Good morning, All,
Ok, it’s not, but anyone who knows Dave McClure (500 Startups) and/or has heard him speak, knows that he will invoke the ‘f’’ word at least a dozen times into any given three minutes of conversation. His TV show, Bazillion Dollar Club, (with Brady Forrest, who runs the Highway 1 hardware accelerator) premieres on Scyfy next month, and here’s a preview. Dave is nothing if not strongly opinionated, and he recently posted a series of tweets aimed at startup investors. While we rarely do this, they were too good for us not to share, and founders, there are takeaways here for you, too:
1/ Dear Startup Investors: STOP PARTICIPATING IN BUSINESS PLAN COMPETITIONS. You are propping up a HORRIBLE practice in the industry.
2/ similarly, STOP ASKING FOR 3-5 YEAR REVENUE PROJECTIONS. (if you want, ask for 12-month EXPENSE projections). you’re asking for LIES.
3/ encouraging entrepreneurs 2 guess future metrics & outcomes is THEATER, & not what makes BUSINESS. build prototypes & go get customers .
4/ if you continue to judge business plan competitions & revenue projections as if they are winners / real businesses, YOU ARE A HYPOCRITE.
5/ if you want to highlight WINNERS, then judge product prototypes, measure unit economics, & ask 4 early customer growth adoption charts.
6/ the REASON people built biz plans in past is because it was HARD 2 measure ACTUAL PROGRESS. but NOW we can get BIZ METRICS IN REAL-TIME.
7/ if you choose business plans & revenue projections over ACTUAL prototypes & biz metrics, you are picking SCREENWRITERS over FOUNDERS.
8/ biz plans & revenue projections are nice ideas AT BEST, more likely they are LIES & EXCUSES instead of getting STARTED on REAL BUSINESS.
9/ in summary: STOP writing screenplays, STOP making guesses & lies, START encouraging founders to JUST BUILD PRODUCTS and GET CUSTOMERS.
10/ caveat: MARKETING PLANS & EXPENSE PROJECTIONS are ok — that tells us where/how u want 2 spend u $$$ we give u (& whether ur crazy 😉
In other words, build a company, and then come to us, if and when you need to and despite what you may have seen or heard, results uber alles ,and aren’t we all about inventing the future? But there’s a difference between inventing the future and making it up as you go along.
While literally some of our BFFs are investors, we are reminded of what our friend, serial entrepreneur and investor Stephen Messer, once said during a panel discussion a few years back: that he himself avoids investors, as he’d get better rates from the Mafia. So before you believe that your only recourse is OPM, put that in your pipe and smoke it.
Time to disrupt the business plan and get real, on both sides of the table, in this world of valuations gone amok. For the record, having just raised another $1B round, Uber (is now) Valued at More Than $50 Billion, and while we live in NYC and have personally found great value in Uber, does that mean that the on-demand economy is the winner du jour? There is a startup (launching soon in SF) called Trashday, where ‘helpers’ literally come to take out your trash – and which may well be a sign of at least parts of the economy gone awry. Or as Startup Jackson so aptly put it: “The Uberfication of everything is turning San Francisco into an assisted living community for the young.”
We’re so focused on eyeballs and hockey stick growth that we’ve forgotten what business really is all about: not solving imaginary problems for adult children, but building a sustainable company and knowing who your customers are. It’s no secret that Twitter is obsessed with Facebook (Twitter’s Facebook fixation could be sending the company into crisis), but FB is a social network, while Twitter is a broadcast medium. Apples and oranges. Saks customers are not trolling the aisles of Walmart for their pret a-porter: know your audience. And your value add.
Frothy decks and pie-in-the-sky valuations are both contributing to the latest round of funding/valuation madness, so may be a good time to stop and rethink both now. Nice to be wealthy on paper, but we’ve seen this before, and now as before, the way things are going and to borrow one of Dave McClure’s favorite words, at the end of the day, that paper will not be worth the effing paper it was printed on. Onward and forward.