Why Founders are Wrong, Even When They're Right

Investors turn down deals for some pretty dumb reasons.  They lack logic, consistency, and sometimes even a grasp of what their own job is...  

You know...  taking actual risk.

"We're not interested for this round, but come back to us when Sequoia is leading at a $1.5 pre-money, you have seven enterprise customers and you're cashflow positive.  Oh, and make someone from your 25 person Moldova tech team your co-founder.  Don't forget to tell all your founder friends about our ultra-pre-pre-seed program.  We love early."

It's easy to get frustrated and focus on all of the things the investor did wrong and the ridiculous questions they asked.

You shouldn't, because it's still your fault they didn't invest.

Assuming they weren't unethical and they met your character standard, you went into a pitch with the goal of getting money from this person, and they didn't get there.

Maybe they didn't even have the guts to say no.

But they didn't say "yes", and that was the goal, so that's a failure.  It doesn't pay to look at it any other way--and I think too many founders focus on the investor as the problem versus their pitch or their company.

If you walk away from a "no" without any ideas on what you could have done better, especially if you're consistently getting turned down, then you're missing out on a learning opportunity.

Let's not forget the possibility that the lesson to be learned is that perhaps your idea just isn't a very good one.  You're still a wonderful person, I'm sure, but your idea or company could be one that is disproportionately unlikely to return investor capital in multiples given the risk.

Let's keep in mind that is the definition of good, too:  An investor has to see that you have a statistically significant chance of building a huge company--with "huge" having specific definitions most likely in the hundreds of millions of dollars in enterprise value.

There are a lot of "good" ideas out there that don't have that much potential or don't have a very strong chance of getting there.

Getting an investment is very difficult thing.  How difficult?  Well, my own statistics are that about 2000 things come across my desk in a year, and I make 8-10 investments.  That's the top 0.5%.

Think about that as a race.  How fast are the top half-percentile people running?  Not only are they running really fast, but think about how much they must be training, how they eat, what kind of shape they're in, etc.

They've got their race prep *down*.  That's how good you have to be to be in the top 0.5%.  If you didn't train and you didn't finish that high, you wouldn't blame the course, or the weather, or your shoes.  It would just be obvious you weren't that competitive of an athlete.  Sure, you might have had some shoelace issues or maybe a brisk wind, but chances are that wouldn't have mattered.

Same with pitching.  

Some investors will say yes to deals that others say no to, but statistically, most people who try to pitch are getting no's across the board or by a majority of people--and when that happens, you need to turn the mirror on yourself as a founder.

Ask yourself, "What would somebody need to believe to make this investment and how can I better convey that?"

Or, perhaps, "How can I make believing in this idea so easy, even a caveman could understand it."

(Unfortunately, that's not terribly far from the truth of the situation.)  Still, if you know that's what you're up against, then it's up to you to convince them on their terms.

Here are a few ways founders can improve their chances with an investor:

1) Make sure you actually have a viable startup idea, *before* you pitch.  

Pitching isn't about testing the viability of an idea--it's about getting money for something you already know should exist, can work, and will likely return enough capital to investors to fit their criteria.  It's this last part that trips most people up.  You need to be able to explain how this company can grow to a size and scale in the hundreds of millions of dollars, if not more--so if you're forward revenue projections have you at $5mm in revenues in your eight, you're just not going to get there.

2) Use time tested sales techniques.  

Pitching is a sale--a sale of your own equity.  The investor is *buying* into your company, so why wouldn't you use techniques used by experienced sales professionals?  Here is a list of the top selling sales books of all time.  Seems to me that if you're going to pitch anything, you might as well read one or two of them.  A key one for me is outlining ahead of time how you're going to use the time in the meeting and getting me to buy into it right off the bat.  Tell me what you'd like to convince me of.

3) Tell a story, don't just convey information.

A story as an arch to it--a path with momentum that leads to a place.  I can read the slides just fine on my own, but when we meet, you want to mentally take my hand and lead me to a conclusion that I can make a lot of money getting involved.  Each slide, each fact, has to be part of a whole, versus just another fact you're throwing at me.

At the end of the day, there are a lot of "wrong" decisions made by investors--but it's your job as founders to make sure we don't make that wrong decision.  That's the only way you'll win us over--not by reminding us or yourself of our wrongness.

