The NYC startup community maintains a positive, supportive atmosphere. We celebrate a strong effort.
However, that often makes it hard to tell who actually excels at their job and who just mails it in or got lucky. This goes for founders, employees and investors alike.
I was just noticing that a professional acquaintance of mine just changed jobs for the third time in two years--going from startup to startup to startup without, ostensibly, accomplishing much at any of the companies. They certainly didn't become huge successes. Yet, for some reason, everybody seems to think he's really good at what he does. Why?
The same goes for investors. There are a few obvious investors with great track records of repeat success, but when's the last time you really tried to value an investor's portfolio. That VC speaking on the panel, are the deals you know about really doing that well? They raised more money, but when? How long ago? At what valuation? Are they making real revenue? Are the exit prospects for the company any good?
Even if their record looks good because of that deal, was it really their deal? Did they lead it? Will the entrepreneur count that investor among their most helpful? Would the entrepreneur enthusiastically include them in the syndicate of their next venture?
There are a lot of founders with questionable records, too. If someone bought a company for $50mm after a year, before it became a business with actual revenue, what are you really crediting the entrepreneur with? Could you really call what they did building a business?
There's really no substitute for research. If you're going to pick an investor, hire someone or invest in a founder, you need to figure out what they specifically did to create value--and how what they did was something unique to them. Could anyone have done what they did, or do they have their own special way of creating magic?
We need to raise our expectation level--especially in the media, on panels, and in our everyday discussion. Let's be a little more discerning when we're dishing out praise. Let's figure out who actually went above and beyond, versus getting lucky riding a wave.
Go pitch a VC with an idea, and they'll tell you to build it.
Go to them with a prototype and they'll tell you to launch it.
Launch it, and they'll tell you to get more users.
Get users and they'll tell you to get paying customers.
Get paying customers and they'll tell you to get bigger, enterprise clients.
Get enterprise clients and they'll tell you to get them faster, because it seems to be taking too long.
It frustrates me to no end. If someone actually did check all these boxes, it would be a Series B deal, not a seed investment.
Last I checked, taking risk, and being ok with uncertainty, is supposed to be our job. No risk, no return.
Technology is moving faster, markets are changing more quickly and uncertainty seems to be increasing.
In my mind, that creates the opportunity for increasing returns. New markets are available. We're doing things in personal health, mobile, and physical products that we never could have done ten years ago. TVs are changing. Finance is changing.
Risk, over the long term, is going to be rewarded, but there are no sure bets. Let's remember that, people.
If you're not cool with risk as an investor, may I interest you in some very nice fixed income jobs.
*This post was not directed at anyone specific.
In 2007, I met Rob May for the first time in person at the first SXSW I ever went to. In 2010, I funded his company, Backupify, which has gone on to raise over $19 million in funding and is set to have their best year of revenue to date. I didn't meet Rob at a big flashy party. We just hung out in a small group of nobodies, having chatted a bit through our respective blogs before.
In fact, as I look through the photos from back then, I realize that I funded two nobodies from that group--the other being Michael Galpert at Super.cc.
In 2008, I went to breakfast with Hilary Mason while I was down there. This picture was just after we got back to the conference center, just hours before the meltdown that would be the Mark Zuckerberg interview. That breakfast would lead to me hiring Hilary to work at my startup, Hilary deciding to stay in NYC fulltime, co-founding hackNY, and just generally being a great community advocate for science and tech in NYC.
Just breakfast. No big party.
Last year, my friend Danielle Gould invited me to a small FoodTechConnect dinner, where I met Stephen Plumlee from R/GA. Stephen is a great guy and a Brooklyn resident. We connected around R/GA's role in the tech community and here I am now, a mentor in the R/GA hardware accelerator.
Over and over again, it's small groups and conversations that I've had down in Austin that seem to have the most lasting impact on my business and career--so as the parties get bigger, and flashier, I find myself retreating to smaller enclaves. The best spend of sponsorship money I've ever seen might be the $50 in balls and chalk that Dennis probably spent building the Foursquare court that beat Gowalla in 2010.
This year, I might not even leave my apartment for maximum ROI.
I'm only half kidding. I'm putting together a small series of dinners where I don't have to worry about reservations and long lines to eat and get rushed out. I've got some local chefs lined up to make some fun and authentic meals and I'm putting the coolest folks I can find around the table. SXSW with all its buzz and hype is just the backdrop to the conversation over good food, and I suppose also the excuse that brought all these people together in one place.
A few sponsors have inquired about participating and I might have a opening for more. The best part is, the cost pales in comparison to the huge blowout ragers that no one will ever remember and no meaningful business will ever get conducted at. Drop me a line at firstname.lastname@example.org if you might want to participate.
I can't guarantee you'll sell something, win VC dollars, go viral, etc... but I'm a big believer if you focus in on just a small handful of people at a time, or even just one, and give them your attention, that will pay back dividends over a very long period of time. Sometimes, all it takes to make a friend is to treat them like a person instead of a connection.
My dad, after a 20 year career as a New York City firefighter, went back to school and became an accountant. He was an early adopter of technology in his practice, buying a computer in 1987 and getting some of the earliest versions of tax prep software. To do the bookkeeping for some of his business clients, he used a DOS-based program called One Write Plus.
