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.
Our notions of what's possible affect our performance. I had a very specific experience with that this weekend. I ran a half marathon yesterday, but I couldn't use my Nike+ watch. It has an utterly ridiculous lack of ability to delete old data from the watch itself--you can only do this when it's hooked up to a computer. So, if you find yourself with a watch full of data, you literally cannot use it.
So, I had to wing it--which was made harder by the fact that all the miles weren't marked off on the course. I knew I was in the ballpark of a particular pace, but felt good and wasn't really paying that close attention to every second.
In other words, I was just running.
When I was said and done, I beat my best time by three whole minutes--meaning I was 14 seconds per mile ahead of my best pace and had shattered my previous record. My previous best had been 7:18/mi and I was frustrated in my last race because my watch was off by a few seconds, and I thought I had a 7:16 and it turned out to be a 7:20. Little did I realize the best solution was to ditch the watch entirely and instead of trying to shave a few seconds off, watching the clock the whole way, just running my ass off. I never would have even attempted to run this fast if I would have been using the watch. I didn't think I could.
Knowing what we did before, or what others did, limits our notions of what's possible. Measuring data can help you improve, but often times you don't realize how much you can do if you really dig deep unless you throw out the numbers and work hard.
From a basically unrelated 2004 article on security expert Gavin de Becker...
"...I recommend that before you meet someone for the first time, you send them a bio. You say, "I look forward to our meeting tomorrow afternoon, and so that you'll be more familiar with my background, I'm sending you some general information." When you arrive, they say, "Oh, that's what a security expert looks like." That way, they fit you into their projection instead of the alternative. If a guy shows up and says, "I'm the bomb detection expert," and you judge him based on what he's wearing, how old he is, how tall he is, how he looks, how he speaks—he now doesn't fit your central casting idea. But if a person is sent a bio first, we will fit [the subject of the bio] into our projection."
I'm not going to wade into the "who gets funded and who doesn't debate" any deeper than to say this:
We know that investors pattern match, and also make quick judgements. Their job is to size up a plan, and a team, very quickly. Even unconsciously, the best of folks tend to have an idea of what an investable team "looks like".
Think you're immune? Fine, I'll send my 95 year old grandmother in to pitch your firm for her semiconductor startup. If you can tell me that you wouldn't make a snap judgement when she shuffles in with her walker, then you're just not human. It happens.
Knowing that, however, puts us in a position to fight against that. One thing that I don't think people give investors enough credit for is how easily perceptions can be changed--not in everyone, but I think most investors are just as reasonably open-minded as they are quick to judge.
So, if you tell them ahead of time about why you're the right team, they'll find a way to match who they shake hands with and what they see in the first 15 seconds with the bio they already got.
I know, because it happens to me all the time. Nine times out of ten, someone intros me to a potential fund investor as a connector, someone who knows everyone, etc. So, when I walk in with jeans and sneakers, immediately people construct an image of me as a guy who is mixing it up with startups on their turf.
If someone just said, "Here's an investor, you should meet him," they're going to take one look at how I dress and say, "Who's this knucklehead?"
Tell them who you are before the decide for themselves--or make sure the person who intros you knows exactly what to trump up about YOU, not about the idea.
I had a great conversation with a CEO yesterday who recently realized that she had been too heads down and focused on her day to day tasks to build up her personal brand. It was never something she made a priority until she realized that building up her own brand was part of the company's marketing. It would create just as many opportunities for her company as it would for herself. A strong leader's personal brand helps with hiring, creates inbound business development opportunities, and opens up speaking opportunities where a founder can talk about the business of her company, not just herself and her career.
It's also key to financing. Investors put money into a founder, so walking into a pitch meeting without having built up any kind of personal brand effectively means you've left out a big piece of your company's marketing strategy. It's hard to build a relationship from scratch with no prior knowledge of someone--whereas a strong social media and personal brand presence makes an investor feel like they know you already. I know I wouldn't have been able to raise my fund if it wasn't easy to ask people about who I was and if you hadn't heard about me from somewhere before.
