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What to do when things aren't working at your startup

I've been there.  You come in day after day, work long and hard hours pushing that rock up a hill, only to see it roll back down again overnight.  Traffic isn't moving.  Sales aren't closing.  Investors aren't biting.

The writing is on the wall.  This ship is going down, sinking ever so slowly--one day's payroll at a time.  There's still some cash in the bank, but not really enough to do much of anything.  What do you do?  Here are five tips.

1) Be honest.  You're not going to fool anyone, so don't go pitching to VCs trying to paint a rosey picture.  It's disingenuous.  Do you really think you're going to find the world's dumbest money at this point?  If you make the story that you have a good team and you want to raise for a dramatic pivot, that's fine, but the fact that you didn't spend money on advertising yet is not the reason why things look like they're going south.  You're going to need a strong network of people who believe in you to get another opportunity down the line--so don't make your last round of pitches a bridge burning exercise where you try to sell snake oil.  Just be upfront about your situation and what you're still attempting to do.

Be honest with your employees, too.  They can sense when things are going badly, and the last thing you need is people jumping ship at a critical moment.  That will start the human resources equivilant of a bank run.  One leaves, they all leave.  If you're transparent, formulate a plan, and you tell them the timeline of when things will either happen or they won't, they're more likely to sign up for the final push.  

Be honest with your investors.  Overcommunicate.  Let it be no surprise the day you write to them to say that you're now a tax writeoff.  

2) Try something crazy.  At this point, what do you have to lose?  Perhaps slow and steady sales aren't getting you anywhere.  What if you just gave the product away and got to scale quickly?  Maybe there's something else you could be monetizing.  What if you made your otherwise hard to get proprietary data searchable by everyone?  What could you do, productwise, that would make front page headlines and get customers, acquirers and partners interested in you?  Cross the streams, baby.  

3) Don't be afraid to raise the white flag early and in public.  A lot of times, when companies announce that they'll be shutting down, acquirers they didn't know would be interested start coming out of the woodwork.  Why not circle the vultures that much earlier, when you're not desperate, or *as* desperate.  Issue a press release that you're exploring options with acquirers to see who might be interested.

4) Keep competitors and partners close.  From the beginning of your company, you should understand the road maps of others in the space.  How?  By talking to them, often.  Understand who you would be a fit for and what you could do to be more or less attractive as an acquisition target.  Meet multiple people in each organization as well, so when rumors of your ultimate demise start circulating, more than one person at a company guides you in for a soft landing.  

5) Talk to a lawyer.  You have real legal responsibilities around notifications of employees as the money gets low--and there will be some wrap up legal work to be done.  Make sure you leave enough cash in the bank to actually close up shop and know what your requirements are to employees and investors.  

Connecting the Sellers of NYC's Salesperson Community

What's easier to hire for in NYC?   Developers or salespeople?

Well, let's see...  if hiring is a function of the top of the funnel--the number of leads you get, you have to imagine that at least finding larger pockets of those people is helpful to the process.

There are two meetups of Ruby devs that total over 3,000 people in NYC.  There's an iOS developer meetup that hosts over 4,000--and two more than have more than 1,000 each.  

In terms of companies, the average NYC founder can name a bunch of places off the top of my head that have over 50 engineers--Google, MLB, Gilt, Spotify, Foursquare, Etsy, Mongo, Appnexus, Shutterstock, Yodle, Meetup, Squarespace, Quirky, Shapeways, Stack Exchange, Refinery29, Aereo, Smartling, Tapad, Taboola, Yext, all the agencies, all the banks, etc, etc.  

Ok, so who has over 50 salespeople?

Who are the top sales leaders in NYC?  It feels like the revenue engines of NYC are pretty under the radar compared to the teams that write the code.  Is it me, or are the top CTOs in NYC much more of a startup household name than the folks at the top of the sales organizations?

And I thought NYC was supposed to be all about salespeople and not developers?  So where are they?

There are a few burgeoning groups out there that are starting to take shape--but they're quite small in comparison to the size of the overall population of salespeople.  Why?  If anything, there's just as much turnover in sales orgs, if not more--so wouldn't salespeople want to connect with others to check out new opportunities.