Five Lessons Learned Getting to a Second Fund

Today, I'm happy to announce that Brooklyn Bridge Ventures, the firm I founded and continue to run as the sole General Partner, has raised a second fund, totalling $15.1 million in commitments.  Nearly all of our existing investors returned, and they were joined by a couple of new family offices and a prominent college endowment.  

What does this mean?

Most importantly, I get to keep going.  Having a job is way better than being out of one.

Fifty investors took a shot on me four years ago to lead rounds in New York City at the earliest of stages--prototypes, betas, Powerpoints, napkins, or just people.  I had all of seven deals to my name in a short, two year track record.  Granted, two of those companies had exited for great returns, but it was also on behalf of a brand name firm whose name I wouldn't get to carry around all the time anymore.  

Who knew whether I'd even be able to get into any deals on my own?

Thirty-five deals later, the first Brooklyn Bridge Ventures fund has invested in great companies like Canary, Orchard, Floored, Tinybop, Ringly, goTenna, Hungryroot, Ample Hills, Tinkergarten, Homer, Logcheck, and others that I am proud to be associated with--not just because they are doing well, but because their founders work hard, treat people right and have great insight and curiosity around the problems they've tackled.

Second, we have more to offer founders.  Before, when I would lead a deal, I might be able to write a check of about $200k or so.  Now, that number will grow to $350k and the firm will be able to do a small amount of follow on investment.  Truth be told, I still believe the best ROI to be had is in the very first round, but now even a small follow on will help an entrepreneur answer whether all their existing investors are participating.  I won't lead another round, but even this small amount can help make that next round's story straightforward and consistent. 

Nothing else is really changing.  The fund doesn't have a specific industry focus and it will continue to work with New York City companies.  The increase in fund size doesn't mean I'll be going any later either.  We'll still focus on companies that have yet to raise $750k in prior rounds. 

There are some things I learned about running a first fund over and above finding great companies that I think are important for new managers to keep in mind:

1) Venture capital will be humbling.  

You're going to wind up failing a lot.  You're probably not going to have the "coolest" fund or always be first to the trend with the most hype around it.  The founders that are going to make your career aren't the ones that everyone knows already, inviting to all the best parties.  They're the ones working on the companies that were a struggle to get people to invest in--so much so that you'll question your own judgement a lot when you're the first yes.  

2) Focus on getting known for being helpful and hardworking--by actually being helpful and hardworking.  It's easy to get swept up into the cult-like status around venture capitalists as kingmakers or thought leaders.  The truth is you won't really know how good you are for years and years--so don't be so quick to think you know what you're doing, no matter what the media tells you.  This will be my seventh year of leading investments and it's been fifteen years since I first joined the asset class--and I still feel like my learning has just begun.  Don't worry too much about the new new fund everyone wants to write about more than they want to cover what you're doing.  

3) Have a consistent focus.  Since I started working at First Round Capital back in 2009, very few early stage investors seem to be doing the same kinds of deals at the same stage today as they did back then.  There are firms that started after that date that have gone on to raise three, four, or even five funds that are ten or twenty times the size of their original offering--even though we're just figuring out now how good those investors are at what they started out doing.

It takes so long to hone your craft in venture capital that, for me, I could never be successful changing up what I do all the time.  The deals I do today at Brooklyn Bridge Ventures are largely the same kinds of deals I was looking at seven years ago and they'll be the same seven years from now.

4) The investments you make in relationships last longer than most of the companies you'll invest in.  Last year, I got to back a founder that I first met ten years ago when I was an analyst at Union Square Ventures.  I have investors in my fund that have known me that long--and others who took the time to watch my first effort over three years before investing in the second.  I also made an investment in a founder that I previously backed once before--my first repeat founder.

I've spent a lot of time over the past four years thinking about how I treat other people--how I can make people feel respected, comfortable, and listened to.  I'll never get it right 100% of the time, but I realize now, more than I ever have, how these relationships add up to a network over a career.  I take no greater pride than when a founder I passed on recommends me to another founder because they feel like, even though they didn't get a check, they had a good experience with me.

5) You need a plan rooted in reality.