Any founder not working on their own brand is doing their company a disservice. Period. It's important for a founder to publicly project a set of values, believes, share knowledge and best practices and be seen as a leader not just at the company, but in their market. Investors want to back leaders.
Plus, if you don't tell your own story, an investor will make one up for you--often times within the first ten to twenty seconds of meeting you. In a world where we're very concerned about stereotypes and generalizations as they relate to diversity, should we let an investor make a snap judgement about how we look or should be blanket the airwaves with a strong narrative first--so that their opinion is based on the brand they've heard about before even knowing what you look like.
Either you tell your story or someone else will--or you'll have no story and no one will care.
Some financing rounds seem to go really fast. Others drag on for months and months.
The problem with dragging it on is twofold--
a) The entrepreneur is distracted from doing what they need to do--i.e. running the business.
b) There really isn't any more actual information to pour over--it's just a lot of thinking and talking about the same things over and over again.
Most investors could probably get you money and docs signed within 10 days if they really needed to get into something, but that's probably not realistic for all deals. So what should the right amount of time be?
In my mind, it's three weeks from the day we meet. If you actually get a round together, there's no reason why any investor, fund, angel, or group, shouldn't be able to fund a seed round with docs signed within three weeks.
Here's the timing:
The investor gets excited and thinks you have something. Within a few days, they should be able to convene whoever they need to make a decision. When I was at First Round, we had a protocol by which we could call an audible and get all the necessary team members together within 48 hours. It was as mandatory as you could make a meeting and we took it really seriously.
Great, so now that everyone has met you, you need to do due diligence, right?
Herein lies a lot of the problem--if you don't already have a sense of whether or not this thing is a thing, then you're probably a fish out of water in this area. The same goes for vetting the entrepreneur. The people I've backed don't really come out of nowhere. Because I'm in my market and in the flow of top teams and networked with the right folks, I'm never more than a character reference away through someone I trust and know well to just about all of the people I've backed. In many cases, I got to know the entrepreneur before they were pitching or even had a deck.
That's the difference between fulltime investors, angels who focus on particular areas of expertise, and "drop-ins". They're not well networked and all of the founders they meet essentially start out as strangers out of the blue. If someone needs to get to know your work or your industry from scratch, they're probably never going to get there. It shouldn't take more than 2-3 phone calls or introductions to potential clients or experts to stress test a company's offering or plan for one.
That leaves us somewhere in the middle of week two. Great, you get your due diligence back and you either make a decision right then and there or you wait to the following Monday partner meeting. If you get a yes then, there's absolutely no reason in this day and age that negotiating a seed round's legals should take more than week. The fact that you are a) investing in not much more than a team, b) in the risk taking business, not the asset protection business and c) in at single digit valuations should make you pretty flexible on the legals after a few key points like the price, preferred 1x liquidation stock (or a note with a cap), pro rata and some kind of agreed upon board construction.
The fact that most entrepreneurs don't focus on fundraising enough can drag this whole thing out a lot. I've been in processes where I've committed, but I won't write a check until at least 500-750k is committed (b/c I don't want to be part of a bridge to nowhere) and that has taken a long time. You've got to line up all your investor meetings back to back and clear out a couple of weeks to do this--filling the top of the pipeline with enough folks to ensure a positive outcome.
But on the investor side, you should at least be able to get to a yes in three weeks. There's just really no excuse for it otherwise.
And no's... no's should take no more than a week for 95% of them, and then two weeks for the maybes that turn into no's, which probably should have been no's to begin with.
Let's start respecting founders' time more and realizing that the more time we take, the more time it takes away from their business.
Plus, it effects our dealflow. The quicker I get to a conclusion, the more likely I am to see other deals from that source. If I take three months, then I'm pretty sure I can forget ever seeing another deal from whoever showed me the opportunity in the first place.
Tell me how I'm being unreasonable.