And sales is changing a lot.  The number of tools available to sales groups has skyrocketed--so keeping up with best practices seems more of a challenge than over.

It can't be a time thing.  Don't tell me time is money, because the average developer is putting in just as many sheer hours as anyone in the organization, but they still find a way to interact with the community.  Plus, sales teams aren't all about hours--they're about the productivity of their hours.  If anyone knows about how to leverage knowledge and tactics into better output, they do--so I'd assume they'd understand something learned is something gained later on.

So why is the community of salespeople so fragmented compared to engineering, design, founders, or VCs?

On Monday, I've got a best practices event going with top sales folks from H.Bloom, Offerpop and JW Player and it's something I'd love to discuss with the sales professionals in attendance.  Hope to see you there.  

Female Founders: What the numbers mean and what they don't

Last week, there was a Business Insider article measuring the percent of female founded companies that NYC seed funds invest in.  

Brooklyn Bridge Ventures came in first, with a whopping 61%.  

Lerer Ventures was second, with just under 20%.  

So, clearly, I'm making some kind of a portfolio-wide bet there, right?


Well, it's gotta mean something, right?  


The funny thing about stats is that you can basically come up with a stat to justify any argument or position--and the whole female founders in tech conversation has a ton of numbers that people put out there as various types of proof and justification, or blame.

You would probably be surprised on where my views are on some of those conversations.  

Take the most widely used number--that way fewer women are getting venture funding than guys.  That, statistically, is true.  It also doesn't take into consideration many important factors:

One, venture backed companies are a tiny hiccup in the grand scheme of entrepreneurship.  Most companies don't ever raise venture capital and they do just fine.  I scratch my head over why raising venture is put on such a podium.  Do we discount the billion dollar company that Sara Blakely built at Spanx because she didn't raise venture, instead opting to start the company with $5k of her own cash?  That's just silly.  If we look at the larger pool, women run around 30% of the businesses in the US, and they equally co-own just under 20% on top of that.  So women own or co-own almost 50% of all the businesses in the US.  That's a much better picture of female entrepreneurship than the 2-4% of venture capital dollars going to women.  

The main driver of the skew towards men getting venture capital, statistically, is that far more men are pitching.  Of course, you can take into consideration all sorts of things like encouragement, perception--like what would you think your chances were if you see that a firm has never funded a female--but the fact remains that once you actually pitch, your chances don't appear to be any worse than when guys pitch.  I guarantee you that if you ask any of the firms listed in the Business Insider article, and ask them if their dealflow is 15-20% women and they'll say no.  That means you actually have a *better* shot, statistically, of getting VC investment at these firms, statistically, once you actually pitch.

Once again, that's all stats and doesn't really explain anything.  I don't think these funds are actually trying to fund by gender.

What I do think is going on is that men and women start the pitch process at different stages.  I think I can count on one hand the number of times in my career where a woman has pitched me with "just an idea" that wasn't built yet.  Guys, on the other hand, do it all the time.  I believe that women seem to succeed in the funding funnel at a higher rate because they're actually pitching later in their development--when they've got a product, more research, more customer traction.  There are all sorts of socialized norms that play into why--perceptions of risk, failure, expectations, etc.  Guys, in general, feel pretty invincible most of the time and don't mind getting turned down for their idea--and they'll come back again and again showing whatever progress they made.  

In my own case, I do tend to have a bias--and that's industry insight.  I really like it when an entrepreneur has a unique perspective on the industry he or she is working on.  Wiley Cerilli of Singleplatform had been working as the head of sales at Seamless for 10 years.  Chantel Waterbury of chloe + isabel spent 15 years in the jewelry business and had been a Cutco salesperson.  Adam Sager at Canary had worked in and around the security industry for over a decade.  Ellen Johnston of Makr has a decade of senior creative experience.  I tend not to back the type of founder who thinks that code and design alone breaks down all industry barriers--which means that the average age of the founders I've seeded has been around 33.  

