, and avoid the frustration of parking, pushing, shoving, but he picked out a spot and made it work.
I need to thank two other specific people. One kid, I'll probably never know. Around Mile 18 on the Upper East Side, I was in serious need of some food. I burned right through breakfast, and was on the hunt for something solid, regretting that I had passed on earlier offerings. I visually scanned the crowd for small yellow curvatures and spotted one out of the corner of my eye--a little kid who was awkwardly holding onto a banana. He was so small that I think he was standing under the rope. I'm not totally sure he knew what he was supposed to do with it. I almost ran past him and then doubled back a little bit with my hand out. I hope that wasn't his banana, but he did hand it to me as I approached. It was a lifesaver. Thanks, kid.
Once I got through the Bronx and back into the city, I was in one foot in front of the other mode, chanting "Forward" to myself as I mentally did the math on how fast I needed to go to still make four hours. Things were not going well and the mile markers weren't coming fast enough. As I exited the park, each attempt to move just a little faster was greeted with cramps in each calf.
Then, out of the blue, I saw Cyna Alderman, who runs the NY Daily News Innovation Lab and who couldn't be more enthusiastic about working with the startup community. A career lawyer, she's turned her attention towards innovation in the publishing space and has been incredibly fun to work with. I didn't expect to see her--other than my Dad and a random friend from junior high school I hadn't spotted too many people in the crowd that day. It couldn't have been better timing. She screamed her head off when she saw me and it was enough to kickstart my legs. I started my ususal all out sprint to the finish with about a half mile to go.
My legs had other plans and my left hamstring cramped up big time. I said out loud, "Oh, no no no no... we're doing this. I don't care, " and ran through it. I'll deal with you later, legs. I sprinted into the park and grunted my way in with each step. There might have been grandstands of people, I'm really not sure. I just locked onto the Finish Line, and just pumped as hard as I could.
It was incredibly rewarding--but honestly, that wasn't even the best part.
The best part was after--on the street, in the subways, on Twitter and Instagram. Everyone knows what you went through. The moment I finished, I was getting texts of congratulations. I called my mom as soon as I crossed, knowing that she was tracking me on the iPad she's just learning to use. She's not feeling well enough quite yet to navigate the walk and the crowds, but the internet and Apple brought the race into her living room in a very personal way.
Some Hispanic guy on the subway fistbumped me after asking about the run.
"All five boroughs? Serious? Mad props, yo. Congrats."
There was a couple who had just gotten engaged riding along with us. Seemed like she said yes, but perhaps on the condition that he gets his lazy ass into the race next year.
A girl tried to give me her seat, but I was too afraid I wouldn't be able to get back up again. I'd rather lean against the pole in my bright orange poncho, but thanks. The sales associate in Foot Locker asked me if I had won--and I thought about the Kenyans. You know, everyone thinks what they do is about stamina, but then you have to remember that they're running like 12-13 miles per hour, too. That's the most impressive part about their run--they're running the whole marathon faster than most people can sprint.
Everyone I saw on the street congratulated me--and there were thousands, millions of people headed home, talking about the race. Everyone gets behind you, whether they know you or not.
Well, thank you, New York. I couldn't have done it without you. I'm glad to see you back up on your feet after last year. It's days like yesterday that make me wonder why anyone ever asks me, "Do you think you'll ever live somewhere else?"
Pitching is all about telling a story. You've practiced long and hard on how you tell your story.
So why would you allow someone to play it on mute--or, worse, tell themselves your story based on a misunderstanding of your deck. You also won't get feedback on whether the deck works because you won't see them going through it.
The very fact that someone is asking for a deck before they decide whether or not to meet with you is a fail in many ways. Do you think when the founder of Spanx wants to raise money for her next consumer product, investors are going to ask her for a PDF? They'll just be thrilled to meet with her--unless perhaps they don't do consumer products. Even then, they'd probably still meet with her.
How can you build your credentials and your branch such that you're an obvious person for someone to want to meet with, regardless of what the deck says. Are you accomplished? Interesting? Thought provoking? Well connected?
Partners generally don't ask for decks if you check off this criteria because, honestly, we rarely read them ahead of time. Who has time to waste when you're going to see the team anyway, and they're going to go through it with lots of color and interaction?
You know who asks for decks? Analysts--and analysts can't write you a check. Their job is to analyze and you'll never have nearly enough data to satisfy them. They'll pick apart your story and your deck before you have a chance to answer questions in real time.
So how do you get a meeting without a deck?
Well, first. do you think getting a meeting is a very high bar? Think about it. The average partner at a VC firm probably meets with at least two or three companies a day. That's like 40-60 companies a month.
Do you think you're one of the top 40 companies raising money this month?
Come, on, seriously...
You've been to demo days and pitch meetups and read Techcrunch and Mashable about product launches. Most of these companies are crap. You're better than these clowns, right?
If you're not obviously better on the face of what you're doing, or at least in the top 40, than what are your chances of getting an actual investment? Founders are often convinced if they just got a little face time, they'd be able to impress or explain better.
