How to Perform Inception on a VC

One of my favorite phrases is "performing inception".  Inception is one of my favorite movies and I love the idea of meticulously planning out the placement of an idea in someone else's head.  

That's basically what founders have to do when they fundraise, because you'll never be more successful with an investor who thought it was their brilliant idea to invest in your company, not yours.

Remember what we learned from the movie.  Ideas that stick well in other people's heads have to be simple, and they're better when based on positive emotions.  

Who invests is also important--these are people who want to make money, but also be seen investing in the "hot" companies.  Sometimes, just proving out a business model isn't enough.  

Are you creating a company that looks like something they'd be excited to share?

So what ideas are you trying to place in your next round investor's heads?  And how do you do it?

It has to be simple.  

If an investor had to believe one simple thing about the world that would eventually lead them to investing in your company, what would it be?

That very idea should be at the heart of all of your PR.

Is it that there is a lot of money to be made in your sector?  

Is it that your team is the best out there?

Is it that your business model rises above everything else or is really innovative?

Maybe you're the next obvious iteration of a model that works?

Customers need your product to live happy lives--perhaps that's it.

How many times can you repeat that, and where, and who can you get to repeat it for you?  What relationships does this VC have that can help reinforce the message?  Content you create, interviews, podcasts, speaking engagements, survey data you research and disseminate, events, engagement over social media...   VCs need to see your message time and time again. 

Founders should also be spending time in networks of other venture-backed founders--not only to learn, but to have their message and reputation echo back to other VCs.

"Have you met so-and-so?  They're really impressive."

Simplicity, consistency, repetition and pervasiveness.  That's how to get an idea to stick in a VC's head.

Five Lessons Founders Can Learn from Donald Trump

Honestly, it's difficult to think about anything else besides the election and this impending clown show of an administration these days--but I'd really like to get back to blogging about startups.  

Consider this post part of my own transition team of posts.

While the country is far from a startup, founders find themselves as essentially newly hired CEOs with a lot of uncertainty surrounding them.  This is the position Donald Trump finds himself in now, and by watching what he's up to, we can learn a lot of lessons around how to handle it (or how not to, mostly.)

1) Get to work.

Watching a President-Elect comment on every single SNL skit is like watching a founder who won't stop adding on to their fundraising around.  Fundraising feels good when it works out, especially towards the end when there are always a few more angels who want to squeeze into an oversubscribed round.  You need to come off of riding that high and put your head down and out of the spotlight for a while after that, and do some real work once you've got your fundraising win.

2) Hire people who create confidence, not the people you already happen to know.

Hiring should be a process--from Day One.  If you don't create a process that seeks out the best people from wherever they are today, how are you ever going to do it two years from now, four years from now, etc.  Eventually, you run out of people you know well--and frankly, most of these people aren't the best people for the job anyway.  Once again, this isn't exactly what's going on in the Trump administration and anyone who has built teams knows it's going to hurt his chances for success later on.

3) Stay positive.

Your competition is going to launch just before you or there's going to be some press saying how the funding cycle is done for your industry.  Maybe you'll get a bad review or two for your beta release.  These are all people you will need to convince and get the support of in the future, so while discrediting them might feel good in the short term, it doesn't help you win in the future.  Instead, why not listen to their criticisms fairly and double down in your efforts to win their support with action and results later?

4) Being a CEO isn't that glamorous.  

A lot of people start companies because they want to be their own boss or be in a fast paced environment, but most days, you won't feel like either of these things are true.  You're always lacking for resources or time, and you're not moving nearly as fast as you want.  The best companies build for the long term, and the job of the CEO is to create processes that effectively take the founder out of way.  So, if you're a developer, marketer or salesperson, you're going to have to reckon with the fact that you're now a manager.  Instead of building, you're taking meeting after meeting after meeting, and you won't be able to have your hands in everything.  

This is the job you asked for--so don't kid yourself what it's going to be like once you get into it.  Success can be a curse if you're not realistic about what it's like--it seems from the sobered expression Trump seems to carry around all the time, actually being President isn't nearly going to be as fun for him as running for the job.

5) Don't surround yourself with "Yes" people.

