In a world turned upside down and gripped with panic, we thought we’d point out a few pieces of information that you might have missed, and a few potential opportunities that you may be missing:
Evidence over hysteria — COVID-19. Keep calm and carry on, and if you’re constantly checking the somewhat sensationalist Johns Hopkins bubble map, this is a must read.
The headline is a reference to a 1985 novel written by Nobel prize winning author Gabriel García Márquez. Namely, Love in the Time of the Cholera.
China did not immediately inform the world that the Corona virus was out there.
We know that the current virus is not the flu, but the two do share certain symptoms, and we will remind you that not every case is a death sentence. Chances are, it started spreading before the city of Wuhan was quarantined, especially given the fact that the US has already seen 21,000 deaths from the ‘flu’ this season – much higher than normal – and million upon millions of instances where people recovered, despite the fact that they were bereft of the magical properties seemingly imbued by hording large amounts of toilet paper.
FYI: the headline is a reference to a poem by Ogden Nash:
A flea and a fly in a flue
Were imprisoned, so what could they do?
Said the fly, “let us flee!”
“Let us fly!” said the flea.
So they flew through a flaw in the flue.
The Wuhan Flu has certainly been consuming the headlines globally and we all know the drill: wash your hands often with soap and water (using hand sanitizers does have consquences) avoid large crowds (is it canceled yet? your list of cancelled large industry events); companies are encouraging employees to cancel non-essential travel; dispense with hand-shaking as a salutatory greeting, hide under your desk and cover your head, in case of a nuclear attack…
We attended Peak Pitch last week, and thought we’d share some of the lessons that we gleaned from the experience. Namely, points about pitching to investors that every entrepreneur needs to know.
FYI, every year, Peak Pitch brings together 40 or 50 seed and series A investors (some of whom may come from finance, while others are recovering entrepreneurs themselves) and 40 to 60 curated founders for networking and informal pitches on the slopes. Skiing is not mandatory. Pitches can also be done fireside, speaking of warm introductions. There is no shortage of investors there to listen, give constructive criticism or offer advice. The activities and shared experiences are enjoyable, to be sure, but at the end of the day (actually, all day long), everyone is there to do business.
We reviewed What Investors Are Really Looking For in a pitch deck just last week. Since Peak Pitch is the next stage – your deck has passed muster and you’ve moved up to the next level – what’s the drill once you have the ear of an investor – or 40? It’s not just a rehash of your deck. It’s the points that are going to pique and keep an investor’s interest.
It’s been a while since we discussed pitch decks, and it seems that it may be time for a refresher course/reminder.
We all know that there are a few points to cover. Again, in no particular order:
If this is the latest project from a team of very successful serial entrepreneurs, you’re going to move that ‘team’ slide up. Investors want to know that if this startup’s founders are, say, Larry Page and Sergey Brin.
The Softbank Vision Fund hasn’t had an easy time of it and we use this as an example of the bro-cul (bro-culture) focus that might have contributed to some of their current woes.
They’re not alone. Simply more heavily tracked by the tech media.
First, there was WeWork, which very publicly and unceremoniously came crashing down (time will tell if new CEO Sandeep Mathrani, who comes from the real estate sector and has a successful turnaround history, according to the Bloomberg News, will save the company), despite CEO Masayoshi Son’s abundant/blind faith in ousted founder/tech-bro Adam Neumann (we are aware that WeWork is not nor was it ever a tech company, but Neumann did manage to spin it that way).
Despite the fact that it is ubiquitous, software is never easy to build and/or scale. In case you’ve been hiding under a rock, or from the various virulent viruses and flus that are going around, the Democratic Iowa caucus decided to go the tech route to capture and tabulate their voting results last week, and why not? We all have apps on our phones. Which we use seemingly constantly, if the numbers are any indication (Americans check their cell phones 150 times a day) and since we’re all so cell phone-enabled, why not a voting app? The tech community has been advocating for this for quite some time. Although, given the number of hacks we’ve seen and/or experienced and the tech community’s seeming unwilling to address security flaws (Google discovered several iPhone security flaws, and Apple still hasn’t patched one), what could possibly go wrong?
Enter the Iowa caucus debacle, where everything that could go wrong, did go wrong.
But this isn’t about what went wrong: since this is an election year, rife with contentious candidates and no shortage of social media platforms, this is a heads up to entrepreneurs who wish to step into the fray with their own tech offerings and we know that you’re out there.
If you want to know what investors are thinking/looking at these days, a must-read is Elizabeth Yin’s (@dunkhippo33 @HustleFundVC – VC investing in hilariously-early founders) recent series of tweets:
“1) At the early stages (call it pre-A or the whole “seed range”), I’m seeing lots of bifurcation. On one hand, in the Silicon Valley, for some founders, it’s never been an easier time to raise. 2) These founders, largely serial entrepreneurs/pedigreed founders (based on schools & work), are highly sought after even at the pre-seed stage. 3) So with these founders (mostly in SF), I’m seeing massive party rounds — like $3m-$5m seed rounds. Sometimes higher! No product / no traction. My friend – fantastic founder – raised $8m recently. $30m+ post-money, no product. If you have this background, raising is EASY. 4) For non-pedigreed founders, if you are running a SaaS company & have some rev traction, also pretty easy to raise. VCs have gone gaga over SaaS in the last 2 months. They think predictable cap efficient companies are the way to go in light of issues at unnamed marketplace cos 5) And then, there’s everyone else. Still HARD to raise money. Even in the Bay Area, if you don’t check said boxes above. Outside the SF Area, even harder. 6) So we have a weird Goldilocks & the 3 bears situation. Some companies are really HOT. Others are really cold. The range of valuations are insane. Everything from < $1m post valuations to $30m+ for PRE-SEED! 7) The press mostly writes about the hot deals. After all, no one wants to read about someone’s poor fundraising situation. So, now everyone thinks Silicon Valley is littered with gold. The reality is that SF mostly has poop on the ground. 8) Then there’s the downstream. The later stages. In 2020, I think raising a series A or a series B will become incredibly challenging. (fundraising always is, but even more so than last yr). 9) Why? VCs all of a sudden care about profitability. Your co still needs to be growing at 30% MoM AND also profitable! (unclear why you need VC in this case but that’s beside the pt 🙂 )”
We know that raising funding is considered by many an entrepreneur to be a trophy of sorts, or a even proof of concept. Great! If you need the confirmation, go talk to investors – but bootstrap as long as you can. As an investor pointed out at one of our breakfasts, once you’re on the VC treadmill, there’s no getting off. And it’s not free money: You’ll be under more pressure and scrutiny that comes with it, especially in this funding climate.
We work with entrepreneurs all the time, and while there may be no lack of interest in the startup, it still may take time to close the round. Why is that?
As Anne Lee Skates @anneleeskates noted: 1/ There are now 1000+ micro VC firms, >4x more than 10 years ago, most of these seed funds. Despite this trend, it can still be hard to raise a seed round. Why? Few firms lead rounds, and many wait for a lead investor to commit before investing.
Said Rob Go from NextView Ventures (The Seed Funding Market Is Less Crowded Than You Think), leading a round involves a lot of heavy lifting: “Part of it is the mechanics of putting together the actual financing. This includes working with founders to determine the right valuation, negotiating the other substantive terms of a round, and typically writing one of the largest checks. But more important than the check or term sheet is the moral authority and responsibility of building independent conviction for catalyzing the rest of the round.