Because if your product can't be simply explained via simple, human language, how the hell are you ever going to market it.
What the hell are you pitching? The Matrix? I can't be told what the product is? I have to see it by myself?
First of all, that totally wasn't necessary for the Matrix, either.
"Yeah, so, um, machines control the world and you're actually sleeping in a vat of pink snot with a plug in the back of your head that is feeding you data making you think you're experiencing stuff that you're not. They're doing that so you pump out heat energy to power their machine ways."
How hard is that?
I'd suggest three or four bullet points and/or a very brief description of who you are should be all you need to get someone psyched to meet you.
If someone wrote me:
"I worked in the best ice cream shop in the country, helping them grow to become the #1 rated by Zagats. I was there from day one, churning the cream by hand.
That gave me the insight into a new workout tool to give you jacked forearms--and it works. I've won arm wrestling competitions in 45 different New York counties. The product was designed by the award winning makers of the Flowbee, the Magic Jack and the Amish Oven.
- We have a signed LOI to appear on QVC.
-Our Kickstarter did 40x it's target.
- If we raise, the head of marketing from the Ab Rollee has agreed to come on board."
At this point, unless I'm not a consumer products investor, I'm in for at least a meeting. It's certainly interesting. I really want to meet the guy to talk about the arm wrestling circuit.
He told me that he not only has a qualified team, he has a GREAT, HARD TO GET team. I wouldn't assume that Flowbee designer works with just anyone.
He's derisked the product with channel partners and customers--which I would have done anyway. Better that he's talked to potential buyers and distributors before I had the chance.
Plus, he built something. I'm sure it's crap and falling apart but that's ok. He proved resourceful. I'm in for that meeting.
This is also where the networking and warm intro thing comes into play. If people who know their stuff have spent time with you and I trust their opinion, how crappy and boring would you need to sound before I turned down that meeting?
The truth is, I don't even need to know the person. If the head of ESPN digital e-mailed me and said, "You have to meet this great technology for engaging fans--and if he can get funded to finish a few things, we're totally rolling this out and paying for it" then I'm taking that meeting, deck or no deck.
Bullet points, a bio, a link to a working app, a personal brand that I can look into--all of these things are compelling things that should get you a meeting--but the deck? The deck is your tool to tell your story. Don't let an investor seperate you from it.
It would be like getting the feel of a Lady Gaga concert by just seeing the big egg she hatches out of at the opening.
A lot of money is being put into trying to figure out what I do when I walk into a store. Nomi just raised $10M and Prism Skylabs just raised $15M. These efforts aren't new. Path Intelligence raised a million bucks to do this years ago.
Given the time I spent a decade ago doing not only venture capital, but investing in private equity funds that buy retail companies, I find this data collection fascinating. I was on the team that did a leveraged buyout of AMF, the bowling alley company--so I've looked at lots of plans to upgrade in venue customer marketing. It's very cool to think about. (Side note, I know more about the economics of bowling than most VCs.)
I don't freak out about being tracked, but I'm not every customer.
You don't have to go very far before you realize that the majority of people aren't very comfortable with this. I mean, if they're split on it when it comes to tracking to prevent terrorism--how do you think they feel about it when it comes to tracking me as I walk around a store?
Don't get me wrong--I have the utmost respect for the entrepreneurs behind these products and as a data wonk, I love the idea of sophisticated customer traffic analysis.
I just think there's going to be a very severe customer backlash against this. Privacy is a very sensitive topic these days--and people have only begun to scratch the surface of understanding what carrying around mobile devices means for privacy. Did you know that your EZ Pass tracks you even when you're not at the toll booth paying tolls? One guy rigged a setup to test how often his EZ Pass gave away his location and the results were surprising.
A few years ago, there was a huge consumer fluff up over behavioral tracking on the internet. I think it's only going to be magnified when it comes to tracking your movement in person.
And yes, I totally have a dog in this race. I invested in a company called SocialSignIn. SocialSignIn is going after the heart of the problem--retailers and venues have no relationship with the people in their physical spaces.
No one really needs tracking data--unless that data helps you bring in revenues. That's the point of data--it's revenue optimization, and the main problem that retailers have is getting more people in the store. They're looking for more marketing channels and the best potential marketers of your business are the ones that already frequent your store. To me, if you're going to connect with a customer using their mobile devices, it seems obvious that you'd want to form an actual relationship with the customer, not just passively watch what they do.
SocialSignIn makes getting on to wifi easy in a venue--no more struggling to Instagram photos of that dress you want to buy from deep within a retail's lead box. It gives them a value proposition, like easy access to wifi, to tell a store who they are, sign up for more info, tell their friends that they're there, and create lots of earned media around the experience.
If you look at Google, they gave the analytics away for free and make money off the marketing channel--a marketing channel that users opt into. They tell you what they're looking for. People have a customer relationship with Google and that's what makes it such a great marketing channel. It provides a useful service so we don't mind being marketed to in a relevant way.
Offer first, then ask. That's why I like the SocialSignIn service and the business--and why I think the future of retail marketing in venues is about relationship building, not secretly tracking people.