The program went over to Windows, but he never liked that version, so he stuck with DOS. He wasn't alone. Lots of people liked the old version better and stuck with it. Eventually, support for the OWP DOS version was discontinued, but he kept on truckin'. I'd bet anything he was one of the last active users of the program.
In the desktop software world, you could do that. You bought a version that you liked and you could use it for as long as you liked regardless of what happened to the underlying company. In a cloud world, software has a continuous cost of upkeep. When the company dies, the software dies. That frustrates a lot of users.
Today, one of my portfolio companies, Editorially, announced that it was shutting down. I can't say enough about the terrific job that Mandy, David, Jason and their team did to create a product that many people loved. Twitter is full of some really great things people had to say about it.
Oh no! @editorially is closing down. I wrote my entire book in that. It was such a good app. What a shame :(— Paul Boag (@boagworld) February 13, 2014
Unfortunately, the market turned out to be smaller than we had hoped for the potential paid features of the product, so it has to go away. It would be cost prohibitive for anyone to stay on to run it, and it would eventually brake. You're left with no cottage industry of users--a SaaS Cuba, where you can seemingly keep a 1950's car running forever.
Is there an opportunity here, perhaps? A holding company that could be the Land of Misfit toys for webapps? You run out of cash and then you apply to turn your code over to some caretakers--and if they think enough people love the business, they run the apps on a donation basis. Maybe you retain some small portion of the equity.
It's unfortunate to see all that work go to waste, but at least in Editorially's case, it wasn't all for naught. Lots of great writing was produced on the service--writing that will far outlive the service. Personally, I got to meet a great team that I hope to work with again in the future. Seed investing is a risk, and while things are playing out really well at Brooklyn Bridge Ventures, the portfolio is simply not going to have 100% success rate. Editorially was a risk well worth taking and I'd do it all over again given the caliber of the team I got to back.
I've closed three investments in the first Brooklyn Bridge Ventures fund that haven't quite been made public yet, bringing the total to 13 companies. These companies didn't announce their financings right away, and for good reason. They're building up their PR plans to make the financing announcements part of a larger story arc.
Announcing your funding without a larger PR plan is the equivilant to George Costanza saying "I love you" to his date and not getting it returned--"that's a pretty big matzo ball" to leave hanging out there. You'll drive all sorts of attention and it won't really wind up going anywhere if you don't create a context around it and build up structures to handle it.
First off, you need to have a clear sense of your goals. What do you want out of this announcement? Is it to get on the radar of future investors? Is it to get sales contacts or consumer awareness? If your announcement has goals, you need to make sure you do what it takes to support those goals.
For example, if it's to get on the radar for future investors, use the investment announcement to plan a tour of future potential investors. "Hey, we just raised (see link) and have over a year of runway, but we'd love to get a sense of where we need to be to get a next round from you and to start building a relationship." VCs love meetings with interesting people when they don't need to say no.
If you're looking for business development partners, is there a "Partner" section on your website, or a way to capture leads from all the attention? Did you specifically state in the press that you were looking for partners? What type?
Are you looking to hire? Who? What makes a great employee? Does the section about employment on your website just say "e-mail resumes to email@example.com" or does it detail why your team is awesome and why anyone would want to work with them on this particular set of problems?
The biggest mistake I see companies do is fail to build follow up into their PR plans. You launch to the public, announce a funding, and then what? What's the PR going to say two weeks after that, and two weeks after that, and two weeks after that?
PR isn't a one shot deal--it's about constructing a story that will evolve over time. You introduce the characters, you build an audience, unveil the right things to the right people, maintain their interest until you have something to sell, get customers, and leverage customer wins to establish position.
That doesn't always mean public press, nor does it mean telling everything about your product. Sometimes it means establishing founder credibility over time to prospective future investors or to potential employees. Sometimes you don't want to telegraph to the competition what you're doing or how you're doing it, but, at the same time, you want customers to know who you are. That's a small needle to thread--generating interest without suspicion, and it requires a clever storyteller.
One way to do that is to talk about something else that isn't you or your product. Perhaps you have an interesting building management technology. Why not profile the most innovative buildings or the people who are behind modernizing the processes and infrastructure at famous addresses? Make a whitepaper available on the topic of innovative technology in buildings, just to get the leads, without telling everyone what your business is upfront.
I'd say that one of the biggest misunderstandings about the PR process is relationship building with reporters. An introduction to a reporter could result in the best story ever about you--six months from now. You need a long lead time to get someone in the media to care about you, so what are you doing for them in the meantime. Are you doing a wearables company for women? Maybe start curating a newsletter about tech that women love six months ahead of your launch--so that when you're ready with your product, thousands of people, including press, already care about what you care about and you've convinced them you're the authority.
Here are five aspects of PR I feel like most startups need to do more of:
1) Fit all PR into a long term plan. What do we tell about ourselves, to who, over time, and what is the goal--and when will we benefit from that goal. Sometimes, you need a really long lead time, especially for things like future funding.
2) Establish the team as experts on the problem you're solving. Educate the market by being the authority.
3) A smaller list of deeper relationships. Go out to lunch more, spam bloggers less.
4) Highlight your customers. Shine the spotlight on others, and how awesome they are (thanks in a very small part to you.) Get them to be your advocates by being theirs.
5) Give before you get. The more you help a journalist out by being a source for expertise, stories, tips, the more likely they are to cover you in the future.
And please, please, please don't pitch VCs who blog to write about your company as if we were tech journalists.