If you go for people with some experience and insight, you are definitively going to get more females.  That's because if you're funding 21 year olds, there tends to be less industry insight present so what makes up for it is a build.  They made something that seems to be working as opposed to knowing what will or should work.  Because software development skews so male, the younger you fund someone, and you make that builder versus expert tradeoff, the more likely it will be that you're funding guys.  Women in tech, from what I've seen, tend to become entrepreneurs when they feel like they've gathered up the experience to give them the right idea--i.e. later in their careers.  

So, if nothing else, my skew towards female founders probably has more to do with experience than gender.  

Another factor in my results has to do with my willingness to fund first time founders.  Only one of the 13 founders that I've backed in this fund, and none of the seven I backed at First Round, had previously been the CEO of a venture backed startup.  If you're only backing repeat founders, of course you're going to skew more male, because that's who founded startups in the past.

Lastly, six of the eight founders that counted as part of the BI study were part of mixed teams--where there were both male and female founders.  If it wasn't for those teams, I'd be right in the middle of the back with about 15%.  Why so many mixed teams?

I think it has a lot to do with the personality of the guys I've funded.  They seem to be much more open to sharing the spotlight, focused on building teams that come at problems from multiple perspective, and they think a lot about culture.  In other words, they have a vision not just for a product but for the company behind that product.  When you think ahead about what your company looks like, it gives me a lot more confidence that you'll actually be able to build it.  

So, before you label me (or congratulate me, which I think is the weirdest thing) as an investor that is looking or more willing to fund women, you should be applying the following labels first:


  • Experience friendly
  • First time founder friendly
  • Thoughtful team builder friendly


In truth, that's what's actually driving my investments.  I couldn't really care less what gender you are as long as you've got the ability to make my investors a big return.    

Where's the seed?

The other day, I met up with one of my favorite investors.  We talked about some deals we had done and this investor brought up how they weren't really doing true first money in anymore.  Instead, they said that entrepreneurs should raise 200-300k on their own and get something up and off the ground first with traction and that they'd rather wait to see where that goes.

That was on the heels of another conversation I had with an investor whose firm was about to raise a larger fund.  It was a big next step for them, but it also meant that putting 200k of 750k in a person and half a prototype wasn't going to be the kind of round they could do anymore.  They were effectively out of the seed game.

I've seen this happen over and over again in New York over the last few years.  Seed really doesn't scale--and like any good startup, VC firms themselves are looking for ways to leverage themselves and get to scale.  Picking out the one great entrepreneur out of the sea of way too early startups is incredibly hard, requires a lot of sifting, and you can't put that much money to work anyway.

So why bother?

It makes sense, except when I square it with my own personal experience.  Some of my best investments have been in this way too early stage.  GroupMe was done right out of a hackathon.  Canary barely had a prototype for just the hardware and hadn't done its record setting pre-sale yet.  Tinybop was just a guy and an idea.

The interesting thing out of those rounds is that many of them either struggled at the time to raise or would struggle today.  Many of the original GroupMe investors probably would see that deal as being too early if they were raising now--and the Canary and Tinybop rounds have a mishmosh of non-traditional investors and angels mixed in.  The latter two firms don't have any other traditional seed funds invested in them in their first rounds.  

The seed fund feels like a very temporary animal these days.  No one wants to stay at this level. Many of the people who say they do seed would never pull the trigger on a pre-product concept and they're looking ahead to raising a bigger next fund.  That means more staff, bigger offices and potentially bigger deals.

I think part of the reason why NYC firms don't seem to be staying at this level is our level of sophistication in building financial firms.  Finance is something we grow and scale here.  If you invest for a living and you're in that world, people will look at you askew if you say you don't want to raise a bigger fund next time around.  Investing in two people in a prototype for the love of the tech and because you like startups feels like a rarity these days.

Don't get me wrong, we do need bigger funds--but someone has to take risk early on.  That's been falling into the hands of the small startup funds--people who can't write bigger checks because they're just starting out.  It makes this super confusing and tough to keep track of for an entreprener.  "Who actually still does seed?" is a question I hear over and over.

Personally, I'd rather write that check than wait for tons of traction.  It's fun for me and particularly rewarding if you can help a company get off the ground at the way too early stage.  Does it scale?  Not at all.  Who cares?  I'm not playing that firm building game and don't care to.