It's easy to live in your own little filter bubble, especially as a founder, or, apparently, as a President-Elect.  You can forget that there are lots of people who didn't think your ideas were very good--and those are the people who can make you a better founder, and who can make your company better.  It's easy to satisfy a small, vocal minority that feels like "everyone" until you need to build things that really scale.  Make sure you listen to a few skeptics along the way and really hear out what they have to say.

 

"About Last Night..." The note I just sent to my portfolio.

In 2008, I tried to fundraise for my startup the week that Lehman Brothers went under. 

You can imagine how well that worked out.

Basically, VCs told us that they were going to wait and see how the election turned out--and things didn't really thaw out until the following September.  

Extreme uncertainty slows the VC market to a crawl--that's what I learned.  We didn't get a bubble, but we got a really tough year fundingwise and that's what I'm expecting.  Over the long term, innovation prevailed and 2008 turned out to be a great year to have a 1-3 year old company if you could make it through the next year.

Here's what I would suggest:

1) Reassure your teams about your mission.  If you felt good about what you were doing at your company yesterday, you should feel good about it today.  Listen to them.  Let them ask questions and listen to them.  Talk out their concerns.  That's most important above all.

2) Find a way to extend your runway--whether it's pausing hiring for a little bit, and yes, thinking about salaries.  I don't think there's any worse morale killer than a salary cut, but if you're worried about your company going out of business, some hard decisions may need to happen.  Feel free to reach out to me and your other investors and talk about this.  This also means taking on extra capital.  If you're concerned at all about the fundraising cycle, reach out to anyone who has been floating around the company.  Preemptively tell them that you're concerned about the near term uncertainty but you believe in your business and believe you'll have opportunities to make hires, double down on sales, etc., so if they want to talk about coming in at a reasonable valuation, you want to fill them in on all the positives.

3) Find something positive to do as a company--like volunteering.  Clear your heads, feel good about helping--because if there's anything we learned last night is that a lot of people feel disadvantaged and we need to start caring about a much wider tent of people than we have been.

I'm available if you need to chat.

Charlie
Text me and I'll ring you back... 

Did Facebook and Twitter Make Us Better or Worse in 2016?

Yesterday, I got caught up in letting my frustration over the election boil over onto Twitter, and it's definitely not the first time.  

It made me ask the following question:

Were we better off in 2016 having Facebook and Twitter around?

I talked about it with a few people.  One brought up #blacklivesmatter and while I hope some important issues were highlighted, I really don't see these platforms bringing about positive change in the real world.  I retweeted and liked things I cared about, but I can't say they led me to take much in the way of real action.  

There's a narrative around these platforms that all connection is good--a pride they seem to take in things like #Arabspring, as if revolutions never happened before social media.  They seem blind to what's going on in the everyday experience.  

We didn't used to be this dumb.

I'm annoyed that these platforms with so much human potential are designed not to make us more educated, more aware, or more empathetic, but to keep us clicking--to suck us in no better than when the nightly news warns of what will kill us, just later in the program.  

Someone mentioned the other day that news used to be a loss-leader for media companies, so they never tried to make it into entertainment.  They did the news out of a sense of responsibility.  As the media business model got more competitive, and the "Big Three" networks felt competition, the function of news changed.

Perhaps Facebook needs to start thinking of news the way monopolistic media giants used to think about it--one of the few ways they didn't make much money.  With great power comes great responsibility, no?

I'm not saying Facebook needs to take a view--but it can have a mission to improve the level of dialogue.

Technology has the capability to verify claims and to inform us of skewed perspectives.  It can encourage more out of us.  After all, who posts an Instagram without working on it for a few minutes first?

What if social media stopped you before you reposted something dubious or inflammatory--even if just for a moment, to remind you of what you were doing.  

What if there was a cost to hate?

When I drive around in a Car2Go rental, it reminds me whether I'm driving smoothly and in an eco-friendly manner or whether I'm treating this Smart car like my Mustang.  If I'm not, it threatens to suspend my account.

What if I was only allotted a few hate points a month?

The smartest designers in the world could help us be our best selves--and for sure, we need to be better than we are.  

Sometimes we're great and sometimes we're not--but I fear that 2016 has brought out the worst in too many of us.  If we are to accomplish anything, we need to live on the other end of this spectrum.

Perhaps the greatest thing the Chan-Zuckerberg Initiative can work on is Facebook itself, before it tears ourselves apart.  

Other people can raise money for cancer and poverty, but unlocking mass human potential through discourse is a unique opportunity for social media problems to take more seriously.