I highly recommend that any new investor builds out a cash flow model around their strategy.  Are the assumptions realistic or do you need to find eight IPOs in a sector likely to only have four of them?  What's your average going in price?  Will you ever be able to put all this money to work?  When do you expect these companies to fail and how many checks will you need to write before that happens?

That's the difference between angels and VCs.  Success doesn't just come from having a good network and getting in cool deals--it's about building a portfolio strategy and having something that works at scale and over time.

One other note: This isn't, and never will be, about the money.  There are a lot easier and quicker ways to make money than by running a seed and pre-seed fund.  I do fine and pay my bills but greater scale, more management fees, and a bigger operation would undoubtedly put more money into my pockets in the short term.  It wouldn't, however, enable me to make better investment decisions or provide me more time to spend with founders.  That's my only goal--to responsibly invest my Limited Partners' capital as part of a consistent strategy by being helpful to high potential founders.  

Everything else is just noise.

How to Run Startup PR Like an Election Campaign

Campaigns, conventional or not, are highly motivated and energetic storytelling machines.  They come up with a narrative, figure out who they want to get it in front of, and work like all hell every single minute to get it out there.

That's the kind of pace a startup needs to be on--except that most startups treat their PR as if all you need to do is to launch your message at a debate and cross your fingers after that.

Here are five things startup founders can take away from the way campaigns work:

1) Campaigns have a message.

And it's not only "Vote for my candidate".  It's more complex than that.  Sometimes they want you to believe the economy is good or job creation is sluggish or we're at war with terrorism or values or crumbling or whatever.  There are other things they know will get you to cast a vote your way if you believe.  So, maybe some of your campaign is about having the best computer vision team or being smart about retail distribution--or that cars will drive themselves one day.  Whatever the underlying supportive arguments those are, startups need to layer them on top of each other to support the key things you need--sales, funding, hiring, etc.

2) Campaigns work on a schedule.

First we're going to go to this state and say this to this audience, then we're going to that state and then we're going to hit up this talk show.  Campaigns are about editorial logistics.  Who are we telling today's message to and where?  

So many startups but all their eggs in one basket--the launch--but fail to create anything that looks like an editorial schedule that thinks about opportunities to share your message over time.  What conferences should we be asking to speak at over time?  What events should we run ourselves?  When will we write this blog post.

Without a schedule and a plan, you're just a lunatic with a Twitter account shouting at everyone.

3) Campaigns win influencers.

They get endorsements.  Teachers unions, former Presidents, celebs--who can influence votes and tell everyone else to vote for us.

This way, you have an answer to "Says who?"

Startups should be doing the same thing.  Everyone should have a list of 25-50 people or groups that would be key endorsers.  It's one thing for someone to say they bought your product, but if you can get them on message, talking about you in their own blog posts or interviews, that's ideal. 

You can just e-mail around and ask, but the most surefire way to do this is the old fashioned power lunch/power smoothie/office visit--i.e. time spent face to face.  It's slow and it's plodding, but if you can sit with someone and convince them to get behind what you're doing, they're going to feel more special, more invested, and you'll get more of your message across, versus just asking for a Retweet.

4) Campaigns are tenacious.  

Polls may only come out weekly, but campaigns act as if every single day is a battle in the war for human attention.  The moment a story comes out, the candidate spin machine is all over it.  They never miss an opportunity to have their people commenting on TV or in the news and that's the pace your message needs to be closer to.

Every single time a piece of press comes out about your space and you're not mentioned in it is a missed opportunity--and you better be all over that reporter, fixing that mistake, inviting them to see what you have going on, etc.

5) Campaigns run events.

If you can't find enough opportunities to share your message, you need to create some of your own.  Hosting discussions, demos, dinners will be well worth the cost if you can get the right people there and in numbers--or if you can create content out of it.


Is it not obvious that video is the killer medium this year?  How much video is your startup creating?  Seems to be working for the candidates this year, isn't it?  Every single underemployed video creator is a startup missing an opportunity.  

How to Make Time

There is always more to do.

Right now, I have about 1000 unread e-mails in my inbox and I have a bunch of personal errands and projects around the house that I've been unable to get to.  

One of the hardest things to learn is that if I don't get to all the e-mails, that's ok.  You can't live your life in your inbox.

You have to put your personal priorities into your schedule or else other people will put theirs on yours.  Each week, I take another look at my calendar...  Did anything get on there that shouldn't be on there.  I'll cancel if I have to.  

I put in the things in my personal life that make me happy--bike rides to the beach to catch the sunset, kayak volunteering, softball, seeing my family--and work my job around them.  That includes my health--working out and sleep.  

Each week, I try to maximize the amount of time I spend doing things I look forward to, and minimize things done that I don't--things I accepted out of a misplaced sense of obligation or because someone else wants me to, even though I don't.  

I'm a solo General Partner with no partner meetings.  I don't take any meetings with founders where I don't think I can realistically get to a yes--and that means no quick 20 minute meetings.  Small things and quick favors add up.  

I don't do "office hours" at any accelerators--instead opting for a full meeting the one or two  companies (if there is even one) that I really get excited about.  You can't spend full time attention on things you're half interested in. 

I don't do panel prep calls.  If you asked me to speak on a panel, just tell me how you want the narrative to work and you run the panel.  I know what to say because if I didn't, you wouldn't have asked me on.  I'm happy to contribute two hours to be there, travel inclusive, but not two and a half or three because of the stupid prep call.  Volunteering your time shouldn't cost you extra time.

I overindex for groups I can actively curate.  Instead of going to happy hours sponsored by various vendors, I run one or two dinners per month where I can invite the attendees or get recommendations on who I should meet.

Synergies are important.  The more you spend time with people who share interests with you, or where you can make your interests overlap, the more you'll get out of each moment.

It's not a perfect system, but it gets a lot more out of the clock than average.

Punching Above Your Weight as a Founder: Why I invested in Bizly

I'm a founder.

Sure, I'm an investor, too, but I started Brooklyn Bridge Ventures, the firm I invest out of.  That means that in addition to thinking about what kinds of investments I'm going to make, I need to think about where I'm going to work, payroll, business cards, all that stuff.  

As we've seen, the "business stack" of a variety of services entrepreneurs run on everyday has changed dramatically over the last few years.  Google Apps enabled e-mail on demand without a server, Uber enables transportation on demand, and WeWork offers space on demand.

The reason why WeWork became so successful was because they realized that space wasn't just about space.  It was about support--how could they make your work life easier?  That meant over-investing in technology to improve convenience and connect their members.  

In this way, space is something more than just a room with chairs and a table.

Founders know that space needs to be something more when they interact with clients and customers, when they onboard people, and when they focus on culture through offsites and events.  It's not just about people in a room, but a particular environment they want to create.  Just last week, I had a meeting with my Limited Partners at the Highline Hotel--a beautiful building that used to be part of a seminary built in the early 1800's.  The room was eclectic and cool, and afterwards I adjourned to its beautiful outdoor courtyard to meet up with a potential new investor that I had invested to come to the meeting.  

It was exactly the kind of vibe I wanted.  High quality, but interesting and comfortable.  

And yes, I closed that investor.  I also closed on a seriously great sandwich at the hotel bar.  The food their is excellent.  

I got the space through Bizly, a company that I invested in that just launched to the public today.  Bizly takes advantage of the vast supply of conference space in some of the best and coolest designed hotels in the world, as well as the top notch staffs that run them.

With a Bizly room, you get all the benefits of doing your meetings in a hotel--food and beverage service, someone to help you with A/V, and the ability to hit up a lobby bar or restaurant before or after--without all the hassle.  No faxing, phone calls or contracts required.

Businesspeople know how important all these amenities can be, because it's more than just a room that closes a deal or that inspires a team to come up with a new insight at an offsite.  

I'm excited to work with Ron Shah on this company and it's a testament to the kind of long term relationships that have building the deal flow pipeline at Brooklyn Bridge Ventures.  I was introduced to Ron almost three years ago by one of my investors as someone I should invite to my annual Shake Shack party.  He was an investor at his own firm at the time--a fund that had a lot of international LPs.  He had a lot of insight into the business travel market from the perspective of a small fund trying to impress a lot of big names--and after a year plus of talking with him through various iterations of the business, I decided to back what became Bizly.  

It just makes sense--take advantage of the best existing supply without the overhead of needing to own or rent that supply yourself.  

I'm excited to see it come to fruition and I'll offer up a discount code.  Use "BBV" and get $25 towards a very cool meeting space at Bizly.