That puts an extra burden on me to find like-minded coinvestors.  I'm happy to meet other folks in NYC who are willing to write checks and roll up sleeves in that way too early stage--when people will look at you like you're crazy in the moment and look at you like a genius in hindsight.  If that excites you and you're willing to put money to work next to mine, drop me a line, especially if we're doing the same thing, know each other, and haven't caught up in a while.  

Why I applied to the Union Square Ventures analyst position

They say you can't go home again.  I think "they" are wrong.

After much thought and consideration, I've decided that the best move for my career right now is a second stint as an analyst at Union Square Ventures.  By the end of the day, I will have formally completed their analyst application.

Why now?  Why go back to a job I first took nine years ago when things are going so well for me and I'm running my own fund, Brooklyn Bridge Ventures.  

Well, that's part of it.  Things *are* going *incredibly* well.  After raising sizable follow-on rounds, both Canary and Floored have built, pound for pound, two of the best technical teams in NYC--especially around some really advanced computer vision work.  Tinybop's Human Body and Makr's initial iPad version were recognized as some of the most well designed iOS apps of the past year--and both have incredible new products coming down the pipeline.  SocialSignIn, just announced as one of the Techstars NYC companies in this cohort, is growing revenues and has their in-venue marketing solution operating across multi-unit chains, theaters and lots of other places where venue owners want a better relationship with their on location customers.  Ringly, the most design savvy wearables company focused on fashionable women, recently graduated from the Highway1 Accelerator and I'm thrilled to see how beautiful their soon to be launched first product is.  Versa has become the premier content marketing solution for real time responses to breaking news and trending headlines.  Orchard is helping more and more institutions everyday build and gain insight into portfolios of peer to peer loans with cutting edge tools.     

Given all that, I feel like I might as well quit while I'm ahead.  Why bother making any new investments at that point?  

I mean, sure, there are probably other interesting early stage investments to be made in NYC, across lots of different industries--and yes, I definitely could have raised another fund in the second half of 2015 be selectively adding a one or two more institutions and family offices, but there's always been this one nagging loose end in my career that I feel the need to address.

You see, the USV analyst position has always been subject to much competition.  Hundreds of applicants apply every time a slot opens up and those who take the position can say that they were the first choice out of a very dynamic crowd of people.

Except me.

I applied for the job before there was even an opening--even before Union Square Ventures was really on the map.  It was pre-Twitter, Tumblr, Foursquare, Indeed, etc.  

They weren't even considering anyone else...  so I beat out exactly zero people for the job.  I'd like to go back and win the job fair and square--to be able to hang my head high and say that I finished first out of a crowd of highly qualified applicants.  It feels lame to say, "Well, since I was the only one who asked about it and they kinda knew me a little, they took a flyer."

I'm very confident about my chances, especially since I'm undoubtedly the applicant with the most experience actually being an analyst at Union Square Ventures.  I mean, who's more qualified than me?  Plus, I already know lots of things about being at USV.  We share the same fund administrator doing backoffice financial support, and I know Brad's actual first name.  How much could have possibly changed in the last nine years?

Plus, it's a pretty cushy gig these days.  I mean, current analysts get a real desk.  Back in my day, our office was so small, I had to sit in the reception area and I had trouble convincing people I was a real analyst.  Oh, the deals I could find if I was working there with a real desk.  

Plus, the NYC ecosystem is so much more vibrant.  Back then, it was a big deal if you had ten people who could write code at your company.  The NY Tech Meetup was held in the back conference room of Meetup and 25 was a good turnout.  

I can't wait to have the pressure of being decisive lifted from me.  These days, I usually tell companies whether I'm in or out in the first or second meeting--and I won't even take a meeting if I know it's not a deal I can get excited about.  Being in a one-vote fund where you don't need to huddle up in a partners meeting to do a deal--totally overrated.  

Simpler times await, and I couldn't be more excited.  

And if you believe all this, I've got a bridge to sell ya.  Happy 4/1!

Seriously, though... it was a great job and you should totally apply for it.  Thanks to Brad, Fred and Kerry for providing me with a great experience oh so long ago.