I wish them all the best at it, starting the day after tomorrow.  Our only hope is that tomorrow marks the end of a very bad time for social platforms.  

Proudly Investing in Businesses that *Get Better* as People Actually Use Them, Not Worse

Classpass is nothing short of phenomenon--and it's particularly noticeable to me because I passed on its seed round.

In my defense, I passed when it was Classtivity, a completely different model focused searching for classes.  Obviously, the pivot worked out for them.

Still, it's a bit frustrating to see them end their "Unlimited" option to the chagrin of many of their users--just a few months after raising their prices.  

The types of businesses I like investing in are ones whose economics *get better* at scale, not worse.  Remember how much AOL sucked at peak times back in the day?  How much does your local gym suck when everyone else is there?

You should be building something where the more people that use and absolutely love the product, the better your economics get--and the better the offering becomes.  This may even sacrifice top line in the short term, but I think these companies will build better, more sustainable businesses.

Now if we can only get all the VCs to think this way.

Here are a bunch of examples of Brooklyn Bridge Ventures companies getting better at scale:

Canary's explosive growth has enabled it to process more video every second than Youtube, learning patterns in order to make its alert algorithms better.  The more people who buy and use it, the smarter it gets. Check out its new indoor/outdoor product Flex.

Tinybop's revenues have enabled it to build more and more apps--meaning that when you discover them, there are so many more titles to choose from for your kids. Now, you can buy their apps in bundles at better pricing than just one at a time. 

Ringly has expanded its product line to include a bracelet and more and more apps for notifications everyday, enabling lots more use cases.

goTenna's new Mesh product enables off-grid communications in a network that improves as more people have it.  Whether the power is out or you're in a remote place, the more users it has, the better it keeps you connected.

Orchard Platform gathers lots of data about the P2P market over time, because they've been integrating with more and more lenders.  In turn, they've created more product offerings and enable institutions to get better insight into their investments in this asset class.

Logcheck turns maintenance rounds into actionable data.  The more items you track with it and the more buildings you get on the platform, the more insight you can get into your real estate portfolio's health and upkeep. 

Plum Print digitizes kids art and turns it into keepsakes and gifts.  The more you scan, the less macaroni necklaces and hand turkeys you have cluttering up your house, and the more memorable the coffee table books become as they track your child's creative progression through the years.

The more your product and engineering team uses Clubhouse as its product management software, the more organized and efficient your company gets.  Over time, Clubhouse will use that data to make predictions about estimations, deadlines, and bottlenecks that will enable better team planning. 

You can't go anywhere in Manhattan these days without seeing Homer Logistics riders in their neon shirts and black box backpacks.  The more businesses they sign up, the more efficient their network gets, cutting delivery times, improving service levels, and most important for me as an investor, improving their bottom line.  Instead of hemorrhaging more cash at scale like many other last mile delivery businesses, Homer's economics have only improved with its growth.  That also means better economics for riders, too--because they make more tips as the network delivers more per rider per hour.

Tinkergarten is now available across 13 states with over 200 leaders for their classes.  The more classes there are, the closer you are to a terrific educational and fun experience for your kids.  Scale also makes it easier for leaders to fill classes as the brand gets out there more and there are more parents providing great recommendations to friends.

The Wing is only in one location right now, with a *huge* backlog of membership applications.  When they open up more locations, the experience of being in this place-based network of inspiring women will only get better and better.  Members will cross pollinate across locations and find whatever location is most convenient to them throughout their day.

Agrilyst helps controlled environment (indoor) farms track their data and improve yields.  More users and more data makes the platform smarter for each customer.

Bizly is the easiest way to book a conference room in a nearby hotel.  The more hotels sign on in more cities, the better the experience is for every user.

Ample Hills is building an ice cream factory.  At scale, they'll have better economics and will be able to roll out to more locations and never ever run out of your favorite flavors.

Something interesting happened when Hungryroot got more popular and started to scale.  They got more data about what customers liked and didn't like very quickly, enabling them to change recipes and offerings, and expand to categories like breakfast, snacks, and sweets.  Cart sizes grew as the variability and selection offering got better over time--and now most of their customers love it so much, they're on subscription.  

The lesson here?  Build your companies from day assuming wild success as your plan--and don't let usage get in the way of improvement and customer